wills and trusts spring 2012

7/23/2019 Wills and Trusts Spring 2012

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INTRODUCTION TO ESTATE PLANNING AND THE LAWYERS ROLES

GENERAL INTRODUCTIONI. The Statute of Wills: a law which provided legal recognition that property could

be transferred by will, a document executed with the requisite formalities.II. ecent !hanges in Trusts and "states #aw:

a. $oved away from formalism that traditionally characteri%ed it towards anemphasis on client&s intent

b. #aws of the '( states are becoming more similar as a result of the )niform*robate !ode

c. +ow involves the use of instruments in addition to willsd. $edical directives and various forms of powers of attorney allow individuals

to mae advance arrangements for their incapacitye. The -udicial process for probating wills or administrating estates has been

vastly simplied.III. /octrines:

a. /onative Intent: norm in 0merican trusts and estates law has always been to

allow property owners to do what they want with their property, during lifeand at death. It is sub-ect to relatively few limitations.

i. 1eneral *rincipal: a governing instrument, such as a will, dictatesoutcomes to the extent that it addresses a matter even if the choicesmade by the testator seem unfair.

ii. 0pplication: applies even when there is no explicit direction from thedecedent, for example, when there is no written document or anestate planner failed to adequately consider various contingencies.

iii. /efault ules: State laws provide default rules designed toapproximate what the decedent would have wanted.

b. The guiding principle in estate planning and estate administration isefectuating the transerors intent.

THE LEGAL SYSTEM GOVERNING TRUSTS AND ESTATESI. Wills the traditional method for disposing of property

a. Friedman, Dead Hands: A Social History o Wills, Trusts, andnheritance !a"

i. Highly Formal Document:1. Must be in writing!. Must ha"e a certain number of witnesses#. Must be signed by testator$. %estator must intendthe document to be his will

ii. &obody H'( to ha"e a will) the (tate will be happy to distribute yourproperty without one using intestacy laws.

1. *nly property that is owned by the decedent at death is includedin the probate etate and disposed of by will or in the absenceof a will through intestacy.

iii. %rust one of the most important will substitutes1. De+nition: a trust is a legal arrangement in which certain assets

land money stoc,s and bonds are put in the hands of atrustee who manages the assets and has control o"er them butwho e-ercises his power on behalf of the bene+ciaries.


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II. %he mergence of Will (ubstitutesa. De+nition: Will substitutes can dispose of either property or contractual

rights and which ha"e the e/ect of remo"ing property from the probateestate. %hey are established while the donor is still li"ing and theye/ecti"ely:

i. (hift the right to possession or en0oyment of the property or to acontractual payment outside of probate to the donee at the donors

death) !"i#eii. (ubstantial rights of dominion control or en0oyment of the property

are retained by the donor.b. Di/er from the ordinary 2last will and testament3 in three main ways:

i. Most if not all are asset4speci+c: each deals with a single type ofproperty be it life insurance proceeds a ban, balance mutual fundshares or whate"er.

ii. 5roperty that passes through a will substitute a"oids probateiii. %he formal re6uirements of the Wills 'ct do not go"ern will substitutes

and are not complied with.i". Modern practice pro"ides only one theory that can reconcile wills and

will substitutes in a wor,able manner: t"e r$#e o% tran%erorintentthe transferor may choose to pass his property on death ineither the probate or the nonprobate system or in both.

1. %he transferor who doesnt choose or disclose his intent will beremitted to probate the state system.

III. %he 5robate 5rocessa. De+nition: probate is the process by which property from the estate is

distributed to the appropriate recipientsb. #onopoli, American $ro%ate: $rotecting the $u%lic, mpro&ing the

$rocessi. ' decedents probate estate is sub0ect to administration under

applicable laws relating to decedents estates. %he probate estateconsists of:

1. 5roperty owned by the decedent at death where the bene+ciaryis not already determined by a will substitute '&D

!. 5roperty ac6uired by the decedents estate at or after thedecedents death.

ii. Intended to perform se"eral useful functions: 'n e-ecutor is supposedto

1. 7ollect or 2marshall3 all the decedents assets and detail themon a list or in"entory

!. Manage those assets during the time it ta,es to administer the

estate)#. 5ay all debts of the decedent$. Distribute what is left in the estate to the persons named in the

will.iii. 5ersonal 8epresentati"es:

1. Most probate courts allow the decedent to nominate the e-ecutor!. ' will has an E&e'$tor) intestate estates ha"e an

Ad(initrator#. Fiduciary Duty of the 58: means a person ha"ing a duty created

by his underta,ing to act primarily for anothers bene+t in


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matters connected with such underta,ings. %he Fiduciary mustact with 2scrupulous good faith and candor.3

TESTAMENTARY )REEDOM AND LIMITATIONS ON *CONTROL )ROM THE GRAVE+I. 2einberg v. 2einberg

a. Facts: %he decedents grandchildren were sub0ect to the 2bene+ciaryrestriction clause3 which stated that any descendant who married outside

the 9ewish faith or whose non49ewish spouse did not con"ert would be2deemed deceased for all purposes of the instrument and that share of thetrust would re"ert to Decedents children.3

b. Holding: 'lthough the plans of the decedents might be o/ensi"e to indi"idualfamily members or to outside obser"ers Ma- and rla were free to distributetheir bounty as they saw +t and to fa"or grandchildren of whose life choicesthey appro"ed o"er other grandchildren who made choices of which theydisappro"ed so long as they did not con"ey a "ested interest that wassub0ect to di"estment by a condition subse6uent that tended tounreasonably restrict marriage or encourage di"orce.;

THE PRO)ESSIONAL STANDARDS ASSOCIATED WITH ESTATE PLANNINGI. Introduction

a. 5rofessional 8esponsibility issues are raised in a "ariety of conte-tsbeginning with the initial client consultation and continuing after the death ofthe clients. Model 8ules of 5rofessional 7onduct set the rules for how lawyersshould act.

b. state 5lanning 'ttorneys must be concerned that disappointed bene+ciaryor heir may:

i. 7hallenge a will or other panning document

MPRC ,-.- S'ope o% Repreentation and A##o'ation o% A$t"orit/ 0et!een C#ientand La!/er


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MPRC .-,- Ad1ior' lawyer shall e-ercise independent professional 0udgment and render candid ad"ice. Inrendering ad"ice a lawyer may refer not only to law but other considerations such asmoral economic social and political factors that may be rele"ant to the clientssituation.

b. 7on+dentiality

MRPC ,-2- Con3dentia#it/ o% In%or(ationlawyers ser"ices


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III. 7ommon (ituations 8aising thical Issues for state 5lannersa. 9oint 8epresentation representing both a husband and wife who may ha"e

potentially di/erent and thus conicting interests. )o$r Option:

i. ' separate lawyer for each spouseappropriate where the spousesinterests are in conict


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ii. %he lawyer may disclose his own a"ailability to ser"e as a +duciary andit is acceptable for the lawyer to be named:

1. 's a +duciary under a will or trust that the lawyer is preparing forthe client so longa s the lawyer discusses with the clientinformation reasonably necessary to enable the client to ma,e aninformed decision in selecting the +duciary.

c. 7ounseling

i. @awyers are responsible for communicating with their clients andensuring that clients understand matters ade6uately so that they canma,e informed decisions.

ii. ' lawyer who proceeds reasonably to ad"ise a client with the intent ofpro"iding the client with legal ad"ice on how to comply with the lawdoes not act wrongfully e"en if the client employs that ad"ice forwrongful purposes or e"en if a tribunal later determines that thelawyers ad"ice was incorrect. A't reaonab#/ and /o$ are o7-

IE. Malpracticea. De+nition: When the lawyers actions create 2a legal cause of in0ury3 that

damages 2a person to whom the lawyer owes a duty of care3 and the lawyer

has no "alid defense he may be held liable for malpractice.b. '"oiding Malpractice: primary reason for not precluding liability of #rdparties

may be that unless a #rdparty has the right to sue a lawyer for breach ofduty or malpractice no one will ha"e the right to bring an action fordamages.

i. state itself usually has not su/ered harm and the reco"ery may belimited to the relati"ely minor cost of the state planning.

ii. For #rdparty to pre"ail must pro"e that the attorney breached a dutyowed to the decedent) standard of care is that the attorney shoulde-ercise s,ill and ,nowledge ordinarily possessed by attorneys undersimilar circumstances.

iii. (uits ha"e been instituted for: error in e-ecution) failure to accomplishtestator goalsintent) error law) failure to update estate plan for newlaws or facts) failure to in"estigate heirs and assets) failure to ad"ise %on e/ect of his intent on ta-es or other Gs) breach of contract to ma,ewill) negligent estate planning that causes addl ta-es) errors indrafting) allowing e-ecution when % lac,ed capacity) delay inimplementation of plan) missed deadlines) limiting representation todiscreet issues

i". Most causes of action are based on the tort of ne8#i8en'eand includebreach of +duciary duty professional malpractice iniction ofemotional distress fraud breach of good faith and fair dealing andor

negligent misrepresentation.c. 5ri"ity:

i. Important Information: you can purchase life insurance for you orsomeone else) it is one of the most important forms of non4probateassets) '&D if deceased owns a policy on himself proceeds are sub0ectto estate ta-) if deceased originally purchased policy but transferredownership at least # years before death proceeds are &*% ta-able.

ii. Schneider &. Finmann1. Facts: % bought policy transferred se"eral times then bac, to

himself. 5 says D negligently ad"ised % to transfer or failed to


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ad"ice % not to transfer the policy which resulted in increasedta- liability.

!. Issue: whether an attorney may be held liable for damagesresulting from negligent representation in estate planning thatcauses enhanced estate ta- liability.

#. Holding: a personal representati"e of an estate may maintain alegal malpractice claim for negligent ad"ice about the ta-

implications of life insurance that results in pecuniary losses toestate.

