Irrevocable Trust Account by Arkansas Laws by fdh16177

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									DEATH, GREED, & BASTARDS                                                                Dean Foster                         2000 Sheldon Smith
Chapter 1: INTRODUCTION
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                                                             Public policy – restraints on religious practice are against public policy
                                                             Partial restrictions on marriage are not contrary to public policy
                                                             Testator can encourage (positive) son to marry into a certain type of religion, but cannot forbid (negative)
                                                              him to marry a certain type of person based on their religion
                       Terminology
                       o     Descent – passing of real property by inheritance by intestacy
                       o     Devise – passing by will; a distribution of real property by will
                       o     Devisee – a person taking real property by will
                       o     Legacy – a distribution of personal property (money) by will (also called a bequest)
                       o     Legatee – a person taking personal property by will
                       o     Bequeath – give personal property
                       o     Testator, testatrix – person who dies leaving a will; testator is the person who made the will
                       o     Intestate – pass away without a will
                       o     Escheat – property passes to the state when there are no heirs; in Arkansas, it escheats to the county
                       o     Distribution – The passing of personal property by intestacy
                       o     Probate Estate – Property requiring administration by the court. Includes all interests in property owned by decedent at death that descends to others. Often
                             referred to as the decedent's estate. The administration process of the decedent’s estate is called the probate of the estate.
                       o     Non-probate Estate – Property not requiring official administration. Includes property in which the decedent held a lifetime interest but which passes
                             according to the rules applicable to a particular Will substitute. Examples: survivorship interests, interests in trust, contractual arrangements, life insurance,
                             retirement programs, etc.
                       o     Will – A written or oral expression of a person's intentions concerning the disposition of his property at death.
                       o     Heirs – Those who are entitled to take through a will or intestate succession upon death of the testator.
                       o     Codicil – An addendum to the will.
                       o     Probate – The judicial procedure to establish a transaction as a valid will; or, if no will, the procedure to determine one's heir; and distribute their estate
                             according to statute.
                       o     Consanguinity – Relationship by blood (parent, child, cousin)
                       o     Affinity – Relationship by marriage. Most statutes do not protect inheritances for relationships by affinity except for the surviving spouse.
                       o     Ascendants – Persons related to, the testator/intestate in an ascending line. Ex: parents, grandparents, etc.
                       o     Descendants – Persons related to the testator/intestate in a descending line. Ex: child, grandchild, etc.
                       Collaterals – A relationship between two people based on the sharing of a common ancestor. Anyone who is a blood relation who is neither an ancestor nor a
                       descendant. Ex: brother, sister, cousin, etc.

In the US, there is a strong presumption to follow the testator’s wishes:
-Testators have a natural right to bequeath
-Right to bequeath – incentive to save and work
-Testamentary freedom supports a market for the provision of social services
-If you took it away, people would find a way around it
-It’s what we want to do

Arkansas Slayer Statue - ACA § 28-11-204 – whenever a spouse shall kill or slay his or her spouse and the killing or slaying would under the law constitute
murder, either in the first or second degree, and that spouse shall be convicted of murder for the killing or slaying in either the first or second degree, the one so
convicted shall not be endowed in the real or personal estate of the decedent spouse so killed or slain.
                                        Not really a slayer statute
                                        Applies only to spouses
                                        Applies to first or second degree murder
                                        Must have a conviction
                                        If all conditions met, slayer spouse shall not be endowed (dower or curtesy)
                                                    Dower is not the same as taking under the will
                                                    Also, statutory allowances and homestead rights are not prohibited
                        o      ACA § 28-11-204 is the extent that Arkansas statutory law covers slayers
                        o      However, Arkansas has common law expanding on the Slayer Statute
court expanded AR statute outside of Dower and said Anyone who Kills Cannot Inherit.
Husband killed wife, then committed suicidelook to Equity of the heirs, this case Ct said Slayer Rule should not apply b/c no benefit to husband.

Section II: THE ROLE OF THE LAWYER
3 Roles: Litigator, Policymaker, Planner
                                 Personal Representative owes a fiduciary duty to estate
                                 Trustee owes a fiduciary duty to trust
fiduciary relationship exists when one has a special confidence in another so that the latter, in equity and good conscience, is bound to act in good faith.
BOTH RULES IN EFFECT IN AR. Model Rules of Professional Conduct
Rule 1.6 attorney has a duty not to disclose confidential material, unless client consents.
Rule 1.7 a.            Attorney has to believe that representation will not adversely affect other party.
           b.          Has to get clients consent after consultation.

Common Law Rule = attorney only owes DUTY to CLIENT and NOT to 3rd party beneficiariesNo Duty to P’s b/c no Privity.
MAJ of States has relaxed and broadened the privity. Problem is it opens attorney to endless litigation.
1st Dissent-would allow independent beneficiaries (broad); 2nd Dissent-only to specifically identified in will (limited).

ACA 16-22-310 - Liability for civil damages. Lawyer Privity Statute.
No attorney shall be liable to persons not in privity of K for civil damages except for:
1.        Fraud
2.        Other acts if attorney was aware that client intended to benefit 3rd person.
          A)           has to identify to the client, and
          B)           send a copy to the 3rd person.
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This statute is worthless b/c attorney never sends a letter to 3rd person so attorney will never be liable.

Methods to avoid Probate:
1.       Trusts - Inter Vivos.
2.       Gifts - Inter Vivos and Causa Mortis.
3.       Bank Accounts - Payable on Death and Joint Tenancy w/ right of Survivorship.
4.       Life Insurance Policies - immediately payable at death.
5.       Land and Real Property - Joint Tenancy and Tenancy in the Entirety.
6.       Securities, Bonds etc. - Transferable at death.

AR not inheritance tax. Inheritance tax=person receiving has to pay the tax.

3 Elements of a Gift:
1.        Intent (present irrevocable gift)
2.        Delivery (actual, constructive, or symbolic – the letter in Gruen)
3.        Acceptance (presumed if gift is of value)

AR-elements of Causa Mortis are the same as basic gifts.

Joint Tenancy w/ Right of Survivorship
Not only to land but also bank accounts and brokerage accounts.
ACA 23-47-204 – Multiple party deposits
                 o     Default – multiple party, not married, not specified – joint tenancy with the right of survivorship
                 o     Default – multiple party, married, not specified – tenancy by the entirety

Totten Trust - trust account that is held for somebody else.
UPC - POD Accounts-Allowed in AR. TOD Accounts-also passed and allowed in AR. ACA 28-14-104, 105, 108 &110.



Chapter 2: INTESTATE SUCCESSION
          Intestate Statutes
           o    The laws in question are determined by the state in which the decedent had his domicile at the tune of death and the states where any real property
                is located. See ACA 28-9-214; UPC 2-101.43.
          Rules of intestate succession apply when:
           o    The decedent has no will
           o    To distribute property that the will does not dispose of
           o    To determine who can contest a will – definition of heirs
           o    If a will is invalid, in whole or in part, the rules of intestate succession will apply
           o    If the will mentions the word ―heirs,‖ the rules of intestate succession will apply to determine the definition
          What is paid first from a decedent’s estates?
           o    Debts of decedent
           o    Expenses of administration
           o    Family protections – some states guarantee certain amounts to certain family members
           o    Homestead
           o    Allowances
           o    Exemptions

ACA 28-9-202 Definitions
Adopted Child = a descendent.
ACA 28-9-203 Intestate Succession Generally
c)       Real Estate passes immediately by operation of law.
ACA 28-9-206 Interests Transmissible by Inheritance
Very Important – Tells what heirs are going to get and are entitled to:


Rights Of Heirs:
1st       Dower of Surviving Spouse is first.
2nd       Homestead rights of Surviving Spouse and Children.
 rd
3         Statutory rights and allowances of Surviving Spouse.
4th       Rights to Income Tax Refunds.
5th       Administration Costs.

Section II: THE SHARE OF THE SURVIVING SPOUSE
INTESTATE SUCCESSION in Arkansas
Dower Important Because:
1.      Beginning Intestate Share of Estate (starting point – spouse gets first share)
2.      If Cut out of will then spouse can elect to take share that is same as dower
3.      Dower = right to real property; if both spouses sign a deed for real property, each has a 7-year right to that deed.

28-11-203 7year Statute of Limitation-barred after that point

Points to Remember
Dower comes out of the estate b/f heirs’ share
If Spouse AND child(ren):
           Spouse gets 1/3 Life Estate in all Land                     ACA 28-11-301

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          Spouse gets 1/3 Personal Property                           ACA 28-11-305
If NO child(ren)
          Spouse gets ½ real AND personal property, 1/3 as against creditors ACA 28-11-307
          *Won’t Ask About Creditors on a Test.
After Dower is taken Out:
          If descendents, they get rest
          If no descendents, rest to spouse UNLESS married less than 3 years,
                      In which case rest goes to parents, sibs, their descendents in that order, after that to collaterols and ascendents.
          If no heirs at all, then spouse takes all.
                       Under Arkansas law, 28-9-206 provides that dower, homestead, quarantine, and statutory allowances ($2,000 + $500 family
                              allowance) will go to his wife.
                                       28-11-307 – since there are no children, dower will be ½ of the estate
                                       28-39-101 – statutory allowance will be $2,000 plus necessary property out of home, plus up to $500
                                       28-39-210 – homestead, if applicable, will be life estate to wife (but from the fact pattern here, it doesn’t sound like there is
                                        homestead)
                                       29-9-214 – under this statute, we must know whether they were married longer than 3 years. If so, wife will take
                                        EVERYTHING. If not, wife will take half of the inheritable estate in addition to dower, homestead, quarantine, and
                                        statutory allowances and the sister will get what is left (appx. $74,000).
                       If also survived by his mother, the wife would get the same as above. However, the sister would not inherit the remaining estate – the
                              mother would. The sister would get nothing
      ACA 28-39-102, 103 – quarantine – surviving spouse can reside in residence for 2 months after death
     ACA 28-39-201 – homestead
          o     ACA 16-66-210

Section III: THE SHARE OF THE LINEAL DESCENDANTS
          Representation Among Descendants
           o    Representation is the ability (of a descendant or collateral) to represent an ancestor for purposes of intestate succession. It is essentially a
                distribution concept that permits one's issue to inherit a share that their immediate ancestor would have inherited if the ancestor had survived.
           o    There is no representation if the ancestor takes. This means that a latter descendant will not inherit if his ancestor is alive to take.
           o    There is representation if the ancestor does not take even if a closer relative also takes. This is referred to as bootstrapping. Generally
                inheritance prefers closer relatives, but representation is an exception to that.
           o    The spouse's of married descendants do not share in the decedent's estate.
           o    Per Stirpes
                       The initial division of the state is made at the generation nearest to the decedent, regardless of whether there are any members of that
                            generation who are alive.
                       The number of primary shares is the number of living persons in that nearest generation, plus the number of deceased persons in that
                            generation who are descendants who survive.
                       The latter are permitted to represent their ancestors.
                       Under common law, strict per stirpes was followed.
                       Example of strict per stirpes:
                       However, a vast majority of American jurisdictions have abandoned strict per stirpes.
                       Modern per stirpes – per capita with representation (this is what Arkansas uses)
                                      Under modern per stirpes, if A and B predecease X, the C, D, E, F, and G will each get an equal share (1/5 of the
                                       entire estate)
                      o     The UPC distributes per capita at each generation
           o    Per capita with per capita representation
                       The initial division of the estate is made at the first generation which left a living member.
                       The number of primary share is the number of living persons in the first generation which has a surviving member, plus the number of
                            deceased person in that generation who have descendants who survive.
                       The same approach is taken in dividing the estate of each deceased member’s share among these descendants
           o    Per capita at each generation
                       The estate is divided into primary shares a the first generation which contains one or more living members.
                       It is the popular way of dealing with issue today.
                       The number of primary shares is the number of living person in the first generation which left a living plus the number of deceased
                            persons who themselves have living descendants.
                       After the living members are allocated their shares, the remaining estate as a whole is combined and divided among the next generation
                            which contains any living members in the same way, and so on

AR has ―PER CAPITA‖ Distribution ACA 28-9-204 and
Modern ―PER STIRPES‖ Distribution ACA 28-9-205

Go to first generation which contains at least one living member.
Count the number of Living members and the number of Deceased members w/ Living Descendents.
The sum of these two numbers = the number of Equal Shares into which the estate will be divided.
Each living member of the first generation receives one Share.
Surviving descendents of each deceased member of the first generation will split that share among themselves, by going through the previous steps – called
REPRESENTATION (the descendants are stepping into the shoes of their ascendant)
            *Another way to remember = is Per Capita if all above are dead-Per Stirpes if not.
            o    Four systems of counting degrees
                        Civil law system (the primary method of counting degrees)
                                       The degree of kinship is the total of
                                               The number of steps counting one for each generation, from the decedent up to the nearest common ancestors of
                                                     the decedent and the claimant and
                                               The number of steps from the common ancestor down to the claimant
                                             The claimant having the lowest degree count is entitled to the property.
                                             All of equal degree share per capita
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                           Common Law System
                           Modified Civil Law
                           Parentelic
                                           System used in most statutes and in Arkansas.
                                            It basically attempts to identify nearest ancestor who either are alive or have issue living. You don’t count
                                             degrees.

Property goes to these ancestors or their issue, universal representation applied
We only reach these if there are NO Descendents and NO Spouse (or a spouse for fewer than 3 years). The easiest way to do these is to follow each subsection of
ACA 28-9-214.

1st        First to Parents, if one or more survive.
2nd        If no parents, then to Brothers and Sisters and Their Descendents, per capita or per stirpes as above.
3rd        If none of the above then to Grandparents, Uncles and Aunts, all related in equal degree, with no distinction between paternal and maternal sides-and the
           Descendents of Uncles and Aunts, per capita or per stirpes as above.
4th        If none of the above then to Great Grandparents and Great Uncles and Great Aunts, or the Descendents of Great Uncles and Great Aunts, per capita or
           per stirpes as above.

Defining the Modern Family: Halfbloods, Adoptees, and Non-Marital Children
          Halfbloods
           o    Defined as persons born of a common ancestor but not of two common ancestors.
           o    All half-blooded relations are collateral relations (brothers, sisters, uncles, aunts).
           o    Under ARK law and the UPC, half-bloods inherit equally with whole-bloods. See ACA 28-9-213 and UPC 2-107.
          Adoption
           o    All states today recognize that adopted persons are entitled to inherit from their adopted parents.
           o    This status is completely statutory.
           o    ARK only says that adopted children inherit from adopted parents as if natural children.
           o    In general courts have refused to construe class gift language as including adoptees.
           o    The UPC recognizes two different adoption circumstances:
                       New Family Adoption = Where neither adopting parent is a natural parent.
                                            In this situation, most states and the UPC (2-114) provide that, for all purposes, the inheritance is by, from and through
                                             the adopted family only inheritance rights are cut off for the old family and for the child as to the old family
                                            The unit is treated as an entirely new family, as though it is a real blood relation.
                       Family Realignment Adoption = Where one of the adopting parents is a natural parent.
                                            Adopted child and the adopted parent inherit by, from and through each other.
                                            The adoption has no effect on the parent/child relationship of the natural parent who is married to the adopting parent.
                                            The adopted child continues to inherit from and through the noncustodial natural parent.
                                            The noncustodial natural parent or kindred does not inherit from or through the adopted child.
           o    Can also have adult adoptions
           o    ACA 9-9-215 is the Arkansas adoption statute
                       All ties are severed
                       Terminates all legal relationships
           o    Inheritance from Step-Parent and Foster Parents
                       Stepchildren do not inherit from a step-parent unless that step-parent adopts the child
           o    Equitable adoption
                       Arkansas does not have this
                       If gone through the steps for adoption and thought you were adopted, then court will assume adoption

Equitable Adoption
No formal adoption, parent raises kid ―as his own.‖ No cases about this in AR but trend is that if parents do not do any formalities, then no adoption.

