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This is an outline for a Trust & Estates class based on the Jesse Dukeminier casebook, "Wills, Trusts and Estates," 8th Ed. (2009). The outline also includes relevant Missouri law on the subject, with reference to some Missouri cases not included in the Dukemenier text.
Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 1 INTRODUCTION I. Things to Consider a. Due Diligence – questions to ask your client i. What property do you have to give away? ii. What family do you have? / Who do you want to give it to? iii. How are your children with money? iv. How do you feel about your children-in-law? v. (If young kids) What do you want to give your kids if you die now? vi. (If teen kids) Do you want to designate money for education? vii. (If married kids) Do you want some $ to go only to kid and not spouse? viii. What about your grandchildren? b. Other documents i. Power of Attorney – Appoints agent to handle your finances. ii. Durable Power of Atty – Appoints someone to make healthcare decisions iii. Living Will – statement of what you want if you’re incapacitated (feeding tube) II. Ethical Issues a. Representing husband and wife together i. Conflicted interests – every $ H gives W is $ he doesn’t give to someone else. ii. Secrecy – “Don’t tell my wife, but ___.” Shouldn’t hide info from client (wife) b. Doing something you’re not comfortable with. i. E.g., Write child out of will only if he’s gay; Leave lots of $ to charity you hate ii. Can refuse to represent client, but only if you don’t leave them in worse position than they began. III. Policy a. Testamentary Freedom: i. Can disinherit anyone you want except surviving spouse (elective share) ii. Can give property to anyone you want iii. Can put conditions on giving of gifts ($ to kids so long as they complete school) iv. Hodel v. Irving (US 1987): Statute said fractional portions of tribal land escheat to tribe at your death – decedent cannot pass along. Statue was unconstitutional – cannot limit ability to give away one’s property. 1. Irving Trust v. Day (US 1942) – earlier case overturned by Hodel. Said states could do whatever they want. v. Dead Hand – person can influence events even after they’ve died. b. Disinheriting: Generally, you are free to leave nothing to your children, INCLUDING minor children i. Forced Heirs – Some states have laws that you can’t disinherit kids under certain age. ii. EXCEPTION: Louisiana – can’t disinherit children 23 yrs old or younger – must give at least ¼ of your wealth if you have one child, or ½ if you have two or more children who are forced heirs. IV. Probate/Administration a. Testacy i. Probate – the process ii. Executor – person who collects assets and then distributes property (MO – also personal representative) iii. Court Appointed Testamentary – what Executor is called after court officially appoints iv. Probate Estate – Stuff that’s collected that isn’t distributed thru other means Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 2 b. Intestacy i. Administration – the process ii. Administrator – person who collects assets and then distributes property (MO – also personal representative) iii. Court Appointed Administrator – what Executor is called after court officially appoints iv. Estate Subject to Administration – Stuff that’s collected that isn’t distributed thru other means c. 3 Functions: i. Provides evidence of transfer to new owners (clears title) ii. Protects creditors by providing procedure of payment of debts iii. Distributes property to beneficiaries/heirs after creditors are paid. d. Probate Property – property that passes under decedent’s will, or thru intestacy i. Stuff decedent owned without a beneficiary designated ii. Stuff decedent named a beneficiary for, but can’t be distributed to that person for one reason or another 1. E.g., almost never give property to dead person (e.g., POD account with son who predeceased you) e. Non-Probate Property – property that passes outside of probate thru an instrument other than a will. If no beneficiary named, spouse will usually get it. i. Joint tenancy property (especially between spouses) ii. Life Insurance (policy paid to beneficiary on receipt of death certificate) iii. Ks with “Payable on Death” (POD) provision (pension, some bank accts, IRAs) iv. Interests in Trust (usually inter vivos trusts) v. Qualified Plans: HUGE assets for people (401k, pension, etc.). Usually have more money in these than outside. Devise – only used for real property Bequeath – only used for personal property Give – generic, so can be used for both INTESTATE SUCCESSION I. General Themes a. Most people don’t have wills. b. Intestacy - RSMo 474.010: Spouse’s and children’s shares, when natural or step children. MO levels are lower than UPC b/c ppl going thru intestacy usu. have less to pass on to heirs. c. UPC 2-102: Spouse’s and children’s shares, when natural or step children. (2) deals with surviving spouse ($200K + ¾ remaining) and parents. d. Partial Intestacy – RSMo 474.030: If something is left out of a will, use intestacy. e. Small Estate Admin – Cheaper than normal admin. In MO, limited to estates less than $50K, and no real property. f. Heirs: i. Child of Marriage: Presumption that child born while H and W together or no more than 9 months after separating is a child of H. ii. First would go to surviving spouse and kids. If you don’t have either, then: 1. RSMo 474.010(2): To parents AND siblings + descendants; to grandparents AND aunts/uncles + descendants… etc. to 9 th degree. IN EQUAL PARTS. If no heirs, then to deceased spouse’s family. If none there, then escheats to state. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 3 a. 9th Degree: Count up to first common ancestor, then down. Add the levels from both up and down. b. Escheat: Property goes to state when there are no heirs. 2. UPC 2-103: To parents, and if none, then to siblings (UP, then OUT). g. After-Born Heirs: i. RSMo 474.050: kids and grandkids can inherit, but after-born siblings cannot. ii. UPC 2-108: Anyone is an heir as long as they were in gestation at the time of intestate’s death and live at least 120 hours. iii. Frozen Embryos/Sperm: Issue is whether decedent contemplated and maybe even approved use of their frozen stuff while alive (Woodward). 1. PROBLEM: Can never close one’s estate as long as frozen stuff exists. 2. MO: Allows after-born descendants. h. Pre-deceased: i. 120-hour Rule: Must survive the decedent by 120 hrs to not be called “pre- deceased.” Aimed at simultaneous death (car accident, etc.). RSMo 474.015. ii. Janus v. Tarasewicz (Ill 1985): Cyanide aspirin. H died first, and W was on life support for 2 days before pronounced dead. W’s family was paid H’s life insurance proceeds b/c W was beneficiary and W was found to have signs of life after H’s death. (not 120 hours, but difft state). i. Bloodline: Intestacy is obsessed w/ bloodline. Generally, cannot inherit from someone unless you are blood relation. Exceptions: i. Spouse ii. Adopted children iii. RSMo 474.010(3): If no spouse or heirs survive, goes to family of predeceased spouse (or spouses, in equal parts). (H received W’s property when she died, so H’s property goes to W’s family, since some of W’s is contained therein. Also avoids escheat). j. Property to Minors: Court appoints guardian of property when property would go to minor through intestacy. Usu. a 3d party so parent won’t spend on food rather than protect child’s property. II. Descendants a. Methods of Representation: Passing property to anyone but surviving spouse. i. Strict Per Stirpes: Least popular but most important. Often used in wills. 1. Treats each branch of the family the same (all children, whether alive or dead, get the same). “To my then living issue, per stirpes.” 2. H has 2 living children and 2 dead. Dead child 1 has 2 kids, and dead child 2 has 3 kids. Each child gets ¼, with the dead kids’ portions going to their own kids, equally. So, DC1’s kids each get ½ of their parent’s ¼ (or 1/8), and DC2’s kids each get 1/3 of their dead parent’s ¼ (or 1/12). 3. If dead kid has no issue, then his portion goes back into the pool and is divided among the dead with issue and the living kids. ii. Per Capita at Each Generation: UPC 2-103(1) and 2-106. Each child who gets property gets same amount; each grandchild who gets property gets same amount, etc. 1. Look at surviving children and children who left descendants. Each living child gets an equal share as if deceased sibling with issue are still alive. 2. Then, portion that would go to deceased siblings is then divided equally among all issue of deceased siblings. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 4 3. H as 2 living children and 2 dead children. Dead child 1 has 2 kids, and dead child 2 has 3 kids. 2 living kids each get ¼. The remaining ½ is divided among the 5 grandkids of DC, so each gets 1/5 of ½, or 1/10. 4. If dead kid has no issue, then his portion goes back into the pool and is divided among the dead with issue and the living kids. iii. Per Capita w/ Representation (Modern Per Stirpes): RSMo 474.020. 1. Make your first division at the first generation w/ a living person. Descendants represented by their dead parent. 2. H has 1 living child and 2 dead children. Living child takes 1/3, and then Dead Children’s issue get their shares just like per stirpes. 3. H has 0 living and 3 dead children. There are 5 living and 0 dead grandkids. Each grandkid gets 1/5, since they are the first generation with a living person. Division not dependant on what their parents’ portions would have been. (A dead grandkid’s portion would be divided among his issue, per stirpes). b. Half Bloods: i. RSMo 474.040: If there are half and whole blood heirs, the half-bloods get ½ of what the whole bloods get. If collaterals are all half-blood, they all get whole portions, and any ascendants would get double portions. ii. UPC 2-107: Half and whole bloods are treated equally. c. Adoption: i. RSMo 474.060: 1. Cuts off natural parents, no matter what. 2. If “new” parent adopting after 2d marriage, “old” parent must give up all parental rights, consent to adoption, or be dead. 3. When parents adopt, child is now also “adopted” by grandparents, etc., for inheritance purposes. 