$. 8ule: the court now holds that pri"ity e-ists between personalrepresentati"e of an estate and the estate planning attorney.

a. 58 of estate shouldnt be pre"ented from raising anegligent estate planning claim against attorney whocaused harm to the estate.

d. Malpractice for &*% e-ecuting a willi. 7ase below continues e-amination of parameters of lawyers duties to

client.ii. Sisson &. 'an(o"s(i

1. Facts: % was dying of cancer and hired Ds to ma,e a will for himbecause he didnt want to die intestate. Will was to gi"ee"erything to %s brother. D went to see % but he didnt ha"ecapacity. Had to re"ise will ne"er got it e-ecuted


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APPENDI9 0- G#oar/ : A(eri'an Probate G#oar/

Ad(initrator: %he person in charge of administering the estate of an intestate decedentAttetation: dual act of watching % of a will sign the will and then writing ones signature aswitness0ene3'iar/: person who is to bene+t from the income and principal of a trust or person namedto recei"e be6uest under a will.E&e'$tor: %he person in charge of administering the estate of a testate decedentHeir: relati"es who are legally entitled under state law to inherit the estate of a person whodies without will or 2intestate3Inteta'/: ha"ing died without a willInteta'/ Stat$te: state laws de+ning who is legally entitled to inherit a %s estate if that %dies without will

;oint Tenan'/: form of title to property that pro"ides co4ownership and results in title toproperty passing automatically to the sur"i"ing 0oint tenants when one co4owner dies.Mar"a#in8 Aet: act of identifying and in"entorying the deceaseds assets in an estate.Perona# Repreentati1e: eneric term for the person in charge of administering the estate ofa decedentPo!er o% Appoint(ent: pro"ision in a will or similar document that grants an indi"idual


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INHERITANCE AND RELATIONSHIP

INTRODUCTIONI. (tate (tatutes

a. Intestacy: ach state has a default rule or a set of 2intestacy statutes3 thatgo"erns who is entitled to inherit from a decedent who dies without a will.

b. Wills: each state has laws 2statutes of wills3 that allow citi>ens to opt outof the intestacy statutes and draft a will.

c. 7anons: each state has 2canons3 or 2rules of construction3 that help courtsinterpret those wills and other instruments li,e trusts that pass property atdeath.

II. (tatusa. De+nition: Who constitutes a 2family member3 is a 6uestion of status

certain people are entitled to inherit from the decedent because theyconnected by blood or marriage.

b. Interpretation issues:i. When a decedent dies without a will the interpreti"e issues that arise

in"ol"e applying the intestacy statutes.ii. When an indi"idual drafted a will or trust the 6uestions in"ol"e

interpreting the meaning of the instrument.

WHO IS A CHILD,6 Genera# De3nition1. 27hild3 includes an indi"idual entitled to ta,e as a child under this 7ode by

intestate succession from the parent whose relationship is in"ol"ed ande-cludes a person who is only a stepchild foster child a grandchild or anymore remote descendant.

!. 2Descendant3 of an indi"idual means all of his descendants of allgenerations with the relationship of parent and child at each generationbeing determined by the de+nition of child and parent contained in this7ode.

#. 2Issue3 means lineal descendants i.e. children grandchildren great4grandchildren etc.

i. Ways to stablish the 5arent47hild 8elationship


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1. %his relationship 6uali+es the child to inherit under intestacy oras a member of a class for purposes of wills or trusts.

!. ' child who is either genetically related to the parent who islegall adopted by the parent or whose parent has indicated hisconsent to be a parent to a child concei"ed with reproducti"etechnology e"en if there is no genetic connection can nowestablish such a parent4child relationship.

UPC .=,>?6 S"are o% Heir Ot"er t"an S$r1i1in8 Spo$e@6 C#a Gi%t Contr$ed to A''ord !it" Intetate S$''eionE&'eption


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i. %hese are children who do not fall within the marital presumptionoutlined abo"e.

ii. %he K( (7 has established a constitutional re6uirement that statesmust pro"ide some statutory mechanism by which nonmarital childrencould try to establish paternity and inherit from their fathers.

iii. Most states responded to this by adding language to the intestacystatutes that pro"ided nonmarital children with se"eral ways by which

they could establish paternity.i". K57 simply states that there is no di/erence in statuts between a

marital and a nonmarital child for purposes of inheritance form hisgenetic parents.

UPC .=,,4- No Ditin'tion 0aed on Marita# Stat$


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b. If the father has died many courts will order relati"es ofthe father to pro"ide genetic material or e-hume the body

c. 6uitable 'doption


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i. In limited circumstances courts use their broad power to promote0ustice to +nd out that there has been an 2e6uitable adoption.3

ii. Somecourts re6uire child to establish that an adoption proceeding hadactually begun but had not been completed.


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relati"e of the genetic parent functioned as a parent of the child before the child reached1; years of age.

a. K57 P !411B@- C#a Gi%t Contr$ed to A''ord !it" Intetate S$''eionE&'eption-


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INTESTACY : WHAT HAPPENS TO A DECEDENTS PROPERY I) THEREIS NO WILL

INTRODUCTIONIf the decedent dies without a will or if the will o/ered for probate is in"alidated in wholeor in part the intestacy rules apply to determine who the bene+ciaries are and to whatportion of the probate estate they are entitled. Intestacy statutes S statutory will ine/ect.

I. Who Dies Without a Willa. 1ary, Adapting ntestacy !a"s to hanging Families

i. 7haracteristics of those li,ely to die without a will:1. 'ge: younger decedents are more li,ely to die intestate than

older decedents!. Wealth: as an indi"iduals estate increases in si>e the person is

more li,ely to be concerned with its disposition.a. Wealth is also tied to age.

#. *ccupationducation: greater education correlates with greater

testacy and white collar wor,ers are more li,ely to die testatethan blue collar wor,ers.a. Wealth is ob"iously also tied to occupation and education

$. ender: women are more li,ely than men to die testate e"enthough mean re more li,ely to ha"e greater wealth.

B. Marital (tatus: widows and widowers are the most li,ely of anygroup


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b. 5ossible for statutes to apply une-pectedly:i. If the will is in"alidated for some reason)ii. If one or more will substitutes fails if there is no will because the %

belie"ed it was not necessary since all his property was being disposedof by will substitute intestacy would control its disposition.

UPC .=,>,- Intetate Etate-


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ii. *nly descendants by blood or adoption share under intestacy)stepchildren do not.

iii. If the probate estate is small the share to which the sur"i"ing spouseis entitled may consume the entire estate to the e-clusion of otherheirs.

i". If there are any descendants of the decedent they will ta,e e"erythingthat is a"ailable and collateral heirs will recei"e nothing.

b. K57 P !41J#. (hare of Heirs *ther than (ur"i"ing (pouse.i.


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maternal grandparents or either of them if both aredeceased the descendants ta,ing by representation)

B. if there is no sur"i"ing descendant parent or descendant of aparent but the decedent is sur"i"ed by one or more grandparentor descendants of grandparents on the paternal but not on thematernal side or on the maternal but not the paternal side tothe decedents relati"es on the side with one or more sur"i"ing

members in the manner described in paragraph


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intestate estate not going to the sur"i"ing spouse is di"idede6ually among them.

i". If the decedent is sur"i"ed only by some of her children


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c. (trict 5er (tirpes /etermined by family stoc at


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the same manner as (tep 1 and distribute the probate propertyin the same manner as step !. 8epeat this generation bygeneration putting each descendant who is represented at thetop of the chart.

ii. Y'M5@ 1: D had # children ' G and 7. D is sur"i"ed only by her son7 who has a young son Y. Ds son G died many years ago without anychildren. Daughter ' died recently lea"ing # children of her own K E

and W.1. *rocedure and result:

a. Firstdetermine the number of shares by di"iding theestate into as many e6ual parts as there are li"ing childrenof the decedent if any and deceased children who arerepresented by their li"ing descendants.

i. (ince son G did not sur"i"e and did not lea"e anychildren to represent him his potential share is lost.%hus only two shares are created one for 7 and onefor the bloodline of '.

b. (econd distribute to 7 the half to which he is entitled.


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i. Modern rule 0umps down to the +rst generationwhere there are actual survivors.

ii. 5rocedure for Determining 5er 7apita with 8epresentation (hare1. (tep 1: )ind t"e 3rt 8eneration !"ere t"ere are #i1in8

de'endant-Determine the number of shares by di"iding theestate into as many e6ual shares as there are:

a.

c. Do not deter(ine t"e n$(ber o% "are at a8eneration !"ere t"ere are no #i1in8 de'endantand e1er/one i (ere#/ repreented- T"ere ($t bea #i1in8 de'endant at a 8eneration to $ti%/ t"e"are deter(ination- THUS per%or( tep , at t"e"i8"et 8eneration !"ere o(eone i a#i1e-

!. (tep !: distribute one share to each #i1in8member of thehighest generation.

#. (tep #: for the children who were not ali"e but whose bloodlines

were entitled to a share because they were represented by theirdescendants determine the portion allocated to that bloodline inthe same manner as (tep 1 abo"e


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iii. 5rocedure:1. (tep 1: )ind t"e 3rt 8eneration !"ere t"ere are #i1in8

de'endant-Determine the number of shares by di"iding theestate into as many e6ual shares as there are:

a.

c. Step one i identi'a# to t"e ori8ina# UPC (odern pertirpe (et"od- In ot"er !ord per%or( tep one att"e "i8"et 8eneration !"ere o(eone i a#i1e-

!. (tep !: distribute one share per capita to each li"ing member ofthe +rst generation where there are li"ing members.

#. (tep #: combine the remaining shares if any into a pot forsharing by lower generations. It is at Step ?that the 5er 7apitaat ach eneration method brea,s from the modern per stirpesmethod.

$. (tep $: Mo"e down to the net generation and basically repeatsteps 1 to # until the entire estate is distributed.

i". Y'M5@ B: D had # children ' G and 7. D is only sur"i"ed by on 7who has a young son Y. Ds son G died many years ago without anychildren. Daughter ' died recently lea"ing # children of her own K Eand W.

1. *rocedure and esult:a. Firstat the highest generation where there is at least 1

descendant that sur"i"es the D we determine the numberof shares by di"iding the estate into as many e6ual partsas there are li"ing descendants of the D and deceaseddescendants who are represented by their li"ingdescendants. *ne these facts we determine the number of

shares at the 2child3 generation because at least one child


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children !% the decedent, i% an#, and 021 deceased children ith li$in& descendants. 3T4E ESTATE ISDI5IDED AT T4E 6E5E6 OF T4E C4I6DREN 7 A6WA8S9-2 Distri"te !ne share t! each li$in& eer !% the hi&hest &enerati!n.-: M!$e d!n t! the ne;t &enerati!n, re(eat as needed.


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2. I% the deceased ha$e n! child !r children, !r their descendants, then the s"r$i$in& h"sand !r i%eshall e entitled t! all the (ers!nal estate, and t! !nehal% !% the lands !% the intestate, ith!"t reaindert! an# (ers!n, and the !ther hal% shall (ass and e inherited acc!rdin& t! the r"les !% descent anddistri"ti!n+ (r!$ided, h!e$er, that i% the deceased has neither s"r$i$in& %ather n!r !ther n!rs"r$i$in& r!thers !r sisters, !r their descendants, then the s"r$i$in& h"sand !r i%e shall e entitled t!the h!le !% the estate !% s"ch intestate.


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NONPRO0ATE TRANS)ERS : PASSING PROPERTY 0Y WILLSU0STITUTES AND GI)TS

INTRODUCTION. ouch, $ro%ate !a" /eorm and 2onpro%ate Transers

a. 5robate refers to the body of substanti"e and procedural rules that go"ernthe de"olution of decedents estates by will or intestacy.

i. ' will has no binding e/ect until it is allowed by the court) estateadmin cannot begin until the court appoints a 58) and the 58 oftenremains sub0ect to court super"ision until the court orders a +naldistribution and discharge.

ii. rowing number of states now pro"ide for independent admin withminimal court super"ision as well as informal procedures for adminsmall estates and collecting speci+c types of assets butcomprehensi"e reform proposals still encounter sti/ resistance.

%. Will (ubs: designed to achie"e the practical e/ect of a will designatingbene+ciaries to recei"e property at the owners death outside the probate

system.i. Main obstacle: "iew that all property owned by D at deathautomatically becomes part of probate estate.

ii. Will subs ordinarily ta,e the form of a gift trust contract or other non4testamentary arrangement that technically operates as a lifetimetransfer while lea"ing the transferor with substantially undiminishedownership rights.

iii. 'ccording to the standard account of the 2nonprobate re"olution3 therise of will subs is basically about deregulating the process ofdeathtime wealth transfers and allowing pri"ate4sector competitors tochallenge the probate systems monopoly.

i&. Will subs ha"e not and cannot completely displace wills because notall %s use will subs and those who do should be aware that most willsubs only apply to speci+c assets.

c. Wills and will subs should be "iewed not as irreconcilable opposites butrather as complementary components of an increasingly "aried and comple-system of deathtime transfers.

i. Will S transfer property at death) will sub S 2lifetime arrangement3ii. Will S easy to classify because of formalities) will sub S easy to classify

because they usually e-hibit some other 2alternati"e formality3 suchas a re"ocable trust instrument or boilerplate G designation for+nancial assets.

d. Wills and will subs operate side by side.

WHY THE ADVENT O) WILL SU0STITUTES.- DUTY O) LOYALTY-

in6uiry3 rule by ma,ing transactions in"ol"ing trust property entered into by atrustee ma,ing transactions in"ol"ing trust property entered into by a trustee forthe trustees own personal account "oidable without further proof. (uchtransactions are irrebuttably presumed to be a/ected by a conict betweenpersonal and +duciary interest. It is immaterial whether the trustee acts in goodfaith or pays a fair consideration.

a. 7ourt 'uthori>ationtrustee can as, the appropriate court for authori>ationto purchase property from a trust or to engage in some other transactionthat breaches the duty of loyalty.

UTC F>.- DUTY O) LOYALTY

?..


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trustee or a person that owns a signi+cant interest in the trustee has an interest thatmighta/ect the trustees best 0udgment.Co((ent to UTC F>.-%his rule is less se"ere with respect to transactions in"ol"ing trust property entered intowith persons who ha"e close business or personal ties with the trustee. Knder subsection.- D$t/ o% Lo/a#t/-?


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c. 5ro"iding reports and accountings is a 2best practice3 and protects trusteebecause (*@ begin to run once Gs ha"e information about the trust.

d. 7lass &otes:i. % must present info in goof faith and Gs best interest in mind e"en if

it might get % in trouble.ii. 5erils with presenting too much or too little information:

1. 'ccounting must be presented in a 2meaningful3 way. G can loo,

at a few pages and understand e"erything that is material.!. Determine presentation based on G If G is a 7* present a lot

more info than if G is 1L year old college ,id. %a,e Gssophistication le"el into account.

iii. Formal demand for accounting is the last thing you want to do if youare attorney for G. 's trustees attorney you should ad"ise sendingregular accounting.

II. %he Kniform %rust 7odea. P 1# incorporates the 7@ rule in paragraph

instrument)


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b. Duty o are Duty to manage trust property and to administer thetrust "ith 8reasona%le care, s(ill, and caution.

II. Duties to 5rotect the 5ropertya. Duty to pay property attention to the trust and to treat the property of the

trust in a way that protects the property for the Gs.b. For e-ample: duty to collect and protect trust property


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i. oals:

b. !ang%ein, The )niorm $rudent n&estor Act and the Future o Trustn&esting.

I. *@D8(%'&D'8D(*F58KD&%I&E(%I&1. Ksed to be a restricted list of presumpti"ely proper trust

in"estments li,e go"ernment bonds and well4secured +rstmortgages. (toc, was later added with "arious other court orlegislature4appro"ed corporate issues.

!. 5rudent Man 8ule: trustees should 2obser"e how men ofprudence ? manage their own a/airs not in regard tospeculation but in regard to the permanent disposition of theirfunds considering the probable income as well as the probablysafety of the capital to be in"ested.3

a. 5rudence S reasonableness) similar to 2reasonable man

rule.3b. Main idea was to a"oid 2speculation.3

II. %HK&IF*8M58KD&%I&E(%*8'7%1. @egislature retained the prudence standard. 5rudent man has

become the prudent in"estor.!. 'ct ma,es # great changes:

a. 'ct articulates a greatly augmented duty to di"ersify trustin"estments.

b. In place of old preoccupation with a"oiding speculation the'ct substitutes a re6uirement of sensiti"ity to the ris,tolerance of the particular trust directing trustee to in"est

for 2ris, and return ob0ecti"es reasonably suited to thetrust.3

c. 'ct re"erses the much critici>ed nondelegation rule offormer law and actually encourages trustees to delegatein"estment responsibilities to professionals.

c. Interest Di"idends 8ents and 7apital ainsPre%ator/ Note to t"e UPIA- Obe't o% t"e Uni%or( Pr$dent In1etor A't-K5I' ma,es B fundamental alterations in the former criteria for prudent in"esting. 'll areto be found in the 8.#d of %rusts: 5rudent In"estor 8ule.

1= %he standard of prudence is applied to any in"estment as part of the total portfoliorather than to indi"idual in"estments. 25ortfolio3 embraces all the trusts assets.

!= %he tradeo/ in all in"esting between ris, and return is identi+ed as the +duciaryscentral consideration.

#= 'll categoric restrictions on types of in"estments ha"e been abrogated) the trusteecan in"est in anything that plays an appropriate role in achie"ing the ris,returnob0ecti"es of the trust and that meets other re6uirements of prudent in"esting.

$= %he long familiar re6uirement that +duciaries di"ersify their in"estments has beenintegrated into the de+nition of prudent in"esting.

B= %he much critici>ed former rule of trust law forbidding the trustee to delegatein"estment management functions has been re"ersed. Delegation is nowpermitted sub0ect to safeguards.


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d. 5rudent In"estor 8ulei. 8e6uires that a trustee act as prudent in"estor and a reminds trustee

that the prudent in"estor rule is a default rule.ii. Knder rule trustee must use 2reasonable care s,ill and caution3 in

ma,ing in"estment decisions. E1er/ tr$t i $ni$eiii. (tandard of prudence is ob0ecti"e standard not sub0ecti"etrustee

should ma,e decisions that other similarly situated trustees wouldma,e. 28easonable person.3

UNIFORM PRUDENT INVESTOR ACT

SECTION 1. PRUDENT INVESTOR RUE.

0a1 E;ce(t as !therise (r!$ided in s"secti!n 01, a tr"stee h! in$ests and ana&es tr"st assets!es a d"t# t! the ene%iciaries !% the tr"st t! c!(l# ith the (r"dent in$est!r r"le set %!rth inthis 3Act9.01 The (r"dent in$est!r r"le, a de%a"lt r"le, a# e e;(anded, restricted, eliinated, !r!therise altered # the (r!$isi!ns !% a tr"st. A tr"stee is n!t liale t! a ene%iciar# t! the e;tentthat the tr"stee acted in reas!nale reliance !n the (r!$isi!ns !% the tr"st.

e. (tandard of 7are) 5ortfolio (trategy) 8is, and 8eturn *b0ecti"es) (pecial(,ills 4 P!

i. P ! pro"ides list of factors trustee should consider including factorsrelated to the trust as well as general economic factors. %rustee shouldma,e decisions with entire portfolio in mind and shouldnt ma,e themon asset4by4asset basis.

SECTION !. STANDARD OF CARE" PORTFOIO STRATE#$" RIS% AND RETURN

O&'ECTIVES.

0a1 A tr"stee shall in$est and ana&e tr"st assets as a (r"dent in$est!r !"ld, #

c!nsiderin& the ("r(!ses, ters, distri"ti!n re/"ireents, and !ther circ"stances !% the tr"st.In satis%#in& this standard, the tr"stee shall e;ercise reas!nale care, s)ill, and ca"ti!n.

01 A tr"stees in$estent and ana&eent decisi!ns res(ectin& indi$id"al assets "st ee$al"ated n!t in is!lati!n "t in the c!nte;t !% the tr"st (!rt%!li! as a h!le and as a (art !% an

!$erall in$estent strate ha$in& ris) and ret"rn !ecti$es reas!nal# s"ited t! the tr"st.0c1 A!n& circ"stances that a tr"stee shall c!nsider in in$estin& and ana&in& tr"st

assets are s"ch !% the %!ll!in& as are rele$ant t! the tr"st !r its ene%iciaries*01 &eneral ec!n!ic c!nditi!ns+

021 the (!ssile e%%ect !% in%lati!n !r de%lati!n+

0:1 the e;(ected ta; c!nse/"ences !% in$estent decisi!ns !r strate&ies+ 0@1 the r!le thateach in$estent !r c!"rse !% acti!n (la#s ithin the

!$erall tr"st (!rt%!li!, hich a# incl"de %inancial assets, interests in cl!sel# heldenter(rises, tan&ile and intan&ile (ers!nal (r!(ert#, and real (r!(ert#+01 the e;(ected t!tal ret"rn %r! inc!e and the a((reciati!n !% ca(ital+ 01 !therres!"rces !% the ene%iciaries+

01 needs %!r li/"idit#, re&"larit# !% inc!e, and (reser$ati!n !r a((reciati!n !%ca(ital+ and0G1 an assets s(ecial relati!nshi( !r s(ecial $al"e, i% an#, t! the ("r(!ses !% thetr"st !r t! !ne !r !re !% the ene%iciaries.

0d1 A tr"stee shall a)e a reas!nale e%%!rt t! $eri%# %acts rele$ant t! the in$estent andana&eent !% tr"st assets.0e1 A tr"stee a# in$est in an# )ind !% (r!(ert# !r t#(e !% in$estent c!nsistent iththe standards !% this 3Act9.


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0%1 A tr"stee h! has s(ecial s)ills !r e;(ertise, !r is naed tr"stee in reliance "(!nthe tr"stees re(resentati!n that the tr"stee has s(ecial s)ills !r e;(ertise, has a d"t# t!"se th!se s(ecial s)ills !r e;(ertise. S(e)*a+ S,*++s.

f. Di"ersi+cationSECTION 3. DIVERSIFICATION.

A tr"stee shall di$ersi%# the in$estents !% the tr"st "nless the tr"stee reas!nal# deterines that,

eca"se !% s(ecial circ"stances, the ("r(!ses !% the tr"st are etter ser$ed ith!"t di$ersi%#in&.

g. 7ostsi. Duty to incur only costs that are 2appropriate and reasonable3 for the

trust. 7omment describes the pro"ision as a direction to 2minimi>ecosts.3

SECTION 4- COSTS-In in"esting and managing trust assets a trustee may only incur costs that areappropriate and reasonable in relation to the assets the purposes of the trust andthe s,ills of the trustee.

h. &ot Gy Hindsighti. % must ma,e decisions based on the information a"ailable at the time

the decision is made. % has duty to in"estigate the truth of info relatingto the in"estments and must be diligent in see,ing info but !i## notbe $d8ed b/ t"e $''e : or #a'7 o% $''e : o% in1et(ent-Decisions will &*% be 0udged in hindsight.

SECTION F- REVIEWING COMPLIANCE-7ompliance with the prudent in"estor rule is determined in light of the facts andcircumstances e-isting at the time of a trustees decision or action and not byhindsight.

i. Delegationi. % cannot 2turn things o"er3 to in"estment ad"isor but must continue to

monitor wor, done on behalf of trust.ii. 8ules go"erning delegation balance potential bene+ts to trust of

appropriate delegation with ris,s of o"erbroad delegation.iii. 7omment: 2If the % delegates e/ecti"ely the Gs obtain the ad"antage

of the agents speciali>ed in"estment s,ills or whate"er otherattributes induced % to delegate. Gut if % delegates to an incompetentthe delegation can wor, harm upon the Gs.3

SECTION - DELEGATION O) INVESTMENT AND MANAGEMENT )UNCTIONS-


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0:1 shall adinister a tr"st !r estate in acc!rdance ith this 3Act9 i% the ters !% the tr"st !r the ill d!n!t c!ntain a di%%erent (r!$isi!n !r d! n!t &i$e the %id"ciar# a discreti!nar# (!er !% adinistrati!n+and0@1 shall add a recei(t !r char&e a dis"rseent t! (rinci(al t! the e;tent that the ters !% the tr"st andthis 3Act9 d! n!t (r!$ide a r"le %!r all!catin& the recei(t !r dis"rseent t! !r eteen (rinci(al andinc!e.

01 3A9 %id"ciar# shall adinister a tr"st !r estate i(artiall#, ased !n hat is %air and reas!nale t! all !% the

ene%iciaries, e;ce(t t! the e;tent that the ters !% the tr"st !r the ill clearl# ani%est an intenti!n that the%id"ciar# shall !r a# %a$!r !ne !r !re !% the ene%iciaries. A deterinati!n in acc!rdance ith this 3Act9 is(res"ed t! e %air and reas!nale t! all !% the ene%iciaries.

SECTION 14. TRUSTEE/S PO0ER TO AD'UST.

0a1 A tr"stee a# ad"st eteen (rinci(al and inc!e t! the e;tent the tr"stee c!nsiders necessar# i% the tr"steein$ests and ana&es tr"st assets as a (r"dent in$est!r, the ters !% the tr"st descrie the a!"nt that a# !r"st e distri"ted t! a ene%iciar# # re%errin& t! the tr"sts inc!e, and the tr"stee deterines, a%ter a((l#in&the r"les in Secti!n L:0a1, that the tr"stee is "nale t! c!(l# ith Secti!n L:01.01 In decidin& hether and t! hat e;tent t! e;ercise the (!er c!n%erred # s"secti!n 0a1, a tr"stee shallc!nsider all %act!rs rele$ant t! the tr"st and its ene%iciaries, incl"din& the %!ll!in& %act!rs t! the e;tent the#

are rele$ant*01 the nat"re, ("r(!se, and e;(ected d"rati!n !% the tr"st+021 the intent !% the settl!r+0:1 the identit# and circ"stances !% the ene%iciaries+0@1 the needs %!r li/"idit#, re&"larit# !% inc!e, and (reser$ati!n and a((reciati!n !% ca(ital+01 the assets held in the tr"st+ the e;tent t! hich the# c!nsist !% %inancial assets, interests in cl!sel#held enter(rises, tan&ile and intan&ile (ers!nal (r!(ert#, !r real (r!(ert#+ the e;tent t! hich an assetis "sed # a ene%iciar#+ and hether an asset as ("rchased # the tr"stee !r recei$ed %r! the settl!r+01 the net a!"nt all!cated t! inc!e "nder the !ther secti!ns !% this 3Act9 and the increase !r decreasein the $al"e !% the (rinci(al assets, hich the tr"stee a# estiate as t! assets %!r hich ar)et $al"esare n!t readil# a$ailale+

01 hether and t! hat e;tent the ters !% the tr"st &i$e the tr"stee the (!er t! in$ade (rinci(al !racc""late inc!e !r (r!hiit the tr"stee %r! in$adin& (rinci(al !r acc""latin& inc!e, and thee;tent t! hich the tr"stee has e;ercised a (!er %r! tie t! tie t! in$ade (rinci(al !r acc""lateinc!e+0G1 the act"al and antici(ated e%%ect !% ec!n!ic c!nditi!ns !n (rinci(al and inc!e and e%%ects !%in%lati!n and de%lati!n+ and01 the antici(ated ta; c!nse/"ences !% an ad"stent.

Coe2t

Pr(ose a2d S)o(e o Pro-*s*o2. The ("r(!se !% Secti!n L@ is t! enale a tr"stee t! select in$estents "sin&the standards !% a (r"dent in$est!r ith!"t ha$in& t! realie a (artic"lar (!rti!n !% the (!rt%!li!s t!tal ret"rn inthe %!r !% traditi!nal tr"st acc!"ntin& inc!e s"ch as interest, di$idends, and rents. Secti!n L@0a1 a"th!ries

a tr"stee t! a)e ad"stents eteen (rinci(al and inc!e i% three c!nditi!ns are et* 01 the tr"stee "st eana&in& the tr"st assets "nder the (r"dent in$est!r r"le+ 021 the ters !% the tr"st "st e;(ress the inc!eene%iciar#s distri"ti!n ri&hts in ters !% the ri&ht t! recei$e Hinc!e in the sense !% traditi!nal tr"stacc!"ntin& inc!e+ and 0:1 the tr"stee "st deterine, a%ter a((l#in& the r"les in Secti!n L:0a1, that he is"nale t! c!(l# ith Secti!n L:01.I(art*a+*t5 a2d (rod)t*-*t5 o *2)oe. The d"t# !% i(artialit# eteen inc!e and reainderene%iciaries is lin)ed t! the tr"stees d"t# t! a)e the (!rt%!li! (r!d"cti$e !% tr"st acc!"ntin& inc!ehene$er the distri"ti!n re/"ireents are e;(ressed in ters !% distri"tin& the tr"sts Hinc!e.Fa)tors to )o2s*der *2 exer)*s*26 t7e (oer to ad9st. Secti!n L@01 re/"ires a tr"stee t! c!nsider %act!rsrele$ant t! the tr"st and its ene%iciaries in decidin& hether and t! hat e;tent the (!er t! ad"st sh!"ld ee;ercised. . . . I% a tr"stee h! is !(eratin& "nder the (r"dent in$est!r r"le decides that the (!rt%!li! sh!"ld e


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c!(!sed !% %inancial assets h!se t!tal ret"rn ill res"lt (riaril# %r! ca(ital a((reciati!n rather thandi$idends, interest, and rents, the tr"stee can decide at the sae tie the e;tent t! hich an ad"stent %r!(rinci(al t! inc!e a# e necessar# "nder Secti!n L@. On the !ther hand, i% a tr"stee decides that the ris)and ret"rn !ecti$es %!r the tr"st are est achie$ed # a (!rt%!li! h!se t!tal ret"rn incl"des interest anddi$idend inc!e that is s"%%icient t! (r!$ide the inc!e ene%iciar# ith the ene%icial interest t! hich theene%iciar# is entitled "nder the ters !% the tr"st, the tr"stee can decide that it is "nnecessar# t! e;ercise the(!er t! ad"st. . . .

Exa(+es. The %!ll!in& e;a(les ill"strate the a((licati!n !% Secti!n L@*Exa(+e :1; 7 T is the s"ccess!r tr"stee !% a tr"st that (r!$ides inc!e t! A %!r li%e, reainder t! B. T hasrecei$ed %r! the (ri!r tr"stee a (!rt%!li! !% %inancial assets in$ested 2L in st!c)s and GL in !nds.F!ll!in& the (r"dent in$est!r r"le, T deterines that a strate !% in$estin& the (!rt%!li! L in st!c)s andL in !nds has ris) and ret"rn !ecti$es that are reas!nal# s"ited t! the tr"st, "t T als! deterines thatad!(tin& this a((r!ach ill ca"se the tr"st t! recei$e a saller a!"nt !% di$idend and interest inc!e. A%terc!nsiderin& the %act!rs in Secti!n L@01, T a# trans%er cash %r! (rinci(al t! inc!e t! the e;tent T c!nsidersit necessar# t! increase the a!"nt distri"ted t! the inc!e ene%iciar#.Exa(+e :!; 7 T is the tr"stee !% a tr"st that re/"ires the inc!e t! e (aid t! the settl!rs s!n C %!r li%ereainder t! Cs da"&hter D. In a (eri!d !% $er# hi&h in%lati!n, T ("rchases !nds that (a# d!"ledi&it interestand deterines that a (!rti!n !% the interest, hich is all!cated t! inc!e "nder Secti!n @L !% this Act, is a

ret"rn !% ca(ital. In c!nsiderati!n !% the l!ss !% $al"e !% (rinci(al d"e t! in%lati!n and !ther %act!rs that Tc!nsiders rele$ant, T a# trans%er (art !% the interest t! (rinci(al.

SECTION 41. C


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SECTION =1. DIS&URSEMENTS FROM INCOME. A tr"stee shall a)e the %!ll!in& dis"rseents

%r! inc!e . . . *

01 !nehal% !% the re&"lar c!(ensati!n !% the tr"stee and !% an# (ers!n (r!$idin& in$estent ad$is!r#!r c"st!dial ser$ices t! the tr"stee+021 !nehal% !% all e;(enses %!r acc!"ntin&s, "dicial (r!ceedin&s, !r !ther atters that in$!l$e !th theinc!e and reainder interests+0:1 all !% the !ther !rdinar# e;(enses inc"rred in c!nnecti!n ith the adinistrati!n, ana&eent, !r

(reser$ati!n !% tr"st (r!(ert# and the distri"ti!n !% inc!e, incl"din& interest, !rdinar# re(airsre&"larl# rec"rrin& ta;es assessed a&ainst (rinci(al, and e;(enses !% a (r!ceedin& !r !ther atter thatc!ncerns (riaril# the inc!e interest+ and0@1 rec"rrin& (rei"s !n ins"rance c!$erin& the l!ss !% a (rinci(al asset !r the l!ss !% inc!e %r! !r"se !% the asset.

SECTION =!. DIS&URSEMENTS FROM PRINCIPA.

0a1 A tr"stee shall a)e the %!ll!in& dis"rseents %r! (rinci(al*01 the reainin& !nehal% !% the dis"rseents descried in Secti!n L01 and 021+021 all !% the tr"stees c!(ensati!n calc"lated !n (rinci(al as a %ee %!r acce(tance, distri"ti!n, !rterinati!n, and dis"rseents ade t! (re(are (r!(ert# %!r sale+0:1 (a#ents !n the (rinci(al !% a tr"st det+0@1 e;(enses !% a (r!ceedin& that c!ncerns (riaril# (rinci(al, incl"din& a (r!ceedin& t! c!nstr"e thetr"st !r t! (r!tect the tr"st !r its (r!(ert#+01 (rei"s (aid !n a (!lic# !% ins"rance n!t descried in Secti!n L0@1 !% hich the tr"st is the!ner and ene%iciar#+01 estate, inheritance, and !ther trans%er ta;es, incl"din& (enalties, a((!rti!ned t! the tr"st+ and01 dis"rseents related t! en$ir!nental atters, incl"din& reclaati!n, assessin& en$ir!nentalc!nditi!ns, reed#in& and re!$in& en$ir!nental c!ntainati!n, !nit!rin& reedial acti$ities andthe release !% s"stances, (re$entin& %"t"re releases !% s"stances, c!llectin& a!"nts %r! (ers!nsliale !r (!tentiall# liale %!r the c!sts !% th!se acti$ities, (enalties i(!sed "nder en$ir!nental las!r re&"lati!ns and !ther (a#ents ade t! c!(l# ith th!se las !r re&"lati!ns, stat"t!r# !r c!!nla clais # third (arties, and de%endin& clais ased !n en$ir!nental atters.

SECTION ==. INCOME TA>ES.

0a1 A ta; re/"ired t! e (aid # a tr"stee ased !n recei(ts all!cated t! inc!e "st e (aid %r!inc!e.01 A ta; re/"ired t! e (aid # a tr"stee ased !n recei(ts all!cated t! (rinci(al "st e (aid %r!(rinci(al, e$en i% the ta; is called an inc!e ta; # the ta;in& a"th!rit#.

REMOVAL O) TRUSTEESNOTES6

8e6uires 2serious3 breach of trust. %rustee is re6uired to be a"erage so there willbe many minor breaches. P NJC


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o 7an be friendly remo"al 2- REMOVAL O) TRUSTEE-a= %he settlor a cotrustee or a G may re6uest the court to remo"e a trustee or a

trustee may be remo"ed by the court on its own initiati"e.b= %he court may remo"e a trustee if:


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RIGHTS O) 0ENE)ICIARIES AND CREDITORS IN TRUST PROPERTYMODI)ICATION AND TERMINATION O) TRUSTS

INTRODUCTION

DISTRI0UTION PROVISIONS : RIGHTS O) 0ENE)ICIARIESI. *"er"iew of Distribution 5ro"isions Gs rights in a trust depend on pro"isions

in the trust instrument) distribution pro"isions may be mandatory ordiscretionary.a. Mandatory 5ro"isions:

i. Direct the trustee to pay something to a G without e-ercisingdiscretion as to amount or timing. May a/ect present or futureinterests.

ii. -ample: 2I gi"e these assets to M in trust to pay income to ( for lifeand on (s death to pay the corpus to @.3 M cannot do more or less)she has no discretion with respect to distributions.

b. Discretionary 5ro"isions:

i. Direct the trustee to e-ercise some 0udgment in deciding what and howmuch to distribute when to distribute or to whom to distribute. %rustinstrument usually pro"ides guidance for trustee. (tandards may benarrow or broad speci+c or general ascertainable or nonascertainable.

1. (ome pro"ide mandatory distributions of both income andprincipal) some are entirely discretionary.

ii. -ample: 2I gi"e these assets to M in trust to pay all of the income to,ids in e6ual shares and so much of the principal to my ,ids as thetrustee in the trustees discretion determines is necessary for theirhealth and education.3 M has discretion only to distribute principal for,ids health and education.

c. (pray or (prin,le 5ro"isions:i. %erms may direct trustee to distribute income or principal among anumber of named Gs or to one or more of a class of Gs. Distributionsmay be discretionary or mandatory but trustee being able to 2spray3or 2sprin,le3 the property pursuant to terms of trust among "arious Gsma,es the power as to whom to distribute discretionary.

ii. -ample: 2%rustee shall distribute all of the income of the trust at least6uarterly to one or more of D and in such shares as the trusteedetermines to be in the best interests of these Gs.3 roup of Gs isnarrow and obligation to appoint all income is mandatory the standardis broad as to who should recei"e the income.

II. Interpreting Discretionary (tandards of Distribution

the +duciary dutiesincluding duties of prudence loyalty and impartiality will a/ect decisions thetrustees ma,e about distributions.a. 9udicial 8e"iew of %rustees -ercise of Discretion 8easonableness and

ood Faith:i. %he court will inter"ene only to pre"ent misinterpretation or abuse of

the discretion) in will not impose its own "iew of how a trustee shoulde-ercise discretion. 'buse of discretion S 2Ill ,now it when I see it3problem.

1. Must use standards of 2reasonableness3 and 2good faith.3


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ii. If trustee has discretion in how and when to ma,e distributions hemust ta,e action) trustee cannot 0ust refuse to anything or dole outmoney without gi"ing consideration to a "ariety of facts andcircumstances.

,- A## a 'o$rt !i## re$ire i t"at tr$tee (a7e a 'are%$##/'onidered de'iion one (ade in 8oo% %ait" and one t"ati reaonab#e 8i1en t"e ter( o% t"e tr$t- 5rocess in

ma,ing decision is important not result.iii- K%7 P 1$. Discretionary 5owers) %a- (a"ings.

,-


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#. 7onclusiona. %rustee must +rst consider the intent of the settlorto the

e-tent it can be determined from the trust document andany information about the relationship between settlor andG.

b. (upport usually means the Gs accustomed standard ofli"ing so la"ish "acations and fancy cars may be within the

standard.c. %rustee should consider needs of future Gs and the amount

of property in the trust relati"e to current Gs needs as wellas needs of future Gs.

ii. Ed$'ation: clearly co"ers education) may also co"er room and boardboo,s fees and other costs.

1. %echnical training as well as college or grad school are typicallyco"ered.

!. 8elated costs for education pri"ate primary school studyabroad music lessons sports instruction are less li,ely to "iewedas 2education3 unless speci+cally pro"ided for in the trust.

#. %rustee must consider not only the standard for distribution butalso other resources of G


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a. Issue: whether creditor can get a court to order the trustee to turn o"er thetrust property or pay distributions from the trust to the creditor instead of+rst ma,ing payment to G.

i. Doctrine of Deri"ati"e %itle creditor cannot ha"e more rights toproperty than owner


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CANget a court order attaching present or future mandatory distributions toor for the bene+t of the G. K%7 P BJ1.

i. 7ourt order can re6uire trustee to pay creditor directly rather thangarnish payments from G.

SECTION =1. RI#


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ii. Follow one of these # methods 8eason being people who loo, atdocuments ,now the intention

mortgage pledge or otherwise dispose of or encumber all or partof any trust estate established for his bene+t under thisagreement. &o part of such trust estate including income shallbe liable for the debts or obligations of any G or be sub0ect toattachment garnishment e-ecution creditors bill or other legalor e6uitable process.

ii. enerally a/ect both mandatory or discretionary standards. See K%7 PBJ#


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1 A ter !% a tr"st (r!$idin& that the interest !% a ene%iciar# is held s"ect t! a Hs(endthri%t tr"st, !r!rds !% siilar i(!rt, is s"%%icient t! restrain !th $!l"ntar# and in$!l"ntar# trans%er !% theene%iciar#s interest.

c1 A ene%iciar# a# n!t trans%er an interest in a tr"st in $i!lati!n !% a $alid s(endthri%t (r!$isi!n ande;ce(t as !therise (r!$ided in this 3article9, a credit!r !r assi&nee !% the ene%iciar# a# n!t reach theinterest !r a distri"ti!n # the tr"stee e%!re its recei(t # the ene%iciar#.

SECTION =3. E>CEPTIONS TO SPENDT


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021 the ters !% the tr"st a"th!riin& a distri"ti!n c!"(le lan&"a&e !% discreti!n ith lan&"a&e !%directi!n.

01 Whether !r n!t a tr"st c!ntains a s(endthri%t (r!$isi!n, a credit!r !r assi&nee !% a ene%iciar# a# reach aandat!r# distri"ti!n !% inc!e !r (rinci(al, incl"din& a distri"ti!n "(!n terinati!n !% the tr"st, i% thetr"stee has n!t ade the distri"ti!n t! the ene%iciar# ithin a reas!nale tie a%ter the desi&nated distri"ti!ndate.

SECTION =@. PERSONA O&I#ATIONS OF TRUSTEE. Tr"st (r!(ert# is n!t s"ect t! (ers!nal!li&ati!ns !% the tr"stee, e$en i% the tr"stee ec!es ins!l$ent !r an)r"(t.

e. -ceptions to (pendthrift 5rotection 2(uper 7reditors3i. (ome creditors claims do not arise "oluntarily common law of

numerous states has created e-ceptions to spendthrift rule for these.ii. -amples: 7hild trying to enforce court order for child support or

former spouse trying to enforce order for alimony.III. 7reditors of a Gene+ciary Who is 'lso a (ettlor

a. 8e"ocable %rustsb. Irre"ocable %rusts

i. Modi+cation by 7onsent of the Gs: If no material purpose of the trustwould be frustrated by its termination or modi+cation the Gs can agreeto a modi+cation if all of the Gs consent. "en if all the Gs do notconsent the court may authori>e modi+cation under certainconditions.

ii.c. 'sset 5rotection %rusts Foreign and Domestic 5roblem

MODI)ICATION AND TERMINATION O) TRUSTSI. 8e"ocable %rusts

a. 5ower 8etained by the (ettlor to Modify or 8e"o,ei. K%7 P CJ!. 8e"ocation or 'mendment of 8e"ocable %rust.

1.

method pro"ided in the terms is not e-pressly made

e-clusi"e by:i.


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re"o,e terms of the trust according to the means speci+ed in thetrust instrument.

!. CJ!occur by means other than the method pro"ided in the terms ofthe trust.

a. CJ!


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material purpose of the settlor. %his rule pre"ents modi+cation ofmany common pro"isions in trusts.

!. %he traditional common law "iew is that a spendthrift clause ispresumed to be a material purpose thus precluding modi+cationby Gs.

ii- Modi3'ation b/ Conent o% t"e 0ene3'iarieUTC B,,- MODI)ICATION OR TERMINATION O) NONCHARITA0LE IRREVOCA0LE

TRUST 0Y CONSENT-


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UTC B,B- MODI)ICATION OR TERMINATION O) UNECONOMIC TRUST- MODI)ICATION OR TERMINATION O) TRUST PROCEEDINGS )ORAPPROVAL OR DISAPPROVAL-


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i. For e-ample: a court can terminate a trust if all Gs agree and if thecourt determines 2that continuance of the trust is not necessary toachie"e any material purpose of the trust.3 P $11


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POWERS O) APPOINTMENT AND THE RULE AGAINST PERPETIUTIES

WHAT IS A POWER O) APPOINTMENTASCOUNT8 OF Be%!re e, the "ndersi&ned a"th!rit#, !n this da# (ers!nall# a((eared , and , )n!n t! e t! e the testat!r and the itnesses


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res(ecti$el#, h!se naes are s"scried t! the anne;ed !r %!re&!in& instr"ent in their res(ecti$eca(acities, and, all !% said (ers!ns ein& # e d"l# s!rn, the said , testat!r,declared t! e and t! the said itnesses in # (resence that said instr"ent is his last ill andtestaent, and that he had illin&l# ade and e;ec"ted it as his %ree act and deed+ and the saiditnesses, each !n his !ath stated t! e, in the (resence and hearin& !% the said testat!r, that the saidtestat!r had declared t! the that said instr"ent is his last ill and testaent, and that he e;ec"tedsae as s"ch and anted each !% the t! si&n it as a itness+ and "(!n their !aths each itness stated

%"rther that the# did si&n the sae as itnesses in the (resence !% the said testat!r and at his re/"est+that he as at that tie ei&hteen #ears !% a&e !r !$er 0!r ein& "nder s"ch a&e, as !r had een la%"ll#arried, !r as then a eer !% the ared %!rces !% the United States !r !% an a";iliar# there!% !r !%the Maritie Ser$ice1 and as !% s!"nd ind+ and that each !% said itnesses as then at least %!"rteen#ears !% a&e., Testat!r, Witness, WitnessWitness S"scried and s!rn t! e%!re e # the said , testat!r, and # the said and , itnesses, this da# !% A.D

.0SEA610Si&ned1 0O%%icial Ca(acit# !% O%%icer1

01 An a%%ida$it in %!r and c!ntent s"stantiall# as (r!$ided # S"secti!n 0a1 !% this secti!n is a Qsel%(r!$in& a%%ida$it.Q A ill ith a sel%(r!$in& a%%ida$it s"scried and s!rn t! # the testat!r anditnesses attached !r anne;ed t! the ill is a Qsel%(r!$ed ill.Q S"stantial c!(liance ith the %!r!% s"ch a%%ida$it shall s"%%ice t! ca"se the ill t! e sel%(r!$ed. F!r this ("r(!se, an a%%ida$it that iss"scried and ac)n!led&ed # the testat!r and s"scried and s!rn t! # the itnesses !"lds"%%ice as ein& in s"stantial c!(liance. A si&nat"re !n a sel%(r!$in& a%%ida$it is c!nsidered a

si&nat"re t! the ill i% necessar# t! (r!$e that the ill as si&ned # the testat!r !r itnesses, !r !th,"t in that case, the ill a# n!t e c!nsidered a sel%(r!$ed ill.0c1 A sel%(r!$ed ill a# e aditted t! (r!ate ith!"t the testi!n# !% an# s"scriin& itness, "t!therise it shall e treated n! di%%erentl# than a ill n!t sel%(r!$ed. In (artic"lar and ith!"t liitin& the&eneralit# !% the %!re&!in&, a sel%(r!$ed ill a# e c!ntested, !r re$!)ed !r aended # a c!dicil ine;actl# the sae %ashi!n as a ill n!t sel%(r!$ed.

I. Introduction:a. (tatutory formalities include that the will be in writing be signed by % and

attested by ! or # witnessesb. Will formalities ser"e four functions:

i. "identiary function: assure permanent reliable e"idence of %s intente-ists)ii. 7hanneling function: assure %s intent is e-pressed in a way

understood by those who need to interpret it.iii. 8itual


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!. 'dult unless: member of armed forces marriedhas beenmarried

ii. P BL 8e6uisites of a Will:1. Writing doesnt ha"e to be in nglish) cant be "ideotaped!. (igned in person or by another person by %s direction in his

presence#. &ot re6uired to be signed in a particular place. -pect it to be at

the bottom.$. Writing de+ned in o"t 7ode P #11.JJB.

II. %he Writing 8e6uirementa. 7ourts prefer paper writings but the writing re6uirement has been broadly

construed to include a 2medium that allows the mar,ings to be detected.3b. -amples: piece of wood dirty window of a car after accident.

#o-/t Code Se). 311.=. #ENERA DEFINITIONS.The %!ll!in& de%initi!ns a((l# "nless the stat"te !r c!nte;t in hich the !rd !r (hrase is "sed re/"iresa di%%erent de%initi!n*01 QSi&nedQ incl"des an# s#!l e;ec"ted !r ad!(ted # a (ers!n ith (resent intenti!n t! a"thenticatea ritin&. NOT ON RE5IEW

III. %he (ignature 8e6uirementa. Where to (ign

i. 'll state statutes and the K57 re6uire that the % sign the will.ii. Ealid signature S %s act of writing name with intent to adopt the

document as her own constitutes "alid signature.1. Gest Form S %s handwritten name in freestanding form at the

end of the document


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0d1 In this secti!n, Qdisailit#Q eans a (h#sical i(airent that i(edes the ailit# t! si&n !r a)e aar) !n a d!c"ent. NOT ON RE5IEW

b. How to (igni. Gest "idence that % intends doc to be will is a full name on signature

line. 7ourts ha"e recogni>ed that %s may use other means to indicatethat they ha"e intent to ma,e this doc their will.

1. 2subscribe3 means to sign below. % can sign anywhere butWI%&(( must subscribe sign at bottom of the will.

ii. K57 and 8est. says % may sign name or ma,e a cross or a mar, li,e an2Y3 or use a term of relationship li,e 2Dad.3 %hese wor, if done withthe intent of adopting the doc as the T&s will.

c. Who 7an (igni. If % is physically unable to sign e"en with help of someone else

guiding his hand K57 allows for someone else to sign but pro"idescertain safeguard against fraud:

1. 5erson must be in the range of %s senses such as hearing: thesigning doesnt ha"e to be in %s line of sight.

!. Hat+eld gi"es classroom e-ample if he can see them


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iii. 7lass &ote: historical image! boys would ha"e their heads smashedtogether when witnessing will so they would remember it.

1. 8ole of Witness: to be able to come to court and testify that hewas of sound mind e"erything loo,ed +ne no gun to %s headetc.

!. % can ha"e pro-y signatures !itnee 'annot "a1e pro&/i8nat$re-

#. %s can sign with a mar, witness MK(% sign their own name.$. %s need not sign at the end of the will witnesses must subscribe.

b. Who May Ge a Witnessi. Gasically any competent person. %he signing of the will by an

interested witness does not in"alidate the will or any pro"ision of it.1. Witnesses should &*% be Gs to the will. If someone has a

+nancial interest in the will there is incenti"e to lie.ii. Must be o"er the age of 1$ years under P BL.


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1. It would be diAcult to pro"e if the rule was otherwise: Do notha"e to ha"e timestamp the signatures. 9ust need to be sure thatonce the e-ecution begins no one comes in the room and no onelea"es the room until e"erything is signed.

iii. 7lass &otes: (I& I& %( 7*&(7I*K( 58(&7)


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(%8'IH% from P BL. If witnesses sign there is no need for them tocome to court. It is a bit of a nuisance because you ha"e to +nd anotary ed Willi. K57 pro"ides that a will can be "alid if % ac,nowledges before notary

e"en if there are not ! witnesses. Di/erent than (5' because this rule

subs the notary for the other ! witnesses and actually "alidates the wilitself.

h. 5utting the Formalities Into 5racticei. 'ohns, Will 9ecution eremonies: Securing a lients !ast

Wishes


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b. athering(eating of 5articipants attorney % !disinterested witnesses notary public) no family members.

c. eneral Intro-planations: all parties should beintroduced) attorney should e-plain how ceremony willproceed and signi+cance and general purpose of ceremony.&o 0o,es during ceremony.

d. Zuestions to %: &otary administers oath to %. %s

testamentary intent and mental capacity should beestablished by as,ing him 6uestions demonstrating that %understands the transaction comprehends generally thenature and e-tent of property to be disposed ofremembers who are the natural ob0ects of his bounty andunderstands nature and e/ect of the desired disposition.

e. -ecution by %: will should be comprised of same paperand stapled. % should signinitial each page) read aloud thetestimonium clause) +ll in date and sign at the end.

f. 'ttestation by Witnesses: notary should administer oath towitnesses) witnesses signinitial each page) sign and write

addresses ne-t to names in attestation clause. 8ead aloudclause and write under clause designated phrase. *therwitness does same.

g. &otary 8ecords: notary should complete 0urat and record in0ournal.

h. 'nnounce nd of -ecution: attorney announces will ise-ecuted

i. 7onclusion: % instructed as to safe,eeping of will4- SPECIALSTEPSI)CONTESTISANTICIPATED6

a. 5rior to ceremony as, about %s meds and history ofmental issues

b. 'rrangements for "ideotaping madeD* &*% D* %HI(Rc. T of witnesses should be increased and carefully chosend. 'ttorney should as, additional 6uestions of % during

ceremonye. 'fter e-ecution % and witnesses should e-ecute (5'f. 5rior wills that demonstrate consistent desired plan of

distribution should be sa"ed. Inconsistent prior wills shouldbe destroyed.

HOLOGRAPHIC WILLSI. Introduction

a. (tate statutes usually re6uire two witnesses to "alidate a will. Howe"eran e-ception to this rule is the holographic will.

b. If a will or a material portion of the will is written in the testatorshandwriting then the will may be "alidated without any witnesses as aholographic will.

c. K57 P !4BJ!


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a. In %s handwriting signed by % no witnesses re6uired for "alidity GK%you can ha"e holographic will with witnesses self4pro"ing aAda"it etc.

b. '@@ other re6uirements must be met. %he *&@[ thing being holographicmeans is that witnesses are not re6uired for "alidity.

i. Must ha"e testamentary intention capacity etc. %he testamentaryintention could be ambiguous because it doesnt say 2will3 at thetop or follow the usual format.

c. Historically E8[%HI& had to be in %s handwriting.i. (urplusage Doctrine: e-tra words are o,. 2(t. 'nthonys Hotel3 on

stationary was deemed o,.d. Why dispense with witnesses

i. Zuantity of e"idence it is much easier to authenticate


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i. If the %s intention is really clear some states will allow substantialcompliance. %Y'( D*( &*%.

ii. K57 has similar statute 2harmless error3as long as % intendeddocument to be his will then the court will enforce it as such.

UPC .=@>.JbK. HOLOGRAPHIC WILLS- +ot on eview' will that does not comply with subsection

i. Whether and when the attorney might ha"e a duty to contact a clientabout changes in the law that a/ect estate plan if attorney ,eeps thewill he drafted.

b. Drafting 'ttorneys as Fiduciaries 2Its gi"ing yourself a 0ob.3i. %raditional 8ule: atty may not see, appoint as a +duciary though may

accept if as,ed. 'rguably conict of interest because it will generatefees not only for acting as attorney for the estate but also for acting as58. 8is, that lawyer458 will retain himself as attorney rather than


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e-ercising independent 0udgment. ood form drafting attorneysshould a"oid naming themsel"es as e-ecutors.

ii. When is this o, 5resumption is that you should not do this but o, ifdone without inuence to % no improper solicitation 5@K( informedconsent and no other conict issues.

iii. % must be properly informed: in writing in plain nglish info aboutwhat e-ecutor does) anyone can be e-ecutor


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i". (%I@@?. 9ust dont do it. 7lients can pay fees not gi"e gifts.ACTEC COMMENTARY ON MRPC ,-F

1ifts to #awyer. M857 1. generally prohibits lawyer from soliciting a substantialgift from a client including a testamentary gift or preparing for client aninstrument that gi"es lawyer or person related to lawyer a substantial gift. %hesubstantiality of a gift is determined by reference both to the si>e of the clientsestate and to the si-e of the estate of the designated recipient.

e. 8epresenting Multiple 7lientsi. 3usbands and WivesC an estate planning attorney must always be

aware of conicts inherent in representing husbands and wi"es sincerep of one may a/ect ability to rep the other. 7omplications comedown to conict of interest theme.

. 5otential for conict:a. 'ssets the other doesnt ,now about and wants to gi"e to

someone else) bills the other doesnt ,now about) childrenthe other doesnt ,now about) bfgf the other doesnt ,nowabout.

b. *ne is planning to get di"orced and the other does not,now

c. Di/erence in desires about what to do with the propertyd. Fact that there is con+dential information from one client

9. (eparate 8ep Di/ @awyer: I only represent the one that ma,es U


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c. We ha"e been tal,ing husbands and wi"es but these ruleson rep apply to any combination of multiple clients.Motherson etc.

d. %@@ %HM I& W8I%I& what 0oint rep means and that theyha"e chosen to use this form of representation.

ACTECT COMMENTARY ON MRPC ,-4

Foint or Separate epresentation. ' lawyer usually reps multiple clients 0ointly.

Howe"er rep may be separate. May also rep other related clients separately withrespect to related matters. (uch representations should be underta,e withinformed consent of each client con+rmed in writing. Writing may be contained inengagement letter that co"ers other sub0ects as well.

ii. >eneciary and Testator. 'ttorneys are often as,ed by someone other than potential % to

draft a will for the %. While it is not unethical attorneys must beaware of the potential conicts.

9. @awyer must e-ercise particular care if e-isting client as,s lawyerto prepare willtrust for another person that will bene+t the

client especially if client is paying the cost of the ser"ices.ACTEC COMMENTARY ON MRPC ,-4

If repping both e-isting client and new client would create ris, of rep being materiallylimited rep can only be underta,en as permitted under M857 1.Ned by % to recei"ethe will.

b. When client or former client dies the lawyer who has retained the will has aduty to produce it within a reasonable time.

i. Gusiness 5ractice ,eep the will so that they will be hired to represente-ecutor. %his is why it is a little suspicious could be conict ofinterest.

1. 'lso fear of losing doc


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c. 7an do this as long as you ma,e it perfectly clear in writing that you ha"ethe will you dont ha"e to be hired


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ii. 5urpose is to ha"e the document tossed outiii. 7onse6uences: if there is a pre"ious will that will is controlling now if

contest is successful) if there was no will then the property passesunder intestacy statutes

III. Drafting (oftware Mista,es and the Knauthori>ed 5ractice of @awa. 5roblems for people who use the programs. Issue for these %s is the potential

mista,es non4lawyers may unwittingly ma,e. %a- issues are HK under

2forms.3b. Zuestions about unauthori>ed practice of law state bars and plainti/s in

class action suits are pursuing software producers and internet sites understatutes that prohibit unauthori>ed practice of law

i. -ample: unauthori>ed practice because pro"iding legal docs withoutade6uate atty super"ision


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INTERPRETING THE WILL

WHAT CONSTITUTES THE WILLed. %here may be se"eral pieces of paper that ma,e up

the will.b. Doctrines of integrationthen $ 7orners with incorporation by reference

and acts of independent signi+cancestatutory pro"isionsII. Integration

a. ' probate court presented with a will must ensure that the doc beingprobated consists of the pages that were present at the e-ecution ceremonywhich % intended to be par of the will.

b. Doctrine of Integration: process of recogni>ing "arious pages or docs as asingle will. If the pages of the will are fastened together an inference arisesthat the % intended them all to be part of one doc. % doesnt ha"e to signe"ery page.

c. %o help courts attorney should draft the will with the pages and linesnumbered use one font type and si>e and carry sentences from one page tothe ne-t so it is clear they were drafted at the same time. (taple doc % andwitnesses should initial and date each page.

d. 7lass Hypo: !J page will) small tal,) lots of docs being signed


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ii. 7lients want to be able to do this because they want to be able tochange their minds without consulting lawyer. Ue *Po$r o1er+intead pours o"er to trust) if pour o"er isnt operati"e or trust hasbeen re"o,ed then will incorporates terms of trust. Grings instrumentbac, to life.

iii. K57 P !4B1J must be in e-istence at time will is e-ecuted) nothingmay be added.

UPC .=@,>- INCORPORATION 0Y RE)ERENCE-' writing in e-istence when a will is e-ecuted may be incorporated by reference ifthe language of the will manifests this intent and describes the writing suAcientlyto permit its identi+cation.

IE. 8epublication by 7odicila. %s often e-ecute codicils


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b. 7lass notes: signi+cant to the will but signi+cance is independent to the willsomehow.

i. -ample: 2I gi"e U to my children.3 %hen 1J years later % has anotherchild.

ii. -ample: put tape on things you want from &ana. %hese are &*%things of independent signi+cance these are done so &anasintentions are carried out. /oing this solely to mae gifts at death.

iii. -ample: 7ar and ban, account T1!#$BC to G if he sur"i"es me but ifnot to my sister @. Knder the doctrine a court may declare thispro"ision "alid because Gs sur"i"al


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b. 5atent 'mbiguity: one that appears on the face of the will itself. -ample: 2Ilea"e all of my property as follows ^ to ' ^ to G and ^ to 7.3 Did % ma,emista,e and forget to lea"e the last ^ to someone or mean to say 1# to 'G and 7 !ourt can tell there is problem -ust by looing at the will.0mbiguous because of things within the E corners.

c. @atent 'mbiguity: a pro"ision that is not apparent upon reading the will butrather becomes apparent when the pro"isions are applied. -ample: 2I lea"e

U1J, to 9ohn (mith.3 % ,new ! 9ohn (miths "ery well and it is not clear whichone he meant. The court does not now until they loo for Fohn Smith thatthere is a problem.

i. 7ourts historically would consider latent ambiguities with e-trinsice"idence. %hese ambiguities are only noticed when we considere-trinsic e"idence so dont stop there loo, at until ambiguity isresol"ed.

III. 8esol"ing 'mbiguities %he Modern Eiewa. Modern rule focuses on the substance rather than the form of the ambiguity.

&o distinction between latent and patent) if ambiguous all rele"ant e-trinsice"idence is used to resol"e.

b. 8est. #d P 1J.!: in see,ing to determine the donors intention all rele"ante"idence whether direct or circumstantial may be considered including thete-t of the donati"e doc and rele"ant e-trinsic e"idence.

i. -trinsic "idence time to which e"idence relates primary focus ison %s intention at time of e-ecution but post4e-ecution e"ents cansometimes be rele"ant in determining donors intention. -ample: poste-ecution statements of % can relate to donors intention at time ofe-ecution. 'dditionally if donati"e doc was ambiguous when e-ecutedpost4e-ecution e"idence of intent may be considered in resol"ingambiguity if they shed light on donors intent at time of e-ecution or onwhat donors intent would probably then ha"e been had ambiguity

been recogni>ed or subse6uent e"ent anticipated.c. 7ourts impose constraints on considering such e"idence if will is not

ambiguous +rst 6uestion is whether there is an ambiguity with regard tointent in the rst place.

IE. -trinsic "idence and Mista,e 8eformation of Willsa. 8estatement and K57 support the "iew that reformation for mista,e should

be allowed. 8e6uire clear and con"incing e"idence. &*% 44 a mista,e isntreally an ambiguity.

b. %e-as does &*% allow mista,es to be +-ed. %he lawyer should ha"e beenmore careful) remedy shouldnt be reformation of the will the remedy is tosue the lawyer.

c. Drafting lawyers li,e when the court +-es mista,es) down side is that youha"e to go in and admit your mista,e. Mitigates damages though.

d. %e-as: G cannot sue drafting lawyer for malpractice because no one haspri"ity with lawyer lawyers client is D'D. %herefore no remedy for Gs.%he e-ecutor howe"er can sue if '@@ property went down in "alue.