NON-MARITAL CHILDREN [poor bastards]
          Non-Marital Children
           o   Under common law, non-marital children inherited NOTHING under the intestate succession statutes
           o   In Arkansas, ACA 28-9-209 states various ways a non-marital child may inherit
                      If court establishes paternity
                      Putative father recognizes child
                      Father’s name on birth certificate with his written consent
                      Father is obligated to support the child
                      If father marries mother or tries to marry mother
                      Non-marital child must file claim with court within 180 days of death of father to inherit
           o   In Arkansas, there is a strong presumption that a child born to husband and wife, when they are married, is legitimate and is the child of the
               husband.
           o   At common law, a man married to a child’s mother at the time of the child’s birth was presumed to be the child’s father – the presumption could be
               rebutted only by proof of impotence, sterility, or lack of access during the period of gestation.

No Common Law Marriages in AR. But, AR will recognize Common Law Marriages from other states.
Modern Reproductive Technology
No, under ACA 28-9-210 Posthumous Heirs, an heir must be conceived before death of decedent.
Section VI: SIMULTANEOUS DEATH
          Requirement of Survivorship
           o   At common law, the heir was required to survive for an instant of time. This has been extended to 120 hours by the UPC (2-702)
           o   What is the evidentiary effect of UPC 2-104’s 120 hour requirement for intestacy mandatory survival period all heirs must meet
                     If one does not survive 120 hours, one does not take by intestacy unless one is last heir

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                       Code puts burden of proof on the one contending survivorship
                       The burden is a ―clear and convincing evidence‖
           o     Most properly drafted wills or trust instruments require a survival period of 30 days.
           o     Arkansas Law
                       ACA 28-10-101 – Simultaneous Death
                       Can put in your will that you don’t want to follow the statute (28-10-107)
                                              Probably should put in your client’s will that beneficiary must survive testator for a certain amount of time (120 hours
                                               to 10 days)
                                              Six months is probably too long – want it to be long enough to distribute property the way the testator would have
                                               wanted it to be distributed.
           o     Must look to see if there is sufficient evidence that they died otherwise than simultaneously
           o     Here, there was NOT sufficient evidence to prove they died simultaneously
Simultaneous Death statute which says: if there is Simultaneous Death, the property is disposed of as if the other person
predeceased the decedent.
-    Must be sufficient evidence that they died simultaneously.
The Uniform Probate Code expands the Simultaneous Death period to 120 hours. It also allows you to expand this period to 30 days in a will.


Section VII: DISCLAIMER (RENUNCIATION)
     When a disclaimer is made the law treats the situation as if the disclaiming person predeceased the donor.
     Relevant Statutory Provisions:
      o    Federal tax law—I.R.C. § 2518;
      o    State law—ACA § 28-2-101 to -109; and
      o    UPC § 2-801.
     To have effective disclaimer – follow formalities of statute.
     Reasons to disclaim property:
      o    Tax avoidance (usually used as a substitute for a direct gift)
      o    Marital responsibility avoidance (eg, claim of alimony)
      o    Creditors' claims avoidance (but possibly not bankruptcy) – some argument that if you are in bankruptcy you can’t disclaim to avoid.
      o    Qualification for welfare benefits, e.g., Medicaid
     Can no longer disclaim to avoid federal tax liens
     Arkansas Law
      o    ACA 28-2-101 – right to disclaim interest in property
      o    Can disclaim unless you have already promised that specific property to someone else (28-2-102)
      o    Have nine months to disclaim (28-2-107)
      o    Effect of disclaimer (28-2-108) – effect as if the disclaimant had predeceased the decedent
      o    28-2-107(b)(1)(B) – time of disclaimer is 9 months after actual knowledge of the inherited interest
     Disclaimers in Bankruptcy
      o    Most courts have used the ―relation back‖ theory to permit disclaiming beneficiaries to avoid creditor claims – probably the law in Arkansas
      o    Two federal Courts of Appeals have held that a disclaimer executed before the disclaiming heir petitions for bankruptcy is effective to cut off any rights
           of the bankruptcy trustee.
      o    However, whether a disclaimer executed after the heir has petitioned for bankruptcy is effective to cut off the rights of the bankruptcy trustee remains an
           open question.
     Disclaimers and Eligibility for Public Assistance – courts have invariable held that the disclaimed assets do count toward the eligibility threshold.
      o    Whether a disclaimer defeats a federal tax lien is a matter of federal law, not state law
cannot Disclaim before Death of Decedent (cannot Disclaim an interest that you do not have yet) unless receive valuable consideration for disclaiming;
ACA 28-2-101 Disclaimer Statute
Can Disclaim part or all of an estate. Cannot be oral, must be in writing
ACA 28-2-107 Disclaimer Procedure
Disclaimer must be w/i 9 months after the death of the decedent. Must be written and filed in probate ct.
ACA 28-2-108 Effect of Disclaimer
It devolves as if disclaimant predeceased decedent and ―relates back‖ to death of decedent.

*In AR, you can Disclaim to avoid Creditors but this is very hard b/c of state and federal law. This is a S.Ct. case that started in AR:
1.        Skipping a Generation – if the decedent dies and whole estate skips a generation when distributed (either b/c skipped generation is deceased or they
          disclaimed), then it is not subject to Taxation.

Section VIII: ADVANCEMENTS
           Advancements
          An advancement is an irrevocable gift of money or other property that applies to gifts to child or descendant or heir (depending on statute). It anticipates
           inheritance.
          At common law, a substantial gift to a child by a parent raised a presumption that the gift was an advancement of the child’s inheritance and that the gift
           should be charged against the child’s share
          Advancements only occur in intestate estates.
          Whether or not there is an advancement depends on the intent of the donor
          It has the effect of reducing the share of the probate estate that the family member receives under the intestate succession statute upon the decedent's
           death.
                 o     The dividing line between gifts and advancements is the intent of the donor.
                 o     In addition, the common law would not allow the donor to convert a previous gift to an advancement (but a previous advancement could be
                       converted to a normal gift). ACA 28-9-216; UPC 2-101(a), 2-109.
          UPC 2-109: What does the UPC require?
                 o     Formality:
                                  A writing is required as evidence that the gift was intended as an advancement.
                                  If a writing is not made, then it may not be found to have been an advancement.
                                  Therefore, intent is no longer important except that it must be expressed in writing.
                                  This raises the problem of persons destroying evidence.
                                                                                                                                                                          5
                                   No writing = no advancement.
                                   The UPC assumes most gifts are not advancements.
                                   There is a danger different from the common law, because it assumes that nothing is an advancement.
                                   This applies to both total and partial intestacy.
                                   The risk of failure of proof falls on nonadvancees.
          What is the writing requirement of UPC 2-109?
                  o     No special form or words are required
                  o     No need for words of art it need only be something in writing, E g., note on check advancement."
                  o     Must be some physical evidence that courts characterize as a writing.
                  o     One additional requirement is that the writing must be contemporaneous with the advancement.
                  o     It is unclear whether it has to be dated.
          Arkansas Law
                  o     ACA 28-9-216
                  o     Requires a writing – does not have to be contemporaneous
                  o     Dower probably comes off the top before you determine the hotch pot
          The advancement is valued when the heir takes possession or at intestate’s death – whichever occurs first
          If the recipient of the property fails to survive the decedent, it is as if the advancement never occurred – the recipient’s heirs are not effected by the
           advancement
          Hotch pot
ACA 28-9-216 Advancements
- Must be total intestacy. Advancement must be in Writing by decedent or acknowledged in writing by the heir for it to be an Advancement.
- Advancements are never in writing so in AR Advancements are rarely used.




Chapter 3: PROTECTION OF THE FAMILY
Section I: INTRO TO THE ELECTIVE SHARE
     An Introduction to the Elective Share
         All states give the surviving spouse an elective share
         How is an elective share different than an intestate share?
                o     An intestate share applies only if the decedent dies without a will
                o     An elective share can only be taken if the decedent dies with a will
         Under American law, the decedent's spouse is the only relative favored by a protection against intentional disinheritance. The decedent's children and
          possibly more remote descendants are granted protection only against unintentional disinheritance.
         The three basic types of family protections are: (1) Allowances, (2) Homestead and (3) Exemptions.
                o     The laws of the state of domicile controls the scope and terms of the family protections for an estate.
                o     The three family protections are paid before creditor's claims, intestacy distribution or testate distribution.
         Dower/Curtesy= life estate in 1/3 real property and 1/3 outright of personal property if there are kids (in Arkansas); if no kids, ½ real property and ½
          personal property
         How to take against the will – ACA § 28-39-403
                     Time limit – within one month of the expiration of the time for filing claims
                     Right of election is personal – does not survive the surviving spouse (ACA 28-39-405)
                            o     This is supported by Arkansas case law
                                             must be married continuously for a year in order to get dower/take against the estate
                                             cannot take homestead then claim adverse possession
         Waiver of Elective Share Rights
SECTION III: MODERN ELECTIVE SHARE STATUTES
ACA 28-11-101 et seq. and ACA 28-29-301 Elective Share
Must be married more than one year. There has to be a Will and Elective Share is same as Dower.
To Spouse, if married more than one year, can Elect:
- if Kids then 1/3rd of property, Life Estate in land.
- if No Kids then ½ of property, 1/3rd as against creditors.
- property – includes all land spouse seised of during marriage unless sold w/ consent.
- ancestral estate – if decedent had one, spouse takes only ½ Life Estate as against Collateral Heirs.

Section IV: OTHER PROTECTIONS FOR THE SURVIVING SPOUSE
HOMESTEAD ALLOWANCE, EXEMPT PROPERTY, AND FAMILY ALLOWANCE
. In Community Property states, the spouse automatically owns half property received during marriage (unless by inheritance). Since spouse
           automatically owns half, then spouse gets this half at death and Elective Share is not needed to protect spouse from not getting his/her share.
*In AR, a Non-Community Property state, each owns their own account if spouse dies, there is either Dower or Elective Share of the other’s account.
*If a couple moves from a Community Property state to a Non-Community Property state, then property stays Community Property unless couple agrees to change
           it.
*The Elective Share is same as Dower. If couple moves to AR from Community Property state, all property obtained in that state is presumed to be society
           Property and not part of Dower.

ACA 16-66-210 and ACA 28-39-201 Homestead Allowance
To Spouse (and/or minor kids), if married more than one year, can Elect:
-     Homestead – 80 acres in rural areas and 1/4th acre
ACA 28-39-102, 103 Occupancy
 - Called sustenance by statute
 - Spouse can live in chief residence of deceased for 2 months after death or till Dower is assigned
 - Spouse shall have reasonable sustenance out of estate during this time.


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UPC has Augmented Estate where spouse gets bigger share the longer they are married.

Pre-Marital Will
Some states say that is person gets married and had a will before marriage, marriage will change the will. In AR, Spouse gets Dower and Statutory Allowances
          even if not included in a will that was made before they were married.

Section VI: PROTECTION OF CHILDREN: PRETERMITTED CHILD STATUTES
*Pretermitted child is one left out of the will.
Protection of Children: Pretermitted Child Statutes
         Generally, one may disinherit ones relatives including children (probably in all jurisdictions).
         Only LA provides children with statutory protection against intentional disinheritance
         Most states protect children against unintentional disinheritance
         Pretermitted – left out; omitted
         Common way to disinherit in a will is to give $1.00
         ACA 28-39-407(a) – subsequently born or adopted children
         ACA 28-39-407(b) – pretermitted children
                o    Also applies to grandchildren
                o    Child entitled to recover from devises his intestate share
         Arkansas case law
                o    Is extrinsic evidence admissible in Arkansas? NO, unless there are ambiguities in the will
                                 Inadmissible to show the intent to disinherit
                                 Can use extrinsic evidence to show whether a child was really mentioned (misspelled name, ambiguities in naming a class)
                o    Use of ―my children‖ or ―my heirs‖ is sufficient to avoid pretermittion
                o    Presumption against disinheritance of a child
                o    Presumption against intestacy (subordinate to presumption against disinheritance of a child b/c it is much more than the other)

ACA 28-39-407 Rights of Child or Issue
- (a) Subsequently Born or Adopted Children – if either of these are left out of the will, the testator shall be deemed to have died intestate w/ respect to the child
      and child can recover his respective share.
- (b) Pretermitted Children – if any living child is left out of the will, the testator shall be deemed to have died intestate w/ respect to the child and child can recover
      his respective share.