4. Child born out of wedlock is child of Mother. Is also child of Father if: a. M and F participated in wedding ceremony before or after birth of child, even though attempted marriage is void; OR b. Paternity established by adjudication BEFORE death of Father, or established thereafter by clear and convincing proof. i. Child can then inherit from F. ii. F can inherit from child only if he openly treated child as his and has not refused to support child. iii. Statute assumes that fathers should take care of their kids, even if they purposely avoided responsibility. A sort of postmortem punishment. c. (Common law: child born out of wedlock was “child of no one”) ii. UPC 2-114: 1. A child is the child of the natural parents, regardless of their marital status. 2. Adoption by spouse of a natural parent cuts of other natural parent’s ability to inherit from child, but DOES NOT cut of ability of child to inherit from/through other natural parent. 3. Parent may only inherit from/through child if they openly treated the child as his/her own and has not refused to support child. iii. Adult Adoption: Usu. done to make someone a descendant who otherwise isn’t. 1. Minary v. Citizens Fidelity Bank (KY 1967): Man who adopted his wife to make her an heir for purposes of trust on his side of the family, so she could Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 5 benefit if he died first. Wife/“grandchild” couldn’t inherit b/c adoption was for sole purpose of making her a beneficiary. 2. Policy Discussion: a. Generally not an issue with intestacy – comes in with wills, trusts, etc. b/c adoptor anticipates large inheritance. b. If decedent wanted that person to be a beneficiary, he would have named her by name or position (e.g., Sally, or “my child’s wife”) c. Some states allow adoption for persons under a certain age only. d. For wills/trusts, can put limit on age for adoption, or name the beneficiaries specifically instead of giving class gift. d. Class Gift Terminology: RSMo 474.435 – Halfbloods, adopted, and persons born out of wedlock are included in class gift terminology and terms of relationship in accordance with rules for determining relationships for purposes of intestate succession. i. SO… If your WILL says, “give $10K to each of my siblings” – use intestacy rules to determine what to do with your half-sister. III. Disqualification, Disclaimer & Advancement a. Disclaimer: Denying an inheritance. i. Reasons to Disclaim: 1. Taxes: If you disclaim and let it skip to your child, then it gets taxed only once for one transfer (instead of twice for two transfers) 2. Creditors: Can avoid having money in your possession that creditors can reach. Includes Medicaid (Spend-down). a. Exception: Dryer v. US (1999): Cannot disclaim inheritance to avoid the IRS as a creditor. Must pay taxes. 3. Passing on to someone else: You are terminally ill and don’t want to complicate your estate by receiving more property right before you die. 4. Property you don’t want: e.g., toxic waste clean-up site; real estate that you don’t want but will have to pay prop. taxes on. a. If you want it to escheat, must get everyone in the 9 degrees of inheritance to disclaim. ii. How to Disclaim: 1. Varies from state to state. May or may not have to file with probate ct. (regardless of whether there is a probate open), or other office. 2. RSMo 474.020: Requires signed writing showing refusal to accept part or all of property, within 9 months after transfer. Deliver to transferor/representative, holder of title, or probate ct. having jx. b. Advancement: Property given to someone in advance of giver’s death, as an “advance” on the recipient’s inheritance. i. RSMo 474.090 / UPC: Only works if in writing by decedent or recipient. 1. Hotchpot Method: Add the advanced amount to total intestate estate, divide into equal parts, then subtract amount of advancement from recipient’s inheritance. 2. If advance is greater than what inheritance would be, recipient does not give anything back. 3. If recipient predeceases giver, then amt of advance is not used to calculate intestate estate of giver. c. Disqualification: When a person who is supposed to inherit is not allowed to because of their conduct i. Spousal Abandonment Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 6 1. RSMo 474.140: Person who goes away and either commits adultery or abandons spouse without just cause and lives apart from spouse for an entire year preceding spouse’s death, that person is forever barred from inheriting from spouse’s intestate estate unless person voluntarily reconciles with spouse and starts to live with spouse again. a. Abandonment: A showing by the one charged with it to completely give up on the relationship w/ spouse w/ no intent to resume it. i. This includes constructive abandonment. b. Applies only to intestacy and elective share, and specific off-sets (e.g., homestead allowance, exempt property). c. Bi-costal marriages don’t count, since spouses don’t abandon without just cause. BUT, if living in continuous state of adultery while still married to person in CA, then is DQ. d. If you commit adultery but still live with spouse, no DQ. 2. Matter of Jellech (MO 1993): Wife moved out of marital home, but husband abandoned wife b/c he abused her, which essentially forced her to leave. This amounted to constructive abandonment. ii. Killing the Decedent 1. Estate of Laspy (MO 1966): Person who kills someone may not inherit from their intestate estate if the killing was felonious AND intentional. a. Perry v. Strawbridge: Landmark case that said someone should not benefit form their own wrong (e.g., killing, arson, etc.) 2. UPC 2-803: (b) Forfeits intestate, elective, omitted spouse/child share, etc. if feloniously and intentionally kill decedent. (c) Also revokes killer’s right to represent decedent as fiduciary; severs interests of decedent and killer for property jointly held with survivorship rights. (g) Can be shown by criminal conviction, or if no conviction, show by preponderance of evidence that would be criminally accountable. 3. Policy Discussion: What if father wanted son to assist him with suicide? Would father still want son to inherit? Do we want to discourage this type of behavior? ARGUMENTS: a. MO: No statute, and this isn’t what Laspy addressed. So prolly OK for son to inherit. b. UPC: Statute is pretty much on point. c. Wisc. Case: Court said son could inherit. IV. WILLS V. Validity a. Execution i. Most invalidations happen because will was not properly executed. ii. Miscellaneous Formalities in MO 1. Send draft of will to testator with letter with short summary of will. Signing ceremony happens at another time with finalized will. 2. Attestation Clause: On signature page, where witnesses sign. Recites requirements for proper execution. a. Read requirements aloud first. b. Creates rebuttable presumption that will was properly executed. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 7 3. Notary needed for self-proving affidavit (if one is used) to make it a self- proving will. (easier to get thru probate – all states but one allow) a. In MO, testator must ALSO sign. 4. Sealed with staples (today). Used to be red ribbon across top w/ wax. a. “L.S.” = locus sigilli. The place for the seal. 5. Most attorneys will put some text of will on signature page. 6. All signatures with same pen – shows everyone was there at same time. 7. Optional: testaror initials every page. Problematic if you miss a page. 8. Do it the same way every time! That way you’re likely to do it right, and you’ll remember the ceremony if you have to testify in probate court. 9. Questions: a. Is this your last will and testament? i. To make sure testator knows she’s signing her will. ii. So witnesses can later testify that testator knew she was signing her will. b. Do you want the two/three of us to sign as witnesses? i. In some states, the affidavit needs to be signed at the testator’s request. iii. Writings 1. Will must be written, must be properly executed. 2. Original: Original will must be admitted to probate. If more than one original, ALL originals must be admitted. a. Atty keeps original, usu. in will vault at office or bank. b. Give testator conformed copy – “signatures” typed in. c. No unauthorized changes (e.g., by disgruntled heirs) d. Changes made with atty and executed properly. e. Atty gets business/$$$ (self-interest) 3. RSMo 474.320: All wills must be in writing. a. No video tape wills allowed. 4. UPC 2-502: Will requires proper execution. 5. UPC 2-503: Harmless Error. Allows documents not properly executed as long as it meets other requirements. a. “Document or writing” – implies that videos might be allowed. 6. Video Policy Discussion: a. Might look like someone thinking out loud rather than a will. b. Issue of admitting original to probate. Download from digital camera to computer, then burning disc is not the original. c. Doesn’t have precision of language in wills, which we like. d. BUT, law favors testacy over intestacy. e. ALSO, is what lay people expect will work; law should catch up. iv. Witnesses 1. Attestation Clause a. RSMo 474.320: Requires only 2, but 3 is better (some states require 3). Doesn’t matter if they’re Mother Teresa or Bernie Madoff. b. Witnesses must do so in front of all other witnesses and testator (so others can see). c. Witnesses NEED NOT SEE TESTATOR SIGN. Testator can tell witnesses he just signed, and testator must be present for witnesses’ signatures. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 8 d. Stevens v. Casdorph (WV 1998): Testator signed in front of bank employee, then employee took will to witnesses on other side of bank. Will was invalid b/c didn’t meet WV’s witnessing requirements. e. Strict Compliance Rule: No amt of evidence will make a will valid if it is improperly signed. (Most states follow this; UPC has the “harmless error rule” to protect testators). 2. Witnesses must subscribe (i.e., on bottom of last page) 3. Usu. use attorneys – they’re handy, and they know what’s going on in case they need to testify later. 4. Who signs first: a. RSMo 474.320: No requirement that testator sign first. b. UPC 2-502(a)(3): Requires testator to sign first, but you always have “harmless error” if you mess that up. c. Bad form to have witnesses sign first. 5. When witnesses should sign: a. RSMo 474.320: No requirement for time frame. Could be 1 minute, 1 week. CANNOT BE AFTER TESTATOR HAS DIED, THOUGH. b. UPC 2-502: Requires that witnesses sign “within a reasonable period of time after.” (Trier of Fact decides). This means that if testator dies, witnesses can still sign as long as it is “within a reasonable period of time after.” 6. Interested Witnesses: a. RSMo 474.330: Purging Statute. Will not invalidated b/c of interested witness. But if not 2 other disinterested witnesses, interested witness’s share cannot be more than what he would have received if testator had died intestate. i. Doesn’t necessarily eliminate all interest. If interested witness to 2000 will gets 25% in 2000 will and 0% in 1990 will, then his interest is to argue the 2000 will is indeed valid so it doesn’t revert to 1990 will. b. UPC 2-505(b): Interested party gets entire share from will. c. Common law: Interested party could not be a witness. d. Very few states have laws that will with interested witness is invalid. Most states have purging statutes that give lesser of will portion or intestate portion. e. Executors: Sometimes executors are interested parties b/c they’re also beneficiaries. Because they are personally responsible for property in decedent’s estate, will either be extremely careful with distribution or ask court to take over. v. Holographic Wills: A will written by the testator’s hand and signed by testator. Requires the date; does not require attesting witnesses. 1. Valid just because it is in testator’s handwriting. 2. Some states require entire will be in testator’s handwriting; other states require certain parts only. a. UPC 2-502(b): Requires only signature and “material portions” be in testator’s handwriting. 3. Little less than half of the states allow these. MO DOES NOT. a. RSMo 474.320: Every will shall be in writing, witnessed, etc. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 9 4. Will Forms: Fill in the Blanks. Is filling in the blanks in your handwriting enough to make it a valid holographic will? a. First Generation Statutes: Require the will be “entirely written, signed and dated” in testator’s handwriting. i. “entirely dated” – i.e. “Sept 14, 2009” instead of “Sept 2009” ii. Stamps may invalidate the will (not handwriting) 1. Estate of Thorn: stamped name of testator’s home invalidated the holographic will. iii. Estate of Dobson: Banker’s penciled in spelling corrections invalidated the will iv. Kimmel’s Estate (PA 1924): Letter written by dad to sons was completely hand-written, signed and dated by dad, and had testamentary intent. Signature of “Father” was ordinary signature to his sons. v. Can often probate the handwritten portions as long as they make sense standing alone, absent non-handwritten stuff. vi. Witnesses: That’s someone else’s handwriting, so may invalidate if not properly witnessed for normal will. b. Second Generation (1969 UPC): “Material provisions” of the Will must be in testator’s own hand. i. Courts will sometimes look at typed portions to give it substance, but not always. ii. Handwritten stuff must show testamentary intent. c. Third Generation (1990 UPC): “Material portions” must be in testator’s own hand; extrinsic evidence allowed. i. UPC 2-503(c): Allows use of pre-printed material to show testamentary character. ii. Estate of Gonzales (ME 2004): Decedent filled in will form as draft, had witnesses sign a blank form with intention of cleaning up draft, but then died. Ct. said that even though handwritten portions did not show testamentary intent (2d Gen statute requirement), handwritten portions may draw testamentary context from both printing and handwriting (turned it into 3d Gen). 5. Why do we allow holographic wills? a. We favor testacy over intestacy b. Useful in emergency situations c. Allows ppl to have wills who can’t afford an attorney d. Lay people think it works, so lots of people do it. e. Handwriting is good evidence of anything, esp. testator’s intent. vi. Testamentary Intent 1. Doesn’t have a lot of statutory support, but a requirement nonetheless. 2. What requires testamentary intent: a. When the document is signed or acknowledged before signing. b. During the actual signing c. When the will is attested afterwards. 3. Estate of Kuralt (MT 2000): Testator executed holographic will in 1989 giving Montana property to mistress; executed formal will in 1994 that didn’t mention Montana property or mistress, meaning his wife would inherit everything. Deeded MT property to mistress in 1997; days before his death, wrote letter to Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 10 mistress saying he’d have lawyer visit him in hospital to make sure she “inherited” rest of MT property, but then he died. Letter was a valid codicil b/c showed intent: “inherit,” lawyer, etc. a. Dissent: Letter showed he intended to make another will, so testamentary intent would only work in that will and not this “codicil.” 4. Extrinsic Evidence is rarely let in. Must be extremely good evidence. a. Fleming v. Morrison (MA 1904): Testator created “sham” will to get “beneficiary” to sleep with him. Testator announced this after the first witness had signed and before the last two signed. Intent was not there, and last two witnesses don’t really count. vii. Signatures 1. Testator: RSMo 474.320 requires testator sign. Period. a. Traditionally done at the end to show testator read and understood the document. Finalizes testamentary intent. b. If not signed at the end: i. Must be signature and not just a name written down. ii. Might have to show that signature of testator was meant to finalize the will. iii. Potter v. Richardson (MO 1950): Testator wrote name on first page and signed back cover of will, but not at end of document. Court probated anyway b/c witnesses properly subscribed, and testator signed somewhere. 2. Witnesses: RSMo 474.320 requires witnesses must subscribe – sign at end of the last page. a. UPC – no requirement about where witnesses’ sigs appear. 3. How do we know what is a signature? a. Must finalize testamentary intent. b. Sign as you normally sign, for authentication purposes: “Jim Smith” instead of “James Martin Smith” c. If hands are shaky, an “X” will work. d. If you can’t sign, a computer will work (Taylor v. Holt, p. 235) e. RSMo 474.320: If you cannot sign on your own behalf, someone else may sign for you as long as: i. In testator’s presence, AND ii. At testator’s request. viii. Incorporation by Reference: External documents referred to or written statements added to a will later that is incorporated in the will. 1. RSMo 474.333: A will may refer to a written statement that a. Disposes of tangible personal property (not intangible, not real) b. Through a separate instrument c. Not otherwise disposed of in the will d. Handwritten by or signed by testator e. Is dated f. Describes the items and devisees with reasonable certainty g. AS LONG AS the separate instrument is in existence at the time of the will or codicil. 2. Benefit: Testator can determine who gets his stuff and then change that form time to time WITHOUT having to change original will. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 11 a. More valuable things written into will, as may induce fighting among family/friends. b. Often used b/c attys don’t want testator messing with the will that they wrote. c. Atty often tries to hold onto the separate document. 3. Problem: Testator may not remember to sign and date every time they make a change. 4. Clark v. Greenhalge (MA 1991): Testator referred to a “memorandum” in her will that listed personal property. She had a memo AND a notebook; notebook was updated occasionally. “Memorandum” was generic enough to include notebook. Since notebook was in existence at time will was executed, then can be incorporated by reference. 5. Envelopes of Cash: Not a good idea to incorporate these by reference. Potential for fraud is high if they’re kept at home. Safe-deposit box that only testator has access to might be OK. 6. To avoid naming specific people or items: Use EXTERNAL FACTS. a. Terms that are relative/independently significant, based on situations at time of testator’s death. b. E.g., My home, my husband at time of my death, my then-living issue per stirpes, contents of my safe-deposit box, etc. ix. Foreign Wills: Wills written in one jx are valid in other jxs. 1. RSMo 474.360: A written will is valid if executed in compliance with: a. laws of MO, b. laws of the state in which it was execute at the time it was executed, OR c. laws of the place where, at execution or testator’s death, testator is domiciled, has a home, or is a national. 2. Applies to wills executed in other states or countries 3. Applies to holographic wills if they were valid where they were formed. 4. Applies to wills executed in UPC states that had “harmless error” in execution. x. Self-Proving Affidavits 1. Not part of the will. A separate document. 2. All states but one recognize some form of SPAs. 3. Pretty much malpractice not to use one. 4. Value: You can probate the will based solely on the SPA. 5. RSMo 474.337: Will may be made self-proved at time of execution or later, as long as testator and witnesses sign and notary is present. 6. RSMo 473.065: Wills that are properly executed and are self-proving is probated without further proof. b. Will Contests i. Procedure 1. Missouri Procedure a. RSMo 473.087: Will must be admitted to probate to be effectual. b. RSMo 473.043: Person who has custody of original will must deliver to probate. Could be lawyer, bank, etc. Court may compel to produce. i. Usu. found with attorney or testator (desk, freezer, safe deposit). Can ask probate ct to “hold” for nominal fee. c. RSMo 473.073: Must show testator is dead, will is properly executed, and will wasn’t revoked. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 12 i. RSMo 473.053: Can prove proper execution with self-proving affidavit; testimony from at least 2 of the witnesses; or other evidence (e.g., handwriting). d. RSMo 473.020: Executor asks for letters testamentary. If they don’t, then any interested party may request, including creditors. i. Priority of $: Funeral; court costs/atty fees; creditors. ii. Creditors: Allowed to request b/c they may get the entire estate if testator had more debt than assets. e. Timing: RSMo 473.050: 1 year after testator’s death to do all this. After Notice is given, 6 months to bring a contest. f. Notice: RSMo 473.033: After letters issued, court mails notice to each heir and devisee. Creditors, etc. get notice by publication. g. Common Form: Proponent takes will to ct. with death cert. and (usu.) self-proving affidavit, and clerk either stamps and approves it or rejects it (rejected if appears revoked or improper). h. RSMo 473.083: Unless anyone with interest appears within 6 months of notice of probate or rejection of will, that probate or rejection is binding. i. If interested party is a minor, ct appoints a guardian ad litem (parents often have adverse interests). ii. Jury trial when timely petition to contest is filed. i. Solemn Form: If someone contests a probated will, becomes un- probated. Then proceed in solemn form or w/ jury trial. i. Wills with “X” across, or on napkins, etc. proceed in solemn form. j. Goal: Keep all of the “easy” wills in solemn form. 2. Codicils: a. Must be submitted with the will that it amends. b. Probated and contested in the same way as a will. c. When to use: Used when it is impractical to just write an amended will. i. i.e., when typewriters and carbon copies were the only option for creating documents. ii. Your competence might be challenged at time of the codicil but not when you wrote will years ago. iii. Making a change that won’t affect the “bones” of the will. 1. Client might not want to pay for new 40-page will. 2. Change address of property mentioned in will. 3. Change gift for nephew from $25K to $50K. d. When not to use: When it makes more sense to write a new will. i. You have too many codicils and have to probate every one. ii. You reduce a gift (e.g., from $50K to $25K) – recipient will see you reduced and may possibly contest. iii. You change portions of will by codicil, then use another codicil to amend same will, can be confusing. ii. Capacity, Generally 1. RSMo 474.310: Any person of sound mind may make a will. 2. Measuring Sound Mind: Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 13 a. Competence: intelligence sufficient to know your property, the natural objects of your bounty (beneficiaries), and relating to one another. (Rest. Of Property §8.1 is similar) b. Sehr v. Lindemann (MO 1899): Testator’s children of his first marriage contested will b/c testator favored children from his second marriage in will. Need to show more than favoritism to show lack of competence. c. Burden of Proof: In MO, proponents of will must show competence of testator, then contestants must show incompetence. d. LOW THRESHOLD in MO for showing competence. e. Alzheimer’s: Doesn’t mean you lack capacity. Must show confusion when will was signed. i. Estate of Washburn (NH 1997): Wrote 3 wills, 2 within weeks of each other, when she had dementia/Alzheimer’s. Court said she lacked capacity on the final two wills – lots of evidence pointing to confusion, lack of competence. f. Changing your mind: Doesn’t mean you lack capacity. E.g., can write new will every time you get a new girlfriend, but doesn’t mean you’re senile. g. Being Weird: Doesn’t mean you are incompetent. i. Wilson v. Lane (GA 2005): Woman w/ occasional forgetfulness, weird behavior, and irrational fear of flooding was not incompetent. Had rational desire to dispose of assets to specific people. h. Uneven distribution: doesn’t mean you are incompetent. i. Mangan v. Mangan (??): Testator changed devises to brothers over time and several wills, with caretaker’s share becoming smaller. Also, had “periods of lucidity”, so could have executed during one of those periods. ii. Even if dad gave equal gifts to kids throughout life, can leave entire estate to one and disinherit the other. i. Testamentary Freedom: You can do whatever you want. Can be weird, unpredictable. j. Hard to prove Incapacity: i. Burden on contestant to show incapacity at time of signing. ii. “Lucid Interval” Doctrine. iii. Capacity standard is very low (lower than for Ks). iv. Living on one’s own generally shows capacity. v. BUT, some will counter with an undue influence argument (e.g., gold-digger girlfriend) vi. Morton v. Simms (MO 1953): No submissible issue of testamentary incapacity without evidence of incapacity at time the will was executed. k. Guardianship: Can be used as evidence, but is not itself dispositive of incapacity. l. Result of incapacity: ENTIRE Will is INVALID. iii. Insane Delusions 1. Definition: A persistent belief that has no existence in fact, which the testator adhered to against all evidence. 2. Proof: Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 14 a. Must be free of insane delusion AND have capacity. b. Show that *testator had an insane delusion *that affected the material provisions of the will (i.e., the will was a product of the insane delusion). i. In re Strittmater (NJ 1947): testator had insane delusions about men that was manifest in her will. (prolly decided differently today). ii. Breeden v. Stone (CO 2000): Testator was suffering from insane delusions, but was not shown to affect the material provisions of holographic will written right before his suicide. iii. In re Honigman’s Will (NY 1960): Liberal rule that will might have been caused or affected by insane delusion. Also, not necessarily having insane delusions even if there are reasonable explanations for wife’s behavior, if he had good reason to believe it. iv. Estate of Kottke (AK 2000): An insane delusion has absolutely no basis in fact... Completely devoid of reason w/o even a glimmer of factual basis. 1. SO… someone who believes there was a second JFK shooter has insane delusion b/c it is an historical fact that there was only one shooter? c. Mistake is NOT the same as insane delusion. d. Unpopular or Distasteful (KKK) is also not insane delusion. 3. The Point: a. Always a two-part test, whether using Strittmater, Breeden, or Kottke. b. Most insane delusions have some basis in fact. c. Mistake is not insane delusion (I haven’t seen or heard from my son in 5 years, so I assume he’s dead). d. Religious beliefs are NOT insane delusions (includes cults). e. Effect on will: INVALIDATES ENTIRE WILL. iv. Undue Influence: When wrongdoer overpowers the intent of the testator and substitutes what the wrongdoer wants. 1. Burden of Proof: a. Very high standard for undue influence b. Contestant must show undue influence (will often win if he shows this). c. Burden then shifts to proponent to rebut presumption of undue influence. Hard to rebut at this point. 2. Controversial circumstances: Much easier to find undue influence when circumstances of creating will are seen as controversial. a. Lipper v. Weslow (TX 1963): Testator’s son (atty) wrote her will, giving ½ to him and ½ to other son, and nothing to dead son’s family. Despite heavy legalese in will, son rebutted presumption of undue influence by showing testator didn’t like son’s widow. b. In re Will of Moses (MS 1969): Widow’s lover was atty 15 years younger than her, and she left him most of her estate. Lover didn’t know about this, and will drafted by another atty. Ct said undue influence by lover. Drafting atty should have tried to convince Moses that she shouldn’t do this, to cover his bases since this case would be highly scrutinized. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 15 c. In re Kaufmann’s Will (NY 1964): Gay man left everything to his partner, who ran decedent’s business and lived with him. Ct. said undue influence b/c family was disinherited. **Prolly would be different today, or different then if hetero couple. 3. Test: a. Confidential relationship (e.g., Fiduciary) + b. Substantial bequest + c. Something (varies; usu. procuring the will or suspicious circumstances) d. MO: Simmons v. Inman (MO 1971): Testator left substantial bequest to her atty and disinherited her twin, her only heir. Undue influence, esp. b/c of testator’s diminished capacity (easier to take advantage of her). e. Fiduciary: Atty, power of atty, physician, caretaker, someone helping with finances, etc. 4. Black Letter Law: a. Wrongdoer wants to substitute his intent for that of testator. b. Most fighting is about the presumption; and most important factor in presumption is suspicious circumstances. 5. Writing Wills for Family Members: a. Most people with a family member in the business want them to write their will. b. Family may be biggest source of customers for new atty. c. ABA Model Rules 1.8: Atty shall not accept testamentary gifts from clients unless they’re related to client. d. BUT, many states will only give atty their intestate share if the will gives more. e. If you give yourself a substantial share, you’re 2+ steps into undue influence (fiduciary, substantial gift, possibly suspicious). 6. Effect on Will: INVALID ONLY as to the part which was unduly influenced. Distribute as intestate. Rest is valid. a. RSMo 473.081: When part of will is inadmissible to probate b/c of fraud, duress, undue influence, mistake, ignorance of testator, partial revocation, etc., the other parts maybe admitted to probate. b. Williams v. Crickman (IL 1980): Only the part of the will which was a product of undue influence is invalidated. v. Duress, Fraud, and No Contest Clauses: 1. Duress: When Undue Influence becomes overly coercive. Could involve threat or wrongful act to get desired result from testator. a. Constructive Trust: Court imposes to avoid giving property to wrongdoer. Property goes to wrongdoer and then immediately to intended devisees, absent duress. i. Works b/c court cannot validate the “new” will that never existed. ii. Latham v. Father Divine (NY 1949): Woman left everything to church, which ct suggested was cult, and it forced woman to leave it everything. Family claimed woman wanted to sign new will w/ them as beneficiaries. Will was valid, but property passed to family thru constructive trust. b. Innocent parties harmed? E.g., Grandma has will giving me $10K and remainder to SLU. Wants to execute new will giving WU Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 16 everything. I overhear this and prevent Grandma from signing new will. Effect of duress: i. I lose my portion to WU ii. SLU might also lose their portion since WU was intended to receive entire estate. 