Wills
Outline—Jenkins
Fall 2003
I.
INTRODUCTION.
A.
50 question MC exam, only covers TX law.
B.
2 Methods of transfer @ death.
1.
By
Will—Testate succession.
a)
Person indicates how to distribute their
possessions @ death (plan of
distribution).
b)
You can write your own w/out a law license.
2.
By
Statute (no will)—Intestate.
a)
Person dies w/out a will, or the will is
defective.
b)
Probate code; declares how property is to be
divided based on family relationships, etc.
3.
Trust is the other way to transfer, covered
later.
C.
Requirements for the validity of a will.
1. Testamentary intent: the transfer takes place at death. “I leave all to Jack” has no testamentary intent b/c we don’t know when the transfer takes place. Need to add “upon my death” to make intent. Adding “Will” also gives proper intent.
2. Testamentary capacity: testator must know:
a) Kind & character of his property.
b) Natural objects of his bounty. Those we would naturally look to that would normally take his property.
(1) A girlfriend can be the natural object of his bounty b/c of a relationship.
(2) You don’t have to leave prop to your children.
c) Effect of this act of making a will.
3.
Must
have ability to form a plan for disposition of her estate.
D. Formal requirements for execution of a will.
1. Execution: actual signing of the will; makes it valid.
2. 2 witnesses if typewritten.
3. T/or’s signature: required in every juris.
4. Competence of witnesses: age, saw the signature applied, etc.
5. Witnesses sign in T’s presence.
6. No publication required.
E. Holographic will—wholly in the handwriting of the t/or; must also be signed by t/or.
1. Problem: what is wholly?
2. Doesn’t require witnesses; must prove handwriting/sig. in ct.
F. Codicil: amendment/addition to existing will.
1. Must be executed in the same way a will in the same format would’ve been executed.
G. Revocation: getting out of an executed will.
1. Requires intent to revoke.
2. Subsequent will revokes the previous.
3. Written revocation of the current will.
H. Probate: validation of the will by a ct.
I. Administration of estate: management of the estate after the will is probated.
1. Administrator (appointed by ct):
a) Gets property together;
b) Pays debts;
c) Distributes what’s left.
2. Executor (named in the will).
3. Independent executorship (TX): acts free of ct. control.
4. Dependent admin: acts under ct supervision; expensive b/c everything requires ct’s permission.
II. POWER TO TRANSMIT PROPERTY AT DEATH.
A. Passing of interests.
1. At death, property passes to the beneficiary, w/ a will or w/out.
2. The heirs exist, but haven’t been determined; the property vests by operation of law—no gaps in seisin.
3. The prop vests subject to the admin of the estate—pay debts, litigate/probate the will, collect prop, etc.
4. Prop is willed by a living person, does a dead person have any rights over it?
5. Dead hand—ability to control prop after death.
B. Right of control of prop.
1. Irving v. Day (p. 3): nothing in the const. prohibits a state to limit, condition or even abolish the power of testamentary disposition over prop w/in its juris.
2. Hodel v. Irving (p. 3): Indian land got fractionated after Congress allowed land allotments. Congress then made a law that allowed the land to escheat back to the tribe if the land earned its owner less than $100/yr; the owner couldn’t devise by will or intestacy. Issue: is this a const. taking, requiring just compensation; is the right to pass it on a prop right? RULE: the right to pass on prop goes into the bundle of sticks; a const. right.
a) Getting rid of any of the rights in the bundle of sticks is an unconst. taking.
b) Factors in determining a regulatory taking:
(1) Economic impact of the reg;
(2) Its interference w/ reas. investment-backed expectations;
(a) Diff. b/t bought land & inherited land = you worked to buy the land; probably no real difference.
(3) The character of the gov’t action.
(a) It should distribute the benefits/burdens broadly.
(b) It’s a taking b/c the statute totally abrogates the right to pass on prop.
3. Is there a const. right to receive prop at death? NO—not a right to receive just b/c you’re a testator’s child.
a) State legislatures are given the power to change the intestacy laws.
C. Taxes & Transmission of Wealth.
1. See syllabus for schedule of amts.
2. Some opinions are that gov’t needs to distribute wealth evenly, & should then tax estates at a higher rate.
D.
In
Terrorem Clause
1. Example - “A beneficiary shall forfeit his bequest under the will if he contests the validity of the will”
2. Also called the “no contest clause”
3. Rule is valid in Texas but will not apply to an attack on the will that is based on reasonable grounds and instituted in good faith.
4.
Shapira v. Union National Bank: Restriction in will requires son to
have married a Jewish girl with two Jewish parents; Π argued that the restriction was an
unconstitutional restriction on the right to marry.
a)
This argument fails because a 14th
amendment violation requires state action; this restriction is action by the
individual testator.
b)
However, to enforce a condition of a will,
parties go to state courtàis this sufficient state action for a 14th
amendment violation? Courts have
repeatedly held that court enforcement is not sufficient to constitute state
action.
c)
The Π’s
right is not constitutionally protected – there is no constitutional right to
inherit property.
5.
Pennsylvania case – testator left
money in trust to a university for the education expenses of poor white male
orphans; this was state action because it was enforced by a state agency (the
university).
a)
This does not mean that there cannot be a
college fund for a particular group – it must be managed by a private
organization rather than a state agency
6.
Restatement
(p. 32)—if the restriction does not unreasonably restrict the
transferee’s opportunity to marry, it may induce a person to marry a member of
a particular faith.
a)
Ex: “if D marries, X, who is Jewish” – overly
restrictive.
b)
Condition that D marries a Jewish girl would be
invalid if the testator knew that D was engaged to another girl who is Catholic
(this is disruptive of the family).
c)
This same logic would apply if the son was gay
and the testator knew that (this is effectively a total restriction).
7.
Residuary
– Destruction.
a)
What happens if the testator requests that
property be destroyed upon their death?
b)
Public policy – society’s total wealth will be
maximized by permitting private individuals to decide the best use of their
property; there is an assumption that each individual will make rational choices
to maximize her wealth, and the loss that would follow poor decisions will act
as a deterrent.
c)
The court may ignore this kind of condition in a
will because it violates public policy – waste of property harms society.
d)
The court will:
(1)
Weigh the social utility of destruction against
loss to society of valuable resource.
(2)
Weigh motivation of testator.
e)
When you are alive, you bear the burden of
whether you are going to waste your assets, because you will bear the resultant
economic burden; after your death, others must bear the burden associated with
waste, and you are not in as good of a position to make such a decision.
f)
Notes discussion other kinds of property that
have been requested to be destroyed – Justice Black destroyed his notes in his
lifetime; what about musicians and authors whose works have literary value? In
some of those situations, instructions to destroy have been ignored.
E.
Probate Process.
1.
Probate means that the court validates a will;
court issues and order admitting the will to probate.
2.
The process has to do with administering the
estate after the court has decided that the will is good.
3.
TPC §72
a)
Probate or administration of the estate of a
living person is void.
b)
Probate of one believed to be dead proved by
circumstantial evidence is allowed.
(1)
Ex:
two pilots – one saw the other eject
and the parachute did not open; this is sufficient circumstantial evidence to
prove death.
c)
4 year statute of limitations (unless proof that
party was not in default-muniment of title only).
d)
Muniment of title – if the testator put
the will in a mason jar and buried it, forgetting to tell someone where it was,
after 5 years it is found – if the person can show that they were not in
default (not at fault) for failing to present the will, the will can still be
probated as a muniment of title (this can be done as many as 30 years later).
e)
If everything is distributed and the will is
found, a party must swear that there is no will and a diligent search has been
made; even so, if it involves real property, the property can be subsequently
divided according to the will (this would be unlikely if cash were involved
because it is probably gone).
4.
TPC § 81(b)—Probate
of a Lost Will.
a)
Presumption: the testator destroyed it.
b)
In order to probate a lost will, you must
overcome the presumption and must show:
(1)
Reason it cannot be produced;
(2) Contents, as far as known;
(3)
Date of execution & executor, as far as
known;
(4)
Name, age, martial status, rela. to decedent, of
each devisee, as far as known.
(5)
To have this information you would have to have read
the will or have seen a copy of it.
c)
interested person – one who has a pecuniary
interest (see definition section of the code).
5.
Non-probate property – Property passing under an
instrument other than a will which became effective before death.
a)
Ex:
(1)
joint tenancy property – right of receivership;
this does not pass under the will, it passes under contract law.
(2)
life insurance.
(3)
contracts with payable-on-death provisions.
(4)
interests in trust – governed by trust law.
6.
Probate property—Property that passes under a
will or by intestacy.
F. Personal representatives = persons who probate the will; executor [named in will] or administrator [ct appointed].
1.
Duties of the rep:
a) inventory & collect the assets of the decedent;
b) manage the assets during administration;
c) to receive & pay claims of creditors & tax collectors;
d) to distribute what’s left.
2. When intestacy occurs, it is not bequeathed, it descends to the recipient.
G. Functions of probate.
1. Provides E of transfer of title to new owners;
a) G/tor = the testator, g/tee = beneficiary under the will.
2. Protects creditors by requiring payment of debts;
a) Property can still be foreclosed upon after the owner dies.
b) Creditors must still be paid.
3. Distributes the decedent’s prop to those intended to get it.
4. Proof for probate of a will TPC § 88:
a) Person is deceased;
b) 4 yrs have not elapsed since date of death;
(1) Exception: person shows good faith
c) Court has jurisdiction [ct has smj over the estate] & venue [person died in that county];
d) Person applying for “letters” is qualified.
(1) Letters testamentary: ct approves that you are named as executor & allows you to do things on behalf of the estate.
(2) Prop collected must be kept separate from the assets of the executor.
5. TPC 83(b)—when another will is brought after 1 is probated.
a) If 1st application has not been heard: ct will hear both & decide which to admit to probate, or void both & consider decedent intestate.
b) If 1st will has been admitted to probate: ct will determine whether the 1st probate should set aside & admit the 2nd will, or void both & consider decedent intestate.
6. TPC 84(b)—proving a holographic will:
a) 2 witnesses required for the will to be valid;
b) Have 2 disinterested witnesses testify that they recognize his handwriting.
H. Probate Venue—TPC 6
1. First sought where the decedent was domiciled at death (primary or domiciliary juris).
2. See Joe Jackson problem, p. 42.
I. Independent executor vs. Dependent administrator.
1. Executor has control of the estate & it’s under his judgment.
2. Dependent administrator needs ct approval for all decisions he makes regarding the estate (can be requested in will).
J. Estate planning problems (p. 50).
1. Remember that life insurance payouts go through the estate for purposes of the estate tax.
2. But, the owner of the policy should not be the deceased—if another owns it, it does not go through the estate for tax purposes.
K. Professional Responsibility.
1. Simpson v. Calivas (p. 59): P sued lawyer for K & neg b/c he said the will drafted did not reflect the intent of the testator. Will gave wife the “homestead;” son claims that it’s only the house, not the 100 acres & family business also on the land. Ct admitted some extrinsic E of intent, would not admit notes taken by the lawyer during consultation that said “house to wife & rem to son, land to son.” So, will not drafted according to intent of daddy. Son had to buy out mom’s LE for $400K.
a) Duty to beneficiaries (TORT): the attorney owes a duty to both the testator & the intended beneficiaries.
b) RULE: foreseeability of harm allows the beneficiary of a will to recover from a lawyer in the K b/t the lawyer & testator. Beneficiary must be a 3rd party beneficiary (almost a no-brainer, except in TX & other states).
c) RULE: a neg action can be maintained if ben shows duty & foreseeability.
d)
TX
RULE: beneficiaries can’t sue
the lawyer for neg will drafting. BUT,
the estate can sue the lawyer for poor estate planning.
2.
Hotz v. Minyard (p. 66): daddy had 2 wills, 1 daughter didn’t
know about. She got screwed by the 2nd
will. She went to lawyer’s office to ask
questions about the will (he was also her attny); he showed her the 2nd will
& did not disclose the 1st. Issue: did the attny owe her a duty to show her the
actual will? YES—she was his client
also.
a)
Beneficiary has no right to see the will w/out
the testator’s permission.
b)
Even though she has a prop right, it’s not
vested—“mere expectancy.”
c)
Lawyer’s rep of both daddy & daughter became
improper (adverse) when the lawyer showed her the wrong will.
d)
Her dgs are probably what she was represented to
receive & what she did receive.
3.
Barcelo v. Elliot (p. 65): D was preparing estate documents for P, P
didn’t want her son to know that she was cutting him out of the trust. P gave specific instructions that the son was
not to know. Trust went unfounded &
cost them taxes, bens sued lawyer. RULE: no privity gives ben.’s no remedy.
III. INTESTACY—STATUTES OF DESCENT & DISTRIBUTION.
A. Intro.
1. Intestacy is the default position, for those w/out a will.
2. Reasons why people make wills:
a) Birth of a child;
b) Death of someone they know who didn’t have a will;
c) Going on a trip.
B. § 45—Community Prop/Disposition of whole community.
1. Protects the share of the surviving spouse.
2. Putitative spouse: one who reas believes that the person she married was free to marry (actually divorced). If the belief was reas, they can get a cut of the estate.
C. Simultaneous Death.
1. A person succeeds to the prop of an intestate or testate decedent only if the person survives the decedent for an instant of time.
2. Survival is necessary to take.
3. Uniform Simultaneous Death Act: when there is no sufficient E of the order of deaths, the ben is deemed to have predeceased the benefactor.
4. Ex: A’s will leaves everything to B, remainder to C. A & B are both killed in the same car wreck. B’s will gives everything to X. If there is no E of order of death, everything goes to C. If there is E that B survives A, X gets both A’s & B’s prop.
5. TX RULE § 47: in order to “survive” the testator, the beneficiary must survive for 120 hours.
a) This can be altered by will, longer or shorter—47(e).
b) But, if it’s altered, it applies to anything that causes death (not necessarily simultaneous).
c) Does not apply if the result would be escheat.
d) Applies to joint owners, insurance beneficiaries.
6. Janus v. Tarasewicz (p. 78): Janus’ died from taking poisoned Tylenol. Husband’s will allowed that $100K ins. went to wife, with Tarasewicz as contingent ben. So, if wife died 1st, mom gets the $; if she survives him, the $ goes to his estate. Issue: did wife survive husband? YES—husband was undoubtedly brain dead when he arrived at hospital, wife showed signs of life for 2 days.
a) In TX, mom would get the $ b/c wife did not survive husband by 120 hours.
b) There are still questions as to when death actually takes place.
D. Shares of Descendants.
1. Per capita: by the head.
2. Per stirpes: by the root.
3. Disinheritance—“my son John gets nothing.”
a) Not allowed at CL, you could get around it by willing all your prop to others & leaving John out in the cold.
E. Shares of Ancestors & Collaterals.
1. Ancestors & collaterals take (after deducting spouse’s share) when the intestate dies w/out descendants.
2. Collateral kindred: all persons related by blood to intestate who aren’t descendants.
a) First-line collaterals: descendants of the decedent’s parents (other than decedent & his issue). Brothers & sisters of deceased.
b) Second-line collaterals: descendants of the decedent’s grandparents (other than decedent’s parents & their issue). Great aunts & uncles of deceased.
3. Order of taking:
a) When no descendant—to parents (after spouse).
b) When no spouse or parent—to collaterals.
c) When no spouse, descendant or parents—to brothers & sisters & their descendants. Nieces & nephews take by representation of their dead parents.
d) When no 1st-line collaterals, 2 choices (states are split):
(1)
Parentelic system: the intestate estate passes to grandparents
& their descendants, & if none to them, & if none to
great-grandparents & their descendants . . . until you find an heir.
(2)
Degree of relationship system: use table of consanguinity on p. 92.
4. TPC § 45—distribution of community prop.
a)
Spouse can only give away their ½ of the
Community.
5.
Real
prop distribution:
a)
Deceased is: married & no kids → all
to surviving spouse.
b)
Married w/ kids of surviving spouse → all
to surviving spouse.
c)
Married w/ kids (kids not kids of surviving
spouse) → ½ to surviving spouse (their ½ of community) & ½ to kids.
(1)
Ex: H has W1 (former) & W2 (current W), &
2 kids w/ each. He dies intestate, W2
keeps her ½; all kids then split his ½ (each gets 1/8).
6.
Other
prop is treated the same way.
F. TPC § 38—distribution of separate prop.
1.
Prop that is not community.
2.
Real
prop:
a)
Unmarried w/ kids → to kids equally per
stirpes.
b)
Unmarried w/out kids → ½ to MOM & ½ to
DAD (or brothers & sisters in place).
(1)
If DAD is dead, his share goes to deceased’s
brothers & sisters.
3.
Other
prop is treated the same way.
4. 38(d): Real estate.
a) Married w/ kids → 1/3 to W in LE, 2/3 to kids.
b) Married w/ no kids → ½ to W
5.
38(d):
Other prop.
a) Married w/ kids → same.
b) Married w/ no kids → all to surviving spouse.
G.
TPC §
43—Distribution per capita.
1. TX distributes per capita; disregard a level if all on that level are deceased. When you find a level w/ a living heir, split the estate by the head. If 1 person on that level is deceased, his descendants take that person’s share.
2. If they’re all on the same level w/ the level above all dead, divide it evenly among those on that level that are all alive.
3. See examples in syllabus.
H. TPC § 41(b)—Half-bloods.
1. Half blood = collateral kindred; the deceased’s rela to his siblings.
2. The whole blood gets twice the share of the half blood.
3. Ex: A is deceased, has 1 sister of half blood (S) & 2 brothers of whole blood (B,D). Then S gets 1/5, B & D each get 2/5.
I. Table of consanguinity—p. 92.
J. TPC § 67—Pretermitted child— a child born or adopted by testator after the execution of the will.
1. Presumption that this child takes the same share as the other child if not provided for in the will.
a) Ex: if the will provides that all kids get something & pretermitted child is left out of will, he will get the same share as the other kids.
b) E that testator provided for the pretermitted child could be life insurance, trust, etc.
2. Also, if the 4 kids are provided for to get nothing & the pretermitted child is not, pretermitted child would get an intestate share & the other 4 wouldn’t.
K. Transfers to children.
1. Meaning of “children.”
a)
Posthumous Children: where it is to a child’s advantage to be
treated as in being from the time of conception rather than from live birth,
the child will be so treated if born alive.
(1) Presumption that gestation is 280 days (rebuttable).
(2) Burden of proof is on child if gestation is longer.
b) Cts have held that adoption of adults to prevent a will contest is perfectly proper. TX also allows this.
(1) Comes up in same-sex relationships, to keep kids from contesting the will.
(2) Guy1 adopts Guy2 as his son, when parents contest the will they can’t b/c they have no standing to contest.
(3) Family Code prevents natural parents of adopted adults from taking by intestacy.
c) But, NY does not allow different sexes to adopt e/o for policy reasons.
2. Hall v. Vallandingham (p. 98): adopted kids in Maryland can’t inherit from their natural parents directly or through representation. Allowing this puts adopted kids in a better position than natural kids.
a) TX RULE: adopted kids can inherit from both natural & adoptive parents.
b) TPC § 40—adoptive child loses the right to inherit from his natural parents if the adoption decree severs the right to inherit from the natural parents.
3. Hagaman, 886 SW2d 398: will said that “bodily issue” would take; ct allowed that an adopted adult still could take. The intent of the legislature was to put adopted children in the same place as natural children.
4. Who is the parent of a child born by surrogate motherhood? Still evolving; 1 ct allowed that kid has 2 birth mothers (p. 103).
5. O’Neal v. Wilkes (p. 108): kid wanted to be claimed “virtually” adopted by couple that took care of kid (but never formally adopted her) for 20 yrs or so. Ct did not allow it, stating that adoption is a K that requires 6 elements:
(1) The parties are competent to K for the disposition of the child;
(2) An agreement b/t the natural & adoptive parents;
(3) Performance by the natural parents of the child by giving up custody;
(4) Performance by the child by living in the home of the adoptive parents (what?);
(5) Partial perf by the foster parents in taking the child in & treating it like it was their child; &
(6) Intestacy of the foster parent.
Ct found that the woman who gave the kid to the couple did not have the capacity to K for the adoption; she was not the natural parent or guardian.
a) Dissent: there should be an equitable “out” that allows for an adoption in cases like this to be founded on the performance & acts of those involved.
6. Hecht v. Superior Ct (p. 117): P (girlfriend) was impregnated by sperm left by decedent. Decedent’s will specifically gave P his sperm. Decedent’s kids challenge the will b/c they claim that P unduly influenced decedent b/c he committed suicide. Trial ct ordered the sperm destroyed;
a) Whether sperm is prop is important b/c: (1) probate cts only have juris over prop; (2) if it’s prop, it can be gifted.
b) Ct finds that the sperm is a pre-embryo, that the deceased has a prop right in.
c) Ct holds that: (1) PP does not prevent the artificial insemination of unmarried women, & (2) post-mortem artificial insemination is not against PP.
(1) Cal. law allows that if the insemination is done by a Dr., donor is not the father. If she does it herself, he is the father.
(2)
TX Fam.
Code allows that if the child is made by assisted means of reproduction,
the donor is not the father. Married
couples can agree to it by permission.
(3)
TPC 42 allows
that if a child is born by assisted conception & father agrees that he’s
the father.
d) Destroying the sperm is an unconst. taking of private prop.
e) Extraction of sperm from dead/comatose men—is the kid his child? Do parents have the right to get the sperm & have grandchildren.
L. Advancements.
1. The ability of a ben to get part of his inheritance b/f the testator dies.
2. If there’s no writing indicating that it’s an advancement, then it isn’t.
3. TPC § 44—requires that a contemporaneous writing declare that it’s an advancement.
M. Expectancies.
1. No living person has heirs—he has heirs apparent.
2. Heirs apparent have mere expectancies, which can’t be transferred.
N. Managing a Minor’s prop.
1. Guardian of the person—responsibility of the minor child’s custody & care. Guardian cannot manage the prop of the child. For that, you need either a:
a) Guardianship
b) Custodianship
c) Trusteeship
2. Parent needs a will to allow for:
a) Designating a guardian;
b) Dealing w/ the mgt of child’s prop.
O. Bars to Succession.
1. Homicide.
a) In re Estate of Mahoney (p. 141): slayer couldn’t get prop of her husband b/c she killed him. At the time of his death, his prop vested her by constructive trust. In equity, the prop would not allow her to profit from the killing.
(1) Constructive trust: legal fiction—trust imposed by law. “Nothing but the formula through which the conscience of equity finds expression.” Prop vests in the slayer & regards the slayer had predeceased the benefactor.
(2) Ct imposes the CT when there is intent of the slayer in the death.
b) Restatement approves the CT, but not when manslaughter is involved; no requisite intent.
2. TX requirements:
a) Intentional & felonious cause of death to the testator.
b) BoP is preponderance of the E (it’s a civil trial).
(1) Criminal acquittal does not mean there was no felonious intent (higher BoP in crim trial).
(2) Probate ct decides if there was a preponderance of E that the benefactor killed the slayer.
c) Applies to multiple party bank accts & ins policies—all survivorship designations.
3. Disclaimer.
a) Troy v. Hart (p. 151): attempt to rescind the disclaimer of Medicaid patient. Ct allowed the disclaimer, but thought he should pay for Medicaid during the period he held the assets b/c his inheritance made him ineligible for Medicaid. Ct holds the $ in a constructive trust for the possible repayment of Medicaid.
(1) Capacity is required to make a PoA.
b) TPC 37A—you can disclaim in whole/in part. You don’t disclaim in favor of anyone, it goes to the next person as designated by the will.
(1) Law looks at it like disclaimer predeceased the testator.
(2) RULE: if a disclaimer is made under a will or intestacy, it won’t be considered a fraudulent transfer.
(a) Dyer: no interest is transferred, b/c the disclaimer never possessed anything.
(3) Disclaimer must be done in writing w/in 9 mo. After, you can’t disclaim.
IV. WILLS: CAPACITY & CONTESTS.
A. TPC 57—Who may execute a will?
1. One who is over 18 (married or a member of the armed forces).
2. Of sound mind.
3. In re Strittmater (p. 159): schizo woman who left her prop to National Women’s Party; will not allowed to probate b/c she lacked mental capacity. The only proof was that she hated men; if she did, she must lack capacity.
a) Even if you show that she was insane b/c of her hatred for men, did this insanity cause the bequest?
b) Case seems a little screwy.
B. Reasons for requirement of Capacity.
1. A will should be given effect only if it represents the testator’s true desire.
2. An incapacitated person is not a “person” under the law.
3. Capacity protects the decedent’s family.
4. Protects society at large from irrational acts.
C.
Test for
Capacity.
1.
Testator
must have the ability to know:
a)
Nature
& extent of his/her prop;
b) Persons who are “natural objects of her bounty;”
(1) Persons likely to take under the will.
(2) Does not have to be a blood relative of any kind.
c)
The
disposition the testator is making;
d)
How these
elements relate to form an orderly plan for distribution.
e)
These only set the stage.
2.
Testator
must have mind & memory relevant to all the things AND must
understand the significance of the acts.
3.
Little isolated facts & idiosyncrasies do
not destroy capacity unless they
directly bear upon & have influenced the testamentary act. Wright,
p. 163.
4.
Just b/c someone is declared legally
incapacitated & put under a guardianship, they still may have enough
capacity to execute a will.
a)
But, be careful—get a ct order.
b)
Power to make a will takes lower level of
capacity than that required to make a K, etc.
c)
But, it takes more capacity to make a will than
to get married (go figure!!).
5.
It’s a
breach of pro res to make a will for an incapacitated person.
D.
Insane Delusion.
1.
Delusion—false conception of reality.
a)
Legal, not psychiatric concept.
2.
Insane Delusion—false conception of
reality to which testator adheres against all reason & E to the contrary.
a)
Testator may have the mental capacity to make a
will, but suffer from an insane delusion that influences 1 part of the will.
b)
If the delusion affects testamentary capacity,
it is insane.
(1)
If so, only that part of the will fails.
(2)
When a part fails, the gift falls into the
residuary part of the estate.
c)
MAJ
view: a delusion is insane even
if there is some factual basis for it if a rational person in the testator’s
situation could not have drawn the conclusion reached by the testator.
3.
In re Honigman (p. 166): guy left nothing in his will to his wife but
her statutory share. He thought she was
cheating on him & there was E showing the possibility. We look for a factual basis to show that he
was not suffering from an insane delusion & allow the will to stand.
a)
MIN
view: if a person persistently
believes supposed facts, which have no real existence except in his perverted
imagination & against all E & probability, & conducts himself,
however logically, upon the assumption of their existence, he is, so far as
they are concerned, under a morbid delusion; & a delusion in that sense is
insanity.
b)
MAJ
view adds the reas person test to this.
4.
TEST:
a)
There an
insane delusion; AND
b)
The will
is a product of the insane delusion.
c)
Contests using this usu. involve family members.
5.
Insane Delusion vs. Mistake.
a)
An insane delusion is a belief not
susceptible to correction by presenting the testator w/ E indicating the
falsity of the belief.
(1)
Cts usu. invalidate wills resulting from insane
delusion.
b)
A mistake is susceptible to correction if
the testator is told the truth.
(1)
Cts do not reform/invalidate wills b/c of
mistake.
(2)
Nothing you do can get it changed.
E.
Undue Influence.
1.
UI must result in coercion—to execute a will in
someone’s favor/to someone’s detriment.
2.
Elements: sets the stage for the TEST.
a)
Susceptibility of the testator;
(1)
Has to do w/ age & physical ability.
(2)
Age alone not a factor, it’s how you handle the
age.
b)
Opportunity;
c)
Disposition for personal benefit;
d)
Unnatural provision in the will;
(1)
Look if heirs were disregarded according to
intestacy statutes.
(2)
Can be overcome w/ E of reasons why the will was
structured this way.
3.
TEST: whether such control was exercised over the
mind of the testator as to overcome her free agency & free will & to
substitute the will of another so as to cause the testator to do what she would
not otherwise have done but for such control.
4.
Lipper v. Westlow (p. 177): P’s are grandchildren of testatrix’s 1st dead
husband, challenge being left out of will.
Issue is whether testator was unduly influenced in making the will.
a)
Problem = will written by son, who was a lawyer;
conflict of interest—avoid the appearance of impropriety. Confidential relationship.
b)
Problem = should have testator write down their
own reasons for leaving out the kids.
c)
Avoid factual recitations in the will; they may
be countered by E at a contest hearing.
Put it in writing other than the will; the will is a public
document. There is such a thing as
testamentary libel.
5.
TPC 58b
a)
Devise to an attny that prepares the will is void,
unless the testator is a family member (spouse, ascendant/descendant, related
w/in 3rd degree of consanguinity).
6.
In re Will of Moses (p. 188): Mrs. Moses shacked up w/ a lawyer 15 yrs
younger. Her will was written by another
attny; the young lawyer got all of her crap.
He probably was the natural object of her bounty b/c of their rela. Ct would not allow probate, based mostly on
the inappropriate rela b/t the 2. Age,
illness, addiction probably increases her susceptibility; but going to another
attny for the will, she manages a business, she kept re-working the will helps
refute it. But, you still have to find a
causal rela b/t the influence & the will.
a)
Attny should’ve asked who Holland was & his
rela to Moses. He should’ve
anticipated/prepared for a contest.
b)
Shell could’ve:
advised her to get a letter, adult adoption, give something to her
natural heirs, marriage, inter vivos trust (to herself for life, remainder to
him).
(1)
Trust allows the benefit of the trustee, you can
validate it by adding to it during her life.
c)
Why wouldn’t Shell want to do any of this? Maybe he was embarrassed to get into her
private life.
7.
Gaines v. Krawley (supp., TX): UI usu. proven by circumstantial E;
it’s often the main E available.
8.
In re Kaufmann’s Will (p. 193): guy left all of his stuff to his male love-monkey. He even left a letter stating what he wanted
to do. Still did not work; probate was
not allowed. Dissent said that the verdict rests upon suspicion &
moral judgment, not on facts & law.
a)
What might he have done? Set up a trust, inter vivos gifts, draft a
letter to the family, videotape the conferences/exectutions.
9.
Seward Johnson’s estate (p. 197): Johnson was 1 of the Johnson & Johnson
boys. He gradually gave his chick-friend
Basia more & more stuff, leaving out his children. Zagat, the attny who drafted the will, was
Basia’s friend. Trusts had been set up
for his kids & some stuff to Basia during his life.
a)
Is it a conflict to represent both H & W in
a will situation? Not usu., but it
becomes a conflict when their interests become adverse.
b)
Problem was that Zagat got herself too
personally tangled up in the will.
c)
If the drafting attny is a witness to be called
at trial, that attny can’t represent the estate.
F.
Fraud:
intent to deceive the testator & influence the testamentary gift.
1.
Fraud in the inducement: a person misrepresents facts, thereby causing
the testator to execute a will, to include particular provisions in the
wrongdoer’s favor.
a)
Ex: testator asks who his nephews are, nephew
answers “2” when there are actually 3.
The testator then makes the will out for 2 & the 3rd nephew
challenges it.
b)
Inducer has a const. trust imposed on him in
favor of the other 2.
c)
Fraudulently procured inheritance/bequest is
invalid only if the testator would not have left the inheritance or made the
bequest had the testator known the true facts.
2.
Fraud in the execution: when a person misrepresents the character or
contents of the instrument signed by the testator, which does not in fact carry
out the testator’s intent.
a)
Ex: testator can’t see/read & is deceived in
making out the will.
3.
Latham v. Father Divine (p. 215): widow executed will, leaving all of her stuff
to D. D prevented her from executing a
new will by killing her. Ct held that it
is also fraud to prevent someone from executing a new will so that they can
take under the current will. The
wrongdoer will then have a constructive trust imposed on him, in favor of the
intended beneficiaries. You must be able
to show who the intended beneficiaries are (easy in this case b/c they had the
new will). You can also go into the
intestacy statutes.
a)
A const. trust may also be imposed where no
fraud is involved but the ct thinks that unjust enrichment would result if the
person retained the prop.
b)
It is a tort to interfere w/ an expectancy.
4.
Action
for tortious interference is not a will contest.
a)
Challenger is trying to recover dgs.
5.
TX—See King v. Acker (supp.); requires
that the wrongdoer act willfully & maliciously. Cts also allow exemplary dgs in TX.
6.
TX—Neill v. Yett (supp.); tort has a 2-yr
SoL.
G.
TPC 10—Persons
entitled to Contest.
1.
Any
person interested in the estate may, at any time b/f any issue in any
proceeding is decided upon by the ct, file opposition to a will.
2.
TPC
3(r)—person interested means heirs, devisees, spouses, creditors, or any others
having a prop right in, or claim against, the estate being administered; and
anyone interested in the welfare of a minor/incompetent ward.
V.
FORMALITIES & FORMS.
A.
Execution.
1.
Requirements are strict b/c it’s easy to comply
w/ the statute. There is no partial
compliance allowance.
2.
A will that is improperly executed is invalid.
a)
You can’t be sued for improper execution b/c of
the privity barrier.
b)
The last resort is to execute by telephone.
3.
Reasons for formal execution:
a)
Ceremonial function—ct needs to be
convinced that the statements of the t/or were deliberately intended to
effectuate a transfer.
b)
Evidentiary function—gives reliable E to
the ct.
c)
Protective function—safeguards the
testator, at the time of the execution of the will against claims of undue
influence or other forms of imposition.
d)
Self-proving Affidavit: signed by testator, 2 witnesses &
notary. It’s prima facie E that the testator had capacity at the time the will
was executed.
(1)
So, BoP lies w/ the challenger unless the self-proving affidavit is not
executed.
4.
TPC
64–65. Oral wills (nuncupative) are
recognized in TX.
a)
Testator has to ask for witnesses.
b)
Must be made at the time of the last sickness of
testator.
5.
TPC
81(c). Requirements for probating oral
will = all the requirements of a written will, PLUS:
a)
The
substance of the testamentary words spoken.
b)
The names
& residences of the witnesses thereto.
6.
In re Groffman (p. 227): will executed incorrectly; witnesses did not
witness the testator’s signing the will & did not witness e/o signing
it. Wife challenges b/c she got life
estates only; she claims ineffective execution.
Statute required that witnesses witness the signing of the testator at
the same time he signs it. But, the
witnesses can sign 1 at a time, as long as the testator sees it. Testator had to acknowledge to both witnesses
at the same time that he signed the will.
7.
TPC
59. For a typewritten will.
a)
Would Groffman’s execution be valid in
TX? YES.
b)
Testator does not have to acknowledge that it’s
a will.
c)
The will does not have to be signed at the end,
sign it anywhere.
d)
Witnesses (2, credible) do not have to be
in e/o’s presence when they sign; they have to be in the testator’s
presence.
e)
Testator does not have to be in the
presence of the witnesses when he signs.
f)
Witnesses:
must be over 14 & disinterested.
g)
T/or can get someone to sign his name for him,
“by another person for him by his direction & in his presence.” T/or
must ask the person to sign.
h)
Cannot use a rubber stamp.
8.
“Presence” TESTS.
a)
Line of sight test: t/or does not have to actually see the
witness, sign but must be able to see them should the testator look.
b)
Conscious presence test (TX): the witness is in
the presence of the t/or if the t/or, through sight, hearing, or general
consciousness of events, comprehends that the witness is in the act of
signing.
(1)
Slight physical exertion to see the witness is
sufficient.
(2)
Being in another room is too far away. See Nicholas, supp.
c)
See notes on p. 233–35.
9.
Additions after the signature.
a)
TX—does
not require the t/or to sign at the end, it can be signed anywhere.
b)
All wills
must be in writing.
10.
Video/spoken wills.
a)
Not valid in TX b/c not a writing.
b)
Animated words in the video, a signature on the
label do not matter. It must be a writing & witnessed.
11.
Order of signing.
a)
TX—the
exact order is not critical, so long as the signing is part of “1
contemporaneous transaction.”
b)
TX—t/or
can sign by making an “X.”
B.
TPC
62. Execution by Interested Witness.
1.
Interested witness: a witness who is also a beneficiary under the
will they are witnessing.
2. TX “purging” statute: A bequest to subscribing witness shall not be void if the testimony proving the will is corroborated by ONE OR MORE DISINTERESTED & CREDIBLE PERSONS (not witnesses, could be notary, attny).
3.
TPC 61—if
no corroboration, & intestacy occurs, interested subscribing witness
takes—LESSER OF WILL OR INTESTATE SHARE.
a)
You can’t come out better if your gift is purged
by 62.
4. Does not invalidate the will, but the witness’s gift is purged.
5. Estate of Parsons (p. 236): Deceased had will execution witnessed by 3 persons: Nielson, Gower, & Warda. Nielson & Gower were beneficiaries under the will, Warda was not. Nielson got $100 under the will, disclaimed it 10 months later. Deceased’s heirs challenge the will, claiming it is invalid b/c not witnessed by 2 disinterested witnesses (there was only 1). RULE: subsequent disclaimer of an interested witness’ gift under a will does not then make them disinterested.
a)
A gift not taken by a legatee is LAPSE &
goes to the residuary & down by intestacy.
b)
TPC
37A—for purging statute, disclaimer relates back to the date of death.
C.
Executing a will.
1.
See p. 242 & will in syllabus.
2.
You become the custodian of the will & need
to keep it for the client.
a)
Do not make duplicate originals.
b)
Safeguarding a will: you need to let the client know where the
original is—w/ the client or w/ you.
c)
Typically, if a will is validly executed in
another juris., it’s valid in TX.
3.
In re Pavlinko’s Estate (p. 247): H & W each signed the will of the
other. W died, then H died & residuary
legatee tried to probate H’s will. Ct
wouldn’t allow it & made the will a nullity, too many changes were required
to make her will into his. Dissent was
probably right, he claimed the will should’ve been probated b/c the brother who
brought the will for probate was the residuary legatee in both wills & both
H & W were dead.
a)
In re Snide (p. 251): had the same facts
as Pavlinko,
but reversed the names & probated the will.
4.
In re Will of Ranney (p. 252): see brief.
T/or & witnesses signed the self-proving affidavit, but not the
attestation clause. Ct held the will
valid, allowed that they had substantially complied w/ the statute.
a)
Substantial
compliance: a functional rule
that cures the inequity caused by the harsh & relentless formalism of the
law of wills.
b)
No
substantial compliance in TX—the rules are simple enough.
5.
TPC
59(b)—signature on the self-proving affidavit is considered a signature on the
will. But, using this provision makes
the self-proving affidavit is void.
a)
So, you have to prove capacity in court using
the witnesses.
6.
Boren v. Boren—cts previously held
that the will & affidavit were 2 documents & the sig on one could not
be used for the other.
D.
Holographic Wills—written by the t/or’s hand
& signed by the t/or; no attesting witnesses are required.
1.
Ct is more likely to honor the t/or’s intent in
a holographic will than in a typewritten will.
You still must have the required
elements & the rules will still apply.
2.
TPC
60—must be wholly in the handwriting
of the t/or & signed by him [not at the foot—anywhere], no witnesses
are required. May be proved during
t/or’s life by attaching an affidavit by t/or saying that:
a)
It’s his
last will;
b)
He was at
least 18 when he executed it;
c)
He was of
sound mind;
d)
He has
not revoked it.
e)
No date
is required, but is recommended b/c it helps determine which is the later will.
3.
In re Estate of Johnson (p. 264): will denied probate as holographic b/c it was
a form will filled out in t/or’s handwriting.
RULE: form will filled out by t/or qualifies as a
holographic will only if the printed parts can be eliminated & the
handwritten part would still E testamentary intent of t/or. The “material provisions” must be in the
t/or’s handwriting. Here, the material
provisions were in the printed part. 2
witnesses would’ve made this will alright.
This is the typical way cts deal w/ a stationary-store will.
4.
See example
of “arrow” will & notes on p. 270.
5.
A letter of instructions to an attny on how t/or
wants the will made can’t be probated—cts find it a list of instructions.
a)
But, putting a phrase like “keep this in case a
will is not made” or something like this may allow it to be probated.
6.
Statutory form wills: form that essentially tracks the statute, so
it’s easier/more likely to be probated.
Must be signed & attested to as any other attny-made will.
7.
Kimmel’s Estate (p. 271): father sent letter to his sons on the
day he died stating what he wanted done w/ his prop. Sons admitted letter to probate &
intestate heirs contested. Issues: can this be probated? Is “Father” a proper signature? RULE: an informal document evidencing intent of a
conditional gift & an intent to execute may serve as a testamentary
document. “Father” was allowed b/c it
was intended as a complete signature to the particular character of document.
a)
Did t/or intend for that to be his signature on
this document at this time?
b)
Remember, no rubber stamps.
E.
Revocation of wills.
1.
Important b/c it effects the probatability of
the will. Let your client know b/c:
a)
They may want to change it later;
b)
They may do something to screw up a valid will.
c)
Remember the presumption of revocation when
trying to probate a lost will.
2.
Ways to revoke.
Begins with the intent &
capacity to revoke.
a)
By
subsequent writing with testamentary formalities; OR
b)
By physical
act such as destroying, obliterating, or burning the will.
c)
If a duly
executed will is not revoked in a manner permitted by statute, the will is
admitted to probate.
d)
Capacity: same as the capacity to create—prop you have,
natural objects of your bounty, result of your action.
3.
TPC 63—no
will in writing, & no clause thereof/devise therein, shall be revoked,
except:
a)
By a subsequent:
(1)
Will
[revokes the whole thing],
(2)
Codicil
[revokes a provision], or
(3)
declaration
in writing, executed w/ like formalities [not necessarily the exact same way],
or
(a)
Hypo: will #3 that revokes will #2 is not
valid. Then, will #2 is the will that
can be probated.
(b)
Hypo: you can revoke a typed will w/ a handwritten
declaration in writing executed w/ like formalities. Whatever
method you use is valid for that instrument of revocation.
b)
By the t/or:
(1)
destroying
or canceling the will, or
(2)
causing
it to be done in his presence.
(a)
T/or must have intent to destroy/cancel.
(b)
Be aware of the “in his presence” part.
(c)
Same test as for presence of witnesses.
4.
What is a valid revocation?
a)
A subsequent will revokes a previous will.
b)
If there is a valid will and the client
subsequently writes on paper, “I leave my car to X,” the will is not revoked,
the subsequent writing is a codicil.
5.
Problem p. 277 – REVIEW THESE PROBLEMS.
a)
(a) destruction of a codicil does not destroy a
will; however, destruction of a will destroys codicils.
b)
(b) no – see above rule.
6.
Harrison v. Bird: testator executed a will, the original was
kept by attorney, and a duplicate original was given to the beneficiary. Testator called her attorney and told him she
wanted to revoke her will, and the attorney tore it up in front of his legal
assistant (testator was not present; on the phone); he sent the pieces of the
will to the testator along with a letter saying that the will had been
revoked. When the testator died, the
letter was found but the pieces of the will were not; the other original was
submitted to probate.
a)
Duplicate original = there are two original
wills, both are properly executed; either can be admitted to probate.
b)
ISSUE:
is a duplicate will valid when the other original was revoked?
c)
RULE:
revocation by physical act requires that the will be torn up by the testator or
at the testator’s direction in her presence.
Telephonic presence is not sufficient for execution; it is likewise
insufficient for revocation
d)
RULE:
when you cannot find the will, there is a presumption of revocation that
arises.
e)
H: the beneficiary did not present sufficient
evidence to rebut the presumption of revocation, and therefore the testator was
deemed to have died intestate.
f)
If the pieces of the will had been found, the
pieces would have been reconstructed and submitted to probate (would the
attorney be liable for malpractice? Yes; everywhere but Texas because of the privity
bar).
g)
If she (the testator) gets the pieces in the
mail and then tears them up into 8 pieces (or throws them away), that would be
valid revocationàthe
presumption here is that she disposed of them, so she revoked the will herself
after he mailed it to her.
7.
TX:
In Texas, there is no partial revocation by physical act (you cannot physically
cut someone’s name out of the will and keep the rest as valid).
8.
Problem 2 (279) – if the will cannot
be found it can also be probated in Texas as a lost will under §81b; in order
to submit to probate as a lost will you must overcome the presumption of
revocation; the best evidence for this is a copy of the will or a duplicate
original (you must establish that the will was not revoked – he was just
talking about revocation, but the
testator told us it was in a safety deposit box; if someone else says that they
saw the testator destroy it, the presumption remains).
9.
Thompson v. Royall: testator executed a will; later
requested that the attorney come to her house to destroy the will. The attorney suggested that instead of
destroying it, she write “this will is revoked” on each page, and keep it for
when she wants to prepare a new will. The
attorney wrote the note on the will; the testator signed it (but there was no
proof as to her handwriting). The
testator died before executing another will. RULE: There was intent to revoke, but because the
written revocation was not in the testator’s handwriting it was not valid
(holographic revocation).
a)
This was not a valid holographic revocation
because the testator did not write it; if the judge had written that it was
null and void, signed by the testator, and there were two witnesses, it would
have been valid.
10.
TX -
Marks or lines across the written parts of the instrument with intent to revoke
is sufficient; the testator’s signature would not be required; the defacement
does not require the same formalities as declaration in writing.
11.
Problems,
284.
a)
Problem 3– what if there was a self-proving
affidavit revoking the will; one case found this was sufficient because the
affidavit can be considered a part of the will; Texas would likely follow this
decision, based on the decision that the signature on the s-p affidavit can be
considered signature on the will.
b)
Problem 4 – testator writes “canceled; M.
Kroll”; is this a valid revocation by physical act? No because she did not
deface the actual will; would this be a signature – the test is whether the
testator intended for this to be their signature.
c)
Problem 5 – testator writes void across a copy –
a copy would not be a valid will, and you cannot revoke something that was
never valid.
12.
Ashley v. Usher (supp.)
13.
Smith v. Smith (supp.)
14.
Lowery v. Saunders (supp.)
15.
Harris v. Strawbridge (supp.)
16.
Leatherwood v. Stephens (supp.)
17.
Stanley v. Henderson (supp.)
18.
Lewis v. White (supp.)
19.
Matter of Estate of Glover (supp.)
20.
Harrison v. Bird (p. 277):
21.
Thompson v. Royall (p. 280):
22.
Carter v. 1st United Methodist (p. 286):
23.
Estate of Alburn (p. 292):
24.
TPC 62—in
will covered by section 61, the gift to subscribing witness shall not be void
if his testimony proving the will is corroborated by 1 or more disinterested
& credible persons who testify that the testimony of the subscribing
witness is true & correct, & such subscribing witness shall not be
regarded as an incompetent/non-credible witness under section 59.
F.
Doctrine of Dependent Relative Revocation &
Revival.
1.
If the t/or purports to revoke his will upon a
mistaken assumption of law/fact, the revocation is ineffective if the t/or
would not have revoked his will had he known the truth. Ct can
disregard a revocation based on a mistake of law or fact.
2.
TX RULE: there is no revival of a revoked
will—EVER. Once the will is revoked,
nothing can be done. Also, no partial
revocation at all.
a)
Exception:
DRR.
b)
Ex: if you revoke will #1 by making will #2, you
can never bring will #1 back. DRR will
allow you to bring back will #2 if you revoke it by destruction, but you can never get will #1 back.
c)
The idea is that the most recent will is the
closest thing to the t/or’s intent; you can revive the most recent will b/c of tainted intent: t/or did not know the consequences of his
actions by revoking will #2 (he thought he could revive to will #1).
d)
In TX: if t/or destroys will #2 thinking he’s
reviving will #1, ct will revive will #2 under DRR.
3.
Similar
provisions—Ex:
a)
Will #1: $10K to A
Gold watch to B
House to C
$5K to D
$3K to E
Residuary to X
b)
Will #2: $15K
to A
Gold watch to B
House to C
Residuary to X
*These are probably similar enough to allow will #2 to be revived
4.
Carter v. United Methodist (p. 286): t/or made changes to will in handwritten
document which was kept w/ the will.
5.
Estate of Alburn (p. 292): 2 wills executed by t/or; she revokes #1 by
destroying it. Ct would not revive #1
(like TX), they allowed #2 to be revived b/c they were similar enough. Same DRR definition as 1. above.
a)
Ex: if #2 was never validly executed, will #1 is
not validly revoked—no DRR problem.
6.
Revocation
by operation of law (i.e., divorce).
a)
TX
RULE: a gift to a spouse who is now an
ex-spouse is void. Does not apply if t/or remarries divorced
spouse.
b)
What if gift is to “wife,” not named. If t/or remarries a different wife, the
provision still applies to the new wife.
This also applies to ins. proceeds & retirement benefits.
7.
TPC
69(a)—NO partial revocation by physical act in TX.
a)
If will
is not found, presumption of revocation by physical act.
8.
Problems,
p. 290.
1.(a) This is not a holographic codicil, b/c no signature. Argue that it is b/c there’re initials & the amt.; you’ll probably lose b/c material provisions not in the handwriting of the t/or. Handwriting must show testamentary intent on its own.
(b) Blake gets $1000. You can’t do anything about what he wrote on the will.
G.
Conditional Wills.
1.
Wills that contain clauses that take effect when
a certain condition occurs.
2.
Most are given effect b/c of the presumption
against intestacy.
3.
Putting “if only” into the clause makes it more
certain.
4.
RULE: cts presume the language of the condition
does not mean the will is to be probated only if the stated event happens but
is, instead, merely a statement of the inducement for the execution of the
will, which can be probated upon death from any cause.
H.
Components of a Will.
1.
Possibility that documents & acts not
executed w/ testamentary formalities have an effect in determining who takes
what prop.
2.
2
Doctrines permitting extrinsic E to resolve the identity of persons/prop.
a)
Incorporation
by reference.
b)
Acts
of independent significance.
3.
Integration
of wills.
a)
Which papers present @ time of execution comprise
t/or’s duly executed will?
b)
More concrete if all pages are fastened together
b/f t/or signs & t/or signs/initials each numbered page.
c)
Look for:
(1)
Internal continuity;
(2)
Staples.
4.
Republication
by Codicil: an implied
restatement/rewriting of the language of a valid
will as of the date of the codicil.
a)
A will is reexecuted (republished) as of the
date of the codicil. Assumption that a
codicil re-affirms the will to which it is attached.
b)
Ex: will written in 1981. Codicil dated 1992. Will is republished in ’92 when the codicil
is executed.
c)
Ex: t/or has a will & revokes it by executing
a 2nd will. He then executes a codicil
to the 1st will. Since this is a
republication of the 1st will, the 2nd is revoked by implication (“squeezed
out”).
d)
Not applied automatically, only when
updating the will carries out t/or’s intent.
e)
Diff. b/t republication & incorporation
by reference = republication only applies to a prior validly executed will;
inc. by ref. applies to inc. into wills instruments never validly executed.
5.
Incorporation
by Reference (ibr).
a)
Applies only when instruments that NEVER HAD
testamentary life are inc. into a will & given TESTAMENTARY EFFECT.
(1)
Will must
refer to writing IN EXISTENCE [at the time the will is executed] w/ reas
certainty.
(2)
Will
description corresponds to description & was the one intended by T.
b)
Differs from republication by codicil in that
republication only applies to a valid will.
Inc. refers to documents w/ no testamentary value apart from their inc.
c)
Clark v. Greenhalge (p. 303): D was executor & principal ben. of
Nesmith’s will; Nesmith reserved the right to make other distributions of
personal prop in a memo. Nesmith also
made designations in a notebook in addition to the memo. The notebook left a painting to P; D refused
to give it up. It was cool that the
codicil was partially written by t/or’s nurse—intent is what matters. Problem was that the memo referred to in her
will was not in existence at the time of execution of the will. But, they said codicil republished will &
overcame defects in the inc. by ref. RULE: a properly executed will may inc. by ref. any
document/paper not so executed & witnessed, if it was in existence at the
time of the execution of the will & is identified by clear &
satisfactory proof as the paper referred to therein.
d)
Johnson v. Johnson (p. 311): t/or typed his will but did not sign it or
have it witnessed. He later hand wrote a
codicil at the bottom & died. The
entire document (typed & handwritten) was offered for probate. RULE: a valid, holographic codicil may inc. &
republish a prior will which would’ve been ineffective b/c of its failure to
comply w/ formal requisites.
e)
For
holographic wills it is necessary to eliminate the typed part on the face of a
holographic will as either (1) immaterial or (2) no intent to inc. the typed
matter.
6.
Acts of
independent significance.
a)
Determines how much extrinsic E will be allowed
to show testamentary intent.
b)
If the ben. or prop designations are identified
by acts/events that have a lifetime motive & significance apart from their
effect on the will, the gift will be upheld under the doctrine of acts of ind.
sig.
c)
Ex: t/or leaves “the car I own at my death.” You go outside the will to determine which
car he owns at his death. See cases, p. 318.
7.