Chapter 4: WILLS
Section I: EXECUTION OF WILLS
Execution of a Will in AR:
First you must Execute the Will or put it into effect
-       The Execution Ceremony is a formal ceremony and there are certain Requirements that must be met.
-       Testator must be 18 and of sound mind (ACA 28-25-101).
-       Testator must put the natural objects of the writing, the beneficiaries, in writing.
Second, as the attorney, you review will w/ Testator in private.
Then, you get two witnesses (ACA 28-25-102).
 - Witnesses must be at least 18 (Norton v. Hinsin – must be 18) and competent.
 - Best to have Uninterested Witnesses to avoid any conflicts.
 - The attorney himself can be a witness under Sullivant v. Sullivant.
 - A will is not invalidated just b/c witness is Interested. But, an Interested Witness, unless there are also two Uninterested Wtnesses, shall forfeit any amount in the
        will that exceeds what he would have received had testator died Intestate.
Next, Testator and the two Witnesses sign the Will (ACA 28-25-103(a) – Burns v. Alabama – there must be strict compliance for (a)). Burns also says that
        Witnesses do not have to sign in each other’s presence but they must sign in Testator’s presence and see him see it.
 - It is best to have Testator initial each page and use page numbers like 1 of 3, 2 of 3, etc. to show conclusively the number of pages.
Testator must Declare (or Attest) in front of the two Witnesses that this is his Will (ACA 28-25-103(b) – Faith v. Singleton – there can be substantial compliance
        for (b)). In AR, Will is still valid if Testator does not openly declare but everything in Will has to be correct – better to Declare.
The two Witnesses must either see Testator sign the Will or have Testator declare that the signature on the Will is his signature (ACA 28-25-103(b)(1-4)).
The signature must be at the end of the Will and must be done in the presence of the Witnesses (ACA 28-25-103(b)(5) – Clark v. National Bank – signature need
        not be at absolute end of document; it only needs to be substantial compliance).
The Witnesses then must sign the Will at the request and in the presence of the Testator (ACA 28-25103(c)).
There are different ways a Will can be signed: sign it himself; acknowledge his signature already made; sign by mark, his name being written near it and witnessed
        by a person who writes his own name as witness to the signature; or at his discretion and in his presence have someone else sign his name for him. (ACA 28-
        25-103(b)(1-4)). Also, Testator can acknowledge his signature by acts or gestures.
Next, have Attestation Clause at the end of the Will. This is signed by both Witnesses and it basically says that they Attested to Testator declaring Will to be his
        and signing his Will.
 - What if Testator accidently signs Attestation Clause instead of the end of the Will? Court said this is OK as long as everything else in Will is good.
Finally, have Proof of Will. This is a separate document than Will. It will be filed separately in probate court. This is basically an Affidavit from the two
        Witnesses stating that they were present at the Execution of the Will and that they were the Witnesses, etc. This Proof of Will can be used as evidence in
        court. This is very important since the Witnesses can die before the Testator, the Witnesses may not be found, or the Witnesses forgot since much time could
        have passed. The Proof of Will can be used in court in substitute for their testimony.
                    o    Basics
                                      Witnesses attest – not the testator – however, if the testator signs the attestation clause, it is sufficient compliance
                                      Attorney who drafts the will can be a witness, if disinterested (Sullivan v. Sullivan)
                                      Need to get annotations from the Code
                                      Can acknowledge by gesture – Anthony v. College of the Ozarks
                                      Witnesses must be 18 years of age – no exceptions – Norton v. Hinson
                                                  Strict compliance – substantial compliance not enough
                                      As long as there are no dispository words after the signature, then can write words after the signature – Clark v. National
                                       Bank (Arkansas)
                                      File it with the court – ACA 28-25-108
                                                                                                                                                                          7
         o    Statutory Requirements
                        Voluntarily executed
                        Testator must be competent
                                     18 and of sound mind
                                     Familiar with property
                                     Know natural object’s of his bounty (know who your family is)
                        Will must be in writing
                        Will takes effect only after testator dies
                        Will must dispose of property or give other directions
                        Wills are ambulatory – they walk with the testator
                        Will – can be changed at any time prior to death
                        Will can be revoked at any time prior to death
   Signature requirement
         o    ACA 28-25-103
         o    Proxy signature
                        Under the UPC, the other person (i.e., the proxy) must be in the testator's ―conscious presence‖ and the person must sign only at
                         the Testator's direction
                        Proxy form – ―by (name of signor) for (name of testator)‖
         o    Marks/stamps
                        A mark may be a valid signature
                        The ―X‖ is regarded as the personal signature of the Testator if he so intended. The written name accompanying the mark is for
                         identification only.
                        The testator must complete all of the signature that testator intended to complete
         o    Place of the signature
                        Must be at the end of the dispository information
                        Under the UPC, it may be placed at any place on the document; however, if not at end, there must be evidence that it was intended
                         to be the signature AND the testator had testamentary intent (a will must have been intended to be a will).
                        ARK requires signature at the end. The problem with this is determining what the end is. Most courts have said at the logical end
                                     If the ―at the end‖ formality is not followed, then the entire will is invalid and not just the portion following the
                                      signature.
                                     Some items may usually follow the signature; these include: the date, naming and compensation of executor,
                                      attestation clause, etc.
         o    The purpose of signing a will is to show the will is final, to show the testator’s decision to give the will life.
         o    Anything can be testator's signature as long as testator intends it to be so, and the testator completes all he intended to complete.
                        This does not necessarily have to be his full name – any inscription can be the testator's signature.
                        What must be shown when the testator signs with less than a full signature? It must be proven that the Testator intended the
                         inscription to be his signature and that Testator completed all he intended to complete.
         o    Signature in the Exordium
                        ―I, John Q. Public, being of sound mind, declare this to be my last will.‖
                        It is usually the beginning of the instrument
                        The purpose of the signature requirement is that it signifies finality and fulfills the cautionary and evidentiary functions of the
                         statutory formalities
                        Most courts have accepted a written name in the exordium as a signature when there is some affirmative indication that it was
                         intended to be the will IF the statute does not require a signature at the end.

   Execution Ceremony
   Witnesses – ACA § 28-25-102(b)
         o     Presence Requirement
                           Most statutes require that witnesses sign in the testator's presence. The battleground concerns how ―presence‖ should be
                            interpreted.
                           The Two main tests for interpreting presence:
                                       Line of Sight Test -Majority rule.
                                       Conscious Presence Test -
         o     Competency of Attesting Witnesses
                           The general requirement is that the witness must be credible" or Competent."
         o     Interested Witnesses
                           Interested Witnesses are persons who will take a direct pecuniary benefit by the terms of the will.
                           At common law, the will was held completely invalid if there were not enough non-interested witnesses to satisfy the statutory
                            requirements.
                           Most states do not hold the will invalid, but the witness/beneficiary loses at least a portion of his or her interest (purging statutes).
                           The relevant time for whether a witness is interested is at the time of execution.
                           See ACA 28-25-102 – this does not make the will invalid but the interested witness forfeits any portion of the estate over what
                            would have been his intestate share
                                       They take the less of the two – will or intestacy
   Affidavit of attesting witnesses – ACA § 28-25-106
   Attestation Clause
         o     Attest means to bear witness and competent means qualified to testify in court concerning the material facts of execution
         o     An attestation clause is a paragraph of boilerplate that states the circumstances of the execution and provides a place for the witnesses to sign
               as attesting witnesses.
         o     The attestation clause yields a presumption of due execution and that the events described in the clause actually occurred
         o     When a witness signs an attestation clause, she is expressing a present intent to act as a witness to the will.
         o     These clauses facilitate probate by providing ―prima facie evidence‖ that the testator voluntarily signed the will in the presence of the
               witnesses.
   Proof of Will (self-proving affidavit)
         o     When a witness signs a proof of will, she is swearing to the validity of an act already performed. She is testifying.
         o     Sworn statements by eyewitnesses that the will has been duly exeucted
   Substantial Compliance
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                 o     Judicially developed, says to look at the purposes of the statute and see if the testator has substantially complied with them.
                 o     In re Alleged Will of Ranney
                                  An instrument purporting to be a last will and testament that includes the signature of 2 witnesses on an attached self-proving
                                   affidavit, but not on the will itself, should be admitted to probate.
                                  The witnesses signed the proof of will, but didn’t sign the attestation clause
                                  The court found substantial compliance with the statute
                                  This is a UPC result – ―dispensing power‖
                                              A judicial power to admit a document to probate even when the document lacks even the basic formalities required by
                                               the UPC
                                  In Arkansas, if everything else is OK, then probably OK as long as affidavit is dated the same day as the will
                                  The UPC is looser than Arkansas law
                                  Arkansas allows substantial compliance
                                              Testator’s declaration of will – not needed for substantial compliance
                                              Testator’s request for witnesses to sign – not needed for substantial compliance
                                              It is substantial compliance if the testator’s signature is not at the end as long as there are no dispositive provisions
                                               after the signature
                                  Strict compliance with 2 attesting witnesses – statute specifically requires 2 attesting witnesses
                                              Must have strict compliance – no room for judicial interpretation

Salvage Doctrines: Substantial Compliance
In Re Alleged Will of Ranney - Witnesses did not actually sign the Will (the Attestation Clause). The Witnesses only signed the Proof of Will (the Self-Proving
Clause). Court upheld the Will. Same result in AR as long as everything else in the Will is good.

Holographic Wills - hand-written wills.
ACA 28-25-104 Holographic Wills generally
-  Entire will and signature must be handwriting on Testator.
-  Need 3 credible Disinterested Witnesses that testify that handwriting and signature is that of Testator. These Witnesses do not have to be present when
   Holographic Will was written, only that handwriting belonged to Testator.
-  What if Holographic Will is on paper but not signed at bottom and paper is folded up and signed on the outside and put in an envelope? Smith v. MacDonald
   says Holographic Wills do not have to be signed at the bottom but must be signed somewhere.
        Holographic Wills
               o     ACA 28-25-104
               o     Holographic (or unattested wills) are those that are made entirely in the testator's handwriting. Most statutes say ―Entirely‖ or ―entire body‖
                     handwritten
               o     Handwritten and signed by the testator
               o     No witnesses
        Codicil
               o     Effect of republication of will
               o     A valid codicil will bootstrap an invalid will and make that will valid
               o     Holographic codicil – can it bootstrap a non-holographic will? Courts are split on this issue
                                Not decided in Arkansas

*Must have Present Intent to be a Holographic Will. The words ―I will be giving . . .‖ show future intent.

In Re Estate of Sharpe (AR) - Two witnesses sign Will. There is no Proof of Will Affidavit. Later, the witnesses are called to testify about the Will. One witness
remembers being there and signing the Will. The other witness does not remember the Will or being anywhere near there. There is a third person called to testify
and he says both were there and both signed the Will. Of course, this third person will inherit the estate if the Will is valid. ourt said Will is Invalid b/c it was not
Proved in court b/c one witness cannot attest to it.

Section II: WHAT CONSTITUTES A WILL?
Doctrine of Integration – two kinds: 1.) External Integration – you can have a Will, a later Codicil, a later Will and these are all Valid if they can be put together in
one Will. 2.) Internal Integration – when you look at one Will and the pages are different or not numbered and Ct. determines that these pages are Integrated into
one Will.
                 o     External integration – establishes what will is in regard to different documents created at different times
                 o     Internal integration – pages of a particular will executed at a particular time
                                  Were the pages executed at the same time?
                                  Number pages – 1 of 4, 2 of 4, 3 of 4, 4 of 4
                                  Fasten all the pages together
                                  Use colored ink for signatures
                                  Type-face – keep the same font through out the entire document
           Incorporation by Reference
Doctrine of Incorporation by Reference – if you write a Will and refer in the Will to: 1.) another paper already in existence; 2.) you have Intent to include these;
and 3.) this paper was sufficiently described in Will.
ACA 28-25-107 Incorporation of Writing by Reference
 - Subsection (a): Writing must be in existence at the time of Will; Intent must be manifested in Will; and it must be described sufficiently in Will.
 - Subsection (b)(1) contains an Exception to the writing must be in existence at time of Will: Writing can be prepared after Will when you want to make a list of
      tangible, personal property (like a list of books) not specifically disposed of in Will. (b)(2) says this must be in handwriting of Testator or signed by him
      and must describe the items and devisees w/ reasonable certainty.
To have (b)(3), must have (b)(1) plus (b)(2). Otherwise, must be in existence at time of Will.

Another Exception to Rule that paper must be in existence at time of writing is ACA 28-27-101 - says a Will can refer to a Trust that will be set up later.

AR Incorporation by Reference=1. Has to be in existence, 2. Have to have intent, and 3. Have to sufficiently describe the articles.
AR Jones v. Ellison, 2000. - Died testate w/ estate $2 million. Provision in will that reserved right to make disposition of tangible property by lists. Note found in
jewelry box, handwritten disposing of jewelry and dog, signed and dated. Ct said O.K. as incorporation by reference.

                                                                                                                                                                            9
Tangible items of property are the exception as don’t have to be written prior to the will.
Incorporation by Reference - can have invalid will, that can be validated by the execution of a valid codicil.

Estate of Norton - Son attempts to have invalid will (no witnesses or signatures) validated by a valid codicil. Ct. said have to show intent (merky), also have to
specify and refer back to the will in the codicil. Codicil did not specify therefore not valid.
                  o      Requirements
                                  A will executed as required by statute
                                  A distinct reference to a written document in the will itself
                                  The document itself may be anything (e.g., will, codicil, deed, note, list or memorandum)
                                  The document must in fact be in existence at the time the will is drawn up
                                  The will must show or state that the document is in existence at the time the will is executed. Courts want the document to state
                                   that it was incorporated in the past and not to be incorporated in the future.
                                  The will must show an intention to incorporate the document as part of the will.
                                               The entire document need not be incorporated
                                               May incorporate whole or part
                                  When the document is offered, it must be shown to be the document referred to in the will.
                                               It must be shown that it corresponds to the description in the will.
                  o      Arkansas – ACA § 28-25-107
                                  Exceptions
                                               (b)(3) – can be prepared after the execution of the will
                                               (b)(1) – a memorandum disposing of tangible personal property
                                               (b)(1) – cannot be money, documents of title
                                               (b)(2) – if handwritten, but not signed – OK
                                               (b)(2) – if typed and signed – OK
                  o      Other exceptions to the doctrine of incorporation by reference
                                  Pour-over trusts
                                  Tangible personal property lists
POUR-OVER TRUSTS (History is in the H/O, not tested on).
A provision in the will that leaves money to an inter vivos trust (set up while alive vs. testamentary trust).
Virtually all States allow Statutes to cover trust exceptions.
Today, under the Uniform Testamentary Additions to Trust Act, all of T’s devises could be carried out. In the last instance, if T had written up the trust
documents for the Charity Trust it would come into existence at his death, when it was funded by the will.

ACA 28-27-101 Testamentary Additions to Trusts
A will can devise property by trust already established or in the future, allows both 1) during lifetime, or 2) after death.
Trust can be revocable or changeable.

Section III: CONSTRUCTION PROBLEMS CREATED BY THE TIME GAP B/T WILL EXECUTION AND
      DEATH - ABATEMENT, EXONERATION & ADEMPTION.
5 TYPES:
Abatement.
Ademption.
Exoneration.
Apportionment.
Lapse.



     Abatement
             o         Abatement rules determine the order of priority among various devisees when the value of the estate is insufficient to satisfy all of the devises
                       in the will
                 o     Abatement – the reduction of a devise on account of the insufficiency of the estate of a testator to pay all his debts, all the costs of
                       administration, and all the devises in full.
                 o     Abatement is the process of determining the order in which property in the estate will be applied to the payment of debts, taxes, expenses and
                       dispositions under the will when there is an insufficient amount to pay all claims and dispositions.
                                  If expressed in the will, the intention of the testator governs the order in which property will abate.
                                  It’s a good idea to have the testator put who should take when/if the estate abates
                 o     The problem of abatement: Any time a testator's property after payment of claims against the estate, is insufficient to satisfy all bequests
                       and devises, the shares of some or all beneficiaries under the will must be reduced or abated. The problem can arise because of debts, market
                       value declines, forced share or pretermitted heir situations.
                 o     Classifications of devises:
                                  Specific devises
                                  Demonstrative devises
                                  General devises
                                  Residual devises
                 o     Specific devise – devises of particular, identifiable item of property
                                  A gift by will of property that is particularly designated and which is to be satisfied only by the receipt of the particular property
                                   described.
                                  ―I leave my house at 123 ABC Drive, Little Rock, Arkansas, to my daughter‖
                                  ―I leave all my jewelry to my cousin, Jacque‖ – specific devise of a general nature
                 o     General devise – one which passes property of the testator without a particular enumeration or description of such property
                                  Devise satisfied out of the general assets of the estate instead of from any specific fund or thing
                                  ―I give my brother $10,000‖
                 o     Demonstrative devise – a devise of a particular amount of money to be drawn from a specified fund
                                  ―I leave my brother $20,000, and I direct my stamp collection be sold to satisfy this devise.‖


                                                                                                                                                                     10
                          The demonstrative devise is treated as a specific devise up to the value of the stamp collection, and as a general devise for the
                           balance. Thus, $10,000 of the devise abates with specific devises, while the remaining $10,000 abates with general devises.
                          Sophisticated lawyers rarely draft demonstrative devises b/c demonstrative devises make estate administration more complicated
         o     Residual devise – devise of the residue of testator’s estate
                          ―I devise the residue of my estate to X.‖
                          A residuary gift is a gift of the remaining portion of the estate after satisfaction of other dispositions
         o     In re Estate of Potter (Fl. 1985)
                          General devises abate before specific devises
                          If both devises were specific devises, then the house would have been sold and the proceeds split evenly between the son and the
                           daughter
                          Under the UPC, the kids would have gotten equal shares (not in Arkansas – Arkansas would reach the same result as this court
                           did)
         o     ACA § 28-53-107 – Abatement
                          Order of abatement:
                                      Property not disposed of by will – what would be given intestate
                                      Residual devise
                                      General devise
                                      Specific devise
         o     Creditor claims – generally enjoy priority over claims of estate beneficiaries
                          This is generally true with the exception of dower
         o     Ratable abatement within each class – devises within the same class will abate ratably
                          The value of the testator’s estate, after payment of creditor claims, and after distribution of all specific devises, is valued at
                           $100,000. The testator’s will made general devises totaling $250,000. The $100,000 will be distributed ratably among the
                           general devises.
                          Since the funds available to satisfy general devises equal 40% of the total general devises, each devisee will receive 40% of the
                           devise.
                          Thus, if the will devised $80,00 to one general devisee, that devisee will take $32,000 (40% of $80,000).

