Wills and Trusts short rules.txt

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Wills and Trusts short rules.txt
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2013-07-24 03:53:47
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ca bar wills trusts short rules
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  1. Requirements for a formal will?
    • formal will = typed will
    • A formal will must be:
    • 1) signed by the testator
    • 2) signed by 2 witnesses
    • 3) each of whom witnesses the testator's signing of the will.
    • 4) Both witnesses must understand that the document they signed was the testator's will.
  2. What is an interested witness?
    A witness to the will who is also a devisee under the will is an interested witness.
  3. Rule for interested witnesses?
    • CL: an interested witness is deemed incompetent, and the will is held invalid
    • CA: if one of the two witnesses is interested, the will is still valid. but there is a rebuttable presumption that the witness procured the devise by duress, fraud, or undue influence.
    • if the interested witness cannot rebut, then the provision in the will for the interested witness is purged
  4. What is a specific devise?
    A specific devise is a gift of a particular item of property distinct from all other objects in the testator's estate.
  5. What is a general devise?
    A general devise is a gift of general economic benefit.
  6. Beneficiary predeceases the testator?
    • CL: Under CL, a devise that dies after T executes his will, but before the gift becomes effective, the gift lapses (fails).
    • When a specific gift lapses, it falls into the residuary estate.
    • CA: CA has enacted anti-lapse statutes that provide a substitute beneficiary to avoid this harsh result.
    • CA anti-lapse statute applies if devisee who predeceased the testator was:
    • 1) kindred of the testator, or
    • 2) testator's spouse
    • Under CA law, the substituted issue take the devise per capita with right of representation.
  7. When does anti-lapse statute not apply?
    • When the will expresses a contrary intention or a substitute disposition.
    • Under CA law, the requirement that a devisee survive the testator by 30 days clearly constitutes a contrary intention.
  8. Parol evidence for the will?
    • The disposition of ___ depends on whether or not the document is probated as part of T's will.
    • The question is whether an extrinsic document can be admissible for the will's composition.
    • 1. Integration
    • 2. Incorporation by Reference
    • 3. Acts of Indepenent Significance
    • 4. Codicil
    • 5. Secret Trust
  9. Integration - elements?
    • This doctrine permits papers or writings that:
    • 1) were present at the time of execution that
    • 2) testator intended to constitute her will
    • to be part of her will.
  10. Incorporation by reference - elements?
    • A document may be incorporated by reference into the will so that it is considered part of the will.
    • The document (or writing) must be:
    • 1) clearly in existence at the time of execution
    • 2) clearly ID'd in the will
    • 3) T intended to incorporate the document into the will
    • [if 1-2 is satisfied, 3 is implied]
    • it is irrelevant if the document itself is not a valid will.
  11. Acts of Independent Significance - elements?
    • This doctrine permits a court to fill in certain blanks in the testator's will with documents (or acts) effectuated during T's lifetime.
    • The documents must have been effectuated for primarily nontestamentary motives.
  12. Codicil - elements?
    • Codicil is a testamentary instrument executed subsequent to the execution of a will.
    • A codicil is intended to modify, alter, or expand the will.
    • To be valid, codicil must be executed with the same statutory formalities required for the execution of a will.
  13. Secret trust - elements?
    • A secret trust results when a gift is made in reliance upon the beneficiary's promise to hold the gift property in trust for another.
    • To prevent the unjust enrichment of the named beneficