Wills and Trusts; Wendel

Wills & Trusts: Professor Wendel Policies Governing the Distribution of Property 1. Intent a. Have intent? Memorialize intent? 2. Administrative Efficiency 3. Avoiding Fraud Issue: Who gets D’s property when D dies? The Intestate Scheme 1. Depends: Non-probate or Probate a. Non-probate i. Life insurance ii. Joint Tenancy with survivorship (classic . . . rights extinguish) iii. Inter Vivos Trusts iv. Life Estate with Remainders (legal: put it in the deed) b. Probate: property transferred after death. Inventory, collect, distribute property. 2. Probate Depends: Testate or Intestate a. Testate: (devise) with an effective will when you die (if ineffective property will fall into intestacy) b. Intestate: (inheritance) State Default if you dies without a valid will, you must take affirmative steps to opt out. No will, no gift, no trust! c. The property goes to those who “survive” but what does it mean to survive? 1. Actual Survival: a. What constitutes death? i. CL: heart and lungs stop ii. MT: irreversible cessation of brain activity b/c heart and lung function can be artificially maintained 2. Legal Survival: California a. Probate Intestate: clear and convincing evidence that survived 5 days (120 hours) b. Non-probate: clear and convincing evidence survived by a millisecond ii. Spouse/Domestic Partner: a. Spouse: valid legal marriage ceremony. Putative Spouse: either party has a reasonable and good faith belief that the marriage was valid. Domestic Partner: registered w/ state. b. CA: No common law marriage c. When does marriage end? Not divorced until court enters final judgment. d. Community ends: separated with no intent to get back together. But is separation and clearly telling the other the marriage over sufficient to terminate property? No 2. Depends: What type of property a. Community Property: 100% of D‟s ½ i. Community Property: property acquired by either spouse during the marriage. Each spouse has an independent ½ ownership the moment the property is acquired. b. Separate Property i. 100% No issue, parent, I of P Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel ii. 50% child (or deceased by survived by issue) or No issue, but Parent or Issue of Parent iii. 33% more than one child (alive or survived by issue) iii. Issue: equally 1. Ask: Is there a Pre-Deceased Spouse? iv. Parents: equally v. Issue of Parents: equally vi. Grandparents: equally vii. Issue of PDS: equally viii. Next of Kin: equally ix. Parents or Issue of Parents of PDS: equally x. Escheat to the state: equally 1. What does “equally” mean? There are 3 approaches.(do pg. 88-89) a. Per Stirpes: Divide at the 1st Tier always. Then divide by takers alive or survived by issue. Distribute dropping shares by bloodline. b. Per Capita (CA): Divide at 1st Tier where there is a LIVE taker. Then divide by live takers or by those survived by issue. Distribute dropping shares by bloodline. i. This is the CA default if you don‟t express intent. c. Per Capita Each Generation: Divide at 1st Tier where there is a LIVE taker. Then ADD up all the LIVE/SURVIVED takers and divide the amount by in the estate. 1. Is there a Pre-Deceased Spouse? Recapture Doctrine (prevents a one family windfall) a. If yes, capture ALL of the qualifying property the 2 nd spouse received by virtue of the 1st spouse‟s death. b. What‟s Qualifying Property i. Real Property: 2 nd spouse must die within 15 years ii. Personal Property: 2 nd spouse must die within 5 years, property worth 10K in the aggregate with a written record of ownership. c. Who Takes? i. Issue of PDS ii. Parents of PDS iii. Issue of Parents of PDS iv. If NO: the recapture doctrine doesn‟t apply 2. Next of Kin Issue: a. Parentelic: Count up parentelic line to common ancestor and then count down. b. Degree of Relationship: count the people between you and the relative (count both up and down) c. CA Combo: Degree of Relationship with Parentelic Tie Breaker i. First: Degree of Relationship: count up and count down ii. Tie iii. The taker with the closest common ancestor are preferred 3. Children/Issue Issues a. Marriage Presumption: Child born during the marriage is of the marriage (almost irrebuttable presumption of paternity) b. Who qualifies as an issue? Parent-Child relationship i. Natural Parents: Married ii. Natural Parents: Not Married Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel c. Parents i. Natural Parents: Married 1. child can take from and through BOTH parents (2 arrows) ii. Natural Parents: Not Married 1. child can take from and through Mom (2 arrows) 2. child can take from and through Dad (1 arrow down, 1 arrow up only if 6452 is met: To inherit through a child, the parent/relative of parent must 1) acknowledge and 2) parent/relative of parent must have contributed to support and care. iii. Paternity Established When? 1. Life: preponderance 2. Death: clear and convincing 3. Policy: incentive to have paternity est “inter vivos” d. Adoption Scenarios i. Classic Adoption 1. Natural Parents: No arrows 2. Adoptive Parents: child can take from and through BOTH (2 arrows) 3. Effect: as soon as you adopt, complete termination of NP inheritance rights ii. Exception to Classic: Post-Death Adoption 1. Natural Parents: child can take FROM NP‟s (arrows down only) a. As long as NP lived together with child in a parent-child relationship for some time. 2. Adoptive Parents: child can take from and through (2 arrows up and down) 3. CA: considers this an “involuntary adoption” iii. Step-Parent Adoption 1. Natural Parent marries Step-Parent: 2 arrows up and down a. As long as valid adoption takes place 2. Divorced/Never Married NP: child can take from NP (1 arrow down) a. As long as child lived with NP in a parent-child relationship for some period of time iv. Non-Step Parent 1. Natural Parent: when other parent adopts, the child loses the arrow down from the NP. Inheritance rights terminated. a. Arbitrary and effects child‟s rights 2. Natural Parent and Adoptive Parent (not married): 2 arrows with NP and 2 arrows with AP v. Same Gender Adoption 1. Natural Parent: child can take from and through (2 arrows) 2. Natural Parent and Adoptive Parent (same gender): co-adoption is able to take from and through the child (2 arrows both adoptive parents) a. When the Adoptive Parent adopts under the state law it would terminate the rights of the Natural Parent of the same gender as the Adoptive Parent (essentially kicked out as natural parent) b. Therefore, these two will “co-adopt” and establish a “legal” parentchild relationship vi. Attempted Adoption 1. Natural Parent: 2 arrows a. Usually when NP won‟t give up rights for adoption 2. Natural Parent and Attempted Adopted Parent: 2 arrows with Natural Parent but only 1 arrow down from AAP Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel a. Relationship began during minority and continued through joint lifetime. b. AAP would have adopted except for the legal barrier c. Can only invoke if child has not reached majority, because once they have they can legally affect this on their own. vii. Equitable Adoption (do what ought to have been done) 1. Contract: 1) agreement b/w NP and AP, 2) NP gives up custody, 3) fully performed by child, 4) partial-performance: take child in and treat them as own 5) intestacy of AP a. Modified parent-child relationship b. Only gets arrow down from parent 2. Equitable: a. MT: redefines EA and applies whenever the child was led to believe that he/she was adopted. This is all the child must show e. Half-Blood Issue: Only share bloodline with one parent. i. CL: treated differently ii. MT/CA: treat the same f. Posthumous Children: child born after father dies and for purposes of est. paternity. How do we est. that the child is of the father? i. CL: treats child alive at conception born within 280 days (10 lunar months) will presume paternity. ii. MT: 300 days presumed paternity, but even if you are outside the day you can still PROVE paternity you just don‟t get the presumption Wills 1. Testamentary Capacity a. Threshold: medium i. K: highest Marriage: lowest (fundamental right) b. Required i. 18 years old ii. Sound Mind 1. Ability to know a. Nature and extent of property b. The natural objects of D‟s bounty c. Test. statement is being made (execution/revocation) d. Orderly plan for D‟s estate c. Presumption: testamentary capacity exists to make a will (very strong) d. Burden: Person challenging that there is 1) a defect and 2) causation e. Temporal: Testamentary capacity is needed at the time the testamentary act (will, amend, revoke) occurs. It could be that the person is acting in a “lucid interval” at the time. f. Remedy: Strike Suit strike effected portion of the will i. 10-20% to settle and avoid costly litigation g. Prevent Strike Suite: No Contest Clause i. General Rule: these clauses are valid, but construed narrowly and an action to “construe a will” will not be considered a will contest. Remember, CA is very protective of testamentary intent. 1. Good for protecting intent 2. Bad b/c can be a shield for wrong doing ii. Beneficiary will not get their share if they challenge . . .so you must give something to encourage people not to sue (cost-benefit analysis) iii. CA: Exception 1: Gift Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 1. FIR Claim (Forgery, Interested Drafter, Revocation) 2. Reasonable Cause to bring claim iv. CA: Exception 2: Benefit 1. Person (Drafter, Directions to Drafter, Witness) 2. Probable Cause to bring claim h. Effect of Conservator: lack of contractual capacity will not effect a testamentary act. We will still presume testamentary capacity. Unnatural Disposition of Property 1. Insane Delusion a. Mistake v. Insane Delusion: Mistake: is the belief susceptible to correction? If you presented the person with evidence to the contrary could this be corrected? But remember, you don‟t have to show that you tried to correct the mistake. i. We will not replace a “testator‟s intent” just because of a mistake b. ID: Insane: adhered to despite all evidence to the contrary Delusion: false belief 1. WO: look for life-altering event where person just doesn‟t come out the same (anesthesia, accident, etc) ii. How much do we want to protect Testator’s Intent? 1. Majority: Reasonable Person a. TARP could NOT have come to the same conclusion under the totality of the circumstances b. Protect: Heirs Apparent 2. Minority(CA): No Factual Basis a. Is there ANY factual basis to support the Testator‟s belief, if so then NOT insane b. Protect: Testator‟s Intent c. Causation i. Majority: CA: But For: But for the ID the Testator would NOT have left the property as he did. 1. More protective of T‟s intent 2. Reasonable Basis: look for another reason that the T‟s gave the property the way that he did and the ID attack will fail. ii. Min: Might: 2. Undue Influence: “substituted intent” a. Coercion approach: very narrow (short time) b. Taking inappropriate advantage: broad (long time) c. Approaches (always plead these two in the alternative) i. Three Factor Burden Shifting (CA) (preponderance of the evidence) 1. CAUSATION IS PRESUMED IF 3 FACTORS MET a. Confidential Relationship: “confides in other with great trust) i. b/w party and Def. accused of UI ii. more like “susceptibility” iii. medium threshold b. Active Procurement: widens time frame (not just at execution) c. More like “opportunity” d. Unduly Benefits: what‟s unduly i. Obj: taking valid v. invalid 1. How much would they take if will was invalid? Compare these two. ii. Subj: amount to degree of relationship (proportion) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 1. Is this a “fair amount”? iii. More like “motive” 2. Presumption Arises and Burden Shifts a. Defendant must now rebut presumption and show NO UI b. Rebut by Preponderance of the Evidence 3. Exception: creates a rebuttable presumption UNLESS a. Reviewed by 3rd party attorney who counsels @ then nature of intended transfer, signs, and delivers to transferor b. Related: blood or marriage c. Cohabitant ii. Four Factor Test: Preponderance of the Evidence (Plaintiff) 1. Susceptibility: whether T was susceptible to UI a. Dependant, signed without reading, lonely, old 2. Opportunity: Influencer (Defendant) had opportunity 3. Motive: Def‟s share of the will (good indication) also revenge or some type of emotional stake. 4. Causation: UI caused T to give property away in a way that she would not have other done. a. Hardest to prove b. Do we really think the will was a result of causation? 