   Exoneration
        o     Common law rule held that a specific devisee is entitled to have the mortgage paid at the expense of the residuary estate unless it appeared,
              from the will itself or surrounding circumstances, that testator intended the devisee to take subject to the mortgage.
        o     Trend – a presumption of non-exoneration – the specific devisee takes subject to a mortgage lien unless the testator’s contrary intent appears
              from the will or the surrounding circumstances
                        Mortgage – any kind of secured debt
        o     ACA § 28-53-113 – paid out of general assets of the estate
                        Arkansas follows the common law
                        Can get around the statute by providing for it in the will

   Apportionment of Taxes
        o    Common law – tax claims were generally treated as claims against the estate, unless the will provided otherwise
                        Residuary devisee bears the entire tax burden
        o    Trend (including Arkansas) – statutes directing apportionment of tax liability among estate beneficiaries
                        Each beneficiary bears a proportionate share of estate tax liability
        o    CA § 26-59-115 – payment of tax is spread proportionately among distributes and beneficiaries
                        Exception for surviving spouse – apportionment does not apply to surviving spouse
                        To get around statute, write it in the will
        o    Problem – Oscar Zilch’s will includes the following dispositive provisions:
                        ―1. I devise Rem Brant’s painting of mother to Aunt Suzie Zilch.‖ -Specific devise
                        ―2. I devise $100,000 each to my grandchildren, Zelda, Yolanda, Xavier, and Wanda.‖ - General devise
                        ―3. I devise the remainder of my estate, in equal shares, to my children, Vernon and Ursula.‖ - Residual devise
                        At Oscar’s death, the painting of mother is valued at $2,000. The remainder of Oscar’s estate, after payment of creditor claims
                         and administrative expenses, but before payment of taxes, is valued at $998,000. Assume that the federal estate tax on Oscar’s
                         estate is $153,000. The will contains no direction against apportionment. How will the tax liability be distributed?
                                    Each devisee will owe 15.3% of their devise ($1,000,000 estate)
   Ademption
        o    The doctrine of ademption applies when the testator has devised a particular piece of property which the testator disposes of after executing
             the will
        o    The doctrine of ademption provides that the specific devisee is entitled to nothing if the specifically devised property is not in the
             testator’s estate at testator’s death.
                        The specific devise has been adeemed by testator’s disposal of the specifically devised property
        o    Types of ademption
                        Ademption by extinction
                                    Ademption by extinction occurs when a specific devise is either not a part of the testator's estate or has substantially
                                     changed in character at the time of his death; thus, the gift fails by ademption.
                                    An exception to the ademption by extinction rule exists with regards to the mere change in form of an object. This
                                     exception provides that ademption by extinction is not caused by the mere (unsubstantial) change in form of an object.
                        Ademption by satisfaction
                                    Ademption by satisfaction is the testamentary concept of advancements in intestate estates and applies when a testator
                                     makes an inter vivos gift to a legatee of a general or residuary legacy included in a will executed before the gift was
                                     made.

         o     McGee v. McGee (R.I. 1980)
                       General devise to friend; specific devise to grandchildren
                       Issue – was there ademption?
                       Can only have ademption with a specific devise
                       The court adopted a ―identity theory‖ of ademption rather than the ―intent theory‖
                                  The court did not focus on whether the testator would have wanted the devise adeemed.
                                                                                                                                                           11
                                             Instead, the identity theory requires the court to focus only on whether the devise was specific (and on whether the
                                              property was a part of the testator’s estate at testator’s death)
                                Modern theory – identity theory, which focuses on:
                                             Whether the gift is a specific legacy, and if it is,
                                             Whether it is found in the estate at the time of the testator’s death
                                Here, the court found ademption by extinction b/c the money was no longer in the testator’s bank account
                 o     In many jurisdictions, if a court-appointed conservator sells or transfers specifically-devised property, the specific devise is not adeemed.

                 o     UPC § 2-606
                           o     The UPC presumes nonademption; it reverses the common law presumption unless the testator expressly says that ademption by
                                 extinction applies.
                           o     You can take a lot more under common law or Arkansas law
                           o     Arkansas law falls closer to McGee than to the UPC
                 o     Corporate Securities
                           o     UPC § 2-605
                                            Devisee takes securities devised if in estate at time of death and securities issued by entity including splits, dividends,
                                             other security distributions, but not those acquired by the Testator's exercise of purchase options.
                                            Securities of or distributions from another entity acquired by corporate merger, consolidation, reorganization, etc, and
                                             securities of the same entity acquired through a reinvestment plan are also included.
                                            Note that this section is not limited to specific devises (this could mean that a general gift).

                 o     Problem – Testator’s will devises ―100 shares of Hi-Flier Corp. stock‖ to her sister, Ann. To what is Ann entitled, if two years before
                       Testator’s death:
                            o      Hi-Flier Corp. declared a stock dividend, entitling shareholders to one share for each share they previously held.
                                               Under UPC, Ann will get everything.
                                               Under Edmundson v. Morton (NC 1992), Ann will get everything.
                                               However, if the court finds this is a general devise, then Ann may only get 100 shares.
                            o      Tip-Top Corp. acquired Hi-Flier, issuing one share of Tip-Top Corp. stock for each two shares of Hi-Flier stock.
                                               Under UPC, Ann will get 50 shares (everything) of Tip-Top (change outside of testator’s control)
                                               If court finds this to be a specific devise, Ann will get everything
                            o      Hi-Flier declared a dividend of $5.00 per share, and offered each shareholder the opportunity to take one-tenth of a share of stock
                                   in lieu of the $5.00 dividend. Testator took the stock.
                                               Under UPC, Ann gets everything.
                                               Under traditional rule, Ann is denied the extra shares.
                                               What if Testator chose cash instead of stock?
                                                            The cash dividend is a change in substance so the beneficiary is not entitled to cash dividend
                 o     Ademption by Satisfaction
                            o      Similar to advancements
                            o      Problem when there is a general devise
                            o      Testator’s will devises ―to each of my three children, one-third of my estate.‖ One year before testator’s death, he gives $30,000
                                   to one of his three children. Should that gift be charged against the recipient’s share of testator’s estate?
                                               In general, the answer is no – unless the testator has provided, either in the will or in a writing contemporaneous with
                                                the gift, that the gift is designed to satisfy the devise in the will
                            o      Question of value – same as advancements
          Lapse
               o        When a devisee named in the will dies before the testator’s death, the devise generally lapses unless the jurisdiction’s anti-lapse statute
                        preserves the devise for the devisee’s descendants.
                  o     What happens if a devisee predeceases the testator?
                  o     Categorize lapses
                                   Devises to descendants
                                   Devises to other relatives who are not descendants
                                   Devises to those who are not relatives
                  o     ACA § 28-26-104 – anti-lapse statute
                                   Arkansas has a narrow anti-lapse statute
                                   The anti-lapse provision applies to testator’s descendants
                  o     Purpose of Antilapse Statutes: The original idea was to protect persons who it is believed the testator would have wanted to protect (had
                        he/she thought about the matter). The intent of the testator always prevails if it can be shown in the will. If it is not shown, then the statute
                        will apply.
                  o     To get out of the anti-lapse statute, indicate contrary intent
                                   Use ―magic words of survivorship‖ – these words cause lapse
                                              ―If he survives me‖
                                   These words cut off anti-lapse provisions of the statute (the devise will lapse if the testator’s uses these words)
                                              By using express language in a will, testator can assure that an anti-lapse statute will not apply
                                   In Arkansas, do not need to use these magic words of survivorship for those who are not descendants
                                              Arkansas exception to lapse – descendants, not siblings
                                   However, in jurisdictions with broader anti-lapse statutes, need to use the magic words of survivorship for those who are not
                                    descendants in order to get out of statute (to cause a lapse)
ACA 28-53-107 Abatement
Claims (creditors), legacies, family allowances, pretermitted heirs (children in AR), surviving spouse must
Be paid 1st in the following order:
1.          Property not disposed of by the will. Intestate.
2.          Property devised to the residuary devisee. Residuary.
3.          Property disposed of by the will, but not specifically devised to the residuary devisee. General.
4.          Property specifically devised. Specific.
Demonstrative Devises on any specific property shall be specific and any residuary shall be deemed general.

ACA 28-53-113 Exoneration
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Exoneration follows the common law rule. Mortgage would be paid from the rest of the estate, to exonerate and pay it off, leaving the beneficiary mortgage free.
(Also on p. 21 of Outline).

AR case: McDermott v. McAdams - Daughter sued the executor because the will did not account for the substantial admin costs.
Abatement Statute appliedtook costs out in following order: SpecificGeneralResidual. Daughter took hers as specific.


*Increases in Property = Accession.

ACA 28-26-104 [AR anti-lapse statute] Failure of a Testamentary Provision
AR has the anti-lapse statute. Look for several characteristics.
To whom does it apply? ARonly to children, grandchildren, issue. Not to collaterals.
e.g.      3 kids, 1 predeceases. In the will the kids weren’t named just share and share alike. (named as a member of a class (3 kids).
Would pass to the issue in AR, if specifically named would also pass to the issue.

Common Law Rule. Residue.
If leave it to 2 people and 1 person predeceases Tthat persons share would pass intestate. Devisees heirs or descendents take nothing, it lapses.

ACA 28-26-104 (2)
AR if 2 people are not issue to T and 1 predeceases Tthe others share would pass to the remaining beneficiary. If more than two beneficiaries then residue is
distributed equally.
ACA 28-26-104 (1)
If leave devise other than a residuary devise fails for any reason then it becomes part of the residue.

TO VOID ANTI-LAPSE STATUTEinclude language “IF HE SURVIVES ME” = words of survivorship

Consequences of Lapse.
Specific or General Devise, passes to residue.
Residual devise passes to surviving devisee, if no survivor devises intestate.

p. 280 UPC Anti-Lapse Provision (on cutting edge).
States that the magic words “if he survives me” do not work anymore.

Section IV: CONSTRUCTION PROBLEMS MORE GENERALLY
RULES
1.          Will is construed as a whole even if ambiguities in certain sections. (Matter of Marine)
2.          Words are construed by their everyday, ordinary meaning. (Estate of Carroll)
3.          Technical words used to imply technical meaning are viewed strictly (e.g. lawyer held to technical meaning of legal words)
4.          Try to look at T’s intent at time of the construction of the will.
5.          When construing the willwhether to admit extrinsic evidence and if so, what type of extrinsic evidence. Estate of Carroll wanted to admit that he
            thought of wife’s nieces and nephews as his own, ct. said not ambiguous said ―my‖.
6.          If there is no ambiguitythen no extrinsic evidence is allowed in, it is the ct.’s discretion as to what is allowed in.

2 Types of Ambiguity.
1.          Patent Ambiguityif it appears on the face of the document (what a proofreader would notice) e.g. Leave my house to John, later in the same document
            say leave it to Jane.
2.          Latent Ambiguitye.g I leave my property to my daughter and later ct. finds there are 2 daughters.
Often difficult to distinguish from a mistake.
Ct.’s reluctant to allow extrinsic evidence to patent ambiguity.

Estate of Gibbs - T left money (1%) to Robert J. Krause at a stated address (attorney had tried to add specificity but used the phone book). Robert J. Krause was a
taxi-driver with very little connection to T. Robert Krause employee claimed intent was to devise 1% to him. No ambiguity but ct. allowed extrinsic evidence to
show intent.
Britt v. Upchurch - 2 lots in question. Ct. said will was ambiguous but didn’t allow all extrinsic evidence. Ct. wouldn’t allow affidavit from attorney stating T’s
intent. Ct. reluctant to allow b/c attorney should have included it in the will.

MISTAKE:              Whether to allow Extrinsic Evidence.
3 Types:
By Inducement – will not read T’s intent unless it appears on the face of will
As to the type of Document (in the factum) – will allow extrinsic evidence b/c looking at testamentary intent
By Omission – generally won’t allow ext. ev. – but if so, will take something out rather than add something

Section V: REVOCATION OF WILLS
          Wills are ambulatory (they walk with the testator)
                o     A testator can change or revoke a will right up to his death
          Ways to revoke a will
                o     Revocation by physical act to the original will (either to the paper the will is written on or to the writing on the paper)
                o     Revocation by subsequent instrument (either by an express clause of revocation or by inconsistent subsequent provisions)
                o     Revocation by operation of law due to a change in the circumstances of the testator
          ACA § 28-25-109 – revocation of wills
                o     ―Presence‖ – over the telephone will NOT work
          ACA § 28-25-110 – revival of revoked or invalid will

ACA 28-25-109 Revocation
3 ways to revoke part or all of the will.
1.         Subsequent Will-needs to contain language revoking first.
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2.         Destruction by T or another in the presence and direction of T.
3.         Operation of Law-AR=divorce, revokes the provisions that are in favor of the divorced spouse.
           No will or part will by revoked by change of circumstances, although subject to 28-39-401.
(c)        If partial revocation, then don’t have to re-attest the remainder of the will.

ACA 28-40-302 Lost or Destroyed Wills
Requires 2 witnesses, but if it is a copy then just 1 witness and it has to be in existence at the time of death or that it is fraudulently destroyed.
ACA 28-25-109 allows Partial Revocation.
Can revoke part of will by physical act, but cannot increase someone’s testate share.
Doesn’t matter if someone’s share increases intestate.

Other jx’s not so strictDEPENDENT RELATIVE REVOCATION has evolved.
          Revival and Dependent Relative Revocation
                 o     In Arkansas, once a will is revoked, it cannot be revived except by re-exeuction
                 o     Arkansas does not recognize the doctrine of dependent relative revocation
                 o     Testator wrote a will in 1990 and then wrote a second will in 1996, explicitly revoking the 1990 will. In 1998, testator burned the 1996 will,
                       but did not execute a new will. If the testator died in 1999, the testator dies intestate.
                 o     Doctrine of dependent relative revocation – regards as mutually dependent the acts of one destroying a will and thereupon
                       substituting another instrument for distribution of estate, when both acts are the result of one plan, so that, if the second act, through
                       incompleteness or other defect, fails to accomplish its intended purpose, and it thereby becomes evident that the testator was misled
                       when he destroyed his will, the act of destruction is regarded as bereft of intent of revocation and way for probate of the destroyed
                       will is opened
Ex.        T’s will leaves $100k to A, among other dispositions.
           There is a residuary clause.
           T crosses out $100k legacy and writes in $200k above it.
           3 options:
           a.          Ct. could allow-not in AR.
           b.          Not allow and give allow, or
           c.          give original.

In AR-if there is a residuary clause, by changing $100k increase reduces residuarycan’t increase without
Testamentary formality. It would revert back to the $100k.
Very small minority would allow the $200k increase.

In other jx’s that follow it would be a Dependent Relative Revocation problem.
Would recognize the revocation of $100k, but would not recognize $200k without testamentary formality. Would revive $100k because the obvious intent was to
give at least $100k.

Same pattern but now without the residuary clause.
The cross out of $100k would not increase any one else’s sharevalid revocation.
In AR=valid revocation but no testamentary formality to reexecute the $200k.
Some states would allow the $200k revival under Dependent Relative Revocation.


Section VI: LIMITS ON THE POWER TO REVOKE: JOINT WILLS AND WILL CONTRACTS
Problems with Joint Wills:
1.       2 parties have to agree and continue to agree (parties change minds).
2.       Time before death may be substantial, 1 party outlasts the other by a large period.
3.       The value of the estate may increase substantially.

ACA 28-24-101 Reciprocal Wills
(c)(2)  Reciprocal or mutual will does not create a presumption of a K, and not to revoke will.

          Shimp v. Huff (Md. 1989)
                 o    H and W1 executed a joint will; W1 died; H remarried; H died; W2 demanded her spousal share
                 o    Court said there were 2 competing policies – testator’s intent/contractual rights vs. policy of enforcing spousal rights
                 o    Court held that W2 could take her spousal share
          Estate of Gregory (Ark. 1993)
                 o    2 reciprocal wills and a contract not to revoke wills
                 o    ACA § 28-24-101
                 o    Wills created a trust which paid income to surviving spouse and kids
                 o    Contract provided will could be revoked with consent of all beneficiaries and devisees
                 o    W died; H remarried; H died; W2 elected to take her elective share
                 o    Court held that W2 knew of the reciprocal wills
                 o    W2 claimed that property was acquired after marriage – however, there was no proof of this
                 o    Contract rights trumped spousal rights and court denied spousal share
          If have contract not to revoke and surviving spouse revokes after first spouse’s death, beneficiary can sue for breach – ACA § 28-24-101


CONTESTING THE WILL
      A.   Testamentary Capacity
                o   Testamentary capacity is an issue of fact
                o   In Arkansas, no jury in probate court, so it is up to the probate judge to decide
                o   Defendants argued testator had lucid periods; also jury instructions; that the doctor’s evidence was too remote; error in use of lay witnesses
                o   Lay witnesses are usually allowed to testify as to testamentary capacity (not a good idea to only use lay witness testimony)


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                 o        Rule – ordinarily, before a lay witness will be permitted to give his opinion that a person is of unsound mind, he must first detail the facts
                          upon which he bases such opinion, but if he expresses an opinion that such person is of sound mind, he is not required to detail the facts upon
                          which he founds his opinion.
             Element to Testamentary Capacity
                    o     Nature of act (making a will to give away property)
                    o     Must know the persons who are the objects of your bounty
                    o     Must know the nature and extent of your property
                    o     In Arkansas, must know who you are excluding from your will
                    o     These things must be known without prompting
             When must testator have testamentary capacity? When executing the will
                    o     Lucid intervals are okay (if will executed within that lucid period)
             The following are not evidence of lack of testamentary capacity
                    o     Extreme age, illness, bad health, alcoholism
                    o     Evidence of guardianship can be rebutted
             Burden of proof – on the contestant (preponderance of the evidence)
             Common Attributes of Mental Deficiency:
                    o     Paranoia: delusions of persecution and extreme jealousy
                    o     Paresis: delusions of great wealth, strength, etc.
                    o     Flightiness
                    o     Irresponsibility
                    o     Forgetfulness
                    o     Short attention span
                    o     Irritability
                    o     Slovenliness
                                      The problem with list is that everyone suffers to some extent from one or more of these. The main problem is in determining when
                                       the mental problems reach full deficiency.
                    o     Rule – delusion is insanity where one persistently believes supposed facts which have no real existence except in his perverted imagination,
                          and against all evidence and probability, and conducts himself, however logically, upon the assumption of their existence. But, if there are
                          facts, however insufficient they may in reality be, from which a prejudiced or a narrow or a bigoted mind might derive a particular idea or
                          belief, it cannot be said that the mind is diseased in that respect.
             Insane delusions
                    o     Arkansas case law recognizes insane delusions
                    o     Reason for claiming insane delusions – if mistake in the will (court will reform will based on insane delusion, but not for a mistake)
Insane Delusionparticular typebelief in facts that do not exist and that no rational person would believe, when there is no evidence that a rational person would
believe.
Unusual religious beliefs are usually not insane delusions.
The insane delusion must have been the cause of the testamentary disposition e.g. son is seeing martians from space so I disinherit him.
It is so difficult to get Mistake so lawyers will often go for Insane Delusion.

Shifting the Burden of Proof.

AR S Ct. Proponents Burden:
Offer Will to be probated, have to appear to show clear on the face of the will and that the testamentary formality is sufficient.
Once Proponent meets a party can challenge.
Shifts the burden to the challenging party to prove by a preponderance of the evidence that lacked mental capacity.

Lucid Intervals-AR Case
T in hospital-3 kids. Son mutually agreed to be disinherited. T in bed running fever, not enough oxygen, confused and in a straight jacket. Ct. reviewed the
evidence of doctors and witnesses.
Witnesses were completely disinterested parties at at the time of execution said seemed competent.
Ct. said at the time of execution he was having a good day and allowedLucid Interval.
Ct. paid a lot of attention to the disinterested witnesses.

          Duty of Attorney to Determine Testamentary Capacity
                               The primary duty of the attorney is to the client and is fulfilled if the attorney, convinced of testamentary capacity by his or her
                                own observations and experience with the client, draws the will as requested.
                               An attorney who fails to investigate the testamentary capacity of his or her client is not liable in tort to a former beneficiary
                                disinherited by the will drawn by the attorney. The attorney is not liable in contract since the disinherited person is not a 3rd party
                                beneficiary of the contract between attorney and testator.
                o    What is the attorney’s duty?
                               From attorney’s own observations, he must decide whether the testator has testamentary capacity

Section II: UNDUE INFLUENCE
Undue Influence: influence is exerted on the T; effect of influence was to Overpower Free Will of the T; and Product of Influence – will that does not reflect the
True Intent of the T. BUT FOR this influence, the will would never have been written or written this way.

Cts mostly look at Testamentary Intent, but, sometimes Cts will also look at Testamentary Capacity.

Shifting Burden of Proof:
Once Proponent of will shows that:                     will is Rational on its face
                                                       will execution accords w/ testamentary formalities
Burden is on Contestant to prove Incapacity or Undue Influence – by Preponderance of the Evidence.
BUT – there is a Presumption of Undue Influence if: confidential relationship (i.e. fiduciary, parent/child, etc.) or Procurement of the will.
Presumption can be Rebutted by Clear and Convincing Evidence.




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Procurement – when beneficiary (B) participates w/ preparation of the will. Examples – if B is person who came up w/ attorney who drafts the will; if B instructs
        attorney what the will should contain; B’s knowledge of contents of will before it is executed; B rounds up the witnesses before execution of the will; B
        drives T to attorney’s office to execute will; B is present at execution of the will; and B safeguarded will after execution.

          Conflict of Interest – Rule 1.7(b)
          Presumption of undue influence often arises when the following occur:
                o     The beneficiary chooses the attorney who drafts the decedent’s will
                o     The beneficiary takes the decedent to the attorney’s office
                o     The beneficiary is present at the execution of the will
                o     The will is in the beneficiary’s possession

Section IV: PREPARING FOR THE CONTEST: THE LAWYER’S ROLE
Ways to prepare for Contest:
- produce evidence-like affidavits from partners, friends, and others that can testify to capacity and intent of T at time of execution;
- videotapes of T at time of execution;
- having witnesses in addition to the two needed for execution – have all the witnesses fill out detailed affidavits giving impression of T and saying there was no
           Undue Influence;
- Psychiatric exams to show T’s capacity; and
- put No-Contest Clause in will.

No-Contest Clause – [also called in terrorum clauses] if beneficiary contests the will, such person will be deprived of all beneficial interest from the will.
          Sometimes, if a person gets only a small devise, he may challenge the will b/c if he loses, he only loses his small devise (though he will have to pay
          attorneys fees). But, if he wins, the will is invalidated and he will get his intestate share.
- Spouse can elect to take dower even when there is a No-Contest Clause. ~ Devisee’s election to take spousal share trumps a no contest clause

ACA 28-40-113 Contest of Will
An Interested Person has standing to contest a will. An Interest Person (ACA 28-1-102) is an heir, devisee, spouse, creditor, or anyone else who has a property
right in, an interest in, or claim against the estate.

*No-contest-clauses are valid in AR

Ante-Mortem Probate – will is determined valid before death. This is ok in AR – ACA 28-40-202&203.
                              Gary asserts a right to take an elective share of his wife’s estate
                                          Doesn’t trigger the no contest clause
                                          The statute trumps the clause
                                          Pretermitted spouse claim does not trigger no-contest clause
                                          Pretermitted child claim does not trigger the clause
                              Gary challenges a trust created for the wife’s descendants on the ground that the trust violates the Rule Against Perpetuities
                                          Doesn’t trigger – not a contest
                              Gary seeks construction to determine whether a devise of ―my country home‖ includes the furniture in the house
                                          Doesn’t trigger – not a contest
                              Gary challenges the qualifications of his wife’s sister, who was named in the will to serve as executor
                                          Doesn’t trigger – not a contest
                              Gary seeks a determination that certain property did not pass through his wife’s estate b/c he and his wife owned the property as
                               joint tenants with the right of survivorship
                                          Doesn’t trigger – not a contest
                              Gary assets a claim against the estate for repayment of a $50,000 loan he made to his wife
                                          Doesn’t trigger – not a contest


Chapter 7: TRUSTS
Section I: CREATION OF TRUSTS
          Trust – an entity in which ownership is divided between the trustee (has legal title to the trust property) and the beneficiary (holds beneficial title to the
           trust property)
          Elements of a Trust
                 o     Trustee
                 o     Beneficiary
                 o     Trust Property
          Grantor – also called the settlor or trustor; one who creates the trust
          Merger – when the same person holds both legal and equitable title to the trust property
          Testamentary Trusts – created by will; comes into existence only upon the decedent’s death
          Life Estate vs. Trust
                 o     When a life tenant and remaindermen share ownership of property, no one person has the power to sell a fee simple interest in the property.
                                  If a trustee has the legal title to property (along with a power to sale unproductive property in the trust instrument), the trustee
                                   could exchange the unproductive property for other property that better meets the needs of the intended beneficiaries.
                 o     A legal life tenant has no power to lease the property for a period beyond the expiration of the life estate.
                                  By conveying property in trust and conferring the trustee a power to lease the property, the grantor avoids this difficulty.
                 o     When ownership is divided between legal life tenant and remaindermen, the life tenant’s management responsibilities are often murky.
                                  When the owner of property creates a trust, the owner conveys decision-making power in the trustee. The trustee decides what
                                   repairs are necessary and whether sale or lease of the property would be advisable. With respect to potential buyers and tenants,
                                   the trustee has the power of a fee owner.
          Inter Vivos Trust
                 o     Does not pass through the probate system (avoids probate)

          Requirements for a Valid Trust

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         o     Intent by the grantor to create a trust (however, the word ―trust‖ does not have to be mentioned to create a trust)
                          It is essential to the creation of an express trust that the grantor overtly manifest an intention to create a trust
                          The grantor must intend to impose enforceable duties on a trustee to deal with property for the benefit of another.
                          Intent may be made manifest by words, conduct, or both; no particular words or form of conduct are necessary
         o     Grantor must split legal and equitable title for the benefit of a beneficiary
         o     Grantor must have capacity to make a trust
                          In Arkansas, this is the same level of capacity as for a testator
                          Grantor need only have the capacity to make the arrangement similar to the trust created. If the trust is created by will, grantor
                           must have testamentary capacity; if by gift, grantor must have the same capacity as one needs to make a gift; if by contract, then
                           contractual capacity suffices.
         o     Sometimes, trust must be in writing (to comply with the Statute of Frauds), but it may sometimes be oral
         o     Purpose of trust may not be illegal or against public policy
         o     Trust must have property to come into existence
                          Must have transfer of property
                                       If transfer is during the grantor’s lifetime, then the elements of intent and delivery must be present
                                       If the transfer is by will, it must comply with the statutory requirements for a will
         o     Initially must have a trustee
         o     Must always have a beneficiary
         o     Rule Against Perpetuities – the trust cannot violate the RAP
         o     Cannot have a passive trustee (trustee must have some obligations for the trust to be valid)

         o     Honorary trust – residuary beneficiary or heir has an incentive and standing to sue
                        An honorary trust is loosely definable as an intended trust for a specific non-charitable purpose where no beneficiary
                         is actually named and the designated purpose cannot be considered charitable.

         o    Can’t create a trust from a mere expectancy interest
         o    A mere expectancy cannot be the res of the trust unless the expectancy is supported by consideration
   Speelman v. Pascal (NY 1961)
         o    Producer assigned B a percentage of profits to be derived from the musical (My Fair Lady), which was not yet written
         o    Court held that B acquired an enforceable right to the future profits from the musical
   Standby Trusts
         o    Designed to receive assets at death
         o    Similar to a pour-over trust
         o    Don’t have to be funded during the testator’s life
         o    Doesn’t come into existence until testator’s death
         o    Testamentary trusts – allowed in Arkansas by statute

   Precatory words – words of entreaty, request, desire, wish, or recommendation
         o    Mere precatory words or expressions in a will or trust or ineffective to dispose of property – there must be a command or order as to the
              disposition of property
         o    Examples – ―I would like;‖ ―I desire;‖ ―it would be nice if. . .‖
         o    When precatory intent words are used, what are the Courts three options?
                        Outright gift to devisee—expression is a mere hope of donor.
                        Resulting Trust—If no beneficiaries identifiable, resulting trust to estate (residuary devisee).
                        Express Trust—If beneficiaries identifiable, enforce trust—or create a constructive trust.