INTERPRETING THE MEANING O) A WILL USING THE RULES O) CONSTRUCTIONI. 7lassi+cation of De"ises

a. 7lassi+cation matters because certain doctrines li,e ademption apply onlyto speci+c de"ices) also important in doctrine of abatement.


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REST- ?D O) PROP6 WILLS OTHER DONATIVE TRANS)ERS @-,-CLASSI)ICATION O) DEVISES-

De"ises are classi+ed as special general demonstrati"e or residuary:?- ANTILAPSE DECEASED DEVISEE CLASS GI)TS-


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would ha"e been entitled had all of them sur"i"ed the % passes to thesur"i"ing de"isees and the sur"i"ing descendants of the deceasedde"isees. ach sur"i"ing de"isee ta,es the share to which he would ha"ebeen entitled had the deceased de"isees sur"i"ed the %. ach deceasedde"isees sur"i"ing descendants who are substituted for the deceasedde"isee ta,e by representation the share to which the deceased de"iseewould ha"e been entitled had the deceased de"isee sur"i"ed the %. For

the purposes of this paragraph 2deceased de"isee3 means a classmember who failed to sur"i"e the % and left one or more sur"i"ingdescendants.

c. will.&*%: $ elements must be met in order for the antilapse statute P !4CJ# to apply:

%he intended G must predecease the % or be deemed to ha"e predeceased %

%he intended G must lea"e li"ing descendants

%he intended G must be a family member de+ned as the %s grandparents adescendant of the grandparents or the %s stepchild) the reach of the statute is"ery inclusi"e co"ering almost all relati"es who would recei"e property if the %died intestate.

%he will must neither pro"ide for an alternati"e gift


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ii. 'demption by e-tinction on#/ app#ie to pe'i3' de1ieand not togeneral or residuary de"ises.

iii. %wo theories:1. Identity theory: ma0ority and historical approach) you identify

property on date will is e-ecuted. If you cant +nd property nogift.

!. Intention theory: K57: property is gone what would % want @oo,

at all facts and circumstances to determine what % would want."en under K57 the default rule is the Identity %heory though)

#. K57 P !4CJC adopts intention theory but only in C limitedsituations

disposition or otherwise the % did not intend ademption of the de"ise.


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ation or any successor related or ac6uiringorgani>ation e-cluding any ac6uired by e-ercise of purchase options)ation ac6uired as a result of a mergerconsolidation reorgani>ation or other distribution by the organi>ation orany successor related or ac6uiring organi>ation) oration ac6uired as a result of a plan ofrein"estment.

4- NON E9ONERATION-' speci+c de"ise passes sub0ect to any mortgage interest e-isting at the date of

death without right of e-oneration regardless of a general directi"e in the will topay debts.

f. 'batementi. If % made be6uests to indi"iduals that cannot be fully satis+ed the

doctrine of abatement held probate court decide who gets what.Doctrine of 'batement speci+es which be6uests will be reduced oreliminated altogether and in what order it will be done.

ii. P #4LJ! doesnt apply if the will gi"es us a di/erent order% canpro"ide for order in the will.


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1. 8emember: must satisfy claims of creditors +rst so gi"ee"erything a U amount so that if we ha"e to sellanythinge"erything to pay o/ creditors this is the amount theestate has to pay such claims. If youre the G you wante"erything appraised @*W.

!. Also 2ote: when be6uest of stoc, says 2all my stoc, in Ycompany3 it is a speci+c be6uest. Ksually when you say 2my3 its

speci+c be6uest.UPC ?=>.- QDISTRI0UTION ORDER IN WHICH ASSETS APPROPRIATEDA0ATEMENT-

be6uest shares the ta- burden pro4rata.i. state ta-es


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$. %a- conse6uences: gi"e money to your wife it is ta- free) gi"emoney to your gf it is ta-able. Wife gets residuary will said tota,e ta-es out of reside not apportioned. (o the wife paid theta-es on gfs property. (tatute says that wife and charity recei"eestates o"er UBM ta- free.;

iii. K57 ma,es clear that 'pportionment is the default rule where % hasnot declared speci+cally that estate ta-es are to be paid in a di/erent

manner.III. 8ules of 7onstruction 'pplicable to Goth Wills and Will (ubs

a. Determining Deathi. Determining who sur"i"es whom is an essential component of deciding

who gets which assets in inheritance law. K57 P 141JN

1. Death occurs when an indi"idual is determined to be dead under theKniform Determination of Death 'ct; has sustained either


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&*%: under subsection e wealth

among other Gs) minimi>e ta-es) e"ade creditors.c. Di/erence is between *W&I& the property and gi"ing it away and &E8

*W&I& the property at all. *wning and assigning "s. disclaimer


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i. If you get a nasty piece of property then sign deed o"er to sisteryou did own it so you may ha"e liability. 7reditor claims go with it ta-conse6uences


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REVOING THE WILL AND WILL CONTESTS

INTRODUCTION*nce % has created a "alid will it will become e/ecti"e upon death unless re"o,ed orsuccessfully challenged. %he re6uirements to revoe are much less onerous than theformalities re6uired to create a "alid will.

REVOCATION 0Y SU0SEUENT INTSTRUMENT OR PHYSICAL ACTI. 7lass &otes: (e"eral ways to re"o,e a will.

a. 7ommon element to all: whether % had had intent to re"o,e will.b. Most ob"ious way is under K57 P !4BJN re"ocatory act so long as % intended

to destroy the WI@@ itself.i. 7an write 27'&7@@D3 all the way across especially across signature


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could be e-trinsic e"idence.#. Witnesses who signed the will can testify that he did in fact ha"e

a will. &ow we must pro"e the contents these witnesses wontQ&*W the contents.

$. Drafting lawyer could theoretically testify but he probably wontremember the will without seeing the copy to refresh memory.@awyer could loo, at +le for notes and copies of the will. Mayha"e letter to % summari>ing will.

B. Gurden is on proponent to pro"e will was not destroyed then topro"e contents. D*&% ha"e to pro"e how the will wasdestroyedlost.


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C. 'nyone else who read the will could come testify accountantetc.

ii. n re 9state o

a. ' few states still re"o,e the will in its entirety if the % marries but marriagewill generally not re"o,e the will if e"idence shoes that % did not intend thatmarriage re"o,e the will or that % e-ecuted the will contemplation ofmarriage.

II. 8e"ocation on Di"orcea. 8easonable inference is that di"orce should remo"e gifts to e- under the will

so di"orce re"o,es any gifts to the e- spouse. If the e-es still want to gi"e

each other stu/ they can e-ecute a new will.b. Di"orce I%(@F re"o,es the gifts default pro"ision. 8ule applies to wills and

will substitutes li,e re"ocable trusts. It re"o,es be6uests to former spousesand con"erts interest in 0ointly held property to a tenancy in common.

UPC .=F>B- REVOCATION O) PRO0ATE AND NON=PRO0ATE TRANS)ERS 0YDIVORCE NO REVOCATION 0Y OTHER CHANGES O) CIRCUMSTANCES-

?.


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b. K57 P !4J# re"o,es a be6uest if the ,illing was 2felonious and intentional.38ule applies only to ,illings that could be prosecuted as felonies and thatin"ol"e the element of intent. If the ,iller is con"icted of a felonious andintentional ,illing then the con"iction after all right to appeal has beene-hausted will cause the application of the re"ocation pro"isions.

c. E1en i% t"e 7i##er i not 'on1i'tedor if the con"iction is not +nal aninterested person ?- E))ECT O) HOMICIDE ON INTESTATE SUCCESSION WILLS TRUSTS;OINT ASSETS LI)E INSURANCE AND 0ENE)ICIARY DESIGNATIONS-

?.


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community property with the right of sur"i"orship; transforming the interests ofthe decedent and ,iller into e6ual tenancies in common.

?.


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ii. W! is actually a codicil and in !JJB % tears up W!


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i. %he ne-us between the re"ocation of the old will


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c. Holding: no argument or e"idence on issue of %s intent) no indication thatmista,e occurred) e"idence produced by the will contestants is not suAcientto raise a genuine issue of material fact on the issue of whether %s will wase-ecuted as a result of undue inuence) no proof of fraud.

III. Improper -ecution proponent of the will has the burden of presenting aproperly e-ecuted document. If will appears to be regular on its face i.e. if it is inwriting and all re6uisite signatures of % and witnesses e-ist then it will be deemed

properly e-ecuted. 7hallenger has burden of establishing that the re6uisite legalre6uirements and formalities were not complied with.

IE. %estamentary 7apacity eneral 7apacity and Insane Delusionallegations ofthis typepresume testamentary capacity.

!. Issue: whether the probate court correctly applied the insanedelusion and !unningham elements tests

#. Holding: 5robate court thoroughly considered all of the e"idencepresented by the parties and concluded that $. 8easoning:a. !unningham%est: mental capacity to ma,e a will re6uires

that:


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,nows the e-tent of his property)


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0a1 A d!nati$e trans%er is in$alid t! the e;tent that it as (r!c"red # "nd"e in%l"ence, d"ress, !r %ra"d.01 A d!nati$e trans%er is (r!c"red # "nd"e in%l"ence i% the r!n&d!er e;erted s"ch in%l"ence !$er thed!n!r that it !$ercae the d!n!r's %ree ill and ca"sed the d!n!r t! a)e a d!nati$e trans%er that thed!n!r !"ld n!t !therise ha$e ade.0c1 A d!nati$e trans%er is (r!c"red # d"ress i% the r!n&d!er threatened t! (er%!r !r did (er%!r ar!n&%"l act that c!erced the d!n!r int! a)in& a d!nati$e trans%er that the d!n!r !"ld n!t !theriseha$e ade.

0d1 A d!nati$e trans%er is (r!c"red # %ra"d i% the r!n&d!er )n!in&l# !r rec)lessl# ade a %alsere(resentati!n t! the d!n!r a!"t a aterial %act that as intended t! and did lead the d!n!r t! a)e ad!nati$e trans%er that the d!n!r !"ld n!t !therise ha$e ade.

EIII. 7lass &otesa. 8emember no one ,nows Y'7%@[ what they own


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(r!tected (ers!n lac)ed the re/"isite ca(acit#, shi%tin& the "rden !% (r!!% t! the (r!(!nent t! sh! that the(r!tected (ers!n (!ssessed the re/"isite ca(acit# hen ta)in& the acti

wills and trusts spring 2012

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