Trusts & Estates

Question 1

What are the two requirements that every testator must have before making a will?

Answer 1

1. Testamentary capacity: must be 18 years of age, of sound mind, and able to understand the nature & Extent of property
2. Testamentary intent

Question 2

What are the five requirements for a valid will?

Answer 2

1) will must be in writing

2) signed by T

3) signed or acknowledged in the joint presence of 2+ witnesses

4) signed by 2+ witnesses during T’s lifetime

5) witnesses understand the instrument

Note: a will not meeting the reqs. still valid if T intended the document to be their will.

Question 3

What is a holographic will and what are the requirements?

Answer 3

A holographic will is a will in T’s handwriting. No witnesses are needed. It only requires:

1. to be signed by T (anywhere)
2. with material provisions in T’s handwriting.

Question 4

What is a codicil?

Answer 4

A codicil is an alteration to a will. The original will is treated as republished and takes the date of the codicil.

Question 5

When can there be incorporation by reference? (3 requirements)

Answer 5

T can incorporate by reference a separate document into a will when 1) the document is in existence; 2) will shows intent to incorporate; and 3) the writing is described

Question 6

How may a will be revoked?

Answer 6

A will may be revoked in whole or in part by:

1. a subsequent instrument such as a new will or codicil that expressly or impliedly revokes the first will
2. Physical act: physical destruction, burning, tearing, etc. WITH INTENT to revoke either copy or original.

Note: T may direct another person to destroy the will in their presence; if only part of the will is destroyed extrinsic evidence is admissible to prove if entire will is revoked or part.

Question 7

What is dependent relative revocation

Answer 7

T didn’t really revoke the will. T cancels the revocation based on mistake of law or fact and but for this mistake, T would not have revoked. The revocation is set aside and remains in force.

Question 8

What is abatement?

Answer 8

Abatement is when the estate is insufficient to pay all debts and claims and gifts are abated to satisfy the debt in the following order: 1) intestate property; 2) residuary devises; 3) general devises; 4) demonstrative devises; 5) specific devises

Question 9

What is ademption by extinction

Answer 9

Specific devise fails (is adeemed) when T no longer owns the gift at death. Look to T’s INTENT. May occur intentionally (sale, gift) or unintentionally (fire, theft) - beneficiary takes nothing. OR T may have collected balance to intend to give to beneficiary.

Question 10

What is lapse and how can it be prevented?

Answer 10

Lapse is when a beneficiary predeceases T, the gift lapses (into residuary of estate).

Can be prevented by anti-lapse statute which provides a substitute beneficiary. Unless intended by will, the gift will pass to the issue of the intended beneficiary who is kindred

Question 11

What is the simultaneous death act?

Answer 11

If it cannot be established by clear and convincing evidence that one survived the other by 120 hours (five days), the property is administered as if the intended beneficiary predeceased T

Question 12

What is a disclaimer and how is it made?

Answer 12

Beneficiary irrevocably refuses a gift. Disclaimer must be made in writing (identify T, gift being disclaimed) and signed by the beneficiary. Treated as predeceased.

Question 13

A pretermitted child receives intestate share unless, what? (3 scenarios)

Answer 13

1. Will shows omission was intentional
2. T provided substitute will outside of transfer
3. T had other children and left estate to parent of omitted child

Note: only children born AFTER the will was created are protected by the pretermitted statute

Question 14

What is a no-contest clause?

Answer 14

A clause to discourage potential will contestants causing beneficiary to forfeit their right to take. Will be enforced, unless beneficiary with probable cause brings contest on grounds of fraud, forgery, revocation etc.

Question 15

What is an advancement and how is it applied?

Answer 15

inter vivos property that is given to heirs during decedent’s lifetime and is treated as an advancement against an heir’s share of the intestate estate only if 1) decedent declares in a contemporaneous writing that the gift is, an advancement, or 2) heir acknowledges it in writing

Question 16

What is a living will?

Answer 16

Document specifying life-sustaining and pain-alleviating measures one does or does not want in the case they are indefinitely incapacitated.

Question 17

What is a durable healthcare power of attorney?

Answer 17

Document that appoints an individual as an agent to make healthcare decisions on behalf of the principal. It becomes effective ONLY IF principal is incapacitated. Extends to all healthcare questions, unless stated otherwise.

Question 18

What is family consent?

Answer 18

If a person becomes terminally ill or otherwise indefinitely incapacitated and there is no living will or power of attorney, close relatives, usually in order by statute, may act as surrogate decision-makers.

Question 19

What are the five requirements for a valid trust?

Answer 19

1. Intent: Settlor manifests present intent to create a trust by words or conduct.
2. settlor capacity: Must be of majority age and have mental capacity (presumed unless contrary evidence)
3. Identifiable trust property (res) in existence
4. Ascertainable and definite beneficiary
5. valid trust purpose

Question 20

What is the duty of good faith under trusts?