   Precatory words – examples (precatory language is more likely to create a trust if the trustee is NOT the natural object of the testator’s bounty)
          o     ―I bequeath $10,000 to my accountant, John Smith, who is instructed as to my charitable wishes.‖
                           Not an outright gift, but a trust
          o     ―I bequeath $10,000 to my beloved brother, John Smith, who is instructed as to my charitable wishes.‖
                           Outright gift
          o     ―I bequeath $10,000 to my beloved brother, John Smith, but I ask him to use part of the money to care for our ailing cousin, Adam.‖
                           Borderline – duties, but not specific (could go either way)
          o     ―I bequeath $10,000 to my beloved brother, John Smith, but I ask him to pay $50 per month toward care for our ailing cousin, Adam.‖
                           Not an outright gift, but a trust, b/c has specific duties
   Constructive trust – an equitable remedy imposed by courts when someone should not in fairness be allowed to retain property
          o     The constructive trust concept is a flexible judicial remedy that is used in a wide range of litigation situations. No trust intent at all is
                required. The court implies such a device to prevent an "unjust enrichment."
          o     The decree establishing a constructive trust will require the defendant to deliver possession and convey title to the property and to pay the
                plaintiff profits received or rental value during the period of wrongful holding and otherwise to adjust the equities of the parties after taking
                an account.
   Express trust – arises b/c of expressed intent and involves a fiduciary relationship in which the trustee holds property for the benefit of a 3rd party
          o     An express trust is one that is specifically created by one with trust intent
   Resulting trust – trust implied in law from the intentions of the parties to a given transaction; one in which a party, through no actual or constructive
    fraud, becomes invested with legal title, but holds that title for the benefit of another, although without expressed intent to do so, b/c of a presumption of
    such intent arising by operation of law
          o     What two situations create resulting trusts?
                           One which arises because an express trust fails or makes an incomplete disposition of the trust property.
                           Once in which A buys land but has title put in B's name. Assuming a falling out later occurs between A and B, the courts have
                            imposed a presumption that B holds title for A's benefit. This is called a ―purchase money‖ resulting trust.
   Trust Formalities
          o     Aside from the substantive requirements discussed above, trust law imposes no formal requirements for creating a trust.
          o     For example, a declaration of trust of personal property may be entirely oral.
          o     There are two situations, however, where statutory formalities have created problems in proving either trust intent or the substantive terms of
                the trust.
                           One situation is where the subject matter of the trust is land. If the trust is intended to become effective during, the settlor's
                            lifetime, the Statute of Frauds imposes requirements of a signed writing.
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                         The other situation involves trusts created at the settlor’s death through a will. Testamentary trusts are subject to the requirements
                          of the statute of wills.
          o     Both the SOF and the SOW impose formalities for evidentiary purposes.
   Inter vivos trusts
          o     When grantor is trustee, trust created by declaration of trust
          o     When grantor is not trustee, grantor must deliver trust property to the trustee

   Changed Marital Circumstances and Revocable Trusts
        o   UPC – divorces revokes revocable dispositions
        o   ARK – no operation of law to revoke this trust
                      The statute regarding revocation by operation of law only applies to wills

   Life Insurance Trusts as a Probate Avoidance Device
          o   Life insurance does not go through probate
          o   Life insurance trust – beneficiary of the insurance policy is the trust
          o   Unfunded – trust is not created until grantor’s death; grantor pays the insurance premiums
          o   Funded – trust is created now; trustee pays the insurance premiums
          o   Can be revocable, but, if revocable, it will be included in the grantor’s estate for estate tax purposes
          o   Life insurance trusts are OK in Arkansas

   Building Flexibility into the Estate Plan: Support Trusts & Discretionary Trusts
         o    Support trust – trustee’s responsibility to ascertain what the beneficiary needs for support and then pay that amount to the beneficiary
         o    Mandatory support trust – trustee is told a certain amount of money to pay in certain intervals
         o    Discretionary trust – no mandatory obligation on trustee; trustee has discretion to pay income or invade principal for the benefit of the
              beneficiary
                         Spray/sprinkle powers – discretionary powers of trustee to distribute income among any one or all of the beneficiaries; the trustee
                          has the discretion to ―spray‖ the income among the beneficiaries
         o    Support – health, maintenance, education, and support
   Protecting Beneficiaries from Creditors
         o    Under a plain trust, if creditor shows trustee notice of assignment, trustee must pay creditor; if the creditor has a judgment against the
              beneficiary, the creditor can garnish the trust
         o    Ways to keep creditors from trust assets:
                         Support Trust – for necessities of the beneficiary (food, medical care, education); trustee only has to pay creditor if it was for a
                          necessity
                         Discretionary Trust – trustee does not have to make payments; thus, trustee may not have to make payments
                         Spendthrift Trust – trust is insulated from creditor
         o    Spendthrift Trusts
                         Establishment of Spendthrift Trusts: Spendthrift trusts may be created either by direction of the grantor or by statute
                          (in some states all trusts are spendthrift trusts, unless expressly stated otherwise).
                         The beneficiary is unable to transfer her or his right to future payments of income or principal (a voluntary transfer)
                          and
                         The beneficiary's creditors are unable to subject the beneficiary's interest to the payment of their claims (an
                          involuntary transfer).
                          ―The trustee shall pay to Ben the entire net income of the trust, at least annually.‖
                                     Creditor can garnish the trustee
                         ―The trustee shall pay to Ben so much of the income of the trust as the trustee deems necessary for Ben’s education and support.‖
                                     Support trust – Creditor cannot garnish the trustee; if creditor for tuition or medical expenses, then can garnish; if
                                      creditor for groceries, then can garnish
                         ―The trustee shall pay to Ben so much of the income of the trust as the trustee deems appropriate in the trustee’s absolute
                          discretion.‖
                                     Creditor can garnish, but the trustee doesn’t have to pay income; if the trustee makes a payment, it goes to the creditor
         o    How would the creditor’s rights in the previous problem change if the trust instrument also provided the following?
                         ―The interests of my trust beneficiary, whether in trust income or trust principal, shall not be capable of assignment, anticipation,
                          or seizure by legal process.‖
                                     This is a spendthrift provision so the creditor cannot garnish
         o    Exceptions to Spendthrift Trusts
                         Alimony and child support
                         Claims for necessities
                                     A provider of necessary services may enforce her claim against the beneficiary’s interest in a spendthrift trust. If a
                                      trust beneficiary hires a lawyer to protect her interest in a spendthrift trust, the lawyer has a claim against the trust
                                      proceeds.
                         Spendthrift trusts are insulated from claims by bankruptcy trustee
                         Self-settled spendthrift trusts – where beneficiary and grantor are the same, creditors can garnish
                                     States uniformly hold that a grantor may not create a spendthrift trust for his own benefit
                                     Offshore asset protection trusts allow self-settled spendthrift trusts (creditors can’t get to it)
                         IRS tax liens – IRS can get to all of beneficiary’s property with no exceptions
              Spendthrift trusts allowed in AR

   Planning for the Costs of Institutional Care
         o    Cohen v. CIR (Mass. 1996)
                         Medicaid benefits were denied to plaintiffs b/c the plaintiffs had available to them sufficient resources of their own
                         If set up trust and allow any discretion to the trustee, the amount of property the beneficiary has to consider for support purposes
                          is the maximum amount of discretion the trustee has
         o    The Health Insurance Portability and Accountability Act of 1996 imposes criminal penalties on those who knowingly and willfully dispose of
              assets to become eligible for medical assistance
   Minimizing Taxation
         o    Inter Vivos Trusts
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                                  Revocable trusts offer no tax savings
                                  Irrevocable trusts are taxed like an outright gift
                                  Crummey Trusts
                                             Can get annual gift tax exclusion for creation of trust without giving up all property rights
                                             Create a trust which gives the ultimate beneficiary the right to withdraw the property owner’s annual contribution to
                                              the trust for a limited period – say 30 days – upon which the right to withdraw lapses. The gift is arguably not a gift of
                                              a future interest b/c the beneficiary has an absolute right to withdraw the money during the year in which the ―gift‖ is
                                              made. But the limited time for withdrawal, together with the limited savvy of the beneficiary, makes it extremely
                                              unlikely that the money will actually be withdrawn. Moreover, the property owner has a stick to make sure the
                                              beneficiary doesn’t withdraw the money – if the beneficiary withdraws this year’s share, there won’t be a share next
                                              year.
                                             Crummey v. CIR (9th Cir. 1968)

                 o     Testamentary Trusts
                               By-pass (credit-shelter) trusts – allows first spouse who dies to give surviving spouse the maximum control over the decedent’s
                                estate and still get full use of the unified credit
                                           Usually, surviving spouse will have a power of appointment over trust property – must be a special power of
                                            appointment
                                           A general power of appointment will subject the property to estate tax
                                           GPOA – can give money to self or estate
                                           SPOA – cannot give money to self or estate
                               QTIP (qualified terminable interest property) trust limits Surviving Spouse’s power to control assets
                                           QTIP trust used by decedent who wants to provide for the surviving spouse during her lifetime, but to minimize the
                                            surviving spouse’s control over the ultimate disposition of the decedent’s assets
                                           QTIP requirements
                                                   o      Trust must mandate at least annual distributions of income to the surviving spouse
                                                   o      No one else can acquire the power to invade the trust principal during the spouse’s lifetime
                                                   o      The property must be included in the surviving spouse’s estate
                                                   o      The income interest must last for the surviving spouse’s lifetime (cannot terminate upon remarriage)
                                                   o      Surviving spouse need not have any rights to the property itself – either at death or during life
                               Setting up QTIP and by-pass trusts
                                           Maximizes the unified credit
                                           Surviving spouse gets maximum control over by-pass trust property
                                           Surviving spouse gets minimal control over QTIP trust property, but maximizes marital deduction
                               Generation-Skipping Trust
                                           GST tax prohibits people from evading taxes by skipping generations

Transfer can take place by: 1.) Power of Appointment – giving someone else the power to create the trust. 2.) Contract – must be valid contract w/ offer,
     acceptance, consideration. Neither a will or a trust are contracts b/c there is no consideration.

Trust does not have to be in express words. Will does not need to say the word ―trust.‖ Look at intent. Trusts can also be oral though certain kinds must be in
      writing.

Trusts for ―Friends‖: These are too vague b/c there is no statutory definition for ―friends.‖ Not allowed in AR. A trust for ―relatives‖ is usually allowed b/c
―relatives‖ are statutorily defined b/c they are heirs at law.

Trusts for Animals: Main problem is that since beneficiary is an animal, it does not have the capacity to sue the trustee for breach. There have been suggestions
that Trusts for Animals could be treated as Honorary Trusts since the residuary beneficiaries, or heirs, would sue trustee if trustee failed to use funds for animal’s
benefit.

Standby Trusts – trust designed to receive testator’s assets at death and then distribute those assets to designated beneficiaries. Allowed in AR.

Notes of Formalities p. 469
1.         Statute of Frauds – most courts require writings of trusts in land.
2.         Declaration of Trusts – courts generally uphold declarations of trust but courts will look at how trustee treats the property – if he treats property as his
           own, then it is probably not a trust.
3.         Two types of Implied Trusts:
           1.) Resulting Trusts – a trust that fails and trustee holds property for benefit of settlor or settlor’s estate. There was intent to create trust but the trust
                failed. The trustee then transfers the property back to settlor.
           2.) Constructive Trust – not really a trust at all. No intent to create a trust; it is actually a remedial equitable device used by courts. Example: when
                someone kills another, slayer statute kicks in. The slayer cannot benefit so court makes him the trustee and he must either give property to victims
                or make payments to victims.

Spray Trusts – a trust that gives the trustee discretion to pay income to any of settlor’s children, as their needs might appear. Trustee ―sprays‖ income among the
         various trustees.

Credit Shelter Trust (not going to be on test but good to know) - Aka Bypass Trust. Usually created by husband and wife. H puts $675,000 in trust w/ W as
trustee and it will go to kids at her death w/ no tax. When H dies, his estate goes to W w/ no tax b/c of marital deduction. When she dies, $675,000 of estate will
go to kids untaxed (the rest of estate will be taxed). Kids will get an additional $675,00 from the trust and this will not be taxed. So, kids get a total $1.35 million
untaxed.

MINIMIZING TAXATION
Inter-Vivos trusts

Revocable Inter-Vivos Trusts – give few tax advantages. Income to trust will be taxed and trust will be included in taxable estate.
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Irrevocable Inter-Vivos Trust – will be taxed as a gift w/ one exeception: subject to gift but will not be part of settlor’s estate. Can give $10,000 a year and this kind
        of trust cannot be counted w/ this b/c it is not a Present Interest in property.

General Rule: trust must be Present Interest for annual exclusion to apply.

Two Exceptions to Present Interest rule:
1. Property owner can give future interest to a minor and still qualify for the annual exclusion – but only if the income is available for use by the minor before he
   reaches the age of 21, only if the principal becomes wholly available to the minor when he reaches 21, and only if the principal will be payable to the minor’s
   estate if the minor dies before the age of 21.
2. Crummey Trust – gives the beneficiary the right to withdraw the property owner’s annual contribution to the trust for a limited period (30 days is the minimum)
   upon which the right lapses. Must be notice. This creates a Present Interest, even if only for a short time. The limited time for withdrawal and the limited savvy
   of the beneficiary, makes it unlikely that the money will be withdrawn. Property owner can say that if beneficiary withdraws this year’s share, there won’t be a
   next year’s share.

GENERATION-SKIPPING TAX
Very complex. In the past, if estate skipped a generation, it would not be taxed. The general purpose of the tax is tax these generation-skipping trusts.

MARITAL DEDUCTION
Credit Shelter Trusts come about when husband wants wife to have much control over trust but pay little taxes. So, H sets up Credit Shelter Trust w/ $675,000
max in it. Wife is lifetime beneficiary and kids get it at her death. Wife can have anything but General Power of Appointment (she cannot appoint herself the
whole trust and principal). This trust does not become part of W’s estate but is part of H’s estate so it does not become part of W’s taxable estate.

Qualified Terminable Interest Property (QTIP) Trusts – these trusts qualify for Marital Deduction but does not give spouse the control that a credit shelter trust
gives. QTIP falls under marital deduction so there is no limit. Wife is beneficiary but does not have total control. Husband can limit trust to where it will only pass
to kids at death but not to wife’s second spouse (if she gets remarried) or to spouse’s kids (if she has kids from previous marriage).

Section III: TRUST MODIFICATION AND TERMINATION
Three Ways a Trust can be Modified:
1.) The Settlor – general rule is that settlor can only modify if he has reserved the power to do so in the trust. If trust is silent on whether trust is Revocable or
    Irrevocable, then trust is presumed Irrevocable. In AR, if power not reserved, then it is irrevocable. In TX, OK, CAL, the opposite
2.) By Consent – general Restatement rule is that if settlor has passed away, all the beneficiaries can agree to modify or terminate the trust as long as the general
    purpose of the trust’s creation is accomplished or no longer exists (look at Intent of the settlor). Also, a Ct. may appoint a guardians to represent unborn
    beneficiaries for these agreements.
    Exceptions to the rule – when can all beneficiaries consent and trust still not be terminated?
    *     Spendthrift trust – even if all beneficiaries consent, the court cannot terminate the trust b/c it is clear that is not what the grantor intended
    *     Discretionary trust – termination at beneficiary’s request is contrary to grantor’s intention
    *     Support trust – termination at beneficiary’s request is contrary to grantor’s intention
    *     Trust that postpones the termination until the beneficiary reaches a certain age – termination at beneficiary’s request is contrary to grantor’s intention
3.) Third way to Modify or Terminate a will is when the Purposes of the trust cannot be carried out.

A Ct. will terminate the trust, even Spendthrift Trusts, when the value of a trust falls below a certain amount. An example is when the trust property has been
     reduced until it approaches the costs of administration.

There are statutes that let trustees terminate a trust if it falls below a certain amount.

Section IV. CHARITABLE TRUSTS
Charitable Trusts (aka Public Trusts) are different from private trusts and have different elements. In Charitable Trusts, there does not have to be an Identifiable
Beneficiary. Also, private trusts are subject to the Rule Against Perpetuities. Cannot set up a Charitable Trust for your family. The state, through its Attorney
General, enforces Charitable Trusts.

The federal estate and gift tax laws permit a 100% deduction for gifts to charities but they may be subject to state taxes.

Can a trust be both Charitable and private? Yes, they are called Mixed or Split Interest Trusts. There ate two: Charitable Remainder Trust – trust gives life estate
     to someone and remainder at person’s death goes to charity and Charitable Lead Trust.

Charitable Purposes:
1.) Relief of Poverty.
2.) Advancement of Education.
3.) Advancement of Religion.
4.) Promotion of Health.
5.) Governmental or Municipal Purposes.
6.) Other Purposes the Accomplishment of which is Beneficial to the Community.

THE CY PRES DOCTRINE
Applies to wills (charitable bequests) and charitable trusts.

Three Conditions for Cy Pres:
1.) Gift must be to a Charitable Organization for a Charitable Purpose.
2.) It must be impossible, impractical, or illegal to carry out the donor’s stated Charitable Purpose.
3.) It must appear that the donor had a General Charitable Intent – the particular institution in the trust was merely an agent for effectuating the gift.