2. Fraud: Misrepresentation made knowingly and intentionally for purpose of influencing testator’s decisions. a. Very similar to Duress. b. Can invalidate that part of will, OR use constructive trusts. c. E.g., I tell Mom her son John is dead; I tell patient her kids are wasting her money to keep her in nursing home. 3. No Contest Clauses: Clauses that attempt to prevent people from contesting the will by forfeiting their share if they lose. a. UPC 3-905: Provisions in wills penalizing an interested person for contesting the will or bringing other actions against the estate is unenforceable if there was probable cause for doing so. i. Safe-Harbor Provision: no penalty if there was probable cause for bringing contest or other action. b. MO – No-Contest clauses are enforceable. No probable cause exception. i. Commerce Trust Co. v. Weed (MO 1958): Clause said that if anyone brings a contest, they are treated as predeceased with no lineal descendants. P argued clause was invalid b/c against public policy, but ct said no. Also, no “probable cause” exception. Testamentary freedom. c. RSMo 473.080: Says you have the right to contest. i. This means clauses cannot tell you that you cannot contest a will. Must say that if you contest and lose, then you forfeit, etc. d. Avoiding Contests to your Will: Put a no-contest clause in, and b/c no probable cause exception in MO, make sure you give something to those you are afraid will contest, so they have something to lose (make sure it’s enough that they actually worry about losing it, though). VI. Revocation and Revival a. Revocation i. Writing: ALL wills should have clause revoking all previous wills. If not, you’re executing a codicil. 1. When you have two wills where the 2d doesn’t revoke the first, you try to conflate the two, and 2d revokes the first only when there are inconsistencies. a. RSMo 474.430: Court shall have due regard to directions of will and true intent and meaning of testator. b. So, if 1st will gives watch to A, $50K to B, and residue to C, and 2d “will” gives $50K to B, 2d is codicil. BUT, does B get $50K or $100K? Depends on whether testator intended 2d to be will ($50K) or codicil (add on to make $100K). 2. RSMo 474.400: No will or any part thereof shall be revoked except by subsequent will in writing or by other substantive act. a. Niebling v. Methodist Orphans’ Home (MO 1926): Woman had two wills in one envelope. Most recent didn’t have a revocation clause; but Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 17 considered her will b/c it disposed of her entire estate (anything less would have been a codicil). i. Fact that they’re in same envelope not necessarily admissible. Envelope not executed with testamentary formalities. 3. Plain Meaning Rule: In will construction, if a doc is unambiguous, then you DO NOT look at extrinsic evidence. a. Whether or not something is ambiguous is… ambiguous. b. Just b/c people fight over the meaning doesn’t mean it’s ambiguous. 4. UPC 2-507: Same as MO, but mentions that you need clear and convincing evidence to rebut presumption that is unambiguous. a. SO, in Niebling, envelope might be allowed as evidence. ii. Substantive Act: e.g., “X”, burning, tearing, etc. 1. Requirements: a. Sufficient Act: defined by statute. b. Revocatory Intent: Testator must WANT to revoke. c. Original: Must be to the original document. i. If they do it to a copy, is effective ONLY IF they thought it was the original will/codicil. Court often imposes constructive trust in this situation. ii. If more than one original exists, then revocation of one by substantive physical act is effective to revoke. 2. RSMo 474.400: Revoke by… burning, canceling, tearing, or obliterating, by the testator, or in his presence, and by his consent and direction. a. Canceling: Generally requires “X” or “REVOKED” touch the text of the document. Something more than destructive acts. i. Thompson v. Royall (VA 1934): Testator asked atty to destroy her will and codicil. Atty suggested writing memo revoking both and keeping will and codicil as reference for possible future wills. Not revoked b/c not effective cancellation. Had it been in her own handwriting and executed as will must be, then would be effective cancellation. b. Burning or Tearing: doesn’t have to touch the text. c. In Testator’s Presence: Must actually be physical presence. Telephone or video conference is not enough. i. Harrison v. Bird (AL 1993): Testator wanted to revoke will. Atty said he could do so by ripping it up in presence of witnesses. Did so, then mailed pieces to testator with letter that said, “Your will is now revoked.” Generally would be ineffective. 3. UPC 2-507: Cancellation need not touch any of the text of the will. 4. Setting the Wheels in Motion: Often seen as enough to do an act that will cause your will to be destroyed, just not at this very moment. E.g., putting in bin to be shredded, throwing in furnace that will turn on later. iii. Lost Wills: Sometimes are considered revoked, sometimes are truly lost with no intent to revoke. 1. Revoked: When an original cannot be found, and the testator had possession of it before he died, it is assumed that the testator destroyed it, thereby revoking it. a. Can rebut this presumption by showing original was truly lost. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 18 b. Harrison v. Bird: Because pieces of original will could not be found, Ct. assumed that testator destroyed will to revoke it after receiving the pieces. 2. Truly Lost: Situations where it is shown to be truly reasonable that the will was indeed lost. E.g., if your will perishes in a house fire. a. Take a copy to probate court, but say you ARE probating the original, only you don’t have the actual original. Copy is proof of the original. b. RSMo 473.050: Allows for probate of copy or summary of lost will, as long as statement accompanies re: why will not available. i. If don’t have a copy, must prove contents of will by a preponderance of the evidence. iv. Partial Revocation: Allowed by RSMo 474.400. 1. IF the partial revocation creates a new bequest, though, revocation is invalid. New bequests require execution, subscribing witnesses, etc. a. Oliver v. Union Nat’l Bank of Spgfld (MO 1974): Testator crossed out name of only one of 10 nieces/nephews, intending to revoke bequest to nephew. Ineffective partial revocation b/c revoking bequest to nephew increased shares of other 9, which = new bequest, which must be done with 474.320 formalities. 2. Revocation of something that does not change a request is OK. E.g., right of first refusal to buy testator’s house b. Will Revival: i. RSMo 474.410: Revocation of 2d will typically means 1st will stays revoked, unless is evident from circumstances around revocation of 2d or testator’s statements that he intended 1st will take effect again. ii. Rebuttable Presumption: Proponent of 1st will must show that testator intended for 1st will to be revived. c. Dependant Relative Revocation: Where testator revokes will/codicil based on mistaken assumption of law or fact, revocation is ineffective if testator would not have revoked had he know the truth. i. Presumption: It is presumed that testator prefers revoked version to intestacy. Opposing party may show otherwise. Absent such evidence, original will is probated. 1. Watson v. Landvatter (MO 1974): Testator crossed out names of ex-wife and her family and wrote in names of new wife and family, but did not properly subscribe to changes. Ct. said testator would prefer intestacy (goes to wife) instead of old, revoked parts (ex-wife). ii. When Used: When testator destroys will thinking old will will be effective (when state has no will revival statute), or when destroys it thinking new will is effective but actually fails for some reason. iii. Essentially renders a revocation ineffective. 1. LaCroix v. Senecal (CT 1953): Codicil revoked section of will correcting name of beneficiary, but was improperly witnessed and thus invalid. Presume testator wanted original revoked will provision as opposed to bequest going to residuary or intestacy. iv. “Second Best” Option: Doesn’t give testator exactly what he wanted… 1. Estate of Alburn (WI 1963): Testator had two wills. While in hospital, asked brother to rip up 2d will and “let pieces fly into wind.” Testator wanted 1st will to be in effect, but because no will revival statute, wasn’t possible. Options are Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 19 2d will or intestacy. Ct said she did not prefer intestacy since she expected 1st will would be effective. 2. Oliver v. Union Nat’l Bank of Spgfld: Attempted partial revocation of one nephew was ineffective; ct said testator would have preferred old will to intestacy. VII. Construction: a. Time Gap Issues: i. Divorce: 1. RSMo 474.420: All provisions in will favoring ex-spouse are revoked as if ex- spouse died at time of divorce. ONLY revokes gifts to ex-spouse; NOT ex- relatives. a. Cannot opt out of this by putting language in will that bequest stands, regardless of whether you’re married or divorced. b. IF you want to give something to ex-spouse, update your will and name ex-spouse specifically (e.g., divorce for Medicaid). 2. UPC 2-804: Revokes provisions of ex-spouse AND ex-relatives by default. Can get around this by stating otherwise in the will. ALSO, can opt out of revoking gifts to ex-spouse by saying so in will. ii. Ademption: Only applies to specific bequests. 1. Specific, General, and Residuary bequests: a. Specific: Name a specific thing (vase, watch, stock, etc.) b. General: Bequests that can be satisfied by selling estate assets. E.g., Cash, sometimes stock, etc. if not preceded by “my”. c. Residuary: Where devisee gets whatever is left over in the estate. 2. Ademption by Extinction: When testator makes a specific bequest but the property is not in his estate, the property is adeemed, and the gift fails. Don’t get $ value of thing, either. a. In MO: Strictly based in case law. i. We don’t ask about testator’s intent. If he destroyed it or got rid of it, the gift adeems. ii. Identity Theory: Testator wanted a specific, identified object to go to the devisee. Nothing else. iii. Fidelity Nat’l Bank v. Hovey (MO 1927): Testator’s will gave gift of 40 shares of stock, but he only had 12 when he died (might have sold it). Devisee gets ONLY the 12 shares, not 12 shares + value of missing 28. 1. Had testator given 3 people 40 shares each, they would split the 12 shares equally. iv. Exception – wrongdoings of Guardian/Conservator 1. Buder v. Stocke (MO 1938): Testator gave family brick co. to son. Later adjudged incompetent, and guardian was appointed. Guardian allowed forfeiture of co’s charter, so co. no longer existed. B/c testator didn’t have the co. to give because of another’s actions, son gets $ left from sale of brick co. a. Some cts. track money from sale and give whatever is left over. b. Some cts. treat it as general cash legacy and give entire sale amt., regardless of what is left over. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 20 b. UPC 2-606: Provides specific exceptions for ademption in (a)1-5. (a)6 says that if the property isn’t there, can get $ devise equal to value as of date of disposition, but ONLY if requestor can show ademption would be inconsistent w/ testator’s intent. i. Intent Theory: Allow beneficiary to show that testator did not intend for property to adeem and thus did not intend for beneficiary to get nothing. c. Contract to sell property: i.e., property under K to be sold. i. RSMo 474.440: Devisee gets property subject to sale. So gets property, & when sale closes, gets money from sale. d. Property Subject to Mortgage: i. RSMo 474.450: If property was subject to mortgage when will was written, devisee gets property subject to mortgage (is responsible for mortgage). If property was owned free and clear when will was written and then took out mortgage, devisee gets property free and clear (estate pays mortgage). 3. Ademption by Satisfaction: a. RSMo 474.425: If testator gives lifetime gifts to beneficiary, will satisfy bequest to beneficiary in whole or part ONLY if will provides for deduction of lifetime gifts, if testator declares so in contemporaneous writing, or beneficiary acknowledges satisfaction of bequest in writing. b. How to document: e.g., Want to give all kids equal shares, but you’re helping one out now. i. Provision in will that kids get equal shares, with each share reduced by amt of any lifetime gifts. ii. Specify what type of gifts (e.g., not gifts before will execution, not b-day gifts, not gifts under $5,000, etc.) iii. Keep track of gifts to prove amt given (write checks, and give copy of canceled check to drafting atty). iii. Abatement: Chipping away of estate assets when there are debts to pay. 1. RSMo 473.620: Subject to provisions in will, devisees of same class abate proportionally. Order of abatement of both real and personal property: 1) Property not disposed of in will (usu. none b/c of residuary); 2) Residuary devises; 3) General devises; 4) Specific devises. 2. Residuary Devises: Often, largest chunk of estate is in residuary, and given to person testator wants to benefit most. To avoid: a. Divide money into shares (e.g., 75% of my estate to my wife) b. Add dependent clause, e.g., “$500,000 to SLU, provided my estate exceeds $2.5 million at my death.” 3. Preserving property: RSMo 473.467(2): If executor must sell specifically- bequeathed property, may sell to intended devisee so they still get it, and estate gets $ (i.e., if devisee has attachment; keep farm in the family, etc.) 4. Debt Exceeds Assets: RSMo 473.570: If debts of estate exceed the assets, pay off what you can in proportional shares. NO ONE ELSE is responsible for remaining debt. Debts paid in order in RSMo 473.397. a. Executor will get ct orders for selling property at certain prices so creditors far down on list don’t gripe that could’ve gotten more $ for the property. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 21 5. Estate Tax: Estate tax paid out of the estate’s assets. Rate is about 50%. a. Default: taxes paid proportionally out of various bequests. b. Watch out: Some boiler-plate language says all taxes paid out of residuary. iv. Lapse: When devisees predecease a testator. Unless a will clearly provides otherwise (almost never does), you never devise property to someone’s estate. 1. RSMo 474.460: When testator devises property to any child, grandchild or relative and that devisee predeceases testator (or is treated as such), AND devisee leaves lineal descendants (who survive testator by 120 hrs), lineal descendants take predeceased relative’s devise. a. Fascination w/ Bloodline: If you gave it to original devisee, would probably end up with their issue eventually. ALSO, assumes testator would want it to go to predeceased devisee’s descendants, since they’re also family. 2. RSMo 474.460: Except as provided in 474.460, if a devise other than residuary fails for any reason, it becomes part of the residue. 3. Survivorship requirements: e.g., “If s/he shall survive me”. a. In MO, survivorship language of any kind – absent other provisions – gets you out from under anti-lapse statute. b. Estate of Rau (MO 1986): Woman divided residuary between brother and 3 sisters living when she executed her will, and if any of them died, their share would be divided equally among survivors. All 4 predeceased; do their lineal descendants get the gift, or does gift lapse b/c of survivorship language? Ct said lapse b/c language was specifically put in by testator, i.e., not boiler plate. Since was residuary, that part is intestate. c. Minority Rule: UPC 2-603(b)(3): Simple words of survivorship are not enough to defeat the UPC’s anti-lapse statute. i. Such language doesn’t automatically negate an anti-lapse statute, as survivorship language is often boiler plate and not put in with specific intention of having gifts lapse. ii. Ruotolo v. Tietjen (CT 2006): Since survivorship language is often boiler plate, we cannot assume that testator intended gift to lapse into residuary instead of going to devisee’s issue. 4. Alternative Devises: To A if he shall survive me, and if not, then to B, if he shall survive me. a. UPC 2-603(b)(4): Alternative devise, if present, supercedes ordinary substitute gifts as long as alternate devisee is allowed to take under the will. b. Substitute Gifts: If both A and B die, then A Jr. gets substitute gift if he is living. If not, goes to B Jr. v. Class Gifts: When a group is indicated by label and the members of class won’t be known for sure until testator dies. Members take gift on fractional basis. 1. Rest (3d) Prop §13.1: Disposition to beneficiaries described as a group label and who are intended to take as a group, which means: a. Membership of class can change over time until testator dies b. Property is divided among then-entitled class members on a fractional basis. 2. Rest (3d) Prop §13.2: Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 22 a. (b) If beneficiaries are identified only by name, without reference to a group label, isn’t a class gift. b. (c) If identified by both names/numbers and group label, not presumed to be a class gift, but can be rebutted if shown that testator intended them to take as a class. 3. When both names/numbers AND group label: Try to determine if testator was class-minded. Consider” a. Are there other members of the group who aren’t named? b. Is language such as “share and share alike” present? c. Relationship of testator to class members/named people. d. Etc. 4. Anti-lapse and class gifts: If member of class is relative of testator and predeceases testator, their share goes to their issue, if they have any. If no issue, then distributed evenly among other class members. b. Mistake: When someone claims that something written in the will was a mistake. If it is unambiguous, then cannot change. i. Plain Meaning Rule: You cannot use extrinsic evidence if the will is unambiguous. 1. More or less equivalent to Parol Evidence in Contracts (“4 corners”). 2. We may end up with what the testator didn’t want, even if we have good evidence to show intent. 3. DOES NOT APPLY IN TRUSTS – only wills. 4. Lomax v. Lomax (IL 1905): Testator mistyped one digit of one number in full property description re: bequest in will. Not unambiguous, so cannot change the will. Effect: Wife was disinherited. ii. Mahoney v. Grainger (MA 1933): Testator wanted to give residuary to her 25 cousins, but atty drafted to leave to her “heirs.” Only heir at testator’s death was her aunt. Atty was prepared to testify she meant cousins. Too bad – mistake. iii. RSMo 474.430: Courts shall have due regard for directions of the will and testator’s true intent and meaning as expressed in the will. 1. Must be directions and intent as gleaned form the will. 2. Changing the will would mean the testator did not properly execute the will as it was devised. 3. Matter of Morrissey (MO 1984): Testator left “any interest whatsoever” in his company to his employees, with intent that they would run the business. Testator sold business, leaving two $50K notes (buyer was still paying off). Bequest was not ambiguous, and Company was a specific bequest, so we have ademption, and cannot get $ from sale. a. Question re: whether ct got it right. “Any interest whatsoever” might be read to include the debt notes. iv. Mistakes in Inducement: Where testator assumes a mistaken fact and makes will based on that assumption. 1. Gifford v. Day (RI 1852): Testator made will assuming her son was dead, but he was actually alive when testator died. Ct couldn’t do anything to change the will. a. AVOID by stating, “I think my son Bob is dead. If he isn’t, then I would give him X.” b. RSMo 474.240(2): Child left out of will b/c testator thought child was dead receives intestate share so long as child shows evidence that the only reason he was left out of will was b/c he was thought dead. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 23 c. Ambiguity: i. Latent Ambiguity: Ambiguity that is not apparent on the face of the will but rather once we try to find the person/thing it refers to. 1. Two types: a. When 2 or more persons or things fit the description in the will. b. Where description in will does not exactly fit one person/thing, but imperfectly and partially fits more than one person/thing. 2. Allow Extrinsic Evidence to prove testator’s intent. a. Estate of Ihl v. Oetting (MO 1984): Testator left property to “Mr. and Mrs. Wendell Hess, residing at #17 Barbara Cir.” Mrs. Wendell Hess who lived there divorced Mr. Hess. Mr. remarried, but new Mrs. never lived at 17 Barbara Cir. Ex-Mrs. Hess claimed she was intended recipient. b. Estate of Gibbs (WI 1961): Testator left property to friend Robert Krause. Atty wrote “Robt J. Krause of 4708 46 th St., Milwaukee, WI.” Robt. J. Krause didn’t know testator, but Robt. W. Krause of difft address did. Ct said allow extrinsic evidence even though unambiguous – Details of ID such as middle initials highly susceptible to mistake, esp. in large metro areas. 