Answer 20

A trustee must administer the trust in good faith in accordance with the trust purpose and terms, in the interest of the trust beneficiaries. If a trustee acts in bad faith or dishonesty, the court may interfere with actions.

Question 21

What is the duty of loyalty under trusts?

Answer 21

There must be a duty of loyalty to beneficiaries in all matters relating to the trust . Trustee must put interest of the beneficiaries first and must avoid self-dealing and conflicts of interest.

• cannot loan or sale trust property to yourself
• seeing terms such as “closely held”, “arms length”, “illiquid” “market risk” this is a RED FLAG that the trustee breached their duty of loyalty.

A trustee can attempt to explain that a prudent/loyal investor would have made the transaction, however, trusted can proceed to sue if they wish.

Question 22

What are the two types of express trusts?

Answer 22

1. Private express trusts: comprise most of the trusts established by individuals
2. Charitable trusts

Question 23

What are the two types of implied trusts?

Answer 23

1. resulting trusts: places property in the hands of rightful owners when circumstances require it, even though there has not been any wrongdoing on anyone’s part
2. constructive trusts: deprives a wrongdoer from retaining improperly obtained property (usually erected to remedy fraud or unjust enrichment)

Question 24

What is the duty of care under trusts?

Answer 24

Must exercise care, skill, and caution that would be exercised by a reasonably prudent person. Mistakes in judgment do not expose one to liability.

• must keep records and proper accounting
• must diversify their accounting and be a prudent investor (cannot put all money into one place)

Question 25

What is the prudent investor rule?

Answer 25

Falls under duty of care.
Prudent investor rule: trustee must act prudently and reasonably in managing the interests of trust as a prudent investor, as if it were his own. Includes a duty to diversify trust assets and protect from devaluation.

Question 26

What is the duty to earmark assets?

Answer 26

Identify, separate, and account for assets. Trustee may not commingle trust assets with own.

Question 27

Is a trust revocable? Can a trust be amended?

Answer 27

Under the majority rule, a trust is presumed revocable by default. The settlor may revoke or amend the trust unless the terms of the trust expressly provide that the trust is irrevocable.

A trust can also be revoked unanimously by the settlor and beneficiaries (if settlor is dead, the court will see if the purpose has been met)

A trust may be amended.

Question 28

When does a trust terminate?

Answer 28

a trust terminates automatically if its stated terms expires or its purpose is accomplished.

Question 29

Can beneficiaries compel modification or termination of a trust?

Answer 29

Beneficiaries may compel modification or termination of a trust if all beneficiaries and remiandermen consent & modification or termination will not frustrate trust purpose.

Question 30

What is cy pres as it is related to trusts?

Answer 30

Relates to charitable trusts only. If the original charitable purpose is frustrated or can no longer be pursed, trustee and court can modify the trust to one “as near as possible” to the settlor’s original purpose.

Question 31

What is the claflin doctrine?

Answer 31

Trust cannot be modified/terminated, even if all beneficiaries agree, if doing so would be contrary to a material purpose of the settlor. Material purpose includes spendthrift, support, or discretionary trust.

Question 32

How does the transfer of interests to a third-party work when dealing with trusts?

Answer 32

Interests may be freely transferable by the beneficiary (voluntary alienation) and/or may be subject to the beneficiary’s creditors (involuntary)

Question 33

What is the purpose of a spendthrift trust? What are the exceptions.

Answer 33

It restrains alienation and prevents beneficiaries from transferring their interests and creditors from accessing. It MUST BOTH prevent transfer by beneficiary AND prevent creditors from accessing.

Beneficiaries cannot access money until they are allowed.

Creditors can access money in the event of:
1) a court order for alimony or child support
2) felony criminal offenses where someone is injured
3) creditors that supply necessities (food, clothing, shelter)

Question 34

Can someone create a trust using a will and when will it become effective, if so?

Answer 34

Yes, it is called a testamentary trust and will take effect upon the death of the testator.

Question 35

What is the pour-over provision?

Answer 35

When someone pours over the interests in their will to a trust. Even if the settlor changes the trust purpose, it is valid before the testator dies.

Question 36

Intestate succession:

1) Died with no Will and left o it a spouse and no kids

2) Died with no Will but left a spouse and issue

3) Died with no spouse

4) Died with no spouse or issue

Answer 36

1) Most states: spouse gets everything
UPC: spouse gets everything but some states require parents and grandparents to get a portion

2) Most states: surviving spouse received a portion and issues receive a portion
UPC: surviving spouse gets everything if all kids are issues of the spouse (theory being they will take care of the children)

3) Everything goes to the issue

4) Goes to the surviving parents and then to the dead persons siblings and their kids

Question 37

How to prove undue influence in a will

Answer 37

“SODA”
1) susceptibility - testator was susceptible to undue influence: look at age, mental capacity, financial worth

2) Opportunity - accused has opportunity to exert undue influence over testator

3) Disposition - accused has disposition to exert undue influence (being sneaky/shady, evil etc)

4) Appearance - it appears that some trickery occurred (example: $47 million to maid that started 3 weeks ago)