5. Policy: juries should be uncomfortable going in after the fact and replacing their interpretation with memorialized intent. iii. Protect Against Undue Influence 1. BAD: doe not put “why” statements in your will a. Libel/defamation = damages b. Facts can then be refuted and can then be used to attack general testamentary capacity c. Stay vague or be 100% accurate 2. Best: Leave letter sealed outside of will with attorney and used only if people challenge. “Do you want me to go public with this?” 3. Fraud a. Misrepresentation made knowingly and intentionally for the purpose of affecting the testamentary scheme b. Elements: i. Misrepresentation with INTENT to effect the testamentary disposition ii. Causation iii. Strike the part of the will affected by Fraud or place in a Constructive Trust (equitable) 1. Only use Undue Influence or Fraud where 3 rd party is involved iv. Whoever is bringing the claim must have standing c. Two Types i. Inducement (outside the will) 1. Knowingly false statements made to the Testator BEFOR execution 2. Testator is doing what he wants but for the WRONG reasons 3. Defendant misrepresents KEY FACTS and the Testator RELIES upon the facts when making the estate plan ii. Execution (the will itself) 1. Fraud in the execution or misrepresentations as to the character or contents of the instrument 2. Intentionally tricking someone to sign Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 3. Fraud must be made DIRECTLY on the testator; Fraud on the WITNESS is not enough 4. 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 Expectancy i. General 1. Must bring probate claim 1 st 2. An intentional interference with an expected inheritance or gift as a valid cause of action 3. P must prove that the interference involved tortuous (wrongful) conduct: fraud, duress, or undue influence 4. Cannot use to contest Mental Capacity ii. Alternatives for those challenging the NCC to collection if NCC is held valid 1. Not a will contest, but a suit for damages, a NCC does not apply 2. Longer SOL 3. Punitive damages, b/c action in tort 4. Not a challenge to the will, so it avoids the NCC No Contest Clauses 1. General a. Deter‟s P from suing b/c it says that “if they contest the will they will get nothing” b. Challenger must receive something to give effect to NCC (incentive) 2. Policy a. Bad: used to protect wrongdoing b. Good: preserves Testator‟s intent 3. Split Jurisdiction a. Most recognize, but construe narrowly b. Narrow interpretation: Probable cause to support the claim and Nature of the claim 4. California’s position on No Contest Clauses a. WILL NOT enforce a NCC if those challenging the will have 1. weakens the protection of the Testator‟s intent 2. Remember: petitions to construe a will are not challenges to a will. ii. Reasonable Cause 1. to support their claim AND 2. The claim is limited to: Forgery, Revocation, Interested Drafter 3. Connect with interested drafter statute iii. Probable Cause 1. to support their claim AND 2. Claim of wrongful conduct by someone active in the procurement and execution of the will (uninterested drafter, person instructing the drafter, witness) 3. Fraud, Undue Influence, Interested Witness California and Disinheritance 1. Cannot passively nullify a statutory provision for intestacy 2. To cut out an heir, you must ACTIVELY give your property away 3. You cannot just execute a will that disinherits Gifts in Will a. Specific: only one (my wedding ring) b. General: 1000 dollars (can be any 1000 dollars from estate) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel c. Residuary: “my entire” “all” “all remaining” d. Rule with gifts: intent to give, delivery, acceptance 1. Disclaimers: Decline to accept ALL gifts a. Why would you want to disclaim? i. To protect living parent ii. Better arrange who is taking iii. Avoid gift tax consequences iv. To keep money in the family b. Can you disclaim and direct where your property goes? NO i. This is an attempt to exercise control over the property which is a property interest. c. Creditors: can creditors of Disclaiming party reach the property? NO i. Not a fraud on creditors d. Exception: Gov‟t and Medicare: Gov‟t not the same as a regular creditor. This policy is limited in this situation b/c the public picks up the bills. i. You can still disclaim, but gov‟t has the right to sue for a constructive trust over the property showing that the party taking was unjustly enriched. 1. Negative Disinheritance a. CL: can‟t negatively disinherit, you can only affirmatively disinherit by giving all your property to someone else. b. MT: intent controls, negative disinheritance is enough so treat as Pre-D c. CA: NO, follows common law, but can argue in good faith that the court should follow that intent controls considering that CA is highly protective of a Testator‟s intent. VALID WILLS: CALIFORNIA = HYPER STRICT COMPLIANCE Execution BIG 1: statutory requirements BIG 2: degree of judicial compliance 1. Formalities a. Ritualistic: impress upon the Testator the seriousness/finality of what she is doing. Signing and witnessing in order to protect intent. b. Evidentiary: increase reliability with the best evidence which is satisfied by a writing c. Protective: witnesses serve this function to avoid undue influence, fraud, duress d. Channeling: uniformity in the document, encourage getting an attorney to make this easier on the courts, reduces administrative costs and honor the intent in the will 2. Wills Act Formalities (WAF) California requirements a. Writing b. Signed: at the bottom if “subscription” is required (not required in CA). By Testator or proxy (in Testator‟s presence and at his direction). Or by a conservator pursuant to court order. Watch out for “temporal” challenges. c. Witness: in the presence of 2 or more witnesses at the same time the Testator signs and acknowledges the instrument. Witnesses must understand the Testator‟s “intent” but do not need to know the contents of the will. Witnesses must sign and attest in front of the Testator. “Ceremony” 1. Presence of the Witnesses by the Testator 1. CA: joint presence of the witnesses 2. In some states the Testator can sign in front of one witness, then acknowledge in front of another (NOT IN CA). Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 2. 3. 4. 5. 3. The Testator must sign/acknowledge in the line of sight or have a conscious presence. 4. Testator doesn‟t have to be present when the witness signs. Line of Sight v. Conscious Presence 1. Conscious Presence (CA) a. Softens strict compliance b. Sight and sound = totality of the circumstances c. CA: requires only that the Testator sign/acknowledge in presence of the witnesses 2. Line of Sight (narrow) a. Testator can be seen (able to see the act of the signing) b. Actually SEE or capable of seeing c. Less potential for fraud and low cost of administration Delayed Attestation by Witnesses 1. Traditional: must attest during the same ceremony 2. Modern w/in Strict Compliance (flexible) a. Delay is ok as long as the statute doesn‟t mandate presence b. CA: ok w/in 6 months to a year (reasonable time) after Testator signed c. Presence of Testator not required d. Witnesses should sign while memory of what they are signing is still fresh w/in recollection Special Witnessing 1. Telephonic: Modern Rule is that telephonic presence is NOT presence. Too much potential for fraud and erodes protective and ritualistic functions. 2. Video: a. Strict Compliance: NOT ALLOWED by all courts b. Writing is Evidentiary: video is oral will. No jurisdiction has accepted this approach. 3. Bank Teller: If there is not personal contact with the Testator, and no chance to test the Testator‟s capacity, then no. Interested Witness Doctrine 1. California construes narrowly a. 2 disinterested witnesses: neutral at the time the will is executed b. Interested witness doesn‟t invalidate the will, simply PURGE the excess interest. c. Only applies when the beneficiary is the actual interest. d. If a witness gets legal title as trustee or any fiduciary duty, then IW statute doesn‟t apply. (not acting for self interest) e. No reference that this applies to witnesses family members. P is the witness, will give everything to P‟s wife. 2. Rebuttable Presumption: witness engaged in wrongful conduct (Undue influence/fraud) a. Burden of proof on the IW to persuade by preponderance of the evidence that he DID NOT take b/c of wrongful conduct. b. If IW doesn‟t overcome the presumption? Remedy i. Purge the IW of their excess (as compared to an amount under a prior will or intestacy) 1. If intestacy, excess is any amount above intestate share of the heir in question Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 2. If prior will, excess in any amount in 2 nd will be greater than what the IW would have gotten in the 1 st. d. Curative Doctrines 1. Hyper Strict Compliance (mostly California) 1. If there is any doubt, strike the will 2. EACH REQUIREMENT 3. Avoids the slippery slope and kicks out will into intestate scheme 2. Modern Trend: Flexible Strict Compliance (California) 1. Maintains strict compliance absent the potential for fraud, which would be enough to defeat a will. 3. Substantial Compliance (six jurisdictions) 1. Reduces the number of statutory requirements 2. Argue: that this is a judicial doctrine and that CA can and should apply it a. C&C Evidence: Testator intent is in this will b. C&C Evidence: substantially complied with statute 3. Use if the will fails the WAF under strict compliance, try this 4. Dispensing Power (No jurisdiction has adopted) 1. Softer than substantial compliance 2. Elements a. C&C Evidence: Testator intended this to be his will AND b. No evidence of fraud, (actual/potential) involved 3. When met, Testator may dispense of virtually any of the WAF, but must still have writing. Most courts are willing to overlook witnessing. But this is basically just “ignoring” the legislature. Self-Proving Affidavit 1. Strict: not part of the will 2. Substantial Compliance: may be part of the will 3. Examples: witnesses signatures are not part of the will and only on self-proving affidavit may be challenged as not “literally”complying with WAF (Ranney case) a. Court held that the signatures substantially complied (enough to probate it) 4. Aspects: SPA, not part of the will, not necessary to execute, only dispenses with the need to call witnesses during probate, must be notarized. Signature 1. What constitutes a signature? a. Most Jxn: Marking that the person INTENDS to be signature qualifies b. California: were Testator signs attested instrument with a “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. Pre-typed signature ahead of time is good enough, while CA is HSC, this is the only time that CA probate has used “substantial compliance” c. Witness does NOT have to sign in Testator‟s presence d. If the signatory stops short on his own (Pat instead of Patrick) then it‟s OK, BUT if he is stopped (dies, forceful, earthquake) then it is NOT OK under HSC. 2. Can someone else sign? Yes a. If in the presence of the Testator AND b. At the request/direction of the Testator (can just do it for them). 3. Order of signing: Witness and Testator (does it matter who signs first) a. Common Law: Testator ALWAYS had to sign first (implicit in Will Act Formalities) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b. Modern Trend: As long as no one leaves until the Testator has signed, then it doesn‟t matter who signs first. 4. Provisions that come AFTER 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 it is signed ii. Any provision must be on the page (literally) before (time) that the Testator signs it. c. Bottom Line i. If the provision is added temporally before the Testator‟s signature, it doesn‟t matter if it is below the signature line. ii. If it‟s added temporally after the will is signed, it cannot be probated. 5. Incorrect Signature (husband signs wife and vice versa): Arguments to try and get probated! a. Traditional: strict compliance requiring proper signatures b. Modern: One Ceremony, testamentary intent is derived from looking at both instruments, Treat the two documents like one document and let it go. c. Misdescription Doctrine: EXCEPTION to the general rule on “mistakes” i. Correct mistake by only striking the “misdescribed” portion of the will ii. Can strike but CANNOT rewrite (in an otherwise validly executed will) iii. Construction doctrine to resolve latent ambiguities iv. Problem: What if Testator owns more than one piece of land (say Wendel gives me the house with the wrong address, so we strike the address) d. Scrivener‟s Error (one jurisdiction in a non-Pavlinko setting (signing wrong will)) i. Cynical view of lawyer‟s role: he intentionally wanted the will to go through probate intestate ii. Attorney intentionally switched wills (scrivener‟s error) = fraud in the execution = constructive trust. Holographic Wills 1. General a. 1) Material provisions in Testator‟s handwriting and 2) signed by the Testator (nobody else) i. some jurisdictions require ALL in T‟s handwriting b. Expression of Testator‟s intent that this instrument is to be the will c. No witness requirement d. Date is not required e. Only ½ the jurisdictions recognize this (California: yes) 2. Policy: eliminating witness requirement, so other requirements REALLY important! 