3. Falsa Demonstratio Non Nocet: If you can remove the incorrect part of the description and the remaining description clearly fits, you can devise property. a. Arnheiter v. Arnheiter (NJ 1956): Will described property “known as 304 Harrison Ave.”, but was actually at 317. Is unambiguous so cannot correct mistake, but can remove “304” and still have “known as Harrison Ave.” Testator had interest in only one property there, so description sufficiently IDs the prop. b. Lomax, revisited: Could not remove faulty number of plot b/c removing it would assume the correct number = change in devise. i. Arnheiter said removing language doesn’t imply any other language. It either works or it doesn’t. 4. Personal Usage Exception: Used when you refer to something other than with its correct, proper name. If extrinsic evidence shows that testator always referred to person or thing in idiosyncratic manner, that evidence is admissible to show what testator meant. a. E.g., “to my friend, Carl S. Smith of U. City.” Friend is referred to as “Carl” but is really Sigmund Carl Smith, but he AND a Carl S. Smith come forward. Entire description “my friend” and “Carl S. Smith” fit two people imperfectly. Argue personal usage. b. Moseley v. Goodman: Testator called Mr. Trimble “Moseley” b/c he worked at Moseley’s store, and called Mrs. Trimble “Mrs. Moseley”. Left something to Mrs. Moseley – Trimble showed she was intended recipient, not real Mrs. Moseley (testator never knew her). c. In re Nelson (MO 1996): Testator left her “bankaccounts” to 2 of her kids, then divide residuary b/w those 2 + unfavored son. 2 kids argued testator referred to her annuities (worth $400K) as “bankaccounts,” but b/c was not unambiguous and b/c there were bank accounts in her estate, no extrinsic evidence, so annuities not included. 5. Atty-written documents: Held to a higher standard than lay-written documents, as attorneys are “learned in the law.” Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 24 ii. Patent Ambiguity: One that is apparent on the face of the will. 1. Extrinsic Evidence: Allows ALL evidence except statements by testator about what s/he wanted. (e.g., Testator loved Sally and wanted to give her X – all that is admissible is that testator loved Sally). a. Reasoning: Contradicting testator’s language in will w/ other statements is equivalent to ignoring will. Testator cannot contradict his/her will from beyond the grave. b. Historically, NOT ALLOWED for patent ambiguities, but that is no longer the case in most states. c. Breckner v. Prestwood (MO 1980): Testator gave remaining “personal property” to a person in Art. 2 and a charity in Art. 8. Atty said Art. 2 was for personal property and Art 8 for real property; ct said NO. Ct said Art. 2 disposed of tangible personal property, as Art 4-7 disposed of specific intangible personal property, and Art. 8 was the residuary. 2. Typos with numbers: e.g., “I give ten thousand dollars ($100,000) to my friend, Bob. a. Two Cannons: i. Cannon of Construction: Follow the words and not the numbers. ii. Other Cannon of Wills: Follow whatever is written later – “fictional” assumption that later = most recent. b. Using Extrinsic Evidence: Look at everything available that doesn’t speak to testator’s intent. Factors to consider: i. How close is testator and Bob’s relationship ii. How far apart do they live (next door or 2500 miles) iii. How much money testator actually has to give iv. Does testator have children to support v. It’s easier to type an extra “0” than mistype “one hundred” as “ten” iii. Will Reformation: Making changes to a will after testator has died to resolve ambiguities. 1. Evidence: Clear and Convincing standard. 2. Baker v. Grossglauser (MO 1923): Testator’s will said “I give to my 3 grandchildren…” but didn’t say what he gave. Ct read in “my estate” b/c it’s obvious that’s what he mean, and otherwise he’d die partially intestate, which is obviously what he didn’t want to do. Relation of beneficiaries to testator may be taken into acct. when determining what is supposed to fill the blank. 3. Magruder v. Magruder (MO 1975): Will gave devisee a life estate in property, with option to sell for $ if she needed it. Will explicitly stated that it was up to devisee to determine whether she needed it, not trustee. CANNOT add words to a will unless situation like Baker. 4. Policy Discussion: a. At what point do we put our foot down and not fill in the blanks? E.g., “To my wife, ___” is easy, but “I give __ to __” is prolly a patent ambiguity, and testator’s intent is inadmissible. b. Should we allow Reformation? i. YES: Gets us closer to testator’s intent; “clear and convincing” protects from parties w/ no real claim; “plain meaning” rule has lots of exceptions already (ambiguities, insanity), so why not allow proof to correct clear mistakes? Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 25 ii. NO: Slippery slope – may end up probating file, not will; altering docs w/o knowledge of what testator wanted b/c they’re dead; disgruntled contestants may say Mom loved her more and should get more $; we may get the right result sometimes, but opens door for cases where muddle testator’s intent and get wrong result. VIII. Protection of the Family: a. Elective Share: if decedent died testate as to ANY part of their estate, surviving spouse can elect to receive forced share from decedent’s estate, either b/c they were disinherited or b/c they don’t want a big bequest. i. Disinheriting: 1. In all states except Louisiana, you are free to disinherit anyone you want, including a surviving spouse. 2. Connecticut: Electing spouse gets 1/3 of deceased spouse’s probate estate, whether or not decedent has issue. Gets the share as a life estate – ONLY has access to the interest from the 1/3 share. 3. RSMo 474.160: If surviving spouse elects, gets ½ of decedent’s estate if testator had no issue, or 1/3 if testator had issue. a. Elective share is smaller than intestacy b/c we are not guessing as to what testator wanted – must give some weight to what testator wrote in will, but still want him to leave something for spouse. 4. UPC 2-202: Surviving spouse’s share is 50% of the augmented estate. ii. What Constitutes the “Estate”: 1. RSMo 474.163: Estate consists of all money and property owned by decedent at his death… AND increased by aggregate value of all money and property derived from decedent by surviving spouse by means other than testate or intestate succession. a. This means his net probate estate (after pmt of debts). i. Excludes trusts, life insurance, pension, jointly-held property, POD accounts, etc. b. Value of anything received from decedent offsets against the elective share of surviving spouse. 2. UPC 2-203: Augmented estate is sum of values of all real and personal property that constitute: a. Decedent’s net probate estate (2-204) b. Decedent’s non-probate transfers to others (2-205) c. Decedent’s non-probate transfers to surviving spouse (2-206) d. Surviving spouse’s property and non-probate transfers to others (2-207) e. Percentage received depends on how many years married. 3. Which jurisdiction’s rule to use: a. Usually, the state in which the testator was domiciled at death. b. Exceptions: i. Real property governed by state in which it sits. ii. Other property sitting in other states (e.g., MO resident creates trust in NY). Which state law applies varies from state to state. 4. Gifts in Fraud of Marital Rights: a. RSMo 474.150: If found to be made in fraud of marital rights, treated as testamentary disposition and can be recovered from donee, if necessary to fulfill elective share. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 26 b. E.g., inter vivos gift to child of $500K, leaving estate of only $100K; life insurance and estate payable to children, etc. c. Nelson v. Nelson (MO 1974): Joint bank acct b/w decedent and his sister – putting money in acct so sister will take at death is gift in fraud of marital rights. i. Multi-Factor Test: Elements to consider: 1. Lack of consideration (i.e., a gift) 2. Retention of control by transferor spouse (i.e., didn’t make a true gift) 3. Whether amt of transfer is disproportionate to decedent’s total estate at time of transfer 4. Whether decedent made transfers openly or kept them secret from spouse 5. Transferor’s contemplation of death (i.e., why make a death-bed gift when you have a will?) 6. Transferee’s reaction to news – was she conspiring with transferor/decedent? d. Revocable Trusts: If decedent spouse makes revocable trust (i.e., in his control) and surviving spouse isn’t beneficiary, possibly include value of trust in total of estate. i. MO Rule: Surviving spouse may elect against revocable trust IF surviving spouse shows decedent created trust or made large trust transfers with intent to defeat survivor’s marital rights. 1. Minority rule. Most states find a way to include revocable trust in the estate for elective share. 2. McDonald v. McDonald (MO 1991): H had revocable trust. Before marrying W, had W sign prenup waiving elective share so she can’t get to trust, but giving her $25k lump sum or $1K per month for life, her choice. W couldn’t elect against trust b/c didn’t meet her burden of showing H created trust with intent to defeat her marital rights. 5. Avoiding Contests: a. Buy life insurance b. Buy property in Georgia (no elective share allowed there), or jointly in Connecticut (can only force share from probate estate) c. Joint tenancy w/ right of survivorship d. Make a transfer to someone else look like there is consideration e. Make sure you don’t mention anything to your attorney about wanting to avoid giving to your spouse iii. When Surviving Spouse gets Something: 1. Surviving Spouse’s Right to Elect: a. RSMo 474.170: If electing, surviving spouse must file written election with probate court at least 10 days before time to contest the will expires. b. RSMo 474.200: Right belongs to surviving spouse alone. Cannot transfer to another, and cannot elect after surviving spouse’s death. If surviving spouse is minor or disabled, the conservator/guardian ad litem may elect for him with approval of the court. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 27 i. No one can force you to elect, including creditors. c. RSMo 474.160: 1(2) If surviving spouse elects to take against the will, s/he gets nothing else under the will, including bequests to surviving spouse. i. E.g., if H leaves W $100K and his estate was $1 million, W gets $500K if she elects, NOT $500K + $100K from bequest. d. RSMo 474.163(6): If it appears the elective share will be less advantageous to surviving spouse than provision made in the will, survivor may rescind the election to take against the will. i. Estate of Cross (OH 1996): Decedent left entire estate to child; W was in nursing home w/ Alzheimer’s and Medicaid. Ct appointed commissioner to investigate whether ct should elect for survivor. Ct decided NOT to elect b/c problems w/ Medicaid eligibility. 1. Test: Ct determines what surviving spouse would have done for her financial benefit had she been competent to make the decision herself. Consider age, life expectancy, other resources available, physical/mental condition, and survivor’s present/future needs. 