Exception to the “in existence”
rule—Memo of Personal Effects.
a)
TX allows
this rule.
b)
Separate
writing t/or can create after the will is executed, telling the disbursement of
personal prop.
c)
Contains t/or’s personal effects & allows
t/or to change things if he wants. Also
usu. allows the executor to make decisions about some of the crap.
d)
Cannot contain real prop OR cash; has to be
mentioned in the will.
8.
See Simon v. Grayson, p. 309.
9.
Johnson v. Johnson (p. 311): t/or had a typed will that was not signed or
attested, he later wrote another paragraph at the end of the typing. The holographic part he signed &
dated. Issue: were they 1
will, or a will & a codicil? Ct
found it a valid holographic codicil. Ct
is wrong, b/c the 1st will is not
valid—RULE: you can’t have a codicil to a will that’s not
valid.
a)
Possible argument is that the handwritten part
is a will by itself, & the language “this will” incorporates the
typewritten part by reference.
10.
To probate a holographic will, you must
eliminate typed matter on the face of the holographic will on the ground either
that it is immaterial or that there is no intent to inc. the typed matter.
11.
Contents of drawers, etc.
a)
TPC
58(e)(1)—devise of “contents” means tangible, personal prop. Does not
include intangibles, choses in action [bank book], “titled” personal prop
represented by a certificate or ownership requires a formal title transfer
[stock, cars].
(1)
Ex: the “contents of the garage” would not include a Model T, stocks on
the hood, a bank book on the workbench.
b)
Caveat—one
must expect to find item in such a location.
I.
Contracts Relating to Wills—2 types:
1.
K to make a will: individual says “take care of me for 6 months
& I’ll give you my car.”
a)
There’s a valid K;
b)
Does wills law support it?
(1)
TPC
59—the will must state that the K exists, & the will must state the
material provisions.
(2)
If it’s
not stated in the will, can we inc. it by ref?
Yes, if it’s referenced w/ specificity & existed at the time of the
will.
2.
K not to revoke a will: H’s will & W’s will, give all to
e/o. If there’s a K not to revoke, when
H dies W can’t make a new will (protects the will they made together if she
remarries).
a)
Even if there’s a K, you can still revoke it w/
notice to the other at anytime b/f death.
b)
If W does revoke, she breaches the K. You can’t change the nature of the vesting,
so the prop goes into a constructive trust.
The prop goes to the ultimate beneficiaries under H’s will.
c)
W’s new will can’t be challenged until she
dies. Her beneficiary gets the
constructive trust for the benefit of the beneficiaries under H’s will.
3.
Begin analysis w/ K law—is there a K? Then to wills law—can we uphold the K?
4.
Joint will—1 will w/ 2 people on it. VERY
DUMB.
5.
Mutual will—separate wills of 2 or more persons
that contain similar or reciprocal provisions.
Based on a K.
a)
Reciprocal will has mirrored provisions—he gets
mine, I get hers.
6.
Via v. Putnam (p. 323): H’s not making a new will made 2nd wife have
to take a forced share by intestacy. RULE: kids as 3rd party beneficiaries under mutual
wills of parents, should not be given creditor status when their interest
contravene the interests of the surviving spouse under the pretermitted spouse
statute. Protection of spouses more than
children.
VI.
WILL SUBSTITUTE:
NON-PROBATE TRANSFERS.
A.
Contracts w/ payable-on-death provisions.
1.
K’s that avoid probate by paying out to the
beneficiary at death.
2.
Wilhoit v. Peoples Life Ins. (p. 331): P dies w/ W as beneficiary of his life ins
policy. She got the $ & rolled it
over as an investment to the ins co, at a different rate than the offered her
at first. RULE: you can’t use a will to change the
beneficiary designation in an insurance K.
It’s a separate K, governed by separate areas of law. The insurance co would never know who to pay.
3.
Estate of Hillowitz (p. 336): p/ship agreement in investment group gave his
share of the investment club to his W at death.
Ct called it a 3rd-party-beneficiary K w/ a pay on death provision.
4.
Cook v. Equitable Life (p. 339): H purchased life ins naming W as beneficiary,
then they divorced. Divorce decree made
no provision for what to do w/ $, H remarries.
H tried to change beneficiary in his will; ct would not allow it.
a)
W would
lose in TX, b/c the gift to a divorced spouse is void.
B.
TPC 59A—
C.
TPC 68—
D.
TPC 89—
E.
Multiple-party Bank Accounts.
1.
Types: A
opens joint acct w/ B, intending—
a)
That either A or B is to have power to draw on
the acct & the survivor owns the balance of the acct (a.k.a. true joint
tenancy acct);
b)
That B is not to have the power to w/draw on the
acct during life but is entitled to the balance upon A’s death (POD acct);
c)
That B is to have the power to draw on the acct
during A’s life but is not entitled to the balance at A’s death (agency acct).
2.
Include a joint & survivor acct, a
payable-on-death acct, agency acct, & a savings acct trust.
3.
In TX,
the funds during the lifetime of the depositors are allocated depending on what
each depositor contributed. Determined
by looking at the history of the acct.
4.
TPC
442—no multiple-party acct will be effective to transfer to a survivor funds
needed to pay debts, taxes, & expenses of administration, including
statutory allowances to the surviving spouse & minor children, if other
assets of the estate are insufficient.
5.
Franklin v. Anna National Bank of Anna (p.
345): joint tenancy sig cards
can be defeated by clear & convincing E that the deceased did not intend to
give the proceeds of the acct as a gift to the other signatory.
6.
TPC
438A—Convenience acct.
a)
If acct
is established by a party in the names of the party & a cosigner & the
terms of the acct provide that the sums on deposit are paid/delivered to the
party or to the cosigner “for the convenience” of the party, the acct is a
convenience acct.
7.
See note
2, p. 349.
F.
Joint tenancies.
1.
2 types:
a)
Joint tenancy;
b)
Tenancy by the entirety.
c)
Upon death of 1 tenant, the survivor owns the
prop outright, free of any participation by the decedent.
2.
Important features:
a)
The creation of a JT in land gives the JT’s =
interests on creation. The interest
given the other JT can’t be revoked during life.
b)
A JT can’t devise his share by will.
(1)
To devise his part, a JT must sever the tenancy
(need agreement of other tenant; creating a TiC) during his life, then devise
his part @ death.
(2)
This is so b/c @ death, the interest passes to
the survivor automatically; there’s nothing for the deceased’s will to act on.
c)
A creditor of a JT must seize the JT’s interest
during life.
G.
Revocable Trusts.
1.
The settlor can cancel the trust at any time.
2.
Passing of interests by gift:
a)
To be effective as a gift, personal prop must be
delivered. A gift w/out delivery =
nothing.
b)
To effectuate a completed gift, the deliverer
must feel the “wrench of delivery.”
c)
Delivery is separate from the requirement of
intent.
d)
Delivery may be effectuated by:
(1)
Delivery of the thing itself;
(2)
If the object is difficult/impossible to
deliver, it can be delivered constructively.
Only available if you absolutely can’t hand it over.
(3)
Classic ex = a key to a box, the box can’t be
delivered.
3.
Deed of trust: the trust settlor transfers legal title to
prop to another person as trustee pursuant to a writing in which the settlor
retains the power to revoke, alter, or amend the trust & the right to trust
income during lifetime.
4.
On the settlor’s death, the trust assets are to
be distributed to/held in further trusts for other bene.’s.
5.
Revocable declaration of trust: the settlor declares himself as trustee for
the benefit of himself during lifetime, w/ the remainder to pass to others at
his death.
6.
Farkas v. Williams (p. 352): RULE: the beneficiary of a trust must, in the lifetime
of the settlor, obtain some interest in the trust prop for the trust to be
non-testamentary in nature. The settlor
can’t maintain absolute control over the prop & have an inter-vivos trust;
Farkas signed trust instruments that he could only revoke the trusts in
writing. Ct said beneficiary had “a
contingent equitable interest in remainder.”
a)
Trusts can transfer prop @ death.
b)
Here, Williams has an interest in the trust b/c
of the fiduciary duty created by the trust.
Revocability does not make much difference.
7.
Trust is a mgt. rela. whereby the trustee
manages prop for the benefit of beneficiaries.
a)
Trustee has legal title (can do whatever an
owner would);
b)
Beneficiary has equitable title (can’t do what
an owner would, but can influence what the trustee does w/ the title).
c)
When legal & equitable title merge in 1
person, the trust dissolves.
8.
In re Estate & Trust of Pilafas (p.
361): guy created trust &
executed a will. The trust could only be
revoked in writing, delivered to trustee.
When the will was to be probated, they couldn’t find it or the trust
documents. Trial ct held that both were
revoked; appeals ct reversed. RULE: when the settlor reserves a power to revoke
the trust in a particular manner or under particular circumstances, that’s the
only way it can be revoked. RULE: if no method for revocation is specified, it
is revoked in any manner which sufficiently manifests the intention of the
settlor to revoke the trust.
a)
Pour-over will: will that allows that anything not devised by
the will goes into an existing trust.
b)
If you can’t find the will, there’s a
presumption of revocation. Not so w/
trusts—see above rules.
9.
Problem,
p. 368. Even though this is a trust,
it has the testamentary function of a will.
The bank must accept the revocation order if she is competent. Undue influence is irrelevant. Why?
The beneficiary does not get possession until the death of the settlor. If it’s revocable & she’s the sole
beneficiary during her life, she can revoke it whenever she wants.
10.
State St. Bank v. Reiser (p. 368): Dunnebier created an inter-vivos trust w/
stock of 5 corps; he kept the right to amend or revoke it during his lifetime
& had could direct the disposition of p/al & income during his life. He executed a will leaving the residuary of
his estate to the trust. He then got the
bank to loan him $75K, w/out using any of the trust as collateral. He said he had the stock, but did not tell
them it was in a trust. He died still
owing the bank, they want to get at the trust to pay the debt. RULE: when a person creates a trust & reserves
the right to amend & revoke or to direct the disposition of p/al &
income, settlor’s creditors may satisfy debts—to the extent not paid by the
estate—with trust prop over which the settlor had under his control at the time
of his death as would’ve enabled him to use the trust assets for his own
benefit. They can’t get what’s
poured-over at the settlor’s death.
a)
Factors
determining control:
(1)
Whether t/or can use or control the assets;
(2)
IRS views irrevocable trusts as the prop of the
settlor.
(3)
To get around this, make it irrevocable.
b)
It’s important that the creditors could reach
the trust during his life (b/c he had control over prop & income).
c)
RESTATEMENT
2D TRUSTS: in the absence of a
statute, creditors can reach a revocable trust either during the settlor’s
life, or after his death. Scott
on Trusts says the same thing—the power to revoke is not prop, it’s a
power.
d)
TX
RULE: if the trust is revocable by
the settlor, his creditors can reach the entire trust prop, even if the
settlor does not retain any type of beneficial interest.
H.
Pour-over wills.
1.
Passes its residuary into an existing
inter-vivos trust at t/or’s death.
2.
TX
RULE: if you have an existing
inter-vivos trust that is added to (by pour-over will, etc), those assets are
treated as if added to the trust by the settlor.
a)
The
pour-over is seen as being inter-vivos, even though created at death.
3.
Clymer v. Mayo (p. 375): D’s wife made a will naming D
beneficiary. She also created a trust
for the residuary to pour into. After
they divorced, they forgot to take his interest out of the trust. RULE: in the absence of contrary intent, a divorce
will revoke provisions of a spouse’s pour-over trust that favor the former
spouse.
a)
Why not use inc. by ref? B/c the trust was not in existence at the
time the will was executed.
b)
The trust & will were considered 1
testamentary plan & so, a gift to a surviving ex-spouse was void.
4.
TX
RULE: likely the same outcome as
Clymer;
our will law also voids the gift to an ex-spouse in a will.
I. Revocable Trusts in Estate Planning.
1. Idea is to reduce the estate of t/or to avoid taxes at death.
2. See notes 386–95.
3. W/ ancillary probate, you get real prop probated in the state in which it exists after you probate the will 1st in the state where t/or is domiciled.
4. TX allows you to file a certified copy of a will probated in another state right in the real prop records. You don’t have to go through ancillary probate.
J. Planning for Incapacity.
1. Durable PoA: unlike an ordinary PoA b/c it is effective even after the p/al becomes incapacitated. Durable continues throughout incapacity until p/al dies.
a) Agent/attny in fact = person who has power under the PoA.
b) Any power of attny terminates @ death.
c) Can be terminated at any time, governed by the law of agency.
2. Not needed when you have a trust that allows for the care of the settlor during his life.
3. TPC 490—statutory form. You have to choose whether you want it to be effective immediately or “springs-up” when person is incapacitated.
a) Requires that a notary be present, the agent does not have to be.
4. Franzen v. Norwest Bank (p. 397): H executed a revocable trust in favor of he & his W w/ Norwest as trustee. After H’s death, W told Norwest she wanted to keep the trust alive for her life, remainder to nephews. But, she moved to another state & gave a PoA to her brother; he wanted to revoke the trust by its terms. RULE: a PoA that appears to give broad powers should be narrowly construed, but the authority to amend or revoke trusts can be conferred w/out specifically referring to the trusts by name. No CL requirement of specificity; agency must be used for p/al’s benefit.
a) You 1st have to consider whether the trust is amendable, etc b/f allowing the attny in fact to act.
5. Directive to Physicians & Family Circumstances (“Living Will”)—syllabus.
a) Don’t put the directives for how you want to be buried in the will; you’re usu. planted b/f they look at it.
b) The directive is done when the person is competent.
c) You now have to specify that you also want nutrition & hydration removed.
d) The one in syllabus also includes a medical PoA, you can combine the 2.
e) These can be revoked any way the person wants to.
f) Look at the definitions in the syllabus.
6. Anatomical Gift Act: you can decide what you want done w/ your organs.
a) Your corneas can be taken w/out your permission.
VII.
INTERPRETATION OF WILLS.
A.
Admission of Extrinsic E.
1. Mahoney v. Grainger (p. 410): Sullivan made a will leaving most of her shit to 2 first cousins, the rest equally among 25 first cousins. The lawyer made the will to give the residuary to her heirs at the time of her death. This heir was her maternal aunt. Cousins challenged, saying that her comment about the 25 cousins should be admitted to show testamentary intent. RULE: a will duly executed & allowed by the ct must, under the statute of wills, be accepted as the final expression of the intent of the t/or. Finding otherwise makes every will challengeable.
2.
Ambiguities.
a)
Patent:
appears on the face of the instrument.
b)
Latent:
does not appear on the face.
c)
RULE: extrinsic E freely received to determine
intent.
3.
Plain
meaning RULE: a plain meaning in a
will can’t be disturbed by the intro of extrinsic E that another meaning was
intended.
4.
See In re Estate of Smith, note 2, p. 412.
5.
Personal use exception: extrinsic E that shows that the t/or always
referred to a person in an idiosyncratic manner is admissible to show that the
t/or meant someone other than the person w/ the legal name of the legatee.
6.
Fleming v. Morrison (p. 414): guy has a will made & he executes it to
get a chick into bed. He signed it &
as far as the witness knew, he had testamentary intent. Ct allowed E from the lawyer that he had no
testamentary intent. RULE: t/or must have testamentary intent b/f both
witnesses who attest.
a)
What could the lawyer have done when he found
out the will was a sham? Talk to the
client about not using the will.
7.
Estate of Russell (p. 417): will gave part of woman’s shit to a dog. He can’t take it, so the question is—what
happens to it? Ct says that the gift lapses
& goes into the residuary. Ct would
not allow extrinsic E of the heir at law getting the residuary b/c there was no
ambiguity.
8.
Ambiguities
examples.
a)
Will—I leave $6K to my nephew Ben. There are 2 nephews named Ben. Latent.
b)
Will—I leave my beach home in Kemah as
follows: 25% to Ben, 25% to Jerry, 50%
to Bartles, 25% to James. Patent
ambiguity; extrinsic E may be admitted to even out the percentages (no one will
be squeezed out).
9.
Extrinsic
E does not come in to correct mistakes.
10.
A mere mis-description of prop does not make the
gift void; one that is so terribly wrong may cause the gift to fail. We won’t second guess the testator.
11.
Tuttle v. Simpson (TX, supp.): guy
died & left his wife a “20 acre strip on the north end” of a 97.85 acre
strip tract he owned. Wife wanted to
bring extrinsic E of what the will meant.
RULE: if a term of the will is capable of
more than 1 construction, E of extrinsic facts is admissible to show the intent
of the t/or.
B.
Admission of Extrinsic E to correct mistakes.
1.
Erickson v. Erickson (p. 427): dad made will leaving his stuff to his future
wife, Dorothy, & to his kids if she predeceased him. He married Dorothy 2 days later; he died
after 8 yrs. Statute revoked wills upon
marriage. Kids contested will, saying it
did not allow for the contingency of marriage.
Probate ct would not allow extrinsic E of dad’s intent. RULE: extrinsic E is admissible to establish the
intent of a t/or that his will is valid notwithstanding a subsequent marriage
if a scrivener’s error led the t/or to believe that it would be valid. 3 reasons to admit a scrivener’s mistake:
a)
There is no discernable policy difference for
distinguishing b/t innocent mistakes & fraud, duress, or undue influence
when it comes to extrinsic E.
b)
The risk of subverting the intent of the t/or is
no greater than the risk of enforcing an instrument that misstates the intent.
c)
The narrowness of the exception would not likely
give rise to a proliferation of groundless will contests.
2.
Intent
must be shown from the language of the will, not through extrinsic E.
3.
TX does
not adopt this rule; if the scrivener makes a mistake too bad b/c of the
privity bar.
C.
Death of Beneficiary b/f death of t/or.
1.
RULE: all gifts made by will are subject to a
requirement that the devisee survive the t/or, unless the t/or specifies
otherwise.
2.