The Cy Pres Doctrine should not be applied if the testator has:
(1) manifested a specific charitable intent;
(2) has anticipated possible failure of the trust; or
(3) has made alternate disposition of the property if the charitable gift should fail.

In determining whether the testator had a General Charitable Intent, Cts. may consider:
                                                                                                                                                                       20
the existence of a reversionary or gift-over provision; the existence of a limitation or reservation on the use of the gift; whether the bulk of the estate was
bequeathed to charity; and whether specific devises and bequests were made to individuals who would have taken the estate by intestacy.



Chapter 8: POWERS OF APPOINTMENT
POWERS OF APPOINTMENT
A.         Terminology & Classification

          A power of appointment is a power that authorizes the donee to designate recipients of the appointive property
          Donor – the person who creates the power of appointment – the person whose money or property will be distributed when the power is exercised
          Donee – the person who exercises the power – the person who actually decides how the donor’s property should be distributed
                o     Donee is not a fiduciary, nor is he an agent
                o     Donee does not hold title to the property
          Appointees – the people to whom the donee appoints the property
          Objects of the Power – the donor often restricts the people to whom the donee may appoint – the class of people eligible to receive the appointive
           property are the objects of the power or the class of permissible appointees
          Takers in Default – the people who would taken in the absence of exercise – whether or not they are explicitly named in the instrument creating the
           power
          Property will go back to the donor’s estate if the donee fails to exercise the POA and there are no takers in default listed in the instrument creating the
           power
          How to create a POA
                o     Can be created in a trust
                o     Can be created in a deed
                o     Can simply be created in a separate instrument
          Presently Exercisable – donee can exercise power at any time; if the donor gives the donee a POA that the donee is free to exercise immediately
          Non-Presently Exercisable – donee cannot immediately exercise the power immediately; the donor wants the donee to wait as long as possible before
           deciding how to appoint the property
                o     Most often, the donor will specify that donee may only exercise the power by will (testamentary POA)
          General Power of Appointment
                o     Donee can appoint to anyone, including donee, donee’s estate, donee’s creditors, or the creditors of donee’s estate
                o     Default – if instrument does not specify whether it is general or special, the donee’s authority is presumptively unlimited and donee has a
                      general POA
                o     Can have a general POA and limit its use to the purposes of health, education, maintenance, or support
                o     Can have a general POA and require specific reference to the power for it to be exercised – donee must specifically refer to the POA in his
                      will
                o     Blending Clause – typical in wills
                                 ―all the rest, residue, and residual of my estate, including any property that I may have a power of appointment over at my death‖
                                 Even if have to be specifically referred to, some courts hold that this blended clause will work to effectively exercise the power
                                              Split of authority on this issue
                                              Arkansas – allows
                                                     o     Motes/Henes Trust v. Motes (Ark. 1988) – held that a disposition of all ―property to which I may have a
                                                           power of appointment at the time of my death‖ constitutes a ―specific reference‖ to a power of appointment
                                              Restatement – does not allow
                                                     o     If the donee by deed or will manifests an intention to dispose of all of the donee’s property, this does not
                                                           manifest an intention to exercise any power possessed by the donee
                o     Inadvertent exercise – donee does not intend to exercise power

          Special Power of Appointment
                o    Donee is restricted to appointing only to a potential class of appointees
                o    Donee may not appoint to donee, donee’s estate, donee’s creditors, or the creditors of donee’s estate
                o    Exclusive Powers – the donee is free to exclude one or more members of the class of permissible appointees; the power is exclusive b/c the
                     donee is free to exclude objects of the power
                o    Non-Exclusive Powers – if the donor explicitly requires the donee to appoint some assets to each member of the class, the power is non-
                     exclusive; the donee may not exclude any objects of the class
                o    D, donee, has a special POA over property. D has the power to appoint to his descendants. D gives $15,000 to S. Who pays the gift tax?
                                If presently exercisable and donor is alive, donor will pay the gift tax.
                                If donor is dead, the donor’s estate will pay the tax
                o    QTIP trust – can give surviving spouse a special POA, but it must be a testamentary power
                o    Creditors cannot reach property in which the donee has a special POA over

          Non-Exercised Powers
               o    Donee fails to exercise power (either general or special)
                              If takers in default, they will get the property
                              If general power and no takers in default, property passes back to donor or donor’s estate upon failure to exercise
                              If special power with a class of permissible appointees that is clearly defined and no takers in default, then the property will pass
                               to the members of the class
                                           If the donor gives her husband the power to appoint among the couple’s children, and the husband makes no
                                            appointment, the appointive property would be distributed to the children equally.
                              If special power with a class of permissible appointees, but that class is not clearly defined, and there are no takers in default, the
                               property will pass back to the donor or the donor’s estate

B.         Scope of the Power

          Effectiveness of Appointment


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         o     Restatement – to exercise a power effectively, the donee must intend to exercise it and comply with the requirements of exercise imposed by
               the donor and by rules of law
         o     If appointee is deceased, the appointment is ineffective
                         However, in some states, an anti-lapse statute may save what would otherwise be an ineffective appointment
                         This has not been decided in Arkansas
         o     If appointment violates the Rule Against Perpetuities, it will be ineffective

   Impermissible Appointments
        o     Restatement (permissible appointments under non-general power not involving creation of new power)– unless the donor has manifested a
              contrary intent, a donee of a special power may make any appointment that benefits only objects of the power that the donee could make of
              owned property in favor of those objects
        o     Donee of a general POA
                        Can give property to another
                        Can create limited and future interests (can split ownership into different types of future interests – life estate to S, remainder to
                         D)
                        Can confer a power of appointment to another
        o     What if certain actions are prohibited? If it is a general POA, it won’t matter; the donee can appoint the property to himself and then do
              whatever he wants to with it

         o     Donee of a special POA
                         Can create limited and future interests as long as appointees are valid objects of the power
                         Can confer a new power of appointment as long as appointees are valid objects of the power
                         Can confer a general POA as long as appointees are valid objects of the power
         o     D, donee, has a special POA to appoint to descendants. D gives C, a cousin, the power to appoint the property to D’s descendants.
                         There is a split of authority over whether this is OK or not

   Exercising a Power by Creating Another Trust
         o    So long as the trust benefits only the objects of the power and so long as the donor has not manifested a contrary intent, the donee is free to
              exercise the appointment by creating another trust
         o    GPOA – donee may make appointments in trust

   Exceeding the Power’s Scope
        o     Will of Carroll (NY 1937)
                        Court found fraud on the power had occurred
                        W, Elsa, tried to leave money to H, an impermissible object of the power
                        Court found the cousin (who was involved with the fraud) would take nothing
        o     Grandmother gives Mother a power to appoint property among Mother’s daughters. Mother appoints equally among her 3 daughters. The
              daughters, believing it unfair that their brother has been excluded, each give 1/3 of their share to the brother. Does anyone have a cause for
              complaint? How is Will of Carroll different?
                        This is permissible
                        It is different from Carroll b/c no prior agreement (no agreement in advance)
                        In Carroll, there was an agreement between the donee and the appointee
                        Here, the agreement is merely between the appointees
                        In addition, there is no written agreement here as there was in Carroll
        o     What advice would you have given to Elsa (the wife in Carroll) had she approached you?
                        Tell her what the law is
                        Don’t recommend that she writes the letter; can’t recommend conduct that would perpetuate fraud on another
                        When telling her the law, let it be known that without the letter, there would be no clear proof of fraud (but do not recommend this
                         action)

   Doctrine of Capture
         o    If donee of general POA makes ineffective appointment, but donee’s will uses blending clause, some courts will allow property to pass as
              part of donee’s estate
         o    Doctrine of capture – if the donee of a general POA makes an ineffective appointment, an implied alternative appointment to the donee’s
              estate may be found if the donee has manifested an intent that the appointive property be disposed of as property of the donee rather than as
              in default of appointment.
         o    There is a split of authority on this issue
         o    Ineffective exercise of a special power
                         D, donee, holds a special testamentary power to appoint among his children. D’s will disposes of ―the residue of my estate,
                          together with any powers of appointment I may hold, as follows: ½ to my wife E and ½ to my daughter F.‖ D is survived by E, F,
                          and his estranged son G. At D’s death, the appointive property is valued at $400,000, while his personal estate totals $600,000.
                          How should D’s estate and the appointive property be distributed?
                                     E and F should each take $500,000. The $400,000 in appointive assets should all be allocated to F, so that D will not
                                      have appointed to persons outside the class of permissible appointees, and F should also take $100,000 of D’s own
                                      assets, while the other $500,000 of D’s own assets should be distributed to E – thus giving full effect to D’s estate plan.
                                     What if the appointive assets had been valued at $600,000 and D’s own estate had been valued at $400,000?
                                            o     E would only get $400,000.
                                            o     F would get at least half ($500,000).
                                            o     Son will not get anything so remainder goes to F (F will get $600,000 total)
         o    If the donee has blended appointive assets with donee’s own assets, the assets should be allocated to maximize the effectiveness of the
              donee’s intended dispositions

   Contracts to Appoint & Releases
                        Contract is unenforceable b/c it benefits a person outside the class of permissible appointees.
                        What if the power was a general power of appointment?
                                    Contract would be enforceable if the power was presently exercisable
                                    Contract would be unenforceable if the power was testamentary
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C.       Rights of Creditors

        Special POA – not subject to claims by creditors
        General POA – subject to claims by creditors only if power is exercised

CLASSIFICATION & CONSTRUCTION OF FUTURE INTERESTS
A.   Classification of Future Interests
        Future interest – doesn’t become possessory immediate upon its creation; enforceable when created; alienable (call sell a future interest)
        Future Interests in the Grantor (interest reverts to owner/grantor)
              o     Reversion
                                ―to A for life‖ – O gets it back upon A’s death
                                A reversion is vested
                                If O dies before A, O’s successors in interest will get the property
                                A future interest under which a grantor retains a present right to a future interest in property that the grantor conveys to another
              o     Possibility of Reverter
                                ―to A and her heirs so long as A does not remarry‖
                                A has fee simple determinable
                                O has possibility of reverter
                                Future interest left in grantor/owner/successor’s in interest upon simultaneous creation of estate that will terminate automatically
                                 within a period of time defined by occurrence of specified event
                                             The interest which remains in a grantor after the conveyance or devise of a fee simple determinable and which permits
                                              the grantor to be revested automatically of his estate on breach of the condition
              o     Right of entry
                                ―to A and her heirs so long as A doesn’t remarry, but if A remarries, O has the right to reenter and take possession‖
                                A has fee simple subject to condition subsequent
                                O has right to re-entry and take possession
                                The right of taking or resuming possession of land by entering on it in a peaceable manner
              o     Mahrenholz v. County Board of School Trustees (Ill. 1981)
                                Grant – ―to be used for school purposes only; otherwise to revert to Grantors herein.‖
                                Alienability is the issue in a lot of future interest cases (can the future interest be sold; will it go to successors in interest upon
                                 death of the owner/grantor?)
                                Court held that the future interest was the possibility of reverter and the land automatically reverted back to the owner’s
                                 successors in interest (so they could then sell the land)
                                ―only‖ – decision turned on this word
              o     If future interest is a reversion, possibility of reverter, or right of entry, and the owner sells that interest, the interest will remain what that
                    interest was in the owner’s hands (once a reversion, always a reversion)

        Future Interest in Persons Other Than the Grantor
             o     Future Interests:
                             Remainders
                                       Contingent Remainders
                                              o    No ascertainable beneficiaries
                                              o    If subject to condition precedent
                                       Vested remainder subject to complete divestment
                                              o    Ascertainable beneficiary, subject to condition subsequent (complete divestment)
                                       Indefeasibly vested remainder
                                       Vested remainder subject to open
                             Executory Interests
                                       Cuts short a vested remainder subject to complete divestment
                                       Decreases vested remainder subject to open
                                       Following a time gap

              o     Contingent Remainders
                             Is the remainder held by some ascertained person?
                                        If no, the remainder is contingent
                                        T’s will devises Blackacre ―to my daughter for life, remainder to her children.‖ At the time of T’s death, his daughter
                                         has no children. No ascertainable person holds a remainder. Since a vested remainder must be vested in someone, the
                                         remainder cannot be vested. The remainder in the daughter’s children is a contingent remainder.
                             If the remainder is held by an ascertained person, is the remainder subject to a condition precedent?
                                        If yes, it is a contingent remainder
                                        T devises Blackacre ―to A for life, remainder to B if B survives A, otherwise to C.‖ According to Gray, B has a
                                         contingent remainder b/c the condition (surviving A) appears in the same clause as the grant to B.

              o     Vested Remainder Subject to Complete Divestment
                             A vested remainder cannot be subject to a condition precedent
                             A vested remainder can be subject to a condition subsequent
                             T devises Blackacre ―to A for life, remainder to B, but if B fails to survive A, then to C.‖ Gray’s formulation would make B’s
                              remainder in this case a vested remainder subject to complete divestment.
                                        Why? Because the survivorship condition comes not in the same clause as the grant to B, but in a clause that follows
                                         the grant to B.
                                        The clause ―follows‖ the grant to B is that the clause is ―subsequent‖ to the grant to B. Hence, the condition is called a
                                         ―condition subsequent.‖

              o     Indefeasibly Vested Remainder
                              A remainder is indefeasibly vested when it is certain to become possessory whenever and however the preceding estates end

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                              There are no events which might act to diminish or divest the interest, either before or after the interest becomes possessory
                              T’s will devises the remainder of her estate to a trustee, and directs that ―income be paid to my sister, S, for life, then to my
                               daughter, D.‖
                                         The remainder in D is indefeasibly vested b/c D’s interest is certain to become possessory.
                                         If D dies before S, D’s interest will pass to D’s estate.
                                         Even if D’s remainder does not become possessory in D personally, the interest will become possessory in D’s
                                          successors in interest.

              o     Vested Remainder Subject to Open
                             Certain to become possessory
                             The holder of the remainder may find his share of the property reduced as more beneficiaries become eligible to share the property
                             B/c the class of possible takers is till open, his share may be partially divested by new members of the class.
                             T’s will devises the remainder of her estate to a trustee, and directs that ―income be paid to my son, Q, for life, then to be
                              distributed among Q’s children.‖ At the time of T’s death, Q has two children, R and S.
                                         R and S have vested remainders subject to open.
                                         Their interest is certain to become possessory, but their share of the remainder may diminish if Q has additional
                                          children.
                                         Thus, if Q has no additional children, R and S will each be entitled to 50% of the remainder; if Q has three more
                                          children, each child will be entitled to only 20% of the remainder.

