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Wills and Trusts MA


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What is probate?
Probate = court procedure to
1. Determine that D left a validly executed will - or died w/o will and intestate heirs are determined
2. Personal representative appointed to administrate estate
i. Intestate - heirs
ii. Will – beneficiaries
When do we go to intestacy?
Intestacy applies when:
1. No will or bad will
2. Will doesn't dispose of entire estate
3. Heir successfully contests will and will denied probate
4. Testator marries after will execution - will revoked by operation of law
How does distribution through intestacy work? What share does the spouse receive when:

1. Spouse + Issue
2. Spouse + No Issue
3. Spouse + No Issue + No Kindred
1. D survived by Spouse and issue - spouse takes 1/2 of estate, issue take per capita with representation - (if issue dies, his children take per capita of his share)
2. No issue - Spouse takes first 200k + 1/2 of estate - Kindred (first they find - starting w/ parents then siblings, then g-parents, aunts, etc.)
3. No issue/No Kindred - Spouse takes all - won't happen, since no limit on kindred
What other statutory rights does a surviving spouse get, besides dower or elective share?
1. Right to occupy - 6 mo

2. spousal allowance

"In addition, E is entitled to the following statutory rights, which take precedence over creditors' claims. These amounts are over and above the amount passing to E under ⬦"
1. Right to occupy residence for 6 mo
2. Spouse's allowance
What do the issue of the decedent get?
Inheritance by issue - per capita w/ representation (per stirpes) - go to first generation where living issue, divide per capita, and missing issue, divide his share per capita among his issue.
What is the intestate share if there is neither spouse nor issue?
Intestate decedent not survived by spouse or issue
1. All to parents (1/2 each) or surviving parent
2. No parents - to issue of parents - per capita w/ representation
3. No issue of parents - to nearest degree of kindred - no limit on degree
What rights do adopted children have?
Adopted Children - full inheritance rights - once final decree of adoption is entered - no inheritance rights from parents who lost rights
What rights do non-marital children have?
Non-marital children - NO rights UNLESS:
a. M & F married after birth and F acknowledged child

b. Paternity suit

c. Paternity established by probate w/in 1 year after D's death

MA PA2 (Married & Acknowledged, Paternity suit, paternity established by probate)
What about children that are conceived posthumously, what rights do they have?
Posthumously conceived - yes IF:
a. D consented to posthumous conception
b. Consented to support resulting child
c. Prompt and orderly administration of estate not compromised - no guidance as to precise scope of P&O admin
What happens if two people die almost simultaneously?
Deaths in quick succession - Uniform Simultaneous Death Act - USDA - when no sufficient evidence that the persons didn't die simultaneously THEN presume each predeceased the other.
Example: JT With right of survivorship, both die simultaneously, 1/2 distributed through A's estate as though A survived and 1/2 through B's, as though B survived.
What about lifetime gifts? Can they count as an advance on the will?
Lifetime gifts to heir or will beneficiary - Lifetime gifts are not an advancement unless:
i. Declared as such in a contemporaneous writing by the donor
ii. Acknowledged as such in a writing by the donee
Can I disclaim a gift from the will?
Disclaimer by Heir or Beneficiary
i. Must be in writing and signed

ii. Must be filed w/ probate court w/in 9 months after decedent's death
What are the major nonprobate assets?
Nonprobate Assets - major types:
1. Property passing by right of survivorship (Joint bank account, tenancy by entirety)
2. Property passing by contract (life insurance, employee retirement benefits)
3. Property held in trust
4. Property over which the decedent held a power of appointment.

Mnemonic - CATS - Contract, Appointment, Trust, Survivorship
What’s required for a validly executed will?
T must be 18 years old

1. Signed by testator

2. Two attesting witnesses

3. Testator must sign (or acknowledge earlier signature) in each witness's presence

4. Each witness must sign in the testator's presence

Mnemonic: When I turned "18". Dad SIGNed a loan and got me 2 PRESENCE. (18, signed, 2, presence, presence)
What about codicils? Do they have the same requirements?
Yes -=> Codicil must be executed with same formalities
What doesn’t MA require in its wills?
MA Does not require:
a. Sign at foot or end of will
b. Witnesses know they are signing will
c. Witnesses sign in each other's presence

Doesn't matter if need help signing, signature illegible, witnesses not sign in each other's presence, W thought witnessing something else
What about if the Testator signs after the Witnesses?
T signs right after Ws - 2 old cases say W must sign after T, but modern view (cases in other J) exact order unimportant
What is meant by in the presence of the testator?
Presence - w/in line of sight - If could see the W if you turned, then okay (some other J in more recent cases require conscious presence test - must see and be conscious of what they're doing)
What happens if a witness gets something under the will?
Interested witness statute - W gets nothing from will, unless he's an extra witness
Are holographic wills allowed?