2. Life Insurance: In MO, not included in calculating decedent’s estate except when beneficiary is surviving spouse and survivor elects against the estate. a. E.g., decedent leaves $1 million bank acct. to brother and $1 million life insurance benefit to spouse. If survivor elects, estate = $1 mil bank acct + $1 mil life insurance = $2 mil. If no kids, spouse’s share is $1 mil. If kids, spouse’s share is $667K. b. WHY? Testamentary Intent. Decedent already provided for spouse, so we can’t ignore that they gave money to spouse in another way. c. UPC: Life ins. is ALWAYS aggregated, no matter the beneficiary. 3. How Election affects other bequests: Each bequest to another is cut by percentage of share that spouse gets (e.g., 50%, 33%). b. Pretermitted Heir/Spouse: Testator fails to provide for spouse/child that came into his life after he executed his will. i. Spouse: 1. RSMo 474.235: If testator executes will, then marries spouse and makes no provision, surviving spouse gets intestate share unless a. It appears from the will that omission was intentional (e.g., old people marrying, not wanting to disinherit spouse’s issue), OR b. Testator provided for spouse outside the will and shown to be in lieu of will gift by statements of testator, amount of transfer, or other evidence (e.g., life insurance). c. Devises to others abate as in 473.620. 2. Use This when it is evident that decedent forgot to update his will. Intestate share from pretermitted spouse provision is greater than elective share. ii. Heir: 1. RSMo 474.420: If testator fails to provide in will for any children born/adopted after he executed will, omitted child gets intestate share unless: a. It appears from the will that omission was intentional (look ONLY to the will for this one), b. Testator had at least one child when he executed will and devised substantially all estate to parent of omitted child, OR Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 28 c. Testator provided for child in transfer outside will and is obvious that transfer was meant to be in lieu of will provision. d. Does NOT cover children left out who were born/adopted before will was executed. 2. Some other states: Pretermitted heir laws apply to ANY children not mentioned in the will. a. Does mentioning your daughter-in-law mean you ALSO mentioned your son who is married to her, by implication? 3. How to ensure kids don’t think you forgot them: a. Give gifts to your “then-living issue, per stirpes” (or however you want). That way, they’re mentioned in a class, even if not by name. b. If you don’t want to give them anything, mention that in the will. 4. Policy: Should we force parents to leave property to their kids? a. Might cut down on litigation b. Might be good to provide for minor/disabled children c. BUT, why should someone be forced to leave something to their wealthy adult child when they’d rather give to charity for poor? TRUSTS I. Trust Formation a. Why create a trust? i. Advangages: 1. Planning for Incapacity: If you manage as trustee and then become incapacitated, successor trustee that you appointed takes over. 2. Avoid Probate: Much smoother transfer of property than will, which has to go through entire probate procedure. Saves time, filing fees, court. 3. Privacy: Wills are part of the public record, but trusts aren’t. 4. Asset Management: Appoint trustee to distribute property and give them whatever control you want them to have, e.g., if you have minor or irresponsible kids who can’t handle their own money. 5. Execution: No real rules for execution. Often in front of notary, but not required. ii. Problems: 1. Expensive: More complicated to set up than a will. 2. Messier in Contests: if there will be issues with contests, a will is better. a. RSMo 456.4-415: Allows for reformation of Revocable Trusts (not allowed in wills). 3. Not all encompassing: Some property always tends to get left out, e.g., cars (b/c no one wants to go to DMV to re-title to the trust). a. Solution: Pour-Over Will – will that sends all property left in your estate to the trust. 4. Assumptions of Wealth: Ppl assume if you have a trust, you’re wealthy, or your hiding something, etc. a. Solution: Separate checking account – pay smaller bills, write b-day gift checks out of account that doesn’t have word “Trust” in the name. b. Semantics: i. Settlor: Person who creates the trust, with his/her property. 1. Often makes himself trustee and a beneficiary during his lifetime, then pass those positions on to others when he dies. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 29 ii. Trustee: Can be a trust company (bank), your attorney, or trusted family member or friend. Could also be settlor (while alive), or one of the beneficiaries. 1. Often has discretion to decide when distributions are made to beneficiaries. 2. Legal Ownership: All trust property is given to trusee to hold in trust, but the do not benefit from the property and do not own it outright (feoffeta uses). 3. DOES NOT owe a legal duty to settlor – Settlor made gift of property, which he no longer owns. iii. Beneficiary: Person who has the benefit of accessing trust property. 1. Often ppl will leave property in trust until child turns 35. 2. Beneficial Ownership: Beneficiaries actually get to benefit from property, but don’t have possession of it while in trust (cestique trust/uses). iv. Inter Vivos Trust: Created while Settlor is alive. v. Testamentary Trust: Trust created under a will. vi. Missouri: Adopted the UTC in 2005. Allows for trusts created before 2005 under difft rules to be valid as long as in compliance with law at the time. vii. Merger: RSMo 456.4-402.1(5): Cannot have the same person be the sole trustee AND the sole beneficiary. 1. Turner v. Mitchell (MO 1956): If you have only 2 trustees who are ALSO the only 2 beneficiaries, that’s OK. c. Methods of Creating a Trust: i. RSMo 456.4-401: Can create a trust by: 1. Transfer of property to another person as trustee during settlor’s lifetime, or by will/other disposition on settlor’s death, 2. Declaration of owner of property that trustee hold property in trust. a. ORAL Trusts: Allowed in MO, except for real property (RSMo 456.4- 407). ii. RSMo 456.6-602: Unless otherwise designated, trusts are revocable. d. Requirements for Creating a Trust: i. What you need: A creator, a trustee, and a beneficiary. 1. Hollis v. Hollis (MO 1993): Beneficiary designation re: life insurance policy was considered a trust b/c named sister as trustee and children as beneficiaries, w/ ex-husband as their guardian. ii. RSMo 456.4-402: 1. A trust is created if: a. Settlor has capacity to create a trust b. Settlor indicates intention to create a trust c. Trust has definite beneficiary, or is charitable trust, trust for animal care (4-408), or trust for non-charitable purposes (4-409) d. Trustee has duties to perform e. Same person is not sole trustee and sole beneficiary (MERGER). 2. Definite Beneficiary: can be ascertained NOW or IN THE FUTURE. a. E.g., “to my friends” is not a definite beneficiary. b. If to, “my descendants” and I have none, that’s OK. Still ascertainable in the future. If trust ends with me having no kids, then trust fails, and trust property is returned to my estate. 3. Qualified Beneficiary: If you say, “to my descendants, per stirpes,” then it means to your kids and then first line after them (important in Sec. 7 of UTC) iii. Capacity: 1. RSMo 456.6-601: For a revocable trust is same as to make a will. Trusts and Estates (Dukeminier, Wills, Trusts & Estates, 8th Ed.) Page 30 2. Irrevocable Trust: No statute, so same as common law, which is same as is required to make a K. iv. Miscellaneous: 1. RSMo 456.4-408: Trust for care of animals essentially creates an honorary trust. If no person appointed to enforce the trust, the court may appoint (e.g., guardian ad litem for the pet). 2. RSMo 456.4-409: Charitable Trusts. Have ALWAYS been exempt from Rule Against Perpetuities. 3. Cemetery Trust: Some ppl put money in trust so they can plan what their gravesite will look like. e. Vacancy in Trusteeship: i. WHEN CREATING the trust, you need to have a trustee. ii. Trustee might die, or may decide to resign. TRUST DOES NOT END. iii. RSMo 456.7-704(3): Fill vacancy with person designated as successor trustee; if none, then by person appointed by majority of qualified beneficiaries; if no, then by court appointment. iv. Banks as Trustees: They are expensive, and they may not exercise discretion as you would like (b/c no personal relationship). PLUS, distribution dept. may have to meet to approve distribution requests by beneficiary. 1. Good idea ONLY if family hates each other, or for one tax issue. II. Spendthrift & Discretionary Trusts: a. Purpose: Creditor protection. Creditors cannot reach trust assets. Can only reach if a distribution is made to beneficiary once beneficiary has possession. i. RSMo 456.5-502: If you want a spendthrift provision, you need to include one in the trust. Such a provision is NOT ASSUMED (some states assume). 1. Is valid if it restrains voluntary or involuntary transfers, or both. a. Involuntary: Creditors trying to seize beneficiary’s interest. b. Voluntary: Beneficiary selling off his interest (almost never happens) ii. RSMo 456.5-503: EXCEPTIONS 1. Even with a spendthrift provision, a child, spouse or former spouse of beneficiary may reach present or future trust income with a judgment for support/maintenance. (TRUST INCOME, not the trust assets themselves.) b. Self-Settled Trust: Created for benefit of settlor (as a beneficiary). i. Creditor protection? 1. Common Law: If you create a trust for your own benefit, creditors may reach the max amt that could be distributed to you (everything). Used in 45 states. 2. Missouri: RSMo 456.5-505: Creditor may reach max amt that can be distributed for settlor’s benefit. (MINORITY – 5 states follow) ii. Fraudulent Conveyance: Convey property in abject fear of creditors. E.g., you’re in a car accident w/ bus, then come home and immediately transfer all of your property into a trust. 1. General Fear of creditors OK. It’s not a transfer in the face of a specific situation. Means you must think ahead to protect your assets. iii. Policy: Is it OK to allow ppl to make their assets unreachable? 1. NO: Debt is usu. self-created, and not necessarily “right” to allow ppl to run up lots of debt and then escape it b/c they made a self-settled trust. 2. OFTEN, Creditors either lose the suit, or they settle for pennies on the dollar.
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