Lapsing
Devises—see p. 438. Default rules.
a)
Specific or general devise: if a specific/general devise lapses, it falls
into the residue.
b)
Residuary devise: if the devise of the entire residuary lapses
(b/c the sole residuary devisee or all residuary devisees predeceased the
t/or), the heirs of the t/or take by intestacy.
(1)
MIN.
RULE: No residue of a
residuary—if a share of the residue lapses (2 of 3 residuary devisees
predecease t/or), the 2/3 passes by intestacy, not to the 1 residuary devisee
left.
(2)
This
is on its way out.
(3)
Class gifts get around this.
c)
Class gift: if the devise is to a class of persons, &
1 member of the class predeceases the t/or, the surviving members of the class
divide the gift.
(1)
Class of persons—brought together w/ some
kind of commonality (a gift to A, B, C,
& D & they are all e/ee’s).
(2)
If it’s to e/ee’s (not by name) & D is fired, then the other 3 split D’s part.
d)
Void devise: when a devisee is dead at the time the will
is executed.
3.
Anti-lapse
statutes. Change the default rules.
a)
Don’t prevent lapse—they substitute other
beneficiaries (usu. issue) for the dead beneficiaries if certain requirements
are met.
b)
TPC 68—if
the legatee who is a descendent/parent of the t/or dies b/f the t/or, his gift
goes to the legatee’s descendents.
(1)
Ex: you leave your car to X. X dies b/f the t/or & is t/or’s nephew. He counts b/c he’s a descendent of t/or’s
parents; so, X’s kids will get the
car.
(2)
Statute presumes that the t/or would rather have
the kids of legatee to have it than to lapse.
(3)
If the statute applies, the gift is divided up
among the # of people on X’s level.
(4)
If a class gift is made & a member of the
class is under this section, then his children take. But, if the gift is made per capita to nephews,
the anti-lapse does not apply.
(5)
Section (e) also allows you to stipulate that
the anti-lapse does not apply.
(6)
Statute does not apply to a person who died b/f execution of the will.
4.
Allen v. Talley (p. 441): saying my “living brothers & sisters” requires
survivorship & the anti-lapse does not apply. It’s not a class gift & not ambiguous;
it’s clear the intent was only for the living brothers & sisters to take.
5.
Jackson v. Schultz (p. 446): in Delaware, they’ll substitute “or” for
“and” if it’s necessary to effectuate the intentions of the t/or.
6.
See problems & notes, 444–45.
7.
Dawson v. Yucus (p. 449): question of whether a gift to 2 nephews
individually was a class gift. Important
b/c 1 nephew predeceased b/f the t/or.
a) Class Gift: a gift of an aggregate sum to a body of persons uncertain in # at the time of the gift, to be ascertained at a future time, & who all are to take in equal or some other definite proportions, the share of each being dependent for its amount on the ultimate # of persons.
b) Class: a # or body of persons w/ common characteristics or in like circumstances, or having some common attribute, &, as applied to a devise, it is generally understood to mean a # of persons who stand in the same relation to e/o or to the t/or.
c)
TX would
include the nephews b/c it includes descendents & parents of t/or. If the language of the will is contrary to
the making of a class gift, they will make a class gift & not apply the
lapse statute.
d)
No class gift here, b/c both legatees named
specifically. Jenkins thinks this
decision is wrong b/c her intent was stated in the will that her husband’s
family get the interest in the land.
8.
In re Moss (p. 454): Moss gave all his interest in the
Daily Telegraph to his wife in trust for life, then to EJ Fowler & the kids
of Emily Walter who live to 21.
Residuary went to his wife; she leaves it to Kingsbury. EJ Fowler predeceased Moss. Was this a class gift/did EJ’s gift
lapse? Lower ct said it lapsed; appeals
ct reversed. Calls it a class gift;
difficult b/c it’s a class of an individual and the kids of Emily Walter. Ask why Moss would separate out EJ
Fowler? He knew her, Emily could still
have more kids. RULE: a gift to an
indiv. & a group of indivs. is a class gift, unless we have E otherwise.
a)
Ex: a gift to my friend Gary & my friends
Bob, Joe, & Mary is a class gift.
b)
You can also just designate something a class
gift on your own.
D. Doctrine of Ademption—changes in the prop after execution.
1. Ademption by extinction: applies to specific devises (a disposition of a specific item of the t/or’s prop). “My 3-carat diamond ring to Mary.”
2. Does not apply to general/demonstrative devises. “$10,000 to Bob.”
3. Ex: t/or gives Whiteacre to Bob in her will. She executes the will & sells Whiteacre. She then uses the $ from Whiteacre to buy Blackacre & dies. Bob gets nothing, b/c Whiteacre is adeemed. See examples on p. 459.
4. Look at the gift at the date of death. “I give you my Tiffany lamp.” If you sell the Tiffany lamp & buy another one, you still get the lamp.
5. Wasserman v. Cohen (p. 459): Drapkin created a revocable inter vivos trust w/ “certain prop” along w/ a pour-over will. He left an apt. building to P, but the building was never put into the trust. Drapkin sold the building during his life; P wants the proceeds from the sale. RULE: ademption applies to trusts that are executed as part of a comprehensive estate plan.
6. TPC 70A—unless the will provides o/w, a devise of securities that are owned by the t/or on the date of execution includes:
a) Securities of the same org. acquired by a split, dividends of stock, & new issues of stock in a reorganization, redemption, or exchange.
(1) Ex: you are devised 50 shares & it splits, you get 100.
b) Does not include:
(1) Cash dividends accruing b/f death, regardless of when paid ($ dividends after death belong to the devisee).
7. TPC 322B—Abatement (order in which things are sold to pay debts out of the estate).
a)
Property
not disposed of by will, but passing by intestacy;
b)
Personal
prop of the residuary;
c)
Real prop
of the residuary;
d)
General
bequests of personal prop;
e)
General
devises of real prop;
f)
Specific
bequests of personal prop; &
g)
Specific
devises of personal prop.
8. Problems, p. 466.
1. Not in TX.
9. Exoneration of liens: make sure to pass real prop under the will take it subject to existing liens (so the estate is not exhausted to pay off the lien).
10. Shriner’s Hospital v. Stahl (TX, supp.): chick died, devising 103 acres of land to several benes. She sold the land b/f she died, getting a note for $80,000 secured by a deed of trust & vendor’s liens. The will contained a residuary clause which set up trust for her brother, & if he predeceased her the residuary was to go to “Masonic home or homes for crippled children.” John predeceased her; the executor filed suit to have the will construed to find out he gets the $80K. Ct held the devise adeemed by extinction; there was no mention of the $80K in the will, & they wouldn’t rewrite it. RULE: the same rules apply to adeemed bequests as apply to lapsed bequests—they pass under the residuary clause. The hospital gets the cash.
11. O’Neill v. Alford (TX, supp.): Alice left Kenny 69 shares of Kodak stock. The stock split 2 for 1 after the will was executed, then Alice croaked. Kenny sued to get the stock from the split & won. Executor appealed. App. ct affirmed, holding that giving Kenny ½ the shares would only give him ½ the interest the testator wanted to give him. The split only changed the form of the gift, not the substance.
12. Thompson v. Thompson (TX, supp.): Bobby died survived by his wife & 3 kids from his 1st marriage. Wife elected to take against the will. Trial ct & ct of appeals apportioned the estate tax among the benes in the same proportion in which they received prop from the estate. Wife wanted taxes paid 1st out of the intestate prop; 2nd, out of personal prop; last out of real prop. Ct held that the prop was to be paid out of the residuary estate, then personal prop, then real prop.
VIII.
RESTRICTIONS ON THE POWER OF DISPOSITION: PROTECTION OF SPOUSE & KIDS
A.
Property systems.
1.
Separate prop:
whatever the worker earns is his.
No sharing of earnings.
2.
Community:
all earnings of the spouses & prop acquired from earnings are
community prop. TX system. Idea is that the
marriage is a p/ship.
a)
Prop
acquired b/f marriage & prop acquired by gift, devise, or decent is the
acquiring spouse’s separate prop.
b)
Each spouse has an undivided ½ interest in all
the prop acquired during the marriage.
c)
If the wife dies, the community is dissolved;
wife can only devise her ½ by will. It
can be given to whoever she wants.
d)
If it’s willed to a 3rd party, husband & the
3rd party become TiC’s.
e)
Exception: husband gives “all rights, title, &
interest in Blackacre to Fred” & he gives wife $1M to wife. Cts will deem that by accepting the $1M, she
has acquiesced to his giving away the whole interest.
(1)
Widow’s election: she takes the will, or community prop share.
(2)
Value will determine the choice she makes.
(3)
You elect out of the whole will; you can’t do it piecemeal.
3.
Homestead—surviving spouse has as the right to
occupy the family home for his/her lifetime.
a)
Surviving spouse has a life estate in the
homestead; even if she gets married again.
4.
Personal prop set aside is exempt from
creditors’ claims.
5.
Family allowance—$ set aside for 1 yr in a
certain amt to help surviving spouse & children to keep them for a yr
during probate.
a)
Must be approved by a ct.
6.
In re Estate of Cross (p. 488): Cross died intestate, leaving everything to
his son, Ray (not the son of surviving spouse).
Wife was incompetent; Ct decided that surviving spouse would take her
elective share. Ct of appeals reverses;
SC reverses them. She should’ve gotten
her forced share. RULE: a ct may elect for an incapacitated spouse, if it’s
for the benefit of the spouse during her lifetime. It was key that wife was on Medicaid & in
a nursing home. Whatever she did not use
would go into her estate & Ray loses it.
a)
Could’ve made a custodial trust to take care of
her for her life, then Ray as beneficiary of the trust when she dies.
7.
In re Estate of Cooper (p. 492): Cooper’s will left everything but
real prop that was 80% of the estate to Chin.
The 80% went to a former lover of Cooper. Chin is the gay-boy lover who wants to take a
forced share, claiming they were lovers who could not get married b/c the state
prevented it. Cts held it was not a
marriage; he’s not a surviving spouse that can take an elective share.
B.
Rights of Surviving Spouse in Community Prop.
1.
Horlock v. Horlock (supp., 533 S.W.2d 52): fraud on the spouse; looking @ prop to
determine whether a gift perpetrates a fraud on the surviving spouse. Wife claimed gifts to husband’s daughters
were fraud on the community. Factors:
(1) size of the gift in relation to the total community estate; (2)
adequacy of the estate remaining to support the other spouse in spite of the
gift; & (3) rela of donor spouse to donee. Ct found no fraud, the gifts were an estate
planning move.
2.
Basics.
a)
H & W
own earnings & acquisitions from earnings of both spouses during marriage
in undivided = shares. Whatever is
bought w/ earnings is community prop.
b)
Prop
acquired b/f marriage or by gift, devise, or descent is separate prop.
c)
Commingling of prop creates problems in tracing
it on death.
d)
On death, deceased spouse can dispose of his ½
of the community assets.
3.
Widow’s election.
4.
Migrating couples & multistate prop
holdings. RULES—
a)
The law
of the situs controls problems related to land.
b)
Law of
the marital domicile at the time personal prop is acquired controls the
characterization (separate or community) of prop.
c)
Law of
the marital domicile at the death of 1 spouse controls the survivor’s marital
rights.
d)
See p. 526–27.
5.
Estate of Shannon (p. 530): guy was alone when he executed his will; then
he married Lila, but did not put her in the will. She can get a statutory share if she can
prove she’s a pretermitted spouse under the statute, even though dude left all
his shit to his daughter. Problems b/c
he seemed to have intentionally omitted her from the will, which is a statutory
exception that gives her nothing. Cts
require very strict proof to give her nothing, cts lean toward the surviving
spouse.
a)
Pretermitted spouse: 1 who is omitted from the will & marries
the t/or after the execution of the will.
b)
TX does
not have a pretermitted spouse statute b/c we have community prop.
C.
Omission of a child.
1.
TPC
67—pretermitted child—a child of the t/or who, during the lifetime of the t/or,
or after his death, is born or adopted after the execution of the will of the
t/or.
2.
Pretermitted
children are given the same share as the kids get that are included in the
will.
3.
This does
not happen when: the pretermitted child
has been o/w provided for (i.e., trust, ins.).
4.
If the
other kids are provided for & a pretermitted child & some kids are left
out, the pretermitted child still shares.
5.
If all
the kids are left out & you have a pretermitted kid, he still gets an
intestate share.
6.
If kids
are alternate beneficiaries after the surviving spouse under the will, the
pretermitted child does not get an intestate share.
7.
Best way is to mention whether the will makes
provisions for pretermitted children or does not.
8.
Coolidge’s Will, p. 537. John can’t say he’s pretermitted b/c he’s
been intentionally omitted.
9.
Azcunce w. Estate of Azcunce (p. 537): guy had a trust, a will & 2
codicils. 1 kid (Patty) was born b/t the
2 codicils. T/or dies, Patty files to
take her share as a pretermitted child of the will & the early
codicil. The 2nd codicil (republication)
defeats this argument; she’s not pretermitted b/c she was now born b/f the
execution of the will.
10.
Espinoza v. Sparber, Shevin, Shapo (p. 540): Patty now sues the draftsman of the codicil
from the Azcunce case. Privity screws
her; she can’t sue.
11.
Testamantary Libel: you can sue the estate for bad things said
about you in the will. Better to write
him a private note, no publication.
D.
Bank accounts.
1.
TPC 439—Right
of survivorship: (a)—sums on deposit at
the death of a party to a joint account belong to the surviving party/parties
against the estate of the decedent if, by a written agreement signed by the party
who dies, the interest of such deceased party is made to survive to the
surviving party/parties. Survivorship
will not be inferred from the mere fact that the acct is a joint acct.
a)
(b)—if
the agreement is a P.O.D. acct & there is a written agreement signed by the
original payee/payees, on the death of the original payee or on the death of
the survivor or 2 or more original payees, any sums remaining on deposit belong
to the P.O.D. payee/payees if surviving, or to the survivor of them if one or
more P.O.D. payees die b/f the original payee.
If 2 or more P.O.D. payees survive, there is no right of survivorship in
event of death of a P.O.D. payee thereafter unless the terms of the
acct/deposit agreement expressly provide for survivorship b/t them.
b)
(c)—if the
acct is a trust acct & there is a written agreement signed by the
trustee/trustees, on death of the trustee or the survivor of 2 or more
trustees, any sums remaining on deposit belong to the person/persons named as
benes, if surviving, or to the survivor of them if 1 or more benes die b/f the
trustee dies.
2.
TPC 442—
3.
TPC 444—
IX.
TRUSTS:
CREATION, TYPES, & CHARACTERISTICS.
A.
Intro.
1.
Trust:
a fiduciary rela in which 1
person is the holder of legal title to prop subject to an equitable obligation
to keep or use the prop for the benefit of another.
a)
Inter-vivos: lasts through the life of settlor.
b)
Testamentary: begins at the settlor’s death.
2.
Created by:
a)
Declaration
of trust—settlor declares that he holds certain prop in trust. Settlor is trustee. Must have a writing if the corpus is real
prop.
b)
Deed of
trust—settlor transfers prop to another person as trustee.
3.
Parties to a trust.
a)
Settlor—person who creates a trust (a.k.a.
trustor, donor, grantor); must intend that a trust come into being.
b) Trustee—in charge of the trust; must be given something (res, trust prop, corpus, principal) in order for the trust to function.
(1) Holds legal title for the beneficiary (can act w/ regard to prop as actual owner, limited by the terms of the trust).
(2) There may be 1 or several trustees. Co-trustees must act by majority (TX), cts decide deadlocks.
(3) Most trust instruments allow for reas compensation (unless trustee is a beneficiary).
(4) You’re not trustee until you accept the responsibility; you can waive the right.
(a) Once you accept, you can only get out by order of ct or permission of beneficiary.
c) Beneficiary—person who benefits from the trust; holds equitable title to the prop. Equitable title allows bene. to hold trustee accountable for his actions.
4.
Requirements
to create a valid private trust.
a) Intent—intent that prop be held at least in part for the benefit of one other than the settlor.
(1) No particular words are necessary to create a trust.
(2) Intent sufficient when 1 conveys prop to a grantee to hold for the use & benefit of another.
b)
At least
1 beneficiary.
c)
Prop
interest in existence or ascertainable.
d)
It takes
at least 2 persons to create a trust; a trust will not fail for lack of a
trustee—ct will appoint one.
5.
When does
a bene. have standing to sue the trustee?
a)
When his
interest vests—when the instrument is executed it’s an interest, but it’s not
vested in possession.
b) Start at the trust instrument to determine whether the trustee’s acts are improper.
c) Trustee’s 1st duty is to read the trust instrument.
6. Problem, p. 561. When O gave X the $, X did not overtly accept the trust. It can be argued that a trust is not effective until a trustee accepts. This fails b/c a trust can still be valid w/out a trustee. There was intent, a bene., delivery; there is probably a trust & ct will appoint one.
a) X has breached his fid. duty by putting the $ in a safe-deposit box.
b) X is probably trustee by accepting the instrument & accepting the $.
c) Trust-pursuit rule: allows A & B to go after the $ in the hands of D & E.
7.
Jimenez v. Lee (p. 568): daughter sued father (a lawyer) for
property she claimed was given to her; two gifts. Language of the conveyance
makes it clear that it is a gift to the father for the benefit of the daughter (check for 500). Father argues that the
property is a gift given to him and that he is a custodian under UGMA (rather
than a trustee). Daughter argues that it is a trust; father is trying to avoid the
fiduciary duty (he wanted to use the money for his own benefit).
a)
What is the difference between a gift under UGMA
and a gift under a trust? A higher duty is imposed on the father if there is a
trust.
b)
RULE:
as long as it is clear that it is given to a trustee for the benefit of a third
party, the specific language is not required (i.e., it does not have to use the
word “trust”).
c)
Under a trust, he was required to spend the
money for education because that was a specified purpose of the money; if he
was found to be a custodian he could spend the money any way he saw fit (still
for her benefit).
d)
Termination – custodianship lasts until daughter
turns 18; she is 21 at the time of the caseàfather raises this
argument to bar her claims under the statute of limitations (if he is a
custodian, he argued that the SOL ran when the custodianship terminated).
e)
However, the SOL for a custodianship runs once
he provides an accounting, and the father had never done that, so his argument
there failed.
f)
Father had to make an accounting both as a
trustee and as a custodian – he attempted to do this, but the court found it
was insufficient – he showed that he had paid for ballet tickets (for himself
too), birthday presents, etc.; the court did not give him credit for these
items because they were not specifically educational.
8.
Precatory
language (p. 575) – “I wish to give my cousin…”; “I would like for…”; this
is common in holographic wills and is not considered to clearly establish a
trust, but it establishes a moral obligation, which is unenforceable at law;
this is any language that shows a wish or hope that something would be given to
someone.
9.
Equitable
charge – similar to a mortgage lien; the mortgagee gives title to the
trustee subject to payment of the lien/mortgage; after that is paid, the
trustee gives title to the mortgagee (no fiduciary relationship is imposed).
10.
Hebrew Univ. Ass’n v. Nye: P wants possession of a library; he
claims it was given to him (representative of association).
E, wife of A, came into possession of the library when her
husband A died; she expressed her intent to make a gift of the library to P; P
held a luncheon for her and presented her with a plaqueàall of this was
evidence that she had given a gift to P. E
gets ready to send the stuff – packs it up and makes an inventory; but there is
nothing to indicate that she intends to send it to P—no delivery. E died before she sent the property
to P;
beneficiaries of her will are claiming that the library should pass to
them along with the rest of the estate.
a)
E declared a trust at the luncheon; where there
is a self-declaration of trust, there does not have to be a transfer of the
property in order to meet delivery requirementàthere was no delivery
and no consideration, so no trust was established.
b)
In order to establish a trust, she had to take
on herself some fiduciary duties and she did not do that; there is no evidence
to show that E intended to assume the duties of a trustee.
c)
P also argued that she made an inter vivos giftàthis
argument failed because there was no delivery.
11.
Delivery.
a)
Constructive delivery – gives donee means
of obtaining the object (e.g., a key).
b)
Symbolic delivery – gives the donee
something symbolic of the actual object (e.g., a written instrument); when
manual delivery is difficult or impractical.
(1)
In Hebrew, E gave P a memorandum
demonstrating her intent to give the library to the P; This constituted
symbolic delivery
(2)
Delivery – would be giving the actual object to
the donee.
(3)
Is there clear and convincing evidence that E
intended Π to have the
library? YES.
(4)
Held: P was legal and equitable owner of the
library.
c)
RULE:
gift is perfected when the donor gives the donee the means of obtaining the
object together with acts and declarations clearly showing an intention to give
dominion over the property.
(1)
Something can be difficult or impractical to
deliver by virtue of the fact that the donor does not have it with him when he
makes the gift.
d)
Trust created by a written instrument is
irrevocable unless there is a provision that allows it to be revoked; TX has the opposite rule – a trust is
revocable unless there is a statement that it is irrevocable.
e)
A trust can contain a nominal amount for the
purposes of giving it a corpus.
12.
Unthank v. Rippstein (Texas
case): C (deceased) wrote a
letter to R promising to pay her money every month for the next 5 years; letter
expressly bound the estate to make such payments. This is the language challenged by the
estate. R presented the letter
as a holographic will, but the court refused this argument because the letter
lacked testamentary intent – there was no indication that he wanted to give the
money after his death; binding the estate was not sufficient to do so. R also argues that the letter is a
declaration of trust – the court held that the trust failed because there was
no res, and therefore no trust.
a)
The money could be considered a res –
b)
If there is a res, property must be set aside to
generate the 200 monthly payments; C did not do that here – there was no money
set aside to allow the gift to be made
13.
TX Trust
Code 112.001–112.010 (supp.). Fills in duties/conduct when the
trust instrument is silent.
14.
State v. Rubion (supp.)
15.
TX Trust
Code 112.035 (supp.)
16.
Duties
of trustee.
|
Read the trust instrument. Delegate duties you can’t handle. Duty to separate funds (no commingling). Duty to keep accurate records. Duty to make accurate and periodic accounting. Duty of loyalty to the beneficiary. Defend the trust against attack. Duty of Impartiality in Dealing w/ Income Bene & Remaindermen. Duty to Retain Trust Documents & Vouchers & Keep Records. Account to Beneficiaries. Duty to Collect & Protect the Trust Prop. Duty to Separate & Earmark Trust Prop. Duty to not Comingle. Duty to Make the Trust Prop Productive. |
B.
Resulting & Constructive Trusts.
1.
Arise by operation of law, not a written
instrument.
2.
Resulting Trust: a trust that arises by operation of law in 1
of 2 situations—
a)
Where an express trust fails/makes an incomplete
disposition, OR
b)
Where 1 person pays the purchase price for prop
& causes title to the prop to be taken in the name of another person who is
not a natural object of the bounty of the purchaser. A.k.a.
purchase money resulting trust; see
cases, p. 584.
c)
Neither of these is subject to the SoF.
d)
Outcome: takes res back to the settlor/settlor’s
estate.
e)
Ex: A is trustee in a trust for B for benefit of
B for life (no remainder). At CL, the
trust failed at its inception. Now, B
gets it for life & then back to A or A’s estate by way of a resulting
trust.
f)
Ex: A gives $ to trustee for “benefit of Sam’s
cocaine addiction, then to Society for Legalization of Cocaine.” Trust is illegal so res goes back to A in a
resulting trust. Also applies to a trust
in defraud of creditors.
3.
Constructive Trust: ct imposed; a flexible remedy imposed to
prevent unjust enrichment; when prop is acquired in such circumstances that the
holder of legal title may not in good conscience retain the beneficial
interest, equity converts him to a trustee.
a)
Const. trustee is under a duty to convey the
prop to another on the ground that retention of the prop would be wrongful.
b)
Requirements
for imposition of a const. trust:
(1)
A
confidential/fiduciary rela;
(2)
A
promise, express or implied, by the transferee;
(3)
A
transfer of prop in reliance on the promise; &
(4)
Unjust
enrichment of the transferee.
c)
Can also be applied when a person procures an
inheritance by fraud (Latham v. Father Divine), upon the
estate of a person who breaches a K not to revoke a will (Via v. Putnam), to
prevent a killer from profiting form his act (In re Estate of Mahoney),
to enforce an oral trust of land which violates the SoF, or a secret
testamentary trust.
4.
Trust
Code 112.001. Creation of trusts; by:
a)
A prop
owner’s declaration that the owner holds the prop as trustee for another
person;
b)
A prop
owner’s inter vivos transfer of the
5.
TC
112.002. Must manifest intent.
6.
112.003. No consideration is required.
7.
112.004. Must have written E of the trust. Oral trusts are allowed if:
a)
A
transfer of the trust prop to a trustee who is neither settlor nor beneficiary
if the transferor simultaneously with or prior to the transfer the intention to
create a trust; OR
b)
A
declaration in writing by the owner of prop that the owner holds the prop as
trustee for another person or for the owner & another person as a
beneficiary.
8.
.005. Must have trust prop to have a trust.
9.
.007. Same capacity required as for a will.
10.
Power of
appointment.
a)
The right (power) to select (appoint) within
prescribed limits who shall receive
an interest in prop or how various interests in prop shall be allocated.
b)
Permits one to dispose of prop while postponing
or giving to another the auth of disposition.
11.
Brainard v. Comm’ner (p. 586): P tried to create a trust for wife & kids
w/ unearned profits from stock sales.
After the sale of stock, he put the profits into the trust & didn’t
pay taxes on them. RULE: where a promise
to declare a trust of prop not yet in existence is unsupported by
consideration, & the intention to hold the prop in trust is not manifested
until sometime after its acquisition by declarant, the prop is not received in
the trust & is taxable to the declarant.
A K to create a trust must have consideration.
a)
RULE: Trust comes into existence when settlor puts
the res into it. Intent does not matter;
it comes into existence when there is a corpus/is funded.
b)
In Brainard, the trust was created when
he credited the profits on his books.
c)
Future profits can’t constitute the res of a
trust b/c there’s no present interest.
It’s just a gratuitous promise.
d)
It would probably have been ok if Brainard
would’ve said “these are the stocks that will produce the profits for the
trust.”
12.
Speelman v. Pascal (p. 589): D
promised to pay P a shore of profits from future productions of a play he owned
the rights to. After D’s death, P sued
to enforce the promise b/c D’s wife said the promise not enforceable b/c the
profits were not in existence at the time the promise was made. RULE: a gift of prop to be acquired in the future
is valid & effective if the donor manifests an irrevocable intention to
make a present transfer of his interest.
If the donor or trustor retains any interest in the future prop or
maintains any control over its distribution, the gift/trust is likely
ineffective.
a)
Sounds very similar to the future profits in Brainard,
but ct allowed future profits to be a present interest b/c D did have a present
license to produce the play.
b)
But, ct relied on Field v. May, which did
not require any present interest to create a trust w/ future profits.
13.
Go back to Unthank & figure out what’s going
on.
14.
Problems,
p. 593.
a)
#2(a)—this
is a problem b/c the declaration is oral, there is no trust b/c no res.
b)
#2(b)—there
is a res here, b/c he identified the body of stock.
c)
#2(c)—no
specification of a res, but a notarized writing may make a difference b/c he
swore b/f a 3rd party.
d)
RULE: if the owner of prop declares himself trustee
of the prop, a trust may be created w/out a transfer of title to the prop.
15.
Grantor
Trusts: trusts in which the
income is taxable to the settlor b/c the settlor has retained substantial
control & is deemed by the code still to be the owner of the trust assets.
a)
Ex: revocable trust.
C.
Power of Appointment.
1.
The right (power) to select (appoint) w/in
prescribed limits who shall receive an interest in prop or how various
interests in prop shall be allocated.
2.
Permits one to dispose of prop while postponing
or giving another the authority of disposition.
3.
Ex: wife leaves house to husband, to leave at his
death to 1 or more of 4 children. If he
fails to direct, it goes to A. “I leave
my house to husband w/ power of appointment under his will.”
a)
Not a
trust b/c the house can only be disposed of w/in the limits of wife’s
will.
4.
Ex:
a)
Wife gives to trustee to choose among my
nephews. Power of Appt, must be to a clear group of persons.
b)
Wife gives to trustee at his discretion. Semi-secret
trust; invalid.
D.
Necessity of Beneficiaries.
1.
RULE: there must be someone to whom the trustee
owes his fiduciary duties, someone who holds the trustee accountable.
2.
Exceptions: beneficiaries may be unborn/unascertained
when trust is created.
a)
Ex: a trust created by a childless settlor for
the benefit of future children can still be valid. Ad litem represents the unborn children.
b)
Ex: if at the time the trust becomes effective
the beneficiaries are too indefinite to be ascertained, the trust may fail for
lack of ascertainable beneficiaries.
3.
Ex: trustor gives to trustee for benefit of A for
life, then to children of B. B has kids,
X & Y. A dies, the class of B’s kids
is still open. It closes when B dies
(w/out E that B can’t have anymore children).
X & Y represent the interests of that class. X can hold the trustee accountable for waste
during the life of A b/c X is a beneficiary.
4.
Clark v. Campbell (p. 598): decedent left her personal prop to her
trustees in trust to “make disposal by way of memento . . .” to friends of hers
that the trustees selected. Heirs
alleged that the trust was void for lack of beneficiaries or ascertainable stds
to identify them. RULE: a noncharitable
trust fails where the beneficiaries can’t adequately be determined. A trust must have an identifiable beneficiary
or the instrument must contain stds for their identification in the
future. Here, there are none—no accepted
statutory definition of “friend.”
Insufficient criteria for determining the beneficiaries. Kin & kin-folk are allowed b/c of
statutes of decent & distribution.
a)
Ct would not call this a power of appointment,
b/c there was no instruction for default of the gift.
b)
If beneficiaries can’t be defined, the trust
fails & is invalid.
5.
In re Searight’s Estate (p. 602): idiot left $ to a trustee to take care of his
dog, remainder to 5 friends. Creates an honorary trust, which is valid. RULE: an honorary trust is valid where it is for a
valid purpose & the trustee accepts the t/or’s wishes, even though there is
no beneficiary who can enforce the trust.
E.
Necessity of a Written Instrument.
1.
Oral Inter Vivos Trusts of Land are invald.
a)
RULE: where the owner of an interest in land
transfers it inter vivos to another, but no memorandum properly evidencing
intent to create a trust is signed as required by SoF, & the transferee
refuses to perform the trust, transferee holds the interest upon the const.
trust for the transferor if the transferee at the time of the transfer was in a
confidential rela to the transferor.
b)
Not that the conveyance is oral, but the trust
is created orally.
c)
Ex: p. 609.
Father deeded his house to his son to avoid taxes. Son evicted them & ct would not allow
father to call the prop back, b/c of unclean hands—he was trying to defraud
creditors.
d)
Hieble v. Hieble (p. 609): Mrs. Hieble conveyed real prop by deed to her
son & daughter after finding out she had cancer. There was an oral agreement that the prop
would be reconveyed to her if it didn’t come back after 5 years. Mrs. Hieble continued to use the prop &
paid for all taxes & upkeep. The
daughter reconveyed her share of the land, the son did not & mom sued.
(1)
RULE: elements of a const. trust: (1) a
confidential relationship (b/t grantor & grantee; position of trust); (2) a
deed by grantee; (3) an oral agreement to reconvey; & (4) unjust enrichment
of transferee has been established, it is up to the transferee, through clear
& convincing proof, to negate the presumption of a constructive trust. Fraud is not necessary. A mere familial rela may not automatically
qualify as a confidential rela. Unclean
hands not a problem b/c she was trying to avoid probate, not taxes. TX also looks for undue influence &
fraud.
(2)
A const. trust is not a trust.
(3)
Oral promises to reconvey land are unenforceable.
(4)
How could mom have avoided this problem? Set up a revocable trust.
e)
Pappas v. Pappas (p. 613): ct would not find a const. trust when dad
conveyed his prop to his kid to keep it out of the divorce estate. He did not have clean hands b/c he defrauded
the ct.
2.
Oral Trusts for Disposition at Death.
a)
Olliffee v. Wells (p. 614): corpse left a will that gave Wells, the
executor, the residue of the estate & the power to distribute it in such
manner as in his discretion is best calculated to carry out the corpse’s
wishes. Wells said her wishes were to
give the stuff to charity, the family sued to get it. The trust was not on the face of the will, so
can’t be proved by extrinsic E. Trust
could not be carried out & goes into residuary. RULE: where a will upon its face shows that the
devisee takes the legal title only & not the beneficial interest, & the
trust is not sufficiently defined by the will to take effect, the equitable
interest goes by way of resulting trust to the heirs or next of kin as prop of
the deceased no disposed of by his will.
(1)
This is a semi-secret trust, & is void.
Also TX rule.
(2)
Semi-secret
trust: the will indicates no
trust (i.e., “I leave $50K to Ben to dispose of as I have instructed.”). Turns into a resulting trust.
(3)
Secret
trust: a trust where the
existence of a trust is not evident; the donee knows that it is. The donee must distinguish this from a gift;
the law allows him to have a const. trust for the benefit of the beneficiaries.
b)
Why
treat secret & semi-secret differently? B/c in a semi-secret, we can tell it’s not an
outright gift.
c)
A failed trust goes back to the settlor, as a
resulting trust.
F.
Discretionary Trusts.
1.
Trusts are divided into: mandatory & discretionary. Applies to either the principal OR the income.
a)
Mandatory: trustee must distribute all the income; he
has no discretion to choose either the recipients or the amt they’ll get.
(1)
Ex: if settlor says to give all interest income
to beneficiaries earned in the yr, trustee can’t sit on the interest 1 yr to
try & grow the corpus.
b)
Discretionary: trustee has discretion over
pmt of either the income or the principal or both.
(1)
Discretionary powers may be drafted in limitless
variety.
(2)
Ex: O transfers prop to X in trust to distribute
all the income to 1 or more members of a group consisting of A, A’s spouse,
& A’s kids in such amts as the trustee determines.
c)
Trust instrument that the trustee has
discretionary power to distribute principal to the income beneficiary. Such power may be limited by a std (“such amts
as are necessary to support my wife in the style of living to which she has
become accustomed”), or the trustee may be given wide discretion.
2.
Marsman v. Nasca (p. 618): Sara Marsman set up a trust to care for her
husband, Cappy, after her death. Trustee
had discretionary power to pay out amts of the principal as he deemed advisable
but failed to adequately explain that power to Cappy. Cappy got into financial problems &
conveyed his house to Sara’s kids, w/ a life estate for himself. After the kids died, the residuary owner
tried to kick out Cappy’s wife. RULE: where a trust gives the trustee a
discretionary power to pay amts of the principal for the comfortable support
& maintenance of a beneficiary, the trustee has a duty to inquire into the
financial resources of that beneficiary so as to recognize his needs.
a)
You can’t just give the house back b/c there was
a valid transfer.
b)
Ct emphasized that trustee had not fulfilled his
duty to keep up w/ Cappy’s finances.
(1)
He needed to do more to tell what Cappy’s needs
actually were.
(2)
It is important to look into the trust
instrument & see what the intent was of the settlor.
(3)
A little extra work by Farr would’ve required
that he use the p/al of the trust to pay the taxes, etc. that Cappy needed.
c)
Cts will enforce exculpatory clauses unless
they’re inserted to protect against a breach of trust duty.
d)
A trustee
can’t be passive: he must inquire,
inform, & advise.
e)
Problem that Farr was representing adverse
parties; he represented into an ethical problem.