3. Elements: to offset the absence of the witness requirement a. Writing b. Material provisions must be in the witness‟ own handwriting (not everything) i. Who takes? MUST be in own handwriting ii. What property? MUST be in own handwriting c. Signed by Testator i. CA: you don‟t have to sign at the end for either holographic/attested d. BIG: Testamentary Intent (temporal significance for the future . . . T dies) i. Does this document have testamentary intent? This is to be the will. 1. CA: material provision 2. CA: applies the contextual approach when T uses a commercially printed form will. It will use both the handwriting and the form as evidence of testamentary intent Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 3. “if it‟s not a will why did she write it?” ii. Strict Compliance: every material provision must be in writing. If there is anything not in their handwriting, don‟t probate. 1. Form Will: Not valid under strict compliance iii. Contextual Approach: More “Flexible” 1. to the extent that handwriting is ambiguous, look to printed material 2. Testator‟s intent can be preprinted, but material provisions must be handwritten 3. Form will: YES under flexible contextual e. California Approach: i. Testamentary intent may be set forth in either: 1. Testator‟s own handwriting; or 2. part of a commercially printed form will 3. Q: what about additional writing on a will drafted by an attorney? 4. California Rule for Form Will Interlineations: if it is a commercially printed form will, then it can qualify as a valid interlineations if written on the form will. f. Interlineations: i. General Rule: any subsequent changes have to qualify as a valid will. ii. A handwritten change to an attested will is not a valid attested will iii. But if it 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? g. Some require this to be “dated” b/c of big issues: i. Doesn‟t have to be dated UNLESS 1. Another Will (presumption against holographic) a. Another will with inconsistent provision to holographic b. Presume (rebuttable) that the holographic is invalid as to the inconsistency unless the time of holographic will‟s execution can be established to be AFTER the execution of the other (dated) will. c. Later intent always controls over prior intent 2. Capacity (presumption against holographic) a. If it can be established that the testator lacked capacity ANY TIME during which the will might have been executed, then PRESUME (rebuttable) that the holographic was executed during that time. b. Beneficiaries must then prove that the will was executed during that time. ii. Relative Dating is good enough for both two wills and capacity. (not exact dates) iii. Burden is on the party trying to prove the will Date is not required, but potential problem in the statute. iv. If two wills are both undated, send that portion of the property into intestacy. 4. Conditional language: a. Language explaining the purpose of drafting the will b. Presumption is not that the condition is a condition precedent to the disposition of property c. Does not invalidate the will d. Example: “In the event that the plane crashes on my trip to Vegas, I give all my property to X.” i. We are skeptical of conditional language, attorneys usually don‟t use it, but if the attorney does use it, there is stronger presumption that it is a condition. ii. Really, is it a condition precedent or just and “explanation” of why I wrote the will. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel Revocation of Wills: Writing or Act Four: Writing, Physical Act, Presumption, Operation of Law Will we always probate a validly executed will? NO It can be revoked. 1. Codicil a. A codicil is a properly executed will that amends a primary will but may have to stand on its own if the “primary” will is not effective. b. 1) qualify as valid will; 2) supplement or amend the will to some degree c. Limiting Effect i. 1st: read as consistent with underlying will, if possible ii. 2nd: if codicil is knocked out, give original will effect, BUT iii. if will is revoked, then codicil is also (unless you can argue that it‟s not a codicil but an independent will) d. If it doesn‟t totally replace the prior will, it‟s likely a codicil. 2. Subsequent Will a. Writing i. Express “I hearby revoke my prior will” ii. Implied: prior will is inconsistent with provisions of this new will iii. Must qualify as a valid will: 1) traditional attested or 2) holographic iv. Expression to “revoke” in the written provisions of the will. v. Capacity at time of execution of revocation. b. Physical Act i. Destructive act by the Testator by someone else at T‟s direction and in the presence of T, coupled with the intent to revoke (burn, torn, canceled, obliterated, destroyed) ii. Split: 1. CL: must affect written words of document 2. MT: judicial doctrine. CA has no requirement that that revocation by act must affect the printed words. If the act with the appropriate intent is performed “on the will” it doesn‟t have to “affect the printed words.” iii. Capacity at execution of revocation c. Revocation: Presumption Doctrine i. Will is last in the Testator‟s possession AND ii. T was competent until death AND iii. After T‟s death, neither the will nor duplicate original can be found OR iv. Even if the will is found, whatever is done to the will is presumed to have been done by the Testator (defacing, lines, writing) permits partial revocation by act. v. Relatively low presumption that the T destroyed or defaced the will by act and that‟s why we can‟t find it. We assume that people take care of wills. vi. Rebuttable 1. If you can overcome presumption, use the lost will doctrine. So make this an issue for the jury. “plausible reason can‟t find” a. WO: heir who benefits from will not being found has access to papers (may be enough to rebut presumption) i. Not revoked, just lost! 2. If you cannot, will is revoked! 3. Lost Will Doctrine a. Just can‟t find, so presume not revoked. b. Legally: will is still in existence c. Could bring witness: attorney/secretary involved in tearing the will Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel d. If the will is not revocable and can‟t be found. Use EXTRINSIC EVIDENCE to prove it up and probate it-look to the attorney who prepared it (copies/drafts). e. Standard: clear and convincing evidence of what the will is! f. Remember: probate a will unless properly revoked. 4. Multiple Wills a. Multiple wills usually show up when there isn‟t a residuary clause b. 2 stand alone wills c. Probate both to the extent that they are consistent. Then later intent will trump prior intent for the portions that are inconsistent. 5. Duplicate Originals a. 2 or more original wills, properly executed by the Testator and the witnesses. b. How is revocation achieved? c. General Rule: Revocation of 1 duplicate original revokes ALL! d. Revocation by act/subsequent will: ALL duplicate originals are revoked when 1 is “affirmatively” revoked. e. Revocation by presumption: if ANY can be found, the will is not revoked. i. Presumption doctrine will NOT revoke duplicate originals, if one can be found, so when T dies, probate. 6. Partial Revocation a. Generally: partially destroyed, defaced sections b. If the will was last in T‟s possession and when T dies it is discovered that there is an interlineations effecting 1 beneficiary, presume the T intended to revoke that specific devise. c. Concerns: potential for fraud d. Apply Presumption Doctrine: if the will is found in T‟s possession, then it will be presumed that T made the markings. e. Problems: opportunity for fraud, this is really a new gift f. Jurisdictions: i. CA (majority) 1. Residuary of the residuary: modern trend 2. Any gifts that fail (or a revoked in part) fall to the residuary clause ii. Minority 1. Strict compliance: the only place the partially revoked gift can go is intestacy 2. the gift goes to intestacy, but if you want to opt out = codicil. g. Example: i. Valid will: I give total of 10K to S and J. The rest to T ii. S gets ½ iii. Later I cross out J with a pen (so not a pencil draft) iv. Issue: was revocation valid? yes v. Issue: Act/Writing? Act vi. Partial revocation? Yes vii. Intent? w/ pen viii. Rule: Partial Revocation CANNOT increase another gift outside of the residuary, like a failed gift will still fall to the residuary. ix. How much does S get? 1. No ct has adopted that S would get all 2. Majority: the remaining half will go to the residuary 3. really strict: need codicil to give a new gift Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 4. CA: don‟t know how this would come out. Likely falls to residuary. Can possibly argue that T intended to give away the full 10K. x. What if T marked out the 10K and put in 5K? Not enough material provision. 7. Revocation by Operation of Law a. Dissolution of Marriage i. Only cuts out the ex-spouse of probate property identified in the will 1. How do we treat? Pre-deceased w/ no right to take. 2. Issue when T divorces and dies before changes will. ii. Not applied to non-probate (joint tenancy or recapture doctrine) iii. If will provides for ex-spouse and ex-spouse‟s issue, the issue will still take, even the parent is revoked. iv. Separation is not dissolution, but a final judgment of divorce is! b. Majority v. Minority i. CA: divorce revokes all provisions in a will in favor of former spouse. 1. Historically, divorce didn‟t impact non-probate, but CA does . . .except for life insurance (will not be revoked by operation of law) 2. CA: only kicks out spouse, not spouse‟s issue ii. Minority: only occurs if it is accompanied by property settlement c. Wills Only (not inter vivos gifts) i. No reference to non-probate instruments ii. Non-probate is a form of contract (life insurance policies not revoked unless change in the named beneficiary) d. Irrebuttable Presumption: T intended to cut former spouse out of will UNLESS T executes a new will post-divorce e. Revival by Remarriage: any provision revoked by operation of law is revived by T‟s remarriage to the former spouse. f. Remember: as a general rule as spouse cannot exercise undue influence over another spouse Probating a Revoked Will 1. Revival (statutory) a. General: usually when you have at least 2 wills b. Under circumstances you can revive a revoked will that has been revoked by a subsequent will. i. As soon as you execute valid will that displaces will 1 through 100% inconsistency, you have executed intent to totally replace will1. (not a codicil, b/c there is no reason to look to will 1). ii. Revival: have 2 wills an revoke will 2, when you revoke 2, do you revive 1? iii. English: 1. Will 1 is not revoked unless 2 remains in effect until T‟s death. B/c a will isn‟t given effect until T‟s death. (few U.S. cts follows this). iv. General American Rule: When you execute #2 you revoke #1. 1. majority: will #1 is revived only if T intends 2. minority: revoked will cannot be revived unless it is re-executed w/ WAF 3. CA: Statutory a. How was Will 2 revoked? To evidence INTENT to revive! i. Revoked by ACT: we can look to ANY evidence for T‟s intent to revive! Literally, anything (even oral) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel ii. Revoked by Writing: will is revived only if the writing demonstrates T‟s intent to revive prior will. It must be in the document! v. 2. Variation on Revival: Dependant Relative Revocation (DRR) a. Judicial doctrine i. Applying DRR: ignore revocation and give effect to original gift in will ii. Basically, tries to give effect to T‟s intent, presume intent to revive b/c of mistake b. General i. Ignoring the revocation because it was induced by mistake ii. If the T purports to revoke his will upon a mistaken assumption of LAW or FACT, then the revocation is INEFFECTIVE if the T would NOT have revoked his will had he known the truth. iii. Look to the failed alternative scheme to accommodate the T‟s intent c. Elements i. Valid Revocation of a valid will ii. Based upon a mistake of fact or law 1. close relationship b/w the actual revocation and what induced the mistake 2. evidence of the mistake depends on how the will was revoked iii. Causation (But-For): 1. T would not have revoked if he had known it was a mistake 2. Spectrum: choosing between intestacy and the old will (tie, goes up) 3. Totality of the Circumstances: usually when people‟s names are changed iv. How did you revoke? 