When will an out of state will be probated?
Holographic wills - not allowed

A will from another state will be probated if executed in accordance with:
1. MA law
2. Execution law - state where executed
3. Domicile law - state where domiciled at signature or time of death
Mnemonic – MED
What Constitutes valid revocation?

Can it be on the back of the will?

Can I revoke by proxy? I can't reach the pen.
i. Later testamentary instrument
ii. By physical act - burning, tearing, canceling or obliterating
iii. Operation of law

Mnemonic - POT (Physical, Operation, Testamentary)

Words of revocation on will must touch the writing of the will - VOID written on back not effective

Revocation by proxy okay - but must be at (1) T's direction and (2) In T's presence
What happens if you lose a will?
Proof of lost wills rule

1. Prove due execution - bring in the witnesses

2. Prove non-revocatory cause of will loss

3. Contents must be proved by secondary evidence (xerox) (oral testimony must be "strong, positive and free from doubt.")
What do we presume when a will is lost or mutilated?
Presumptions as to revocation
1. When will last seen in T's hands, loss = revocation
2. Last in T's hands, mutilation = revocation
3. When last w/ someone adversely affected - no presumptions
Can a revoked will be revived?
Revival of revoked wills - 2nd will revokes first, later destroy 2 to revive 1.
1. Majority rule - no revival of revoked wills

2. MA - not revived unless:
1) Will is still in existence and
2) Evidence that T intended to revive earlier will

3. Dependent Relative Revocation
Okay, so what’s Dependent Relative Revocation?
Dependent Relative revocation

1. DRR permits a revocation to be disregarded when the act or revocation was premised upon, or dependent on, a mistake of law or fact as to the validity of another disposition.

2. AKA "second best solution" DRR not applied unless distribution that results from disregarding revocation comes closer to doing what T wants than intestacy. (So, works for increases in benefits, but probably not for decreases, T presumably would prefer nothing to go to B than greater amount in Will 1)
What happens when there’s a change on the face of the will?
Changes on the face of the will after it has been executed - revokes part crossed out, does not instate the added part.
1. So, cross out $2k and put in $5k, you've just revoked the $2k.
A. DRR would get you the $2k
2. Cross out name and put in new name
A. DRR doesn't save anything.
3. Cross out and change before will signed/witnessed - valid if can be established by proof
What happens when the beneficiary dies during the testator’s lifetime – specific gift?
Anti-Lapse Statutes
MA anti-lapse statute applies if predeceasing beneficiary was a child or other relative by blood or adoption of the testator
1. Must have been child or other relative by blood or adoption of T
2. Must have left issue who survived T
Stuff passes to issue of predeceasor - unless terms of will forbid it (To Sam if he survives me)
What happens when there’s a lapse in a residuary gift?
Lapse in residuary gift - surviving residuary beneficiaries rule
If residuary estate is devised to two or more persons and gift to one of them lapses, surviving residuary beneficiaries take the entire residuary estate, in proportion to their interests

Anti-Lapse statute trumps surviving residuary beneficiaries rule
What happens when there’s a lapse in a class gift?

What if the class is made up of named individuals?

When is a class closed?
Class gifts - if class gift ("children" "brothers and sisters") then if class member predeceases T, Class members who survive T take (unless anti-lapse applies)

Named B's who constitute class take individual share, missing part goes as per rest of will (residuary) ["A, B, C, the children of J]

Subject to anti-lapse

Class closed on death of T - rule of convenience (280 day gestation period)
What happens when the testator gets married after his will is executed?

What happens if I make a codicil to this will after the marriage?
Marriage - Marriage revokes will in its entirety (unless it appears from the will face that it was made in contemplation of marriage)

Can be revived by codicil (Republication by codicil)
What happens when the testator gets divorced after his will is executed?
Divorce - will revoked as to divorced spouse - as if they predeceased T - Anti-lapse does not apply, since they are related by marriage, not blood
What happens when the will forgets a child?
Omitted Child - any child, whether alive when will was executed or born/adopted after takes intestate share, unless evidence shows omission was intentional OR child provided for before death - will applies to remaining assets

Out of wedlock children - take if they would be heir in intestacy - see above

Gifts to "children" include out of wedlock if they would take as heirs in intestacy
What are the order of priority for testamentary gifts?
1. Specific devise - gifts of specifically described property
2. Demonstrative legacy - general amount from specific source
3. General legacy - Amount only
4. Residuary gift - remainder
5. Intestate property - if no residuary, remainder goes to intestate

Mnemonic: Some Dumb Girls Read Internet (Specific, Demonstrative, General, Residuary, Intestate)
What if there is not enough money to pay all the testamentary gifts?
Abatement of legacies to pay debts - if debts, pay in reverse order, intestate, residuary, general/demonstrative, then specific. W/in each class, no distinction b/w real/personal property.

Exception - gifts to spouse and minor children = last to abate
What happens if the property that is specifically devised disappears?
⬢ Specifically devised property not in estate at death - ademption by extinction - gift fails

Exception - property sold by guardian or conservator - B entitled to proceeds if traceable in estate at T's death.

⬢ Doesn't apply to demonstrative gifts - except the property named has to be sold first to satisfy gift

Watch for equitable conversion !
What happens when there’s a bequest of stock or other securities?

Characterize these two devises (Specific, demonstrative):

"I give my 100 shares of IBM stock to A"
"I give 100 shares of Kodak to B"
Bequests of stock or other securities

"I give my 100 shares of IBM stock to A"
"I give 100 shares of Kodak to B"

First is specific devise, second is demonstrative - ademption applies to first, not second

If B would benefit from shares (Kodak splits) then treat as specific
What happens if the property I’ve devised is subject to a lien?
Specific gifts of property subject to lien - property not exonerated of lien unless will directs exoneration - exoneration of lien doctrine abolished by statute
What happens if I want to incorporate an external document?
Incorporation by reference - can incorporate other writing IF
1. Writing in existence when will executed
2. Will shows intent to incorporate writing
3. Will describes writing in sufficient detail to permit identification
Exception to 1) when writing describes disposition of tangible personal property, can be changed at any time
What if I refer to something outside the will? (“I give my car to A" then buy new car )
Acts of independent significance - Lifetime acts w/ lifetime motive or purpose don't affect will ("I give my car to A" then buy new car, doesn't change that A gets car)
Same effect for "contents of sea chest"
Except - don't get Title documents - only get tangible property and cash
What’s the general rule about mistakes on wills that are unambiguous?
Mistakes or ambiguities - plain meaning rule - unambiguous will = no extrinsic evidence to show mistake - conclusive presumption that T read and intended contents of will

("I give 200 shares to A" - meant 100 shares, no extrinsic evidence)
What if there’s a latent ambiguity because of misdescription? I give a gift to John Paul Jones, but I have a nephew John Peter Jones and one named John Paul Stephens.
Latent ambiguity b/c misdescription - extrinsic evidence admissible - allows court to find meaning of words used, as opposed to above where changing meaning of words used.

("I give $100 to John Paul Jones" - has nephew named John Peter Jones and one named John Paul Stevens - extrinsic evidence allowed)
What if there is a patent ambiguity on the will? ("I give Twenty-five dollar ($25,000) to A")
Patent ambiguity - OLD MA cases say no evidence allowed, but modern trend in other J is to allow extrinsic evidence (Wigmore criticized MA law, 50 years ago)
("I give Twenty-five dollar ($25,000) to A")
What if there is a mistake in the inducement?

("B/c A got lots of money from H, I'm not giving her anything." But, H's estate wiped out by debt.)
Mistake in the inducement - absent fraud - no relief

("B/c A got lots of money from H, I'm not giving her anything." But, H's estate wiped out by debt.)

DRR limited to mistake as to validity of another disposition - this is mistake as to fact of other disposition
What if there is fraud in the inducement? (I get you to sign a will pretending it’s a credit application)
Fraud in the inducement - constructive trust in A's favor
What requirements for contracts relating to wills?
Contracts relating to wills - Statute of frauds applies

If oral contract, should pursue quantum meruit claim against estate for reasonable value of services if performed in expectation of payment.
What about words of disinheritance?
Words of disinheritance are ineffective if partial intestacy - when a will does not make a complete disposition of the estate, words of disinheritance are ineffective - rationale: when property passes by intestacy, it passes pursuant to statute, not decedent's will
What is the liability for a lawyer’s negligence?

Hypo: Income to B for life, remainder to R. T is trustee and T retained L as lawyer - T asked L if investing in derivatives was permissible/prudent. L answered yes, T lost all money
B & R no claim against Lawyer b/c no Attorney-client relationship – The Attorney’s duty runs only to the Trustee who retained him because it would raise a conflict of interest if he represented B and the trustee whose interests are often in conflict (Spinner v. Nutt)

B & R would sue the Trustee who joins the lawyer.
L prepares will for T, but fails to secure two witnesses - can B sue?
Minority rule: No, no privity of contract.

L's duty is to client that contracted for services, only he can sue for negligence

Emerging majority rule: L also has duty to intended B's, privity rejected as defense

MA: No case, argue both ways

(Handwriting on wall, Spinner v. Nutt distinguished majority rule, holding L liable b/c of conflict, probably find no conflict b/w T & B's.)
What is the amount of the elective share?

1. Issue
2. Kindred, no issue
3. No kindred or issue

What do we always say on our essays about the elective share?
Amount of Elective Share (spouse)
1. If decedent was survived by issue (whether by this marriage or other) then
First $25k of personal property + life estate in 1/3 of balance
2. If D was survived by kindred, but not issue
First $25k of personal property + life estate in 1/2 of balance
3. If D had no issue or kindred (extremely rare)
First $25k of personal property + 1/2 of remaining estate outright

Always mention the elective share when answering question, "Since W takes $x under the will, she'd have no reason to file for an elective share which would only give her $y"
Are revocable trusts part of the estate when we’re calculating the elective share?
Revocable trusts are counted in the estate as of 01/23/84. Totten Trusts too (01/23/84) - life insurance proceeds not counted
Where do I have to live to get an elective share? What part of the estate is covered?
Only get election if decedent was MA domiciliary - share covers all personal property regardless of situs and real property w/in MA.
When do I have to file for election?

And if I don't?
Spouse must file for election w/in 6 mo after will is admitted to probate.

Failure = conclusive presumption take under will (unless continuance granted by court)
What about if the spouse is incapacitated can someone make his/her elective share for him/her?
Election may be made for incapacitated spouse with court approval, but not for spouse who dies before probate (intended to protect living spouse, not her estate)
What rules apply for satisfying the elective share?
To satisfy elective share, abatement rules apply. Comes out of residuary first, but property devised to spouse is abated first. (So, if will gives 15k in stock to W, this will be taken first)
Can the spouse waive the elective share by contract?
Right to elective share may be waived by contract, assuming adequate consideration
What if the spouse deserted the decedent, can she still get an elective share?
Surviving spouse is disqualified from right to elective share if he deserted the decedent or if couple has been living apart for justifiable cause.
What if I don't want to take an elective share. What other possibility does a spouse have if he/she has been disinherited?
Dower - (unlikely) can take a life estate in D's real property. Only reason is if D was insolvent, since Dower takes precedence over creditor's claims
Who can contest a will?
Will Contests - only interested parties can contest - only persons adversely affected by will's probate - creditor's don't count. Child born out of wedlock has standing if he would be an heir if D had died intestate
How do I challenge a will based on capacity?
Lack of testamentary capacity - burden on contestants - Test - did T have capacity to:
1. Understand the nature of the act he was doing?
2. Know the nature and approximate value of his property?
3. Know the natural objects of his bounty
4. Understand the disposition he was making

Adjudicated incapacitated evidence of lack of testamentary capacity, but not conclusive.

Mnemonic: how WILL i DIVIDE this CASH between the KIDS (T must understand: Will, Division, Property, Kids)
How do I challenge a will based on undue influence?
Undue influence: Free agency of the T destroyed and the will of the bad actor substituted.

Contestants must prove:
1. Existence and exertion of the influence
2. Effect is to overpower the mind and will of the testator
3. Product is a will (or gift) that would not have been made but for the influence. (Undue influence may be shown for the entire will, or as to one gift in the will.)
What isn’t enough on their own to prove undue influence?
While evidence of UI is circumstantial, these are not enough:
1. Mere opportunity to influence
2. Mere Susceptibility to influence
3. Mere fact of Unnatural disposition

But, a combination of those three (opportunity, susceptibility, unnatural disposition) may be enough.
What if there is a fiduciary relationship between the testator and the beneficiary who gets something?
Fiduciary relationship -=> if benefit from transaction - presumption of undue influence.

Fiduciary must show:
i. T made bequest with full knowledge and intent OR

ii. T had independent counsel
Are no contest clauses okay? Enforceable? Does a will construction suit trigger forfeiture under a no contest clause?
No contest clause - fine regardless of probable cause to file contest - only if contest is successful is the no contest clause voided.
Will construction suit or action against executor alleging improper administration of the estate does not trigger forfeiture
When must a claim against the estate be made?
Estate Administration - all claims against estate must be filed w/in 1 year after decedent's death, unless:

1. New assets discovered
2. Action on claim accrued more than one year after D's death
3. Claim was covered by insurance - to extent covered
4. Where justice and equity require it.

AAIJ (Assets, Accrued, Insurance, Justice)
Can the administrator of the estate dispose of estate assets?
Not by administrator of intestate estate, not by executor or trustee named in will unless given that explicit power by will.
What is a trust?
Trust = arrangement for making gift of property and for management of assets under which trustee holds legal title and beneficiaries hold equitable title
What are the requirements for a valid trust?
Requirements for a valid trust –

(1) Grantor (settlor)
(2) delivers
(3) res (trust property) to
(4) trustee for the benefit of
(5) beneficiaries, with
(6) intent to create a trust. Must be for
(7) Lawful purpose. [No consideration required]

Mnemonic: GeRBIL DaT (Grantor, Res, Beneficiaries, Intent, Lawful, Deliver, Trustee)
What does it mean to have delivery?
Delivery - does not apply to self-declaration (I am trustee) or testamentary trust (will)

But, for inter vivos trust that names 3d party, must deliver property

So, if you die before delivering assets to IV trust, no trust
What are the requirements for a trustee?
Trustee - Individual must have legal capacity to deal w/ property - > 18, capacity to contract, etc. Corp - only banks and trust companies w/ trust powers in charter can be trustees
⬢ Court will appoint trustee if one not named
⬢ Trustee cannot be removed unless cannot perform duties (conflicts w/ beneficiaries only enough when severe conflict)
⬢ Named trustee must have actual power - otherwise, Beneficiary holds fee simple
⬢ So, spendthrift clause w/o other power invalid
What does res mean?
Res - legal title conveyed to trustee - so must have title to convey

Cannot create a trust of an expectancy

Trust must have corpus
What are the requirements for beneficiaries?
Beneficiaries - noncharitable trust must have beneficiaries and interests must vest w/in Rule against Perpetuities time

⬢ Failed trust = resulting trust, which isn't really a trust

⬢ Class gift is okay - look by intestacy rules by analogy to determine who in class

⬢ Charitable trust - must be for charitable purpose (relief of poverty, religious purposes, etc.)

⬢ So, "trust to train spiritualistic mediums" argue both ways

⬢ "scientific proof of sole" - court holds hearing to determine who can best address that purpose
What is the Rule against Perpetuities?
Rule against Perpetuities - No future interest is good unless it must vest, if it does vest, not later than 21 years after some life in being at the creation of the interest.

Example: T devises "to son J for life, and on his death to J's children who have attained age 30."
Can you give me a quick two step process for evaluating the RAP?
Example: T devises "to son J for life, and on his death to J's children who have attained age 30."

Step 1: What interests are created (w/o regard to rule)
J - life estate
J's children - contingent remainder in FS
T's estate - reversion

Step 2: Apply rule - remainder to J's children is void, since it might vest remotely (beyond 21 years)
J's currently living children might die, and J might die with a child under age 10 (meaning vests in that child >21 years after life in being)
Can you give me an example of a bequest that doesn't violate the RAP?
CF - if "on his death to J's children who have attained age 21" that's okay, since even if J dies with child in gestate, there's a 280 day gestation window
⬢ Ignores impossibilities - even 90 year old barren women can have children in RAP
Tell me about the USRAP?
Uniform Statutory Rule against Perpetuities (USRAP) - Alternate vesting period of 90 years. Trust valid if:
⬢ Satisfies RAP
⬢ Actually vests or terminates w/in 90 years after interest's creation
So, very high probability that J's children will reach age 30 w/in 90 years.
What does it mean that I have to have intent to create a trust?
Intent to create a trust - precatory language does not create a trust (It is my wish and desire that T hold G for B in trust.")
⬢ CF - G gives S a check for $10k w/ notation on check "for use and benefit of GSG." This creates a trust
⬢ No particular words are needed to create a trust
What does it mean that a trust has to have a lawful purpose? Anything I need to know WRT to trusts for land?
Lawful purpose - unlawful conditions also unenforceable.
⬢ Encouraging divorce not valid
⬢ Total restraint on marriage not valid
⬢ Partial restraint on marriage (marry Jewish) okay
⬢ Remarriage revocation okay - provides support during widowhood

Oral trusts of land are not valid - statute of frauds - oral trusts of personal property okay
What happens if the grantor is also the trustee?
Self declaration of trust - I'm the trustee, if I don't revoke before I die, then the remainder goes to B - okay
What is a pourover will?
Pourover will - assets from will go into inter vivos trust already set up - valid (i) even if trust is subject to revocation or amendment and is later amended (ii) even if trust is unfunded during T's lifetime (iii) trust can be created after will is signed.
Can you name the trust as a beneficiary to life insurance or employee benefits?

Can creditors reach revocable trusts if the probate estate is exhausted?

Do insurance proceeds have to go to a specific person or is there some way you
You can name trust beneficiary to life insurance, employee death benefits

Creditors can reach revocable trusts if probate estate is exhausted

Insurance proceeds can also go to "trustee named in my will" that's okay - allows one legal fee to set up will/trust
What is the Uniform Transfers to Minors Act (UTMA)?
Uniform transfers to minors act (UTMA) - Allows gifts to minors w/o naming a guardian and also qualifies for tax exemption up to 12k per donee

Custodianship under UTMA is fixed at 21 years of age
The account says, “JT TEN TOD LDPS,” WTF?
JT TEN - Joint tenants with right of survivorship

TOD - Transfer on death

LDPS - Lineal descendents per stirpes
Do charitable trusts have to comply with the Rule Against Perpetuities?
Not subject to RAP - can be perpetual
What is the tort liability limitation for charitable trusts?
Liability of charitable trust limited to $20k.
What happens if we can’t do what the settlor wanted to do in a charitable trust?

What's an honorary trust and will it be enforced?
By statute in MA conclusive presumption that settlor had a general charitable intent, so cy pres must always be applied.

[Similar doctrine - can change administrative terms if changed circumstances would make original terms frustrate primary purpose of the trust.]

Honorary trust - an animal or object is B - only enforceable if the trustee chooses to perform.
What is a constructive trust?
Constructive trust = not true trust - equitable remedy to disgorge unjust enrichment

Appropriate if:

Wrongful conduct &
Unjust enrichment
T wills to A & B. T asks L to prepare will giving estate to D. L returns w/ will and reads it to T in A & B's presence. They wrestle will out of L's hands and T goes into coma.

What happens here?
Step 1: apply law - cannot admit new will - unexecuted, old will not validly revoked
Law result - admit old will to probate
Step 2: apply equity - (1) Wrongful conduct and (2) unjust enrichment = constructive trust - distribute estate to D
What happens if there’s a murder?
⬢ Murder as if murderer predeceases T
⬢ Prove murder by preponderance of evidence, not beyond reasonable doubt
⬢ Murderer does not forfeit his ownership of undivided interests, but does lose right of survivorship
Example S promised M that she'd get estate if she would work as his housekeeper. Gave deed to H saying, "keep in trust for M in consideration of her housekeeping."
⬢ Invalid express trust - SOF
⬢ But, can be constructive trust, if H promised to serve as trustee but had no intention to do so (fraud in the inducement) OR
⬢ Grantor-trustee were in confidential relationship - business associates, father-child, etc.
⬢ If M can prove H promise by clear and convincing evidence constructive trust imposed
⬢ Possible quantum meruit claim for housekeeping
What is a Purchase Money Resulting Trust?
Purchase Money Resulting trust - if A purchases item and puts title in B, presumption that it was in trust for A, unless relatives, then presumption gift
What is a spendthrift trust? How do you create one?
Prevents the beneficiary from assigning away the assets or benefits.

Creditors cannot reach assets.


No interest of beneficiary assignable nor subject to any claim by creditors.

"No interest of any beneficary herein shall be assignable by such beneficiary nor shall it be subject to the claims of the beneficiary's creditors by attachment or other legal process."
Are spendthrift trusts valid?

If they're valid, what exceptions are there?
Spendthrift trusts valid except as to:
1. Contracts for necessities - med, food, rent
2. Alimony, child support
3. Any interest retained by Settlor
3a. Revocable trust - settlor is treated as owner for creditors' purposes
4. Federal tax liens.

Mnemonic: NAT RR (Necessity, Alimony, Tax, Retained, Revocable)
What are the rules of self-dealing by the fiduciary?
⬢ Trustee cannot buy or sell trust assets to himself
⬢ Trustee cannot borrow trust funds
⬢ Trustee cannot loan funds to the trust
⬢ Trustee cannot profit from serving as trustee
⬢ Corporate trustee cannot buy its own stock as a trust investment

⬢ Duty to segregate

Statute of Limitations - doesn't begin running against fiduciary until:
o Repudiates the trust (denies existence of trust)
o Dies or resigns
o Gives an accounting that makes full disclosure of the facts upon which action is based

Mnemonic - can't SLOB - PS SOL RAD(Sell, Loan, Own, Borrow, Profit, Segregate, SOL doesn't run until Repudiates, Accounting, Die)
What happens if the trustee is self-dealing?
If trust self-dealing:
i. B can ratify transaction and waive the breach
ii. Can bring surcharge action for loss - no further inquiry rule - Only issue in case is proving self-dealing, then proving amount of damages
Can the trustee sell or mortgage real property?
Trust Administration problems - absent grant of power, trustee cannot sell or mortgage real property without prior court approval - does have power to sell personal property as long as related to proper administration of trust
What about investments? How do we determine whether the trustee investments are good?
Investments - Uniform prudent Investor Act (UPIA) - trustee investments are measured as to whether good or not by conduct when decision is made
What factors are looked at by the UPIA?
1. General economic conditions
2. Possible effect of inflation or deflation
3. The expected tax consequences of investment decisions or strategies
4. Role that each investment plays within the overall trust portfolio
5. Expected total return from income and capital gain
6. Needs for liquidity
7. An asset's special relationship or value to the purposes of the trust or a beneficiary
8. Any differing interests of the income B and the remaindermen

DRILSTER - (Differing interests, Role, Inflation, Liquitidy, Special relationship, Tax, Economic, Return)
Do I have to invest the trust res for the purpose of dividends?
You don't have to invest for dividends anymore, so can invest for appreciation and capital gain as well as ordinary income. Prudence is measured by conduct at the time the investment decision is made, not by hindsight based on outcome or prudence.
How are these generally divided in a trust?

Cash dividends
Stock dividends
Capital gains
i. Cash dividends - income
ii. Stock dividends - principal
iii. $10,000 capital gains - principal* subject to trustees adjustment power under UPIA
Are trustees liable for torts?
Only if personally liable - sue in his representative capacity
How are trusts terminated early? What about spendthrift trusts?
Early Termination of trusts - All B's (over 18) can consent to terminate trust if no further trust purpose of the settlor to be served. Must be unanimous - one minor B kills agreement

Spendthrift clause makes trust indestructible.
What is the power of appointment?
Power given to named person in will to decide who gets what.

T wills to "D for life and on her death to distribute trust principal to such persons, including D's estate as she appoints by her last will. If she does not exercise this power of appointment, on D's death the trustee shall distribute the trust principal to D's descendents."
Who are the players in the power of appointment?
T, the testator = donor of power of appointment as his will created power

D is donee of a general testamentary power of appointment, b/c not limited in class of B to whom she can appoint; she can give property to anyone, including herself, or her creditors, or her estate
What are the types of powers of appointment?
General power – exercisable in favor of the donee herself, her estate, her creditors or the creditors of her estate.

Special Power – exercisable in favor of a limited class of persons, which does NOT include the donee, her estate, her creditors, or the creditors of her estate.

Inter Vivos power – exercisable during the lifetime of the donee.

Testamentory – only exercisable by the donee’s will

Mnemonic: GITS (General, Inter Vivos, Testamentary, Special)
If there’s no appointment who takes the property? What if the will has a residuary clause? What if it disposes of the property as if it were her own?
D's descendents are takers in default of appointment, as they will take the property on D's death if the power of appointment is not exercised.