(1)
The representation became improper when the
clients’ interests became adverse—when he drew up the deed conveying the house
from Cappy to the kids. He should’ve
known that Cappy was having financial trouble when he did this.
3.
Why favor the remainderman over the life tenant
& be conservative about paying out income/corpus?
a)
Remainderman will be around longer than life
tenant & could sue if they’re unhappy.
b)
Being conservative lessons liability to
everyone.
c)
Keeping the corpus intact may be important to
life tenant also b/c of illness, unemployment, etc.
4.
Even if the trustee’s discretion is not expanded
by “sole,” the ct will not substitute its judgment for the trustee’s so long as
the trustee “acts only in good faith & from proper motives, but also w/ in
the bounds of reas judgment.”
a)
Subjective
std.
b)
Even unlimited power in the hands of the trustee
can be defeated by a suit in equity.
c)
Settlor’s intent is the most important
consideration in considering whether judgment was reas.
d)
In TX,
a settlor may provide that a trust is a spendthrift trust by putting in all the
language, or just calling it a “spendthrift trust.”
5.
Other sources of income for beneficiary.
a)
In Marsman, the trust instrument
required the trustee to consider Cappy’s financial situation & distribute
from the trust as needed to support him.
b)
In the absence of this type of language, cts
presume that the beneficiary should get trust support regardless of his other
financial resources.
6.
Termination.
a)
Claflin
Doctrine: a trust may not be
terminated by all of the benes if it would interfere w/ a material purpose of
the settlor.
b)
Generally, a trust can’t be terminated if:
(1)
It’s a spendthrift trust;
(2)
The bene is not to receive the p/al until a
specified age;
(3)
It’s a discretionary trust; or
(4)
It’s a support trust.
7.
Trust Pursuit Rule.
a)
You can’t follow the trust prop taken in
violation of the trust duties if it goes into the hands of a bfp for value
w/out notice.
b)
Otherwise, you can get it back.
8.
Factors to Consider in deciding whether to allow
an exculpatory provision to be enforced:
a)
Whether the trustee prior to the creation of the
trust had been in a fid rela to the settlor, as where trustee was guardian of
settlor;
b)
Whether the trust instrument was drawn by the
trustee or by a person acting wholly or partially on his behalf;
c)
Whether the settlor has taken independent advice
as to the provisions or the trust instrument;
d)
Whether the settlor is a person of experience
& judgment or a person who is unfamiliar w/ business affairs or is not a
person of much judgment or understanding;
e)
Whether the insertion of the provision was due
to undue influence or other improper conduct on the part of the trustee;
f)
The extent & reas of the provision.
G.
Creditor’s Rights—Spendthrift Trusts.
1.
Beneficiaries can’t voluntarily alienate their
interests nor can creditors reach their interests.
2.
Created by imposing a disabling restraint on
beneficiaries & their creditors.
a)
Ex: T devises prop to X in trust to pay the
income to A for life & upon A’s death to distribute the prop to A’s
children. A clause in the trust provides
that A may not transfer her life estate, & it may not be reached
by A’s creditors.
b)
A is given a stream of income that A can’t
alienate & his creditors can’t reach.
3.
Shelley v. Shelley (p. 633): Dude had 2 marriages & divorces; 1
divorce gave child support, the other child support & alimony. RULE: Spendthrift provision does not protect
the trust income from a divorce decree giving alimony & child
support pmts. In a discretionary trust, corpus
is protected (unless [like here] the trusts instrument allows for pmts in
emergencies to support bene & his children) until the trustee gives
something to the bene.
a)
Ct went w/ public policy arguments—if dude
doesn’t take care of his wife & kids, the state will have to.
b)
Look at the ability of the bene to get at the
trust corpus himself.
4.
Exceptions—limits on the protection of
spendthrift trusts:
a)
Self-settled trusts: spendthrift trust can’t be set up for
settlor’s own benefit.
(1)
In a mandatory trust, creditors are
entitled to reach both income &/or p/al.
(2)
In a discretionary trust, creditors can
reach the max the trustee could pay the settlor or apply for the settlor’s
benefit
b)
Child support & alimony: Shelley is the MAJ RULE.
(1)
Some (TX)
statutes allow cts to order child support & alimony paid from spendthrift
or discretionary trusts.
(2)
TX
requires you to 1st get a judgment in family ct, then take that judgment
against the trust.
c)
Furnishing necessary support: a person who has furnished necessary support
services can reach the bene’s interest in a spendthrift trust. Medical, housing, etc.
d)
Federal tax lien: income can be reached by
the IRS; Fed. tax law trumps state spendthrift trust rules.
e)
Excess over amt needed for support: some
states allow creditors to reach that part of the spendthrift trust income in
excess of the amt needed for the support & education of the bene.
(1)
Station-in-life rule: to determine what amt is
needed for support & education of bene—
(a)
Creditors can reach only the amt in excess of
what is needed to maintain bene in his station in life.
(b)
Useless to creditors if bene was raised w/
substantial luxury; they’re used to living w/ more, so it takes more to support
them.
f)
Percentage levy: some states allow creditors to reach a
certain % of the trust in a garnishment proceeding.
g)
Tort creditors: not settled; but most allow
it b/c they’re involuntary creditors.
5.
Bankruptcy:
A beneficial interest in a spendthrift trust can’t be reached by
bankruptcy creditors.
6.
Support trusts:
a trust that requires the trustee to make pmts of income (or maybe p/al
too) to the bene in amts necessary for the education & support of the bene
in accordance w/ an ascertainable std.
a)
Bene can’t alienate his interest.
b)
Creditors can’t reach the interest, except
suppliers of necessaries can recover through the bene’s right to support.
7.
US v. O’Shaughnessy (p. 643): RULE: in a discretionary trust, the bene has no
interest in corpus or income until the trustee exercises his discretion &
actually gives the bene something. Bene
has a mere expectancy until he gets something.
a)
Creditors standing in the shoes of the bene have
no remedy against the trustee until the trustee distributes the prop.
b)
Cts won’t interfere so long as the trustees act
in good faith, from proper motives, & w/in the bounds of reas judgment.
c)
But, bene can still go after the trustee to
enforce the trust if the trustee acts in bad faith.
8.
Some states allow a creditor to compel a trustee
to pay the creditor b/f he pays the trustee.
9.
Trusts for the state-supported.
a)
Individuals have to meet a financial max to
qualify for Medicaid.
b)
Does a trust count as a resource for this
purpose?
(1)
A trust created by the individual applicant if
the assets of the individual were used to form all or part of the corpus of the
trust & the trust was established by the individual who cares.
(2)
Revocable trusts are considered prop of the
settlor for Medicaid purposes.
(3)
Exceptions.
(a)
A discretionary trust created by the will of 1
spouse for the benefit of the surviving spouse is not a resource for Medicaid.
(b)
If the trust is established for a disabled
individual from the individual’s prop, by a parent, grandparent, or guardian or
the individual or by a ct, & the remainder goes to the state, it does not
count for Medicaid.
H.
Modification & Termination of Trusts.
1.
RULE: trust can be modified or terminated w/
consent of settlor & all benes. No
one else has a beneficial interest.
a)
Trustee can’t object b/c he has not interest.
b)
Power exists even if it’s a spendthrift trust.
2.
If, however, the settlor is dead/does not
consent to the mod/term of the trust, there is a question of whether the benes
can term it if they all agree.
a)
GEN
RULE is Claflin Doctrine— a trust may not be terminated by all of the
benes if it would interfere w/ a material purpose of the settlor.
b)
Exception:
cts may alter the trust if unforeseen circumstances arise that frustrate
the intent of the settlor.
3.
In re Trust of Stuchell (p. 652): Stuchell established a trust w/ his
granddaughter as 1 of 2 surviving benes.
The remainder of the trust was to be distributed among the kids, 1 of
whom was a retard; this would disqualify him for Medicaid. Mom petitioned ct to have the distribution
changed. RULE: a trust may be
terminated if: (1) all the benes agree, (2) none of them is under a legal
disability, & (3) the trust’s purposes would not be frustrated by doing
so. Ct also looks at motive & will
kill the modification if it goes against the wishes of the settlor.
a)
Kids wanted to create a discretionary supplemental
needs trust that would pay wherever social security & Medicare fell
short.
b)
Whatever the retard didn’t use would go to the
other benes.
4.
Changes in Circumstances Doctrine.
a)
In re Walcott (supp.): trust which did not give trustee power to
invade the corpus on behalf of the bene, a surviving wife. Remainder went to settlor’s sons. Trustee had basically all powers except to
invade the corpus. As wife got older,
trustee & benes tried to alter the trust to allow invasion of the
corpus. Problem was that there was a
spendthrift clause that wouldn’t allow them to assign/encumber the corpus. They went to ct; ct allowed them to use the
changes in circumstances.
b)
Requirements: settlor could not have anticipated the
events to come which would affect the bene.
You have to start w/ satisfying Claflin.
c)
Ct has to decide the material purpose of the
trust: to support the surviving spouse,
or to give something to the remaindermen?
Ct said care of wife was paramount.
d)
Would this apply to Stuchell? Maybe, but the material purpose was to split
the trust up among the kids.
5.
Settlor can include in the trust instrument the
power to modify the trust in the trustee or a 3rd party.
6.
Widows may ask to invade the corpus of a trust
created by their husbands that does not give them enough $ to live.
a)
Unless all the remainder benes consent, cts usu.
don’t allow it.
b)
But, trust may be construed as containing a
power to invade, either express or implied.
c) Trusts that create annuities usu. lose buying power w/ inflation, cts also don’t change these.
7. Deviation in exercising powers: cts more liberal in letting trustees deviate from enumerated powers in response to changing situations.
a) Ex: trustee of the Pulitzer family trust was allowed to go against the instrument & sell stock it contained against settlor’s wishes when the stock went into the crapper & put the existence of the trust in jeopardy.
8. TTC 112.051—settlor may revoke the trust unless it’s irrevocable.
a) If the trust is created by a written instrument, the modification & termination must be in writing.
b) Settlor can’t enlarge duties of trustee while settlor is alive, w/out trustee’s permission.
c) The rest of it goes along w/ Claflin Doctrine.
9. In re Estate of Brown (p. 657): Brown died after transferring all his shit into a trust. The income & corpus were to be used for the education of the kids of Brown’s nephew Woolson. After that, the residue was to go to care & maintenance of nephew & his wife in the manner they were accustomed to. At their death, their kids get it. After the education was done, the Woolsons petitioned the ct to terminate the trust & give it all to the kids, saying the purpose of the trust was for the education. RULE: an active trust may not bet terminated, even w/ the consent of the benes, if a material purpose of the settlor remains to be accomplished. The material purpose was also to provide for the parents for life, not just for the education of the kids—remember intent of the settlor.
10. Trust provision in will in syllabus; if the thing isn’t addressed here, look @ trust code (in Prop Code).
11. Trustee can only be removed & a new one appointed if guilty of a breach of trust or has shown unfitness.
a) RULE: inasmuch as the settlor reposed special confidence in the designated trustee, the ct will not change trustees just b/c the benes want to.
b) Usu. also requires that the trustee give an acctng of the trust assets to the benes.
X.
CHARITABLE TRUSTS.
A.
Nature of Charitable Purposes.
1.
When there’s a charitable bene in a will, you
have to put it in your application to the probate ct; the AG of the state is
responsible for keeping up w/ charitable benes.
2.
Diff. b/t private & charitable: charitable is not subject to RAP, private
trust is.
3.
If a charitable trust is found not to be
charitable (or the charitable entity fails), it fails & lapses & goes
by resulting trust back to settlor or his estate
4.
Shenandoah Valley Nat. Bank v. Taylor (p. 859): settlor created a perpetual trust w/ his
$86,000 & Shenandoah as trustee.
Funds were to be invested & the income paid to 1st, 2nd, & 3rd
grade students at some school. Each kid
was to get an equal cut, to use for his education. Distant relative of Taylor challenged the
trust as not being charitable. Problem
was the timing of the gift (just b/f x-mas & Easter) & no trustee
oversight to ensure the $ was in fact used for education. Just having the trustee give the $ to the
kids does not fulfill the charitable purpose; it was only a gift. You can’t set up a charitable trust to just
give gifts; this as a private trust violates the RAP.
a)
We might’ve been able to save this trust today,
w/ perpetuities reform—allow it to exist as a pvt. trust for 21 yrs. & then
trust terminates (“wait & see”).
b)
Difference
b/t charitable & benevolent trust = a benevolent trust is private &
subject to the rule against perpetuities; a charitable trust is public &
not subject to the rule.
c)
RULE: for a perpetual charitable trust to be valid,
it must provide relief to the poor or needy or otherwise benefit or advance the
social interest of the community.
5.
To be classified as charitable, a trust that’s
for the benefit of a class of persons & not for the benefit of the
community at large must be for the relief of poverty or for the advancement of
education, religion, health, or other charitable purposes.
a)
A trust is not charitable merely b/c it’s for
the benefit of a class of persons.
b)
Ex: a trust for the benefit of sick/needy e/ee’s is
charitable, a trust for the general benefit of e/ee’s is not.
c)
It may be valid although the persons who benefit
are limited in #.
d)
A trust to educate a particular person or named
persons is not charitable; neither is one to educate the descendants of
the settlor.
e)
Exceptions: a trust to educate young
people w/ a preference for descendants of the settlor’s grandparents is
charitable; a trust to send a chick through medical school w/ the promise she’d
return to practice in the testator’s hometown is charitable.
f)
Charitable
purposes include:
(1)
The relief of poverty;
(2)
The advancement of education;
(3)
The advancement of religion;
(4)
The promotion of health;
(5)
Governmental or municipal purposes; &
(6)
Other purposes the accomplishment of which is
beneficial to the community.
6.
A trust can’t benefit a political party—against
public policy. You can’t endow
perpetually a political party.
a)
But, you might get away w/ trust for the
improvement of gov’t through the views of a political party.
7.
When making a document that has a charitable entity,
make sure you get the name right.
B.
Modification of charitable trusts—cy pres.
1.
Cy
pres: a royal prerogative power
which made charitable gifts have to comply w/ the king’s public policy.
a)
Ex: Jewish guy left a trust for the purpose of
teaching Jewish law & religion.
Since the $ was left to promote a religion other than the one the king
liked, the king allotted the $ to instruct the Christian religion.
b)
Cts here reluctant to adopt it; recently have
used it to meet testator intent in changing circumstances.
c)
A general
charitable purpose must exist b/f cy pres will be applied.
2.
Applies
where the purpose of a trust has become:
a)
Illegal;
b)
Impossible;
OR
c)
Permanently
impracticable of performance.
d)
Make the
trust as near as possible to the settlor’s intent.
e)
Ex:
a trust for research for a cure for cancer only & a cure is
found. The trust then becomes impossible
& it goes back to the settlor as a resulting trust.
f)
Ex:
a trust for cancer research only in a particular hospital. If the hospital shuts down, the trust becomes
impossible. Cy pres can be used to get
the funds to another hospital.
3.
TTC
5.043—cts intent to reform a trust that violates the RAP. Cts can reform a trust that violates the RAP
to make it conform to the rule using cy pres.
If part of it does not violate RAP, the ct will not touch these parts.
4.
In re Neher (p. 870): Neher willed her home to Red Hook Village to
be used as a memorial to the memory of her husband; was to be called the
“Herbert Neher Memorial Hospital.” The
Village later found it did not have the resources to establish a hospital on
the prop, & another hospital nearby served the community well enough. Village petitioned the ct to erect a building
for the Village’s administration & called the Herbert Neher Memorial
Hall. Ct denied petition & appeals
affirmed. RULE: where a will
gives real prop for a general charitable purpose, the gift may be reformed cy
pres when compliance w/ a particular purpose grafted on to the general purpose
is impracticable.
5.
Applying
the TX rule to Shenandoah Valley.
a)
Cts would
reform the trust by waiting for 21 yrs to see what happens.
b)
It would
eventually fail, but we’d still wait & see.
c)
When it
does fail, it goes back to settlor’s estate as a resulting trust.
d)
Cy pres
doesn’t apply, b/c no general intent to begin w/.
6. Administrative Deviation.
a) Ct permission to deviate from the administrative terms of a trust when compliance would defeat or substantially impair the accomplishment of the purposes of the trust.
b) Cts will interpret “administrative” broadly on appealing facts.
c) Maybe the better choice for application in Buck.
7. AD vs. Cy pres.
a) For cy pres to apply, you need 1 of the 3 I’s.
b) For AD, you still want to do what the settlor wants, you just want to administer it differently.
c) The merger of Hermann Hospital w/ Memorial was administrative deviation—let us administer it differently in allowing the hospital to become part of the Memorial system.
8. The Buck Trust (p.872): chick left oil co stock worth $9M to a trust to benefit Marin & other Calif. counties—a larger % to Marin; the stock went up in value to $300M & the trustees asked for a cy pres change to get more $ to the other counties. No opinion was published b/c the trustees dropped the suit. The ct refused to apply cy pres, saying: inefficiency of trust expenditures in one location given greater relative needs or benefits elsewhere do not constitute impracticability. The situation is not the equivalent of impossibility; nor is there any threat that the operation of the trust will fail to fulfill the general charitable intention of the settlor.
a) Cy Pres—Restat. of Trusts— if prop is given in trust to be applied to a particular charitable purpose & it is/becomes impossible or impracticable or illegal to carry out the particular purpose, & if the settlor manifested a more general intention to devote the prop to charitable purposes, the trust will not fail but the ct will direct the application of the prop to some charitable purpose which falls w/in the general charitable intention of the settlor.
b) None of this applied here, b/c the trust could still be carried out. This case is relegated to its facts; may’ve changed the case on appeal.
9. Racially/gender restrictive charitable trusts.
a) If the trustee is a governmental body, cts have held that the administration of the trust in a racially discriminatory manner violates the equal protection clause; the racial restriction is unenforceable.
(1) Cts applying cy pres or deviation often say the testator would want the trust to continue w/out the racial restriction.
(2) Ex: scholarship to the top male student who excels @ chemistry, to be decided by the superintendent. Being gender specific violates the Equal Protection clause.
(a) AD could be used to take out the super; have the students apply directly to a private trustee.
b) If the trustee is a private person, it does not violate the const. But, it may break state or fed discrimination laws.
(1) If it does break the law, cts will let it continue under cy pres or deviation.
(2) See examples, 878–79.
10. Barnes Foundation (p. 879): ct allowed AD to change the hours of a museum to allow for greater income for trust.
11. Evans v. Avney: racially discriminatory trust that had to do w/ maintenance of a public park in Ga, for whites only. Trustees applied to ct to have the trust changed to allow anyone to enter the park. Ct considered the intent of settlor, which was bigotry. Allowed the trust to stand, no application of cy pres or administrative deviation. The prop went back to the settlor’s estate.
12. Rice University is another example of AD; the trust was to have “a 1st class university for the white inhabitants of Houston, free of charge.” Obviously, this did not stick. Purpose not impossible, so no cy pres. Still have to consider the donor’s intent.
C. Supervision of Charitable Trusts.
1. Carl J. Herzog Foundation v. U of Bridgeport (p. 883): P contributed to D’s nursing school to establish scholarships for needy students. D closed its nursing program in ’91; the $ was then being used in the general scholarships. P sued to have the $ used as specified in the gift instrument. Application of cy pres b/c original purpose of trust became impossible. RULE: donors don’t have standing to enforce the terms of a gift where there was no express reservation of control over the disposition of the gift.
a) Standing: established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved.
b) CL rule was that donors have no standing to challenge what is done w/ a gift.
c) Donor can’t do anything b/c he has no ongoing prop interest in the prop—it’s not his anymore.
(1) Keeps donor from harassing the trustee.
(2) You get tax advantages when you give something away; you can’t give it away & then have something to say about it.
d) The AG of the state can bring suit to enforce the terms of a charitable trust, as can any other public officer, a co-trustee, or any person who has a special interest in the enforcement of the charitable trust. But, not by persons who have no special interest or by the settlor or his heirs, personal representatives or next of kin.
e) Possible solutions under cy pres—give the $ to other medically-related departments in the same university.
2. Benes w/ special interests—can enforce a charitable trust.
a) Person must show that he is entitled to receive a benefit under the trust that is not available to the public at large or to an avg. bene.
3. The trustee-bene rela:
a) Trustee has duties to the benes, not to the settlor.
b) Essentially the same as a modern 3rd-party-bene-K.
4. The Bishop Estate (p. 896): trust established by a descendant of Hawaii’s last king. The assets are estimated at $10B—including 8% of Hawaii’s land mass & 10% of Goldman Sachs. The 5 trustees were appointed by the Hawaiian SC; they were to build 2 schools—1 for boys, 1 for girls—“giving the preference to Hawaiians of pure or part aboriginal blood,” & to expend the annual income of the trust on the maintenance of the school. 2 schools were built, later merged into 1. Today the school has 3,000 students, w/ 30,000 applicants. Some of the breaches of trust:
a) Moving $ against the orders of the trust instrument;
b) Self-dealing;
c) Lack of accounting/safeguards.
XI.
TRUST ADMINISTRATION.
A.
Duties of the Trustee/Administrator.
1.
Loyalty: trustee must administer the trust solely in
the interest of the beneficiaries. Duty
of undivided loyalty to benes.
a)
Hartman v. Hartle (p. 903): son bought home at estate sale for his
sister, the wife of 1 executor. She
split the $ w/ the other kids (as per the will), then turned around & sold
it for more a few days later. RULE: thou shalt not self-deal; trustee’s spouse
can’t buy at a trustee’s sale (just like the trustee can’t) w/out leave of
ct. Indirect benefits also count. If she kept her $ separate, he’s still
receiving a benefit. Selling it to your
adult child is also a benefit to trustee.
Any further away in relations is a question of fact. You also can’t have a friend buy it & you
later buy it from the friend. Don’t sell to anyone you know, or anyone
you’re related to.
b)
When self-dealing is discovered, the trustee’s
good faith & reas of the transaction are irrelevant (“No Further Inquiry
Rule”). Options for benes—
(1)
Benes can hold trustee accountable for any
profit made on the transaction, or,
(2)
If trustee has bought trust prop, can compel him
to return it to the trust, or,
(3)
If trustee has sold his prop to the trust, can
compel the trustee to pay back the purchase price & take back the prop.
c)
Only
defenses to self-dealing:
(1)
Settlor authorized it; or
(2)
Benes consented after full disclosure (get it in writing—CYA).
(3)
Even here, the transaction must be fair &
reas.
d)
Trust
Pursuit Rule: equitable remedy
for breach of trust—
(1)
If the trustee, in wrongfully disposing of trust
prop, acquires other prop, the bene is entitled to enforce a const. trust on
the prop so acquired, treating it as part of the trust assets.
(2)
Also applied where the prop ends up in the hands
of a 3rd person, unless the 3rd person is a bfp w/out notice of the breach of
trust.
(3)
A 3rd party who takes w/ notice or gives no
value does not hold the prop free of the trust.
e)
In re Rothko (p. 906): not about self dealing, it’s conflict of
interest of the executors selling paintings to Marlborough, an art gallery
where 1 of the executors was on the board.
If a co-executor knows the others are breaching the trust duties, he
can’t be passive & act like there’s nothing going on.
(1)
Duty of loyalty to benes of a trust or a will
are the same.
(2)
This wasn’t quite self-dealing, but very close.
(3)
Ct allowed appreciation dgs in this case b/c the
actions of the trustees were inherently wrongful; they were under a duty to retain
the assets under the trust instrument.
(4)
Paintings sold to a 3rd party purchaser who had
no notice of the breach of trust can’t be recovered.
2.
TTC—allows
the trustee to waive the self-dealing exclusion.
3.
Read
& study the terms of the trust instrument, even b/f you’ve decided to
accept.
4.
Co-trustees—when there is more than 1 trustee,
the trustees of a private, noncharitable trust must act as a group w/
unanimity, unless the trust instrument provides to the contrary.
a)
1 trustee may delegate to another ministerial
duties that don’t require the exercise of discretion.
b)
A co-trustee can’t delegate discretionary
duties, they can be exercised only by co-trustees together.
(1)
Ex: purchase/sale of trust assets, investment of
trust funds, allocation of receipts & disbursements b/t principal &
income, & discretionary pmts of income/principal to benes.
(2)
It’s improper for 1 trustee to leave the others
the custody & control of the trust prop.
c)
A co-trustee is liable for the wrongful acts of
a co-trustee to which he has consented or which, by his neg or through
inactivity or wrongful delegation, he has enabled a co-trustee to commit.
d)
TX Rule:
a majority of the co-trustees can make a decision.
e)
But, in
TX, the act of co-executors is the act of all.
f)
Problem,
p. 918. Trustee that went on
vacation w/out making accommodations for investing while he’s gone is neg. He also sat around & waited for 6 months
w/out getting out of the investment.
5.
Not to
Delegate: trustee under duty to
bene not to delegate to others the acts which the trustee can reas be required
personally to perform.
a)
Sometimes, there may be a duty to
delegate—trustee may need to hire an accountant to keep the trust’s books, hire
an attny to defend the trust against attack.
b)
Certain ministerial functions can be attacked.
c)
Does not
absolve the trustee of the duty to supervise what’s going on w/ the stuff he
delegated.
d)
Shriner’s Hospital v. Gardiner (p. 922): Gardner created a trust to pay to her kids,
Shriner’s was remainderman (they are benes, so they have standing). Trustee tried to delegate her duties to her
brother Charles. Charles (stock broker)
embezzled trust funds; trustee tried to hide behind the fact that she delegated
to him. RULE: trustee can
delegate for expert advice, but trustee still responsible. Made no difference that Charles was also 1st
alternate trustee. She failed to
adequately monitor the trust balance sheet—she could’ve easily learned that the
$ was going somewhere else.
6.
Defend
the trust against attack:
7.
Duty
of Impartiality in Dealing w/ Income Bene & Remaindermen.
a)
Interests often clash when income bene wants $
now & remaindermen want the corpus built up.
b)
Depends on the primary intent of the trust—was
it to keep the life tenant, or provide for the remaindermen?
8.
Duty
to Retain Trust Documents & Vouchers & Keep Records.
a)
All doubts are resolved against the trustee.
9.
Account
to Beneficiaries.
a)
As often as is stated in the trust instrument.
b)
TTC—if
it’s silent, no less than every 12 months.
B.
Duties relating to care of the trust prop.
1.
Duty
to Collect & Protect the Trust Prop: duty to obtain possession of & secure the
trust prop w/out unnecessary delay (as soon as is reas possible).
a)
What is an unreas delay depends on the
circumstances.
(1)
Trustee probably has a duty to make
administrator/executor hurry up & give the prop over.
b)
When a testamentary trust is established, the
trustee should collect the assets from the executor as promptly as
circumstances permit.
c)
Testamentary trustee also owes a duty to the
benes to examine the prop tendered by the executor to make sure it is what the
trustee ought to receive.
(1)
So, trustee must look at the acts of the
executor & require the executor to redress any breach of duty which
diminished the assets intended for the trust.
d)
Once he gets the prop, trustee must act as a
prudent person in preserving it.
(1)
Ex: keep buildings in repair, guard against
theft, pay taxes, & insure against loss by fire.
(2)
He also has to get ahold of documents necessary
for this trust prop (deeds, mortgages, certificates, etc.).
e)
Trustee may be responsible for losses.
(1)
Ex: an inter-vivos trust w/ a will that pours
over prop into the trust. Trustee may be
responsible (breach of duty to protect) for embezzlement of executor that
occurred while the trustee sat around & waited for the prop to pour in.
(2)
Trustee has no duty to use his own funds for
anything having to do w/ the trust.
f)
Trustee has to get a ct order to abandon
worthless prop.
2.
Duty
to Separate & Earmark Trust Prop:
differentiate b/t trust prop & trustee’s own prop.
a)
Earmark:
put the name on accts, etc. w/ your name, as trustee in trust for the
bene. Trust stuff is labeled as trust
stuff.
b)
Separate:
keep it apart from your own assets.
c)
Reason:
trustee may claim that profitable investments were his own, losers were
the trust’s; you confuse your assets w/ trust assets.
d)
Exception: a trustee may invest in bonds payable to
bearer instead of registering the bonds in the name of the trustee.
e)
RULE: trustee is liable for losses that result from
the failure to earmark, not losses from general economic conditions.
3.
Duty
to not Comingle: breached when
trustee mingles the trust funds w/ his own, even if he doesn’t use the trust
funds for his own purposes.
a)
Commingled trust funds become more difficult to
trace & hence subject to the risk that personal creditors of the trustee
can reach them.
b)
RULE: trustee is liable to the extent commingling
caused a loss to the trust.
4.
Duty
to Make the Trust Prop Productive:
make sure that the trust prop is providing income for the benes.
a)
Std = what a reas, prudent investor would do in managing
his own affairs; how a prudent person would deal w/ the prop of another.
b)
Is the income:
(1)
Discretionary; or
(2)
Mandatory.
c)
Trustee may be responsible for sitting too long
b/f investing.
d)
Trustees typically invest conservatively; ct
looks for a diversified investment & the performance of the whole
fund. You should diversify.
C.
Powers of the Trustee.
1.
No inherent powers; everything comes from trust
instrument.
2.
But, powers not limited only to what’s listed;
some are implied to carry out the expressed powers.
3.
In some circumstances, cts will grant trustee
powers not expressed or implied in the instrument—i.e., administrative
deviation.
4.
Problems,
p. 954.
a)
B does
take Blackacre free from the trust. A
purchaser who knows he’s dealing w/
trustee must make due diligence to determine whether the transfer is in breach
of trust. If he reas believes that it’s
not a breach of trust, the purchaser is protected. What can bene then do? Sue A for the breach of trust, the duty to
protect the assets or inform the bene.
No const. trust avail b/c B is a bfp.
b)
If the
seller knows that the trustee has a duty not to invest in nonincome producing
prop, the seller is participating in the breach of trust & may be liable.
c)
A
majority of trustees must act in TX (for 2, it’s 2). No, A can’t be compelled to pay again. A probably reas relied on his tendering of
the check to Y. Tough crap, the sale’s
good.
D.
Investment of Trust Funds.
1.
Estate of Collins (p. 957): testator’s will created a testamentary trust
for his wife & kids. Trustees were
allowed to invest $50,000 from the trust corpus. Lawyer trustee loaned the $50,000 to 2 clown
real estate developers; the loan was secured by a 2nd mortgage on prop. The 1st lender foreclosed & the trust got
screwed as 2nd mortgagor. Trial ct said
it was alright; appeals reversed.
Appeals ct said they violated the duty to diversify (2/3 of the corpus
in 1 asset); investing in 2nd mortgages is risky (1sts are better); they didn’t
have the land appraised; relied on info from the real estate developers themselves
about their credit worthiness. The broad
language of the trust instrument did not allow the trustee to make improper
investments; it allowed them to be good trustees.
2.
Exculpatory clause: inserted into trust instrument to protect the
trustee from anything short of gross neg.
a)
Will not
be given effect if the result is to allow a fiduciary to act in bad faith or w/
reckless indifference to the interests of the benes.
3.
Witmer v. Blair (p. 962): grandmother trustee who had to keep $6,000
for her 7-yr-old daughter’s college. She
stuck it in a checking acct & didn’t do anything w/ it. Ct held the failure to invest the $ was a
breach of trust & made grandma pay the interest it could’ve earned sitting
in the acct.
4.
TTC requires
trustee to diversify the trust assets, unless it would be imprudent to do so.
5.
See Restatement of Trusts, p. 965.
E.
Liability of Trustee to 3rd Parties.
1.
Environmental cleanup is a big area here.
2.
Valley National Bank v. City of
Phoenix: trustee purchases a
landfill prop (allowed by instrument); the garbage co that operated lost the
land by condemnation. City sued trustee
under CERCLA to get cleanup costs; ct held that trustee had personal liability,
they were owners under CERCLA.
3.
TPC
113.025—a trustee/potential trustee can inspect real estate, do tests on it
for the purposes of determining the potential application of environmental
law. Allows you to test & stuff
w/out being considered a trustee.
a)
$ for testing comes from the trust.
b)
If you’re not sure if you’re allowed, as the ct
for permission. They will allow a
potential trustee to get $ from the corpus.
F.
TX Prop
Code 113.056. Std. for Trust Mgt &
Investment.
1.
113.056(a)—unless
the inst. provides o/w in acquiring, investing, reinvesting, exchanging,
retaining, selling, supervising,& managing trust prop, the trustee shall
exercise the judgment & care under the circumstances then prevailing that
persons of ordinary prudence, discretion, & intelligence exercise in the
mgt of their own affairs, not in regard to speculation but in regard to the
permanent disposition of their funds.
The investment of all the assets of the trust will be considered, not
the prudence of a single investment.
2.
113.056(b)—w/in
the limits of (a), trustee may acquire & retain every kind of prop &
every kind of investment that persons of ordinary prudence, discretion, &
intelligence acquire/retain for their own acct.
3.
113.056(c)—w/in
the limits of (a), trustee may indefinitely retain prop acquired under this
section w/out regard to its suitability for original purpose.
XII.
GUARDIANSHIPS.
A.
Purpose.
1.
To protect interests of proposed ward.
2.
Definitions—TPC
601.
a)
Ward—someone who has a guardian appointed by a
ct.
b)
Guardian—a person who is appointed guardian, or
a temporary or successor guardian. Has a
fiduciary rela. w/ the ward. 2 types:
(1)
Guardian
of person of a person;
(a)
Has the right to physical possession of the
ward.
(b)
Duty to care, control, & protect the ward.
(c)
Has the right to make medical care decisions,
even make end-of-life decisions.
(i)
Harris cty requires a ct hearing b/f this is done.
(2)
Guardian
of the estate of a person.
(a)
Right to possess all of ward’s prop.
(b)
Right to enforce agreements on behalf of ward.
(c)
Manage estate by prudent person std.
(d)
Acct for rents, profits, etc from the estate.
c) Incapacity—a minor; an adult who, b/c of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself, to care for the individual’s own physical health, or to manage the individual’s own financial affairs; OR a person who must have a guardian appointed to receive funds due the person from any gov’t source.
(1) Dementia, alcoholism, etc.
d) Venue—application must be filed in cty in which the proposed ward resides/is located on the date the application is filed or in the cty in which the principal estate of the proposed ward is located.
e) Attny ad litem—always appointed as advocate for a ward.
f) Guardian ad litem—appointed at the discretion of the court or by application, advocates the best interest of the ward. Officer of the ct.
g) Ct investigator—
3. Getting a guardianship.
a) Application filed w/ ct.
b) Requires a medical basis—TPC 687.
c) Ct requires guardian be bonded (like an ins. policy).
4. Acts permitted by a guardian.
a) Much oversight by ct, must file acctg, investment plan, mgt. plan.
5. Alternatives to guardianship.
a) B/f incapacitation:
(1) Durable PoA (TPC 12); allows A to make financial decisions on the part of ward.
(2) Durable PoA for health care (H&S Code); allows person to make health-care decisions on the part of another person.
b) Designation of guardian—while person has capacity, you can decide who you want as your guardian & also restrict the participation of others.