1. Writing: (usually mistake of fact) a. The mistake must be express in the revoking instrument b. This proves the mistake. The mistake must be beyond the T‟s knowledge. c. narrower 2. Act: (usually mistake of law) a. Revocation must be coupled with a failed alternative play on disposition ( attempt new will, codicil, holographic). Not all jurisdictions require this. b. Broader c. Generally: a handwritten interlineations will not qualify as a valid holographic codicil. Point to this as a failed attempt! (mistake; law) Wills Expanding Doctrines Policy: once we get through the eye of the needle with a valid will, courts will do its best to give full effect to Testator’s intent. Question: What technically constitutes the will when we go to probate it? 1. Integration of Wills: (into one instrument) (backward looking) a. Identifies what is considered the will. b. Requires: 1) all papers physically present at the time of will‟s execution (most important); 2) intended to be part of the T‟s will, and are integrated into one instrument. c. These are considered “actual pages” of the will d. CANNOT Integrate typed material into a holographic will. i. Cts say you can‟t do this! 2. Republication by Codicil (referring to a document that is a valid will) a. General Requirements (backward looking) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel i. Signing a valid will, republishes (re-executes) the will with the NEW date. ii. Key: redates a prior will! iii. The underlying will needs to be: 1) valid instrument and 2) in existence at the time the codicil is executed. iv. Valid Will + Valid Codicil b. Presumption: i. Even though not express, there is a STRONG presumption of republishing the will, which „redates‟ the will. This presumption can be rebutted if the codicil is inconsistent with the T‟s intent. ii. If you reexecute a codicil to a 1 st will, which was revoked by the 2 nd will, you revoke by implication the 2 nd will and RE-EXECUTE the 1st will!!! c. Example: i. Will 1977 ii. Notebook 1979; how will the notebook get in? iii. Republication by Codicil: If a codicil is made in 1980, the 1977 will is redated to 1980, so allows for incorporation by reference b/c the notebook was in existence when it was referenced in the will. iv. WO: how much do we incorporate? Works in progress? Really should only incorporate what was in existence in 1980! d. Exceptions i. Where the codicil is inconsistent with a testator‟s overall intent, a court may decline to apply the doctrine of republication by codicil. We will not redate if it hurts the T‟s intent. ii. Lawyer‟s boilerplate language may rebut presumption of intent to republish the previous will iii. If the codicil has express clause redating will, apply the doctrine iv. If the codicil is missing such a clause, don‟t apply (not sure about this!) 3. Incorporation by Reference (referring to a document that is NOT a valid will) a. General (backward looking) i. Not a page of the will! ii. You CAN incorporate typed material into a holographic will 1. Once you get through the eye of the needle, we are very liberal! Good faith b. Requirements: i. Intent to incorporate the document/writing ii. Document to be incorporated is IN EXISTANCE at the time the will is executed iii. Document to be incorporated is identified/described in the will with REASONABLE CLARITY iv. CA: we don‟t‟ adopt a “tangible personal property list” 1. UPC: can incorporate by reference a list that disposes of tangible personal property, even after the execution of the will as long as the will expresses intent that the tangible personal property will be disposed of by that means. c. Incorporation by Reference v. Republication by Codicil i. IBR 1. First paper does not have to be a valid will, but what you are incorporating it into has to be a validly executed will. 2. Can‟t integrate typed material into a holographic will! ii. RBC 1. It it‟s a valid will, look to republication, if not treat the second will as valid and incorporate the 1st. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 2. Can clear up problems of “interested witnesses or undue influence.” Basically acts as a curative measure when there are concerns with the initial execution. Remember, IW and UI only come into play with who takes, not with whether the execution ceremony was valid. These are only presumptions, but they don‟t invalidate. 3. You can incorporate by reference typed written material in a holographic d. Examples i. Typed will not dated, signed or witnessed. Had a written codicil at the bottom which was held to validate the typewritten portion and enabled it to be probated. a. Holographic codicil? No, b/c not valid underlying will. The typed portion can‟t qualify as a valid will b. Holographic will? Yes c. Can we expand the scope of the will to give effect to the typed written portion? 2. Integration: Make it one document, thus a page of the will a. No, b/c you cannot integrate typed written material into a holographic. This would effectively allow material terms in that are not written in T‟s handwriting. 3. Incorporation a. Should try to argue that the handwritten portion references the typed portion. Argue that the typed portion is one document and handwritten is a separate document. Arguably, once we are through the eye of the needle with a valid holographic will, we can incorporate by reference documents more liberally. Other side should argue that there aren‟t two documents, but only one. And our public policy concern of fraud go down when this is one document and not two, we should probate it! 4. Acts of Independent Significance 1. Forward looking! 2. Pertains to certain evidence outside the will to be admitted to interpret the will if the evidentiary fact, be it act or event, has significance OTHER than to pass property at death. 3. Doctrine applies: regardless of whether the Testator or 3 rd person can affect the act or event subsequent to the will‟s execution 4. Examples: a. Compare a devise to my spouse, versus a devise of the contents of a shoe boxes to the person named on the boxes b. Spouse: clearly has significance other than to pass on contents at death c. Significance: may depend on matters such as convenience versus whimsy and the degree of certainty from misuse. 5. Basics a. Doctrine refers to events/other things that occur in the future b. Will references an act with its own valid inter vivos significance (esp if T has control over this) c. Act is outside the will (marriage/children) d. Act is independent of effect on testamentary disposition 6. Act a. Identify the Act i. Does it have lifetime motive? ii. Does the act have significance apart from the affect it has on T‟s will? Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel iii. Not really related to Testamentary Intent iv. Is YES, the gift is upheld. v. MUST have provision in the will which makes express reference to the act in question vi. The ACT will have control over who takes the gift or the size of the gift the identified beneficiary takes. 7. Examples: WHAT and WHOM a. Leaves A everything in right hand desk drawer i. Put things in to store them and take things out to use ii. There is independent significance from testamentary intent iii. Concerns for fraud iv. Constant change of T‟s intent v. We‟ll go through the drawer and ask “is there where this item is usually stored?” b. Safe Deposit Box i. Potential for fraud is low ii. Concerns: fraud, safety deposit box will have less potential for fraud than the desk drawer. If there is potential for fraud, use Strict Compliance outlook on this issue. iii. Independent motive? Most courts say yes! Contracts Relating to Wills 1) General Requirements a) CONSIDERATION i) Mom is sick. D, her husband says he‟ll care for M if she agrees to leave her estate to him. D will NOT have a breach of K claim b/c SPOUSES have a legal obligation to care for one another and can‟t contract for things you already have a legal obligation to do-but kids don‟t have this obligation. b) Exception to consideration i) Payment on Death Contracts involving 3rd party beneficiary ii) The spouse can give the consideration, not the beneficiary c) California Courts i) Can still bring cases of oral agreements (especially if family member involved). Can show clear and convincing evidence of intent. Must be enforceable in equity. (1) B‟s claiming promise of A leaving property after B cared for A. A said they were going to do this. 1st is this a will? Attested? No Holographic? No Alternate: this is a K, what‟s the consideration? B caring for A. A writing only “evidences” the contract. Even if no writing . . .CA clear and convincing evidence. Alternate: Quantum Meruit: reasonable compensation for services performed. 2) 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: a) Material Provisions: provisions of will or other document stating material provisions of the K. b) Expressed Reference: in a will or other document to a K and EE proving terms of K. c) Writing Signed: by D evidencing the K. d) CCE K b/w D and Claimant: of a promise by D to the claimant that is enforceable in equity. e) CCE K b/w D and 3 rd party: for the benefit of the claimant or a promise by D to another person for the benefit of the claimant that is enforceable in equity. 3) Who Takes First? a) Creditors Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b) Spousal Protection c) Beneficiaries 4) Beneficiary Interest Rule: a) Beneficiary‟s interest is till good under K LAW if the beneficiary dies before the Testator. b) But not with wills b/c of survival requirement c) Rationales for giving priority to K beneficiaries i) Surviving spouse‟s marital rights attach only to property legally and equitably owned by the deceased spouse, and a contract entered into takes equitable title away from the spouse and gives it to the contract beneficiary. ii) Surviving testator accepts benefits under the contractual will, and equitable trust is impressed upon the property in favor of the contract beneficiaries and the T is entitled to only a life estate in the property with the remainder going to the beneficiaries upon the T‟s death. iii) CALIFORNIA RULE: when the surviving T accepts benefits under the K will, the T becomes estopped from making a different disposition of the property, despite any subsequent marriage. iv) When the surviving T breaches the will K, the K beneficiaries are entitled to judgment creditor status, thus giving them priority over the rights of the surviving spouse. 5) Contract NOT TO REVOKE a will (should be in writing, but unclear if CA would force that) 6) Joint and Mutual Wills a) CA RULE: Executing a joint or mutual will DOES NOT yield a presumption of a contract not to revoke. b) Joint Wills: probate twice. One will for multiple individuals. Usually mirror wills for H and W. i) One will signed by both. Only produce one instrument. ii) Although the ordinary joint bank account is not a true joint tenancy, the surviving party to the account has been permitted to take on the basis of K or trust principles. iii) K not to revoke includes all property acquired by either spouse during the entire marriage. iv) Example: (1) Joint will w/ Knot to revoke. Once the 1 st W dies, the husband does not change his will, b/ if he did the beneficiaries would become creditors under the K not to revoke. So, doesn‟t change b/c his new wife would take a forced share before the beneficiaries would take under the will. WO: jurisdictions all over the place with this. If the K said that the party is prohibited from “doing anything” to change the scheme, then getting married would essential breach the K, b/c the new wife could claim spousal protection c) Mutual Wills: have two wills with mirror dispositive provisions. MT: will, not a K, still right to revoke. But treated with disfavor. d) Contract to MAKE ( with respect to execution) a will (that D would leave property to X) i) A contracts with B to leave A‟s estate to B if B takes care of him for the rest of his life. ii) Will is executed and B decides not to perform his duties under the K. A then rescinds K, then dies. B will still take under the will! 7) Spousal Protection Schemes a) General i) Community Property: Pretermitted Spouse Doctrine ii) Non-Community Property: Pretermitted Spouse or Forced/Elective Share Doctrine b) Presumed Intent: Pretermitted Spouse Doctrine (community property states) i) Assume intent to give new spouse a share but didn‟t get around to it. ii) New spouse takes intestate share, but never more than ½ of separate property iii) CA: give the surviving spouse hi/her intestate share, but will not exceed ½ of separate property iv) Spouses need protection at death and divorce v) Can only claim if the omission occurred after the marriage, not if a new will occurred during the marriage . . . then they left you out on purpose. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel c) Protection (non-community property states) i) Extends to surviving spouse immediately ii) Gets protection during the marriage 1/3 to ½ depending on the jurisdiction d) Dual Status of Contract i) Beneficiaries are either beneficiaries or they are contract claimants (creditors) ii) Example of the Dilemma: (1) T enters into K with A that he will leave property to A. T executes a will that leaves T‟s property to A. If T dies, no problem. However, if A dies, A is not like any other beneficiary under the will b/c there is also a K here. Courts have not resolved this. (2) After A dies, T gives all property to X. If a K, T has just breached the K with A. Counter argument: it is only a breach is you can show damages. And A‟s dead. (3) If T contracts with A to leave all, and T then re-executes giving all to X, then A dies before T, it is not necessarily T‟s last will and testament. Could have re-executed, but didn‟t. (4) CA APPROACH: Apply most of the wills related rules to non-probate transfers. (Payable on Death, contracts,). When the surviving testator accepts benefits under the contractual will, the T becomes estopped from making a disposition of the property, despite any subsequent marriage. In other words, the K beneficiary prevails to the detriment of the surviving spouse. Construction Problems 1) Admitting Extrinsic Evidence (EE) a) Common Law: Plain Meaning Rule i) Take the words of the will on their face ii) Start here, but then look for an ambiguity b) EE Ok for Determining Execution i) Execution = validity of the will. But not going to construction. ii) Question: Execution v. Construction (1) Execution: If the question is “is this will valid” then will take EE as needed to find T‟s intent of executing a will. Validity: If the EE is offered to determine validity of the, it‟s in. (2) Construction: NO EE with a valid will to see if it should be altered. If a question of construction then would not be honoring T‟s intent. Court may be rewriting the will: bad! c) Ambiguities: Patent v. Latent i) In construing an instrument and need to decide if EE will be let in. First ask what kind of ambiguity this is? ii) Patent: NO EE (1) A patent ambiguity is an uncertainty which appears on the face of the will. If patent, the court didn‟t need EE to help construe the meaning b/c they could see it on its face. iii) Latent: EE (1) A latent ambiguity is one which is not apparent on the face of the will but is disclosed by some fact collateral to it. If latent we need EE 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 and to resolve it. (2) Subsets: (a) Equivocation: Multiple objects match 1 description of an item. (i) B leaves car to cousin, Alicia. B has 3 cousins named Alicia. This is an equivocation and a form of latent ambiguity. Will admit EE. (ii) Don‟t now you have a problem until you try to apply the will to the facts. (b) Personal Usage Exception: Although writing on its fact given plain meaning is clear, if the T used writing in its phrase to mean something else courts will take EE to determine what T really meant. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel (i) Example: John’s Garden, T calls guy behind the counter John, but names is really T. John is the owner of the store, but T never met him. Plain meaning would give to John. Personal Usage exception will admit EE to show who T was meaning when he said “John.” Generally courts prefer to construe the words written in the will v. rewriting the instrument. Rule: Court‟s don‟t correct scrivener‟s error. (c) Misdescription (i) Could cure by striking out the misdescription 2) CALIFORNIA a) Resolves the tension between will (Probate) and Non-Probate by treating them the same and applying the doctrines to will-substitutes, unless provision or context requires otherwise. b) Technical Words: i) Are not necessary to give effect to a disposition in an instrument. They are considered as having been used in there “technical” sense unless: 1) context clearly indicates a contrary intent 2) it satisfactorily appears that the instrument was drawn solely by the T and that the T was acquainted unacquainted with the technical sense. c) California Rule Admitting EE i) REJECTS: the latent/patent ambiguity and the Plain Meaning Rule ii) Simply asks, is there 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. iii) Is there language in the will that is reasonably susceptible to two or more interpretations? iv) Only take EE that is consistent with one of the reasonable constructions or interpretations of the express language of the instrument. (1) Courts prefer evidence regarding the CIRCUMSTANCES surrounding the T at the time of execution. The court will usually not take alleged oral declarations of the T, unless: (a) It is an equivocation scenario AND/OR (b) The alleged oral declaration was made to the scrivener (c) Harder to fabricate circumstantial evidence, so it is likely admissible. (d) Example: (i) T leaves Saturn to X b/c X is a favorite student. Ambiguity: we can admit EE. (ii) Then B runs in and says that B was T‟s favorite student. B‟s EE is not consistent with the interpretation of ambiguity, so it is inadmissible. d) Scrivener’s Error i) Ericson: If a scrivener‟s error has misled the T into executing a will on the belief that the will is valid notwithstanding the T‟s subsequent marriage, EE of that error is admissible to establish that T‟s intent was to have will valid irregardless of subsequent marriage. ii) Requirements: Show that there was an error that was a result of the scrivener‟s actions. Show effect that it had on T‟s intent. iii) CA: Can T be the scrivener? NO, but can make a good faith argument b/c court adopted this judicially. Lapse 1) The Death of a Beneficiary Before Death of Testator (change in the beneficiary) 2) Lapse Gift: if Beneficiary is ALIVE at execution, but dies before T dies = FAILS 3) Void: if Beneficiary is DEAD at time of execution = FAILS 4) Lapse applies to those who: a) Actually pre-deceased T b) Those treated as „pre-deceased‟ by 1) operation of law: divorce 2) disclaimer 3) homicide 4) simultaneous death 5) Apply Anti-Lapse Doctrine first, then go for Class Gift Doctrine Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel Can with save a failed gift? Anti-Lapse Doctrine: applies to the who, as in “who takes?” 1) Rational a) Presumed intent. Strongest b/c intended beneficiary meets the degree of relationship requirement. Keeps the gift within the family. b) Anti-Lapse: applies to both probate and non-probate property. 2) Presume the intent to devise to surviving issue of the PD Beneficiary (PDB) where there is a: a) Lapse/Void Gift: (unless class) an the beneficiary is . . . b) Related by the Proper Degree: What is the requisite degree in CA? i) Next of Kin of the T or Next of Kin of the Surviving, Deceased, or Former Spouse. Rule: Spouses are not covered under Anti-Lapse. c) Survived by Issue i) The issue take rather having the gift lapse. Therefore apply anti-lapse. d) No Expressed Contrary Intent in the instrument making the gift. i) Express Contrary Intent Exists . . . (1) Intent: can be implicit in the overall testamentary scheme as well as in the expressed words. (2) CL: “if he survives me” language means there is contrary intent to Anti-Lapse application (3) MT: “If he survives me” is not contrary intent so can apply the doctrine. (4) CA: applies CL view, but should be able to make a good faith attempt to argue MT. e) What constitutes contrary intent? Fairly LOW threshold i) Express language in the instrument expressing that Anti-Lapse is not to apply. ii) Requirement that the initial transferee survive for a specific period of time after death of T. iii) Requirement that the initial transferee survive until a future time that is related to the probate of T‟s will or administration. iv) A residuary clause is not enough to be considered an “express gift over clause.” Class Gifts 1) General a) If the devise is to a class of persons, and one of the class members PD the T, the surviving members of the class divide the gift. b) Determine the class at the time of T‟s death. c) Class gifts have a built-in right of survivorship. d) If you‟re not a class, but just a group, the gift falls to the residuary. e) Apply Anti-Lapse 1st before class gifts, unless there is a void gift and the T knew the gift was void at the time of execution. f) IRREBUTABLE PRESUMPTION 2) California: Anti-Lapse applies to BOTH class gifts and void gifts, Unless: a) If one member of the class PD the T, that portion is evenly distributed amount the other class members. b) It is a class gift that is a void gift to one or more of the members of the class AND the T knew the member(s) were dead at the time of execution. 3) Issue: Is this a class gift? Question of T’s intent . . . Factors: who and what (the gift) a) Identification of Beneficiaries: i) Individual (specific/general gift) ii) Collectively (class) . . .my cousins, or my sisters b) Identification of the Gift: i) Specific shares (favors non-class, “I give each 10k”) ii) Aggregate: (favors class, “I give a total of 10k”) iii) However, class member do not have to take equally . . . it is only a factor. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel c) Common Characteristics: that tie the people in question together i) NO (individuals) ii) Yes (class gift) iii) If find a common characteristic, look for evidence of any other members of the potential class that were excluded. If there are others, this cuts against a class gift. d) Intent (overall testamentary scheme) i) Is it consistent with the overall testamentary scheme the T 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 b/w the surviving members of the class. iv) CHILDREN are NOT included in class gifts. (where did this come from?) v) Check to see things like: 1) wife got a life estate in the farm, but if the class gift fails then it will go into the residuary and the wife will a FSA in the farm. Specific and General Devises (Changes in the Property) 1) Specific: unique, only one asset fits the description of what is being given “MY” 2) General: a) General pecuniary value (any 1 bill or any 100 shares of stock) b) Demonstrative: (hybrid) i) General gift from a specific source: treat like a general gift. (100 from my BOA account) ii) Devises typically of an amount of money, payable primarily from a particular source of funds or container. If that source fails or is inadequate, then pull the gift from the general assets of the estate. (Change if form, but not substance) 3) Residuary: any property left over a) A will covers all property accumulated up to the moment of death as long as it has a residuary clause. If it doesn‟t the left over property will fall to the intestate scheme. b) This will cover subsequently acquired property 4) Ademption by Extinction: 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 T‟s death, and can execute a codicil to remedy i) IDENTITY Approach (doesn‟t matter why its not there) (1) Item cannot be found . . . the gift is revoked. (a) Irrebuttable presumption for ademption – no EE allowed to show T‟s intent. (b) Court takes INTENTITY THEORY: ascertain the identity of the item from the written instrument and ask “does the T still own this?” (2) Steps (a) Identify the specific gift based on the will‟s language (b) Go to T‟s estate and see if you can find it. (c) If you can, B takes, if you can‟t B takes nothing. (3) CA: Involuntary Transfers (a) To the extent that the transfer is involuntary (car totaled) there is no difference in treatment. Assume that T understood ademption. (b) Harsh doctrine: efficiency (identity approach) is more important than intent. 5) Avoidance Doctrines: Avoiding Ademption in California (fudge/fact sensitive) a) Re-Classification i) Classify as general rather than as specific ii) Classify as demonstrative rather than specific. (1) Can find the value elsewhere in the estate. (2) Stock. But T doesn‟t own. Argue it‟s general and the stock should be bought for you. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b) Change in Form Not Substance i) Change in banks. Applies to both voluntary and involuntary. ii) Courts construe this one very narrowly. c) Construe Will at Time of Death (exception rather than at Execution (the general rule) i) Overlaps with acts of independent significance ii) The language in the instrument is KEY in how the court will classify. iii) 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. d) California Soften Ademption i) Conservator Doctrine (1) Rule: If the conservator (T lacks capacity) SELLS the property then it is free from ademption. (2) Basically changes the gift to general (full value of the sale owed to the beneficiary). Doesn‟t matter if this is voluntary or involuntary. (3) Doesn‟t apply if, after the sale, conservatorship is terminated and T survives for a year thereafter. (a) Gives time to realize the termination of conservatorship (b) Time to execute a codicil (c) If more than a year passes, treat it as if the T ratified the conservator‟s action. ii) Outstanding Balance Doctrine (not fully compensated for sale) (1) Rule: If there is a specific gift (that is not there) then the recipient has the right to the remaining property. If there is a sale, and all the proceeds have not been paid by the time of death, the outstanding balance is still owed to the beneficiary. (2) How it works? (a) You get any of the remaining specific gift AND (b) Any of the outstanding proceeds (not the money that has already been paid, but money still coming in) (c) Revoked: as to the money already received before death. (d) Outstanding Balance: not revoked, B gets this amount. (e) If there is anything left (totaled care) B will get the property. (f) Look out for insurance: pay amount not received before the death of T. iii) Specific Gifts of Stock Doctrine (CA) (1) When there is a specific gift of stock then the beneficiary will get: (a) The remaining stock not sold by the T and any outstanding payments due on the stock sold. But doesn‟t get what has already been paid. (b) Application (i) 1st change triggered by corp entity, own matching shares in the will/trust at time of the will‟s execution, and get the benefit of the change . . . you don‟t own match them and only get what is described in the will. (2) Rule (a) If the change is initiated by the CORPORATE entity, then B receives the benefit of the change. (b) If the change is initiated by the T, then B does not receive the benefit. (3) Example (a) In will T gives 100 shares of Amgen to B. T sells 50 shares to P. If some of the specific gift is still in T‟s possession then B gets the specific gift and also the outstanding balance due on the shares sold. (b) 200 shares of Amgen to B. Abbotlabs takes over Amgen and issues 3-1 stock trade. T now holds 600 shares. Amgen stock is gone. Specific gift to B of Amgen. (i) What does B get? Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel (ii) Ademption or Counter: change initiated by Company and not T, form not substance. (4) Privately Held Stock Rule (specific gifts) (a) Judicial Doctrine (b) Hypo: Devise 200 shares of In&Out, which does not exist in T‟s estate. (c) Executor cannot purchase In&Out to pay B. (d) If Executor was forced to purchase privately owned stock, then SH‟s could jack up the price and bankrupt the estate. (e) 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. iv) Abatement: insufficient assets to pay debts (1) Problems arise when estate can‟t financially satisfy all the devises in the will. (2) Could occur if the estate is not as large as the T believed or creditors or pretermitted issues or spouse got to the money first. (3) In the absence of a specific order indicated in T‟s will, the order of abatement of person ( and in most states) real property is as follows: (a) Intestate property (b) Residuary legacies (c) General legacies and (d) Specific legacies (i) For example, all intestate property would abate before any type of testamentary devise. Within each class of testamentary devise, the assets abate ratable. (ii) Within specific/general, cut out NON-relatives first. (4) California (yes flexible, has discretion and intent . . .residuary usually for family) (a) In the absence of any indication in the will as how devises should abate or be reduced, devises ordinarily abate in this order: (i) Residuary devises are reduced first (some don‟t start here if the wife is the B) (ii) General (and demonstrative) devises are reduced second, and 1. 1st Non-family members 2. then family members (iii)Specific devises are the last to abate and are reduced pro rata. (5) 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/hospital expenses of the last illness of T, including compensation for those attending (e) Debts and taxes under state law (f) All other claims (g) No preference is given in the payment of any claim over any other claim of the same v) Exoneration: Specific gifts pass subject to any mortgages, deeds, or trusts, etc. (no right of exoneration) (1) CL recognized a rebuttable presumption that loans/liens held on property devised by will should be discharged b/c the personal estate benefited from the loan. Also, if they were paid by the estate these payments would diminish the residuary. (2) UPC reverses the presumption and provides that specific devises pass subject to any mortgage interest existing at the date of death w/o right of exoneration, regardless of a general directive in the will to pay debts. vi) Provision: in will to pay of debts/liens doesn‟t matter vii) CL: exonerated, take w/o debt attached Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel viii) California/MT: take subject to the debt, beneficiary only takes equity ix) Bottom Line: presumed intent that B takes subject to the Debt. Satisfaction 1. General a. Issue: Do inter vivos gifts count against the share that the Benef takes? b. CL: general/residuary devise is adeemed in whole or in part when a T makes an inter vivos gift to the devisee after the execution of the will. c. T‟s subjective intent in making the gift is KEY but frequently difficult to ascertain d. Court‟s use presumptions to settle the issue when evidence of intent is lacking. e. General Gifts: when you give money in a will and then give it inter vivos f. Applies when the T 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 v. Satisfaction a. Difference: Satisfaction b/c T dies intestate b. Applies to both heirs and other beneficiaries under the will. c. As with advancements: the purpose is prevent a devisee from double dipping. d. Unlike advancements, satisfaction does not apply to issue of beneficiaries where B predeceases the testator. 3. MT: Does not apply UNLESS there is a writing, by the transferee or transferor. a. If it s by the T, then it has to be contemporaneous b. At any point in time, the donee can acknowledge that the gift is satisfying the donative intent. c. The donor can execute a codicil d. The instrument creating the gift can stipulate that if any advancements are made, then they satisfy the testamentary intent, thereby invoking satisfaction Will Substitutes and AVOIDANCE OF PROBATE 1. Life Insurance: CA: gets special treatment, sole purpose is brought home by the ritualistic function of purchasing it, to provide for those dependant upon you after your death. 2. Joint Tenancy 3. Inter Vivos Trusts 4. Possessory Estates and Future Interests Contracts with Payable on Death Provisions (remember, K law has no survival requirement) 1. General a. D‟s desire to pay certain people upon death (outside the will) b. CL: only insurance policies valid 2. How do you apply Payable on Death Provisions? a. Rule: a valid payable on death contract is NOT subject to probate. i. Payment on death provision and 3 rd party beneficiary b. CA: Does not invalidate non-probate transfers on death simply b/c they do not comply with WAF. c. CA: applies wills related rules except with Life Insurance (“special”) i. Includes all payable on death contracts, ANTI-LAPSE applies. ii. If only two parties, some gray area. iii. Payee has no present possessory interest, just a future interest. 3. Blockbuster (Super) Will: Will Controls Alls (no jurisdiction recognizes including CA) a. Q: will a probate instrument (will) control a non-probate instrument (POD contract?) Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b. If a contradictory clause in the will subsequent to the POD contract, the subsequent will DOES NOT override the POD as a “blockbuster” will. c. Reasoning: it will negate all the benefits of a will substitute (fast payment) Multiple-Party Bank Accounts 1. CA: presumption of inter vivos rights of the parties with a multiple party bank account. 2. Each party owns in proportion to their contribution and 3. when one dies, all of the others have a right of survivorship. 4. MT: presumes that the account works like a POD contract, unless there is clear and convincing evidence of a contrary intent to either of the two above. 5. Analysis a. Start with the presumption (MT) b. Need C&C evidence that the T intended one of the Other Accounts 6. Other Accounts a. JT bank account has all the characteristics of JT. b. Agency/Convenience Account: B has the power to withdraw during D‟s life but is not entitled to the balance at death. Power of the agent dies at death. Person‟s benefit, not agent‟s. c. POD Account: D does not have the power to draw on the account during D‟s life, but gets the balance upon D‟s death. 7. Key: a. Banks steer people to Joint Tenancy. b. Rationale: CL, POD was invalid. Courts will look at EE to determine the depositor‟s intent at the time of the account‟s creation. c. Used for personal property (pension plans/stock) where you can show that you were not given a choice by the bank. d. Real Property: EE is not allowed b/c in real property you are not forced into JT, but elect. 8. MT a. IV: parties own in proportion to their respective contributions. b. Presume a right of survivorship c. Ultimately this lead to a MT rebuttable presumption of a POD contract. d. Must rebut by C&C evidence of a contrary intent. Joint Tenancy in Land 1. equal interest (right to possess the whole) upon creation 2. Right of survivorship, at death the interest expires and the other tenant holds solely. Therefore you cannot devise it by will. This would not sever it into a TIC, but would be allowing a “blockbuster” will. 3. Creditors: of a JT must seize the JT‟s interest during their life, b/c at death the JT‟s interest vanishes. Revocation Deeds of Land: Possessory Estates and Future Interests 1. Revocable Deed a. It is functionally identical to a will, should we make it comply with WAF? b. Problem: grantor retains power to revoke. c. Courts did not like revocable deeds. 2. Legal Life Estate a. One passed in a deed. b. Disfavored c. Alternative: do it in a trust Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel d. US still permits legal life estates. e. CA: revocable deeds are valid inter vivos transfers that do not have to comply with WAF f. Example i. Wendel LE in property to Lulu and her heirs if not revoked. ii. Lulu: contingent remainder, is still a property interest and inter vivos transfer. 3. Modern Trend a. Emphasize T‟s intent b. There is not greater potential for fraud c. A revocable deed is OK d. All vested remainders are contingent remainders until the T dies. (but something has passed, just what exactly we don‟t know, but something). e. CL: invalid, too testamentary in nature. Spousal and Family Protections that Restrict the Power to Distribute Property Separate Property: takes its effect at time of DEATH Community Property: takes its effect at time of ACQUISITION Elective Share: is only ½ to 1/3 of the probate estate. No state has moved to augmented elective share, which goes after the non-probate estate. Rights of Surviving Spouse 1. Support: in addition to main spousal scheme there are other probate administrations and other spousal and family protective mechanisms. a. Public Pension Plans (social security) i. Only surviving spouse can claim social security. b. Private Pension Plans i. ERISA, surviving spouse must have survivorship rights. Waiver: can only be waived knowingly and voluntarily. Pre-nup: cannot waive ERISA covered pension rights. c. Homestead i. Surviving spouse and maybe family members can claim the family home for his/her lifetime. ii. Can be only one exemption: small or large depends on jxn iii. Some give LE or an allowance or ownership for a certain amount of time. d. Personal Property Set-Aside i. Surviving spouse (minor children) may have set aside certain tangible personal property of the D up to a certain value (homestead for personal property) ii. Set aside from the D and from creditors iii. Statutory checklist or sometimes a lump sum amount, but is considered essential to maintain home e. Family Allowance i. Authorize probate court to award family allowance for maintenance and support of the surviving spouse (maybe dependent children). ii. Standard? CA: lifestyle used to or reasonable standard of living. Only lasts DURING probate, and exempts creditors and not counted against the devise. 2. Dower and Curtesy (not on exam) 3. Rights of Surviving Spouse: Elective Share of D’s Property a. Elective Share Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel i. Either take what they take under the will, or “force” elective share based on statutory amount. ii. Applies to separate property (acquired at any time) and community property ( acquired during the marriage) b. Basics i. Spouse can claim 1/3 to ½ of D‟s estate. Applies ONLY to PROBATE property so if T wants to cut off spouse, the T can change the property to non-probate. ii. Augmented Estate: reaches non-probate property w/in 2 years (no jxn only UPC) c. MT i. UPC implemented a sliding scare for elective share ii. Spouse must earn share over time of marriage iii. The longer you are married the more you get 4. Rights of Surviving Spouse: Community Property a. General i. CL uses instead of elective share ii. Looks like TIC iii. If D dies intestate, surviving spouse takes his share of community property. b. Remains Separate i. Inter vivos gifts, inheritance, devises c. Putting Spouse to an Election i. CA: conditional gift ii. When spouse tries to give away something that they don‟t own, but spouse owns. iii. “If you want to take anything under my will, you will have to let me give away some of your property, if you don‟t then you will not take under my will.” iv. Anytime the D is intentionally or unintentionally giving away the property of the surviving spouse you have the potential of putting that spouse to an election. If the surviving spouse asserts his/her right then they are in danger of forfeiting their right to take under the will. d. MT i. Construe devise against giving an election: must have EXPRESS language to put a spouse to an election. You can no longer “implicitly‟ put a spouse to an election, but you can EXPRESSLY put them to an election. Ambiguity: presumed not to e an election. e. Watch Out: i. CA: will not presume an election unless accompanied by express language. ii. Others: some still allow D to put a spouse to an election w/o expressly intending to do so. Double Step-Up (down) for Community Property (Tax Issue) 1. D dies after Dec. 31, 1947: CP owned by surviving spouse is deemed to have come from the D. So, surviving spouse‟s basis is the FMV at time of death (w/ stepped up basis) 2. CA: allows double step-up. Also, avoids probate, b/c of right of survivorship (also applies to stock transferred by writing). 