              o     Executory Interests
                              Executory interests cut short a vested remainder subject to complete divestment
                              T devises Blackacre ―to my daughter, D, for life, remainder to my grandson G, but if G fails to survive D, then the remainder
                               should be distributed to my nephew N.
                                         Following Gray’s classification system, G has a vested remainder subject to complete divestment. B/c G has a vested
                                          remainder, N cannot have a remainder. Instead, N has an executory interest.
                              Executory interests can also cut short a vested remainder subject to open
                                         If a decedent creates a vested remainder subject to open, decedent’s unborn grandchildren have an executory interest
                                          b/c their interest would partially divest the interests of living grandchildren
                              Executory interests arise when there is certain to be a time gap between the end of the prior estate and the time the future interest
                               will become possessory
                                         T devises Blackacre ―to my daughter, D, for life, and one year after her death, I direct that Blackacre pass to my
                                          grandson G.‖ G’s future interest cannot become possessory immediately upon the expiration of D’s life estate. By the
                                          terms of the grant, there will be a necessary gap between D’s death and G’s right to possession. As a result, G cannot
                                          have a remainder. G has an executory interest.
              o     Problems – classify the following devises by T (assume at T’s death, T has a brother, B, who has one child, D)
                              ―To my brother B for life, remainder to B’s daughter, D.‖
                                         D has an indefeasibly vested remainder
                              ―To my brother B for life, remainder to B’s children.‖
                                         The children’s future interest is a vested remainder subject to open
                                         If no children, then it is a contingent remainder
                              ―To my brother B for life, remainder to those of B’s children who survive B.‖
                                         Contingent remainder
                              ―To my brother B for life, remainder to those of B’s children who survive B by one year.‖
                                         Executory interest

B.       Construction of Future Interests: Gifts to Individuals
        Should We Imply a Condition of Survival?
             o     Consider Problem 1, above. If the trust instrument does not explicitly require D to survive S, should we nevertheless assume that T wanted D
                   to take only if D had survived to the time of trust termination? The general answer is NO
                              Will not imply a condition of survival
             o     Reason for the rule of not implying a condition of survival – tends to keep property within the family

        Presumption in Favor of Early Vesting
              o    Promotes alienability (easier to sell property)
              o    Easier to comply with RAP – don’t want future interests to remain contingent too long
              o    Vested remainders accelerated into possession upon premature termination of preceding estates; contingent remainders did not
              o    Vested remainders were not subject to the common law rule that contingent remainders were destructible (that rule has been abolished almost
                   everywhere)
        Reasons not to favor early vesting
              o    If interest is vested and then becomes divested, may have to go through probate various times
              o    Tax reasons – vested remainders are taxable

C.       Construction of Class Gifts
        Increases in class membership – births
        Decreases in class membership – deaths
        T’s will devises $20,000 ―to be distributed among my grandchildren.‖
              o      Should grandchildren born after execution of the will, but before T’s death, be entitled to share? YES
                              By using the word ―grandchildren‖ rather than naming individual grandchildren, T expressed an intention that the devise not be
                               limited to grandchildren living at the time of will execution.
                              No good practical reason exists for excluding grandchildren born by the time of T’s death.
              o      What about grandchildren born after T’s death? Those grandchildren should not be entitled to share in the $20,000.
                              We will not know definitively how many shares there will be until the death of T’s last surviving child – which may occur long
                               after T’s death
                              Therefore, if we permit all grandchildren to share, we could make no distribution to grandchildren living at T’s death.


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          Rule – when a grantor makes a class gift, membership in the class may continue to increase until at least one member of the class becomes entitled
           to possession of the property that is the subject of the class gift
                 o    The class closes when one member of the class becomes entitled to take her share of the property

          Exception to the class-closing rule – if, at the time an interest is intended to become possessory, no member of the class has yet been born, then the
           class closing rule will not apply, and we will wait for the class to close naturally

          Problem – T’s will directs that, after her husband’s death, trust principal be divided among ―my children.‖ T had 3 children, A, B, and C. A died before
           H, leaving a daughter, D, and a will dividing her estate equally between her husband, E, and Valparaiso University. At H’s death, who is entitled to the
           trust principal?
                 o     Restatement approach – ―children‖ means ―children,‖ but we impose no survivorship requirement. In other words, we treat the class gift to
                       children in the same way we would treat a gift to 3 individual children – the 3 children have an indefeasibly vested interest as soon as their
                       mother dies. As a result, B and C each take 1/3 of the trust principal; E and Valparaiso share the final third.
                 o     Walker court approach – ―children‖ means ―children,‖ but we impose a survivorship requirement. Since A did not survive H, she did not
                       qualify to take as a child. B and C share the trust principal.
                 o     UPC approach – ―children‖ means ―issue.‖ Therefore, D steps into A’s shoes and takes A’s share. The trust principal is divided equally
                       among B, C, and D.
                                               Foster is unsure of which approach Arkansas would follow, so know all three possibilities
          Gifts to “Heirs”
                 o     Harris Trust & Savings Bank v. Beach (Ill. 1987)
                                  Issue – whether the settlor intended that his heirs be ascertained at his death or whether he desired that they be determined after
                                   the death of his wife, who was the life tenant
                                  Possible times to determine ―heirs‖ – (1) husband’s death; (2) wife’s death
                                  If determine ―heirs‖ at testator’s wife’s death, then the charities will not take
                                  If determine ―heirs‖ at testator’s death, then the charities will get a large portion of the estate
                                  Court held ―heirs‖ to be determined at the time of the wife’s death
                                               The trust completely revolved around the wife
                                               Things clearly would not be settled for a long while (wife was much younger than testator)
                                               ―Divide and pay over‖ rule
                                  ―Divide and pay over‖ rule – when a trustee is directed to divide or distribute a gift to a class at a time after the settlor’s death, the
                                   gift is contingent and possession and enjoyment of that gift are delayed until the time of distribution. The gift is contingent under
                                   the rule not only b/c it is dependent upon the happening of an event – the trustee dividing and distributing the assets – but also b/c
                                   the members of the class who would be alive and able to enjoy the gift would not be ascertained until the trustees performed their
                                   duty of distributing the assets.
                                  If the wife had predeceased the testator, there would have been a reversion (revert back to testator) – intent to keep property in the
                                   family




Chapter 9: CLASSIFICATION AND CONSTRUCTION OF FUTURE INTERESTS
Chapter 10: THE RULE AGAINST PERPETUITIES
Prevents contingencies from being too remote.
FUTURE INTERESTS-to be good-
                      MUST-Vest-OR-Fail
                                WITHIN 21 Years of-Measuring Life-in being-at creation of the interest.

When are FUTURE INTERESTS CREATED.

WILLwhen T dies.
REVOCABLE TRUSTSAt T’s death.
IRREVOCABLE TRUSTExecution of the Will (signing and has to be funded otherwise not in existence)
IRREVOCABLE TESTAMENTARY TRUSTWhen T dies.

Problems
1.                    T devises Blackacre ―to A for life, remainder to the first child of A who
                      a.         REACHES THE AGE OF 18. When is the latest it can vest? No later than 18 years after A’s death. A is a measuring life,
                                 therefore it is VALID.
                      b.         REACHES THE AGE OF 40. When is the latest it can vest? No later than 40 years after A’s death. A cannot be the measuring
                                 life, and A’s child might be born after the interest is created, and so cannot be the measuring life, and therefore it is INVALID.
                      c.         GRADUATES FROM COLLEGE. When is the latest it can vest? No later than an unspecified time after A’s death, since maybe
                                 no child went to college till they were quite old. A cannot be the measuring life, and again, A’s child might be born after the
                                 interest is created, and so cannot be the measuring life, and therefore it is INVALID.
2.                    T devises property, in trust with directions to pay income to A for life, and then distribute principal
                      a.         TO THE FIRST CHILD OF MINE (T) WHO REACHES AGE 18. When is the latest it can vest? A’s death. Either A or T’s
                                 child can be a measuring life-why? Because they both were alive at the creation of the interest (T’s death). So it is VALID.
                      b.         TO THE FIRST CHILD OF MINE WHO FINISHES COLLEGE. When is the latest it can vest? When a child finishes college.
                                 Since T’s child is a measuring life, it is VALID.
3.                    T devises property, in trust, and directs the trustee topay income to my sister for life, then to my sister’s children and their heirs until the
                      death of the last survivor of my sister’s children, and then to distribute principal to
                      a.         MY BROTHER’S CHILDREN. What kind of interest? Vested subject to open. When is the latest it can vest? Brother’s death
                                 (even though it may not be POSSESSORY then). When does interest begin? T’s death. Who is the measuring life?
                                 Brother=VALID.

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                        b.          MY BROTHER, IF HE IS THEN ALIVE. When is the latest it can vest? Sister’s last child’s death. Who is the measuring life?
                                    Brother=VALID.
                        c.          THOSE OF MY BROTHER’S CHILDREN WHO ARE THEN ALIVE. When is the latest it can vest? Sister’s last child’s death.
                                    Who is the measuring life? Can’t be brother-could be more than 21 years after his death. Can’t be sister for the same reason.
                                    Can’t be sister’s children, since she could have more who then wouldn’t have been alive at creation of the interest. INVALID.
                        d.          MY YOUNGEST GRANDCHILD. When is the latest it can vest? Death of brother and sister. Who is measuring life? Brother
                                    and sister, they are both alive when interest is created. VALID.
                        e.          MY OLDEST SURVIVING GRANDCHILD, PER CAPITA. When is the latest it can vest? Death of last surviving child of
                                    sister. Who is measuring life? Can’t be brother or sister, can’t be sister’s kids, can’t be granchildren. INVALID.


RAP with Charitable Trustsnot subject to RAP.

Problem with Mixed Trusts.
Only Valid if the future interest is certain to vest (or fail) within the period of the Rule.




THE RULE AGAINST PERPETUITIES
A.          Introduction

           RAP – no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest
                 o    An interest is valid under the RAP if it will fail or vest with 21 years after the end of a life in being at creation
           The premise behind the RAP is that people with property should be permitted to tie up their property for a reasonable period of time – but no longer
                 o    The RAP promotes free movement of property

B.          The Rule’s Operation

           The RAP is a rule against remoteness in vesting
           The RAP requires every interest to ―vest‖ or fail within the Rule’s period – lives in being plus 21 years
           Present interests and future interests in the grantor are vested at creation and cannot violate the RAP
           The RAP’s principal application is to future interests in transferees:
                 o      Indefeasibly vested remainders and vested remainders subject to divestment are not subject to the RAP
                 o      Vested remainders subject to open – analyze for violation of RAP; RAP applies to this future interest
                 o      Contingent remainders – RAP applies to this future interest
                 o      Executory interests – RAP applies to this future interest

           Interests can Vest Before they Become Possessory
                  o     T’s will devises property in trust, with directions that income should be distributed ―to A for life, then to A’s children and their heirs for so
                        long as at least one child of A remains alive,‖ and with a direction that at the death of A’s last child, the principal should be distributed ―to
                        those of A’s grandchildren alive at A’s death.‖ When does the interest in A’s grandchildren vest?
                                   The interest will vest at A’s death b/c, by the terms of the will, only those grandchildren of A who are alive at A’s death are
                                    eligible to take the remainder interest.
                                   If none are alive at that time, the interest would fail altogether, but the interest could not remain contingent after A’s death.
                                   Grandchildren born later would not share in the remainder.
                                   Although the grandchildren born at A’s death have an indefeasibly vested remainder, they will not have a right to possession until
                                    the death of A’s last surviving child.

           “Lives in Being” – Choosing Measuring Lives
                 o     Criterion
                                 The interest must vest or fail within 21 years after the death of the life in being
                                 Life in being at the time the interest is created
                 o     Different measuring lives may be used to establish the validity of different interests in the same instrument.
                 o     The person used as the measuring life does not have to be listed in the instrument
                 o     Analysis
                                 Determine when the interest will vest or fail, and upon what contingencies.
                                 List all persons during whose lifetime, at whose death (or w/n 21 years of whose death) the contingencies will occur, causing the
                                  interest to vest or fail. This list is a list of all persons who satisfy the first criterion for measuring lives
                                 Check to see whether any of the persons on the list were certain to be alive at the creation of the interest (i.e., check to see which
                                  of the persons on the list satisfy the 2nd criterion for measuring lives). If any of the people on the list satisfy the 2nd criterion, the
                                  interest is valid under the RAP. If none of the persons on the list satisfy the 2nd criterion, the interest is invalid under the RAP.

C.          Recurring Problems

           When does the Perpetuities Period Start to Run? – Revocable & Irrevocable Inter Vivos Trusts
                o     With a revocable inter vivos trust, the period begins to run when the grantor/donor dies
                o     With an irrevocable inter vivos trust, the period begins to run at creation of the trust (when the trust is funded)

                  o     PROBLEM – S created an irrevocable inter vivos trust, and direct that income be paid "to my children and their heirs until the death of my
                        last surviving child," and then directs that the trust principal be "divided equally among my grandchildren."
                                   Is the interest in grandchildren valid under the RAP?
                                   The interest is created at the beginning of the trust.
                                   S could have more children so they cannot be the measuring lives.
                                   Children cannot be the measuring lives b/c grantor/donor could have children after the creation of the interest
                                   The interest is invalid.

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                                What if the trust was a revocable trust or a testamentary trust?
                                           The interest is created at S’s death
                                           S’s children can be the measuring lives
                                           The interest is valid.

        Remote Possibilities
             o    Men and women are deemed to be able to have children until their death (even though it is highly unlikely)

        Application to Charitable Gifts & Trusts
              o     RAP applies to charitable gifts in some ways
                                Devise to bank as long as it continues to exist, remainder to Home for Aged Women in Roxbury
                                            Bank is not a charity
                                            Private estate followed by charitable devise
                                            The interest is not vested and might not vest for hundreds of years if the bank were to exist for so long
                                            If a future interest in a charity follows interests in non-charities, the future interest is valid only if it is certain to vest
                                             (or fail) w/n the period of the RAP
                                Devise to church as long as it exists, then to donor’s legatees
                                            Gift to legatees is invalid under RAP
                                            Don’t know whether interest will vest or fail w/n 21 years
                                            A future interest in a non-charitable grantee, even if it follows a charitable devise or a charitable trust, is valid only if
                                             the future interest is certain to vest (or fail) w/n the period of the RAP
                                Devise to charity, remainder to another charity
                                            Not subject to RAP
                                            As one charitable use may be perpetual, the gift to 2 in succession can be of no longer duration nor of greater evil. The
                                             property is taken out of commerce, but it instantly goes into perpetual servitude to charity.
        Consequences of Invalidity
              o     In general, if an interest is void under the RAP, the void interest is excised, or surgically removed, from the dispositive instrument, leaving
                    the rest of the instrument to take full effect.
              o     If the invalid interest would operate to divest a prior interest, the effect of invalidity is to make the prior interest absolute.
              o     These general principles do not apply if a court could give effect to more of the testator’s dispositive scheme by invalidating a broader range
                    of interests.
                                When it would appear that testator would prefer invalidation of multiple interests, or even the entire will, the doctrine of
                                 infectious invalidity permits a court to invalidate valid interests as well as invalid ones.
                                            Court will look to the total scheme to see what grantor’s intent was
D.       Savings Clauses

        Perpetuities savings clauses save many interests from invalidity under the RAP, but careless drafting of savings clauses has itself engendered far too
         much litigation.
        The drafter wants to avoid invalidity of any interests she creates, but also wants to avoid premature termination of any trust she creates.

        Savings clauses should specify the following:
              o     Time the trust will terminate if it might violate the RAP
              o     Persons entitled to principal at the time of the termination

        A savings clause is more likely to be successful if it selects a group of lives in being on the effective date of the instrument and directs that, if the trust
         would otherwise violate the RAP, the trust should terminate 21 years after the death of the last survivor of the group. The drafted must be careful to
         assure that the lives selected are alive on the effective date of the instrument, which, in the case of an inter vivos instrument, will not be the date of the
         testator’s death.

        Some states have abolished the RAP in order to get long-lasting, income-generating trusts to be established
        Some states take a wait-and-see approach
             o     Court will wait and see what happens before taking action
        Some states retain the common law RAP (Arkansas)
        Some states have adopted the UPC RAP


                                                                          THE END.




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