Will must expressly exercise power of appointment SO if D's will gives "residuary estate 1/2 to H, 1/2 to son" then descendents take T's estate as default appointees.

Exception: If donee attempts to dispose of property as though it was her own ("devise B to my son S") then the power of appointment is exercised by implication
M’s will creates trust: "Income to daughter B for life and on her death principal to such of B's descendants as she shall appoint by her last will. In default, to B's children in equal shares." What are the interests?
B has a life estate and a special testamentary power of appointment b/c she is limited in the class of person she can appoint.
M’s will creates trust: "Income to daughter B for life and on her death principal to such of B's descendants as she shall appoint by her last will. In default, to B's children in equal shares."

B dies 10 years later, her will dev
This exercises the special testamentary power in favor of Diane. Blanket exercise of the power works.
Trust provided "an on B's death principal to such of B's descendants as she shall appoint by a will that specifically refers to this power of appointment⬦." What is the significance of the quoted text?
This kills the ability of B to do a blanket grant.
M created trust for son R for life and on his death principal "to such one or more of R's descendants as he appoints by his will; on default to his children." R, for consideration, agrees to appoint daughter Denise by will. Valid exercise?
No - b/c to hold otherwise would transform R's testamentary power of appointment into an inter vivos power - he was supposed to exercise this in will, not while alive and R benefits himself impermissibly

Also, by receiving consideration for exercising power of appointment that was supposed to be limited so as to benefit R's descendant, would benefit a non-object of the power.
T wills to "D for life and on her death to distribute trust principal to such persons, including D's estate as she appoints by her last will. If she does not exercise this power of appointment, on D's death the trustee shall distribute the trust pri
o Only general powers that are exercised are reachable by creditors!

⬢ Yes if D's will exercised general power of appointment

⬢ No if D's will did not exercise the power

⬢ No if T's will had given D a special testamentary power of appointment, and D's will appointed son John.
In what order do we pay off creditors to the estate?
1. Surviving Spouse's Allowance

2. Administrative Expenses

3. Funeral Expenses

4. Preferred Debts under US law

5. Child Support debts and Taxes

6. Debts to Division of Medical services

7. Debts for labor incurred in the year before death (up to $100)

8. Necessities up to $100 (incurred in year before death)
9. Secured debts - up to the value of the property
10. Unsecured debts

Mnemonic: Some Americans Find Pasta Too Long, Now, Shut Up!

(Spouse, Administrative, Funeral, Preferred, Taxes, Labor, Necessities, Secured, Unsecured)
What can't a trustee do?
⬢ Trustee cannot buy or sell trust assets to himself
⬢ Trustee cannot borrow trust funds
⬢ Trustee cannot loan funds to the trust
⬢ Trustee cannot profit from serving as trustee
⬢ Corporate trustee cannot buy its own stock as a trust investment

SLOB-P (Sell, loan, own, borrow, profit)
What must a trustee do?
Segregate the funds
When does the statute of limitations start running against the trustee?
Not until he:

o Repudiates the trust (denies existence of trust)

o Dies or resigns

o Gives an accounting that makes full disclosure of the facts upon which action is based

RDA - Repudiates, Dies, Accounting
What gifts from a will may be disclaimed?
- Any interest can be disclaimed

Disclaimer can be partial
What if a person is incapacitated, how do they disclaim a testamentary gift?
v. Personal representative can disclaim for incapacitated beneficiary if court finds disclaimer in best interest of the beneficiary.
I'm bankrupt. The property that I'm about to get would go to my sister if I disclaimed it. Can I do that?
No - Disclaimer cannot be used to defeat creditors' claims if disclaimant is insolvent.
What defines a charitable trust, what purpose is it for?
Must be for charitable purpose - must confer substantial amount of social benefit
Who are the beneficiaries in a charitable trust?
Must be in favor of a reasonably large number of unidentifiable members of the public at large and cannot benefit identifiable individuals
What happens when the purpose of a charitable trust can no longer be accomplished? ?
Cy Pres

When stated purpose can no longer be accomplished, must be reformed by cy pres
Is a trustee personally liable for contracts?
No unless

(1) contract imposes personal liability or

(2) trustee fails to disclose her representative capacity and identify the trust in the contract
What is it called when the beneficiaries bring a claim against the trustee for misdealing?
surcharge action

Deck Info