3. Example: buy first house for 300k. Sell for 500k. Taxable gain: 200k. Step-up basis to D‟s jointtenant‟s share FMV (250k). Migrating Couples and Multi-State Property Holdings 1. Rule a. Property characterization depends on where you are domiciled when the property is acquired Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b. BUT: spousal protection scheme used to distribute the property depends on the jxn where you reside at the time of death. c. Run the risk of falling through the cracks – should transmute the property b/f leave. 2. Migrating from separate to community property: Quasi-community property a. Property owned by the husband or wife acquired while domiciled in a separate property jxn, which would have been characterized as community property if the couple had been domiciled in the community property state where 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 1 st 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 jxn recognize quasi-community property: be careful v. Example: 1. 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 property, so separate property keeps its character when move into a community property jxn. Spousal protection in AZ in 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 state a. Surviving spouse gests to double dip. b. UDCPR at Death Act i. Enacted by separate property states ii. CP 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. True: unless the spouses have agreed to convert to separate property iv. Now there are laws in some jxns that say if you move, the D‟s half of the community property is not subject to the elective share. c. Example i. Move from CA to MO w/ 100k in cash. H dies and wills all of it to Pepperdine. W gets to take 50k under community property then the other half goes to probate and depending on the jxn, the wife can take an elective share of the probate share. Spouse Omitted from Premarital Testamentary Instrument 1. General a. Pretermitted spouse doctrine . . .death without including the wife b. Scenario i. T executes will, T marries, T dies without revoking/revising the will c. 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. 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 TEST INSTRUMENTS c. Therefore, if the spouse executes or amends any testamentary instrument after the marriage, then pretermitted spouse will apply Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 3. Rebuttable Presumption (statute: three methods of rebutting) a. Clear intent to disinherit (no extrinsic evidence) 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. Non-probate transfer ii. Intention is shown by: statements of the decedent, the amount of the transfer, or other evidence OR (any evidence0 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. Example: prenuptial agreement, amount may be relevant. 4. CA: 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. 1) Low potential for fraud, 2) spousal protection. 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. Rights of Issue Omitted from Testamentary Instruments 1. Pretermitted Child (presume accidental) a. General i. Same as above w/ pretermitted spouse ii. Will executed then the birth of a child iii. Same presumption arises b. Basic Requirements i. Valid testamentary instrument ii. Birth or adoption of a child iii. Death without including the child c. Issues i. Did T intend to disinherit the pretermitted child? ii. Did T intend to provide but accidentally forgot? d. Questions i. Is the fact the other parent gets a LE enough to qualify as “substantially all” of the estate? ii. If this doctrine applies then the pretermitted child would get their intestate share. iii. What if that is more than the other children get? iv. Or would the pretermitted child take outright while the others get in trust? e. Representing Minors, Unborns, and Unascertained Beneficiaries i. Some courts and statutes permit representatives, eg: Guardians ad litem, to provide the consent for minor or other incapacitated persons. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel ii. Look to that person to provide for the best interest of the child. 2. Exceptions a. Intentional Omission i. Expressly stated in the will and/or revocable trust ii. Evidenced in the testamentary instrument b. Otherwise provided for and intended that to be in lieu of taking under the will and/or revocable trust c. Different from pretermitted spouse: i. Gave substantially all of the estate to other parent of the OMITTED child and ii. At the time the decedent had 1 or more children iii. This way, the testator has manifested intent to devise to surviving parent/spouse and let them provide for the children iv. NO WAIVER: not born, no choice like marriage, no waiver 3. Omitted Child: exception, CA Rule on Mistaken Intent a. Child will get their intestate share if the D fails to provide for child for 1 or 2 reasons. b. Erroneous belief (applies to all testamentary instruments) 1) belief that the child is dead or 2) testator didn‟t know the child was the T‟s c. If child qualifies as a pretermitted child, they take their intestate share. Professional Responsibility Issues: CA 1. Who can sue for malpractice? a. CL: have to be in privity w/ the atty to sue for malpractice (client and the client‟s estate) b. CA and MT: (privity abolished) i. Allow 3rd party beneficiary claims ii. Anyone can sue attorney for malpractice iii. No privity required to bring an action against the attorney (tort/contract) 2. Some jurisdictions only look to the estate planning document to determine who would have been an intended beneficiary to determine whether a 3 rd party has malpractice standing. TRUSTS: CREATION (The beginning of the bucket metaphor) 1. Introduction a. Trusts and gifts: similar b. Inter vivos: intent (to give a gift outright), delivery (of property to donee), acceptance (presumed acceptance by donee). c. Trust as a gift: an ongoing gift, conditional gift d. Bifurcated Inter Vivos Gift i. Bifurcated Title: Legal v. Equitable title ii. Bifurcated Interest: Life Estate v. Remainder iii. Bifurcation Property: Principle v. Income e. Disbursement (payment of principle) Distribution (payment of income) 2. What does settler do? a. S gives to T who holds for a life beneficiary with a remainder in a possessory remainder b. S puts property in trust c. Trustee holds legal title and beneficiary holds equitable title i. Can wear all three hats if there is at least another trustee/beneficiary. ii. If not, there are not 2 different people holding the legal/equitable interest d. Sets forth terms and conditions of the trust. 3. What does trustee do? Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel a. Duty of a Trustee i. Trustee owes fiduciary duties (esp loyalty) to the beneficiaries. 1. produce income 2. interest will be split b/w LE and REM, look to settlor‟s intent a. preserve property, make it productive, and where required by the instrument pay the income to the beneficiary. b. Investment decisions: duty of fairness to both classes of beneficiaries (income beneficiaries, remandermen) ii. If trustee dies another trustee will be appointed 1. Trust will not fail for want of a trustee 2. trustee can‟t just walk away 3. must have a court relieve him of fiduciary duty in order to appoint a new trustee 4. Exceptions: clear that the provisions of the trust are personal to the person named as trusted, then the trust will be terminated. (rare, intention clear) iii. Same person can wear both hats as trustee and settlor b. Key question with trusts: i. What rights do the beneficiaries (LE and REM) have in the principle and/or income from the trust? 1. Purpose of trust is whatever the settler wants it to be. 2. Flexible legal instrument 3. Ask: 1) what is the purpose of this trust? Unlimited purposes. Remember, we can‟t analyze the trust until we see the purposes of the trust. Intent to Create a Trust 1. Any time:1 party gives property to a 2 nd party for the benefit of a 3 rd party a. Not a high threshold, easy. But where settler is trustee, evidence to set up is higher. b. Show: segregation of trust property 2. No magic words needed: “trust, trustee, in trust, etc.” 3. Create the Bucket (cute purse) a. Trust is the bucket (cute purse): terms and conditions of the trust b. Instrument that creates the receptacle is either 1) Declaration of trust or 2) Trust Deed 4. Delivery a. Physical/Actual Manual i. Courts prefer manual delivery wherever possible ii. Strongest form of evidence b. Constructive i. Give something that gives control over the property (like a key) c. Symbolic i. Something that represents the property (written statement) ii. No evidence of fraud, mistake, imposition, undue influence iii. Donee is natural object of Donor‟s bounty iv. Witness present and a writing 5. Issue: was there INTENT to impose a moral or legal obligation? a. Precatory Trust i. “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. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 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 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 was created. iii. NO split b/w legal and equitable interest, merged, so NO TRUST iv. How do you make a gratuitous promise to make a future gift and make it look like a trust? 1. change it to a declaration of trust 2. make the settler 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 and sole beneficiary) vi. 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. Solution: recharacterize the gift with failed delivery into a PRESENT declaration of trust 1. When you see a scenario where there is an attempt to give a gift in the future and the giver dies, the take would not give under the gift analysis because of failure of delivery. 2. 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. 3. The counter argument is that this is abolishing the delivery requirement. 4. Woman dedicating books to university: separate property and treat like a trustee! Necessity: Trust Property (fund the trust) 1. General a. Only arises when PROPERLY FUNDED by settler and only applies to property properly placed in the trust. (Principle and Income) b. Property only goes into a trust if it has ACTUALLY been transferred to the trustee c. ANY property qualifies, as long as someone would generally accept it as property. 2. Issues: Is future profit/expectancy sufficient to fund a trust? a. Two problems: Expectancy (may be received as a gift) Future Interest (must be earned) b. General Rule: NO i. Future profits aren‟t an adequate property interest to create a trust. 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: Person can ONLY assign future earnings from an existing contract in three situations i. Party making the gift of the future profits currently owns means of producing the future profits? (gift, symbolic delivery, assignment of future interest) ii. Intent is expressed in writing, rather than orally: 1. clearer manifestation of intent, more convincing to courts even though writing isn‟t required for passing of personal property iii. Preventing Tax Evasion 1. trying to shift profits to other family members who are in a lower tax bracket 2. 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. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 3. If you have these criteria then the future profits will be a sufficient property interest b/c it would meet the requirements for a gift. a. Possession of income producing property, writing, absent fraud 4. 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. Failed Trust v. Unjust Enrichment 1. Resulting Trust (trust failed) GOES BACKWARD (gives back to Settlor) a. Semi-secret (patent . . . some language, no EE ) i. Ambiguous on its fact as to the terms of the will. b. A trust that arises by operation of law in one of two situations: c. 1) express trust fails or makes an incomplete disposition; or purchase money resulting trust d. Purchase Money Resulting Trust i. Created when one person: pays the purchase price for property and 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. ii. Why one would put up all the money and put title in someone else‟s name? Gift, appoint her as trustee iii. Items should have been in writing, but they weren‟t, so look at relationship b/w 2 parties 1. If the receiver is NATURAL OBJECT of BOUNTY a. Rebuttably presume a gift b. Burden is on the giver to establish otherwise 2. NOT NATURAL OBJECT of BOUNTY a. Trustee presumed and failed trust b. However, the resulting trust is imposed and order G to give P the property. e. Mechanics: i. Order the party holding the property to give the property back to the settlor ii. 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. iii. Then the property goes into probate and then it matters whether there is a will (then to the residuary taker) or intestacy (falls normally) 2. Constructive Trust (someone unjustly enriched) GOES FORWARD a. Secret (latent . . . looks like a gift but really a trust, take EE to prove ambiguity) i. Nothing on the face of the will evidencing intent to create a trust. b. You give the property to the failed beneficiaries; to prevent unjust enrichment. i. Disclaimer, homicide, interested drafter took, fraud, undue influence, avoid cheating on SOF, breach of K in will. c. Requirements: i. Confidential or fiduciary relationship ii. A promise, express, or implied, by the transferee to the settlor; iii. A transfer of property in reliance on the promise iv. Unjust enrichment of the transferee 3. Look to unclean hands doctrine to see if either of the above apply. 4. MT: constructive trust is BOTH (secret/semi-secret trusts). Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel Necessity of Ascertainable Trust Beneficiaries (who takes equitable interest) 1. General: when you could have been specific and made your beneficiaries ascertainable, don’t complain if you don’t. 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. Precatory Trust: (gift with a wish) was being created. b. Power of Appointment was created c. Unborn Children: courts allow trusts to be created for unborn children. If no children born, there is a resulting trust. 3. Private Trusts a. No ascertainable beneficiaries, but set up for an honorable reason (pets, tombstone) b. General rule that a trust will not fail for the want of a trustee, does NOT apply to honorary trusts like this. i. Honorary Trusts: arises when real trust fails for want of ascertainable beneficiaries 1. Definite purpose, honorable, not capricious or illegal, trustee voluntarily accepts the wishes of Testator. (dog can‟t enforce fiduciary duty) c. The trust lasts only as long as the trustee will perform the duty then the property will go into resulting trust or a constructive trust. Necessity of the Written Instrument 1. When was the trust created? Inver vivos v. Testamentary Trust a. Testamentary (will) needs a writing b. Inter vivos doesn‟t need a writing unless real property (SOF) c. Depends on “when funded” 2. What type of property? Real v. Personal property a. real property needs writing b/c SOF 3. What does not need a writing a. Inter vivos of personal property b. Judicially created trusts (constructive/resulting trusts) Problems: 1. MT: an oral trust funded with real property will be given effect either through a constructive trust/resulting trust, if equity demands (party seeking equitable relief cannot have „unclean hands‟) 2. CL: if the deed giving a person 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. 3. No writing requirement with personal property allows creation of oral trust to dispose of personal property (sure looks like an oral will). Testamentary Trust 1. only funded when the settlor is dead 2. typically terms of the trust are in the will 3. MUST BE IN WRITING 4. NOT a will substitute Purchase Payment Resulting Trust 1. Item should have been in writing, but were not. Look at relationship b/w the two parties. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel 2. A buys land buy has title put in B‟s name. Courts presume this is a gift where there is a gratuitous transfer to one who is natural objection of such a transfer (wife,child) BUT presume a trust when it is a transfer to a legal stranger rather than a close relative. a. Natural: presume a gift, burden is on the giver to establish otherwise b. Not Natural: trustee presumed and failed trust. Rebuttable presumption that a trust was created and the settlor is the beneficiary. 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. Resulting trust is imposed and order G to give P the property. Revocable Trusts 1. TESTAMENTARY TRUSTS ARE IRREVOCABLE (created in will, funded upon death) 2. General a. ALL jurisdictions b. Wearing 3 hats i. One person can be the settlor, trustee, and life beneficiary of a revocable trust. ii. Meaning someone can wear all three hats (settlor, trustee, life beneficiary) with the power to revoke and have someone hold only a remainder interest – put condition on survivorship. iii. Inter vivos revocable trust for personal property could theoretically be created although it would be difficult to prove that someone held a remainder interest. 3. Two arguments a. Something really passes (contingent remainder) but if the remaindermen ever sues on a breach of fiduciary duty the trustee will simply claim that he revoked. b. Writings involved are similar to a will, 4. Farkas v. Williams a. F was the settlor, trustee, life beneficiary with remainder in Williams b. F retained power to revoke c. W really didn‟t take anything (except for a “Farkas” power to sue for breach of fiduciary duty) b/c Farkas can do whatever he wanted w/ the property. d. Holding: revocable trust VALID, even though it doesn‟t comply with WAF. 5. Presumption: Revocable v. Irrevocable – Default Rule when a trust is SILENT as to Revocability a. CL and Default: presume that trust is IRREVOCABLE (unless express) i. Assumed the settlor didn‟t expressly say it was revocable then it should not be. b. MT and C: presumed revocable. 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. 6. Revocation: (must be express, except in CA . . . breaks with general default) a. Generally, revocable trusts you can only revoke in compliance with the wills revocation doctrines, absent contrary terms in the trust. i. Act, writing, presumption doctrine, operation of law. ii. However, revocation by operation of law (divorce) only applies to wills, not inter vivos trusts. But it does apply to “testamentary instruments” 7. Methods: depends on settlor’s intent. If the settlor prescribes a specific method of revocation, it can only be revoked by that method. 8. Presumption Doctrine (review): applies to inter vivos, UTATA, testamentary trust. 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. i. Counter: boilerplate language, not really intent. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b. EXCEPTION: when the trust instrument provides for an express method of revocation, the presumption doctrine does NOT apply. i. Pilfras: 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 b/c it could not be revoked by act. 1. Most common, merger (pour over doctrine). Will + trust = dies and couldn‟t find document. 2. Change intent: codicil to the will or amend the trust 9. Lost Trust Doctrine a. If the trust is lost apply the lost trust doctrine, like a will. b. A valid trust is lost, extrinsic evidence is allowed to determine the terms of the trust. 10. 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: as far as probate administration it falls under here, which would be non-probate and would not be a revocation. Divorce does not revoke an inter vivos trust because it is not part of the will. ii. Testamentary: revocation by operation of law (divorce) applies because all wills related doctrines apply to testamentary trusts. The settlor believes that the will and the trust are a part of one testamentary scheme. Therefore, it is treated as such and a former husband is not allowed to recover under the probate property doctrine of operation by law. 11. UTATA Trusts a. 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. b. Partially funded before death: revocation doctrine arguably does not apply b/c part of the trust was created inter vivos. To Know About Trusts 1. Discretionary Trust: What is the extent of the beneficiary‟s interest in the trust (income & principle). Look at language of the trust w/ respect to how it tells the trustee to distribute the income. Q: what is the extent of my interest in the principle and remainder beneficiaries? 2. Duties of the Trustee a. Mandatory: Trustee must distribute all the income “Shall.” Not a support trust b/c beneficiaries can transfer their interest. If mandatory with respect to principle . . NOT a trust . . . focus on income 1 st. Beneficiaries interest will always either be mandatory or discretionary. Life tenant‟s interest in the income is usually mandatory. B has a right to demand distribution or disbursement. b. Discretionary: 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). In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary. Discretion relates to more than just the time and manner of payment. Life tenant‟s interest in the principle is usually discretionary. Beneficiary has no right to demand distribution, but can sue for abuse of discretion. 3. Duties of Discretionary Trustee (minimum defaults) a. Duty of Inquiry Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel i. Trustee must check on beneficiaries to see how they are doing. If there was adequate inquiry, doubts are resolved in favor of the trustee, and the opposite is true. b. Duty of Good Faith (subjectively) and Reasonableness (objectively) i. Trustee has to act in good faith (subjective) in regards to terms of the trust. Courts focus on good faith element. Therefore, can qualify it boy “sole and absolution discretion” but can‟t get ride of both elements, therefore “good faith remains as an element.” 4. Trustee Acts Reasonably a. Standard: reasonableness i. Ensure “comfort maintenance and support” 1. B‟s standard of living at time of settlor‟s death 2. Trustee must inquire on status at time they become beneficiary 3. court will only step in if there is an abuse of discretion. ii. Cannot have “sole and absolute discretion” b/c it would be precatory 1. Really absolute discretion would be a precatory trust 2. Not truly absolute discretion, just a high standard 3. Courts focus almost absolutely good faith b. May the trustee consider the beneficiary‟s other sources of income when they are not specifically covered in the instrument? i. Majority: there is a presumption that the settlor intended the beneficiary to receive the benefits regardless of the beneficiaries other source of income. Purpose of the trust was to keep the beneficiary at the same standard of living. Argue that they are beneficiaries and should take something. 5. Exculpatory a. Courts do not like these clauses (similar to no contest clause) b. 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) Creditors’ Rights 1. Spendthrift Trusts (all jxns recognize) a. Is one in which a valid restraint on alienation is imposed expressly or impliedly by the terms of the trust, proving that 1) the beneficiary cannot transfer his interest voluntarily and 2) that his creditors cannot reach it for the satisfaction of their claims. i. Beneficiary CANNOT transfer interest voluntarily ii. Creditors CANNOT step into beneficiary‟s shoes iii. B can‟t sell/give away “future income” iv. Trustee can ONLY give property to beneficiary. 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. However, the restraint on alienation doesn‟t apply to income after it has been paid out to the beneficiary. 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. However, the creditors have to catch the beneficiary before he spends it. 3. Involuntary v. Voluntary Restraint of Alienation a. Settlor can prohibit voluntary and NOT involuntary, but cannot prohibit ONLY involuntary. If they want to prevent involuntary, then must do BOTH. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel b. If the Beneficiary could give his interest away, but his creditor could not reach it, it would violate the basic rule that the creditors can reach any interest the debtor can alienate. c. If it‟s a discretionary trust, can‟t force the beneficiary to give money unless the trustee abuses his discretion. Alternative to spendthrift clause. Discretionary trust may be a better alternative to a spendthrift trust (to protect against creditors taking) b/c the creditor would have to prove abuse of discretion. 4. NOT subject to spendthrift clauses a. Former spouse entitled to alimony b. Children entitled to child support c. Government (tax purposes) d. Creditors who provide basic necessity (food, medical, housing) e. Tort creditors b/c they are involuntary (like children) 5. Spray/Sprinkle Trust a. Hybrid: discretionary and 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 principle. b. Creditor can step into the shoes of the beneficiary, but you must look at whether the trust is mandatory or discretionary. i. Mandatory: creditor entitled to take in the place of the beneficiary, b/c taker can demand. ii. Discretionary: creditor not entitled to take, unless the trustee abuses his discretion. Wendy McGuire Coats – Wills & Trust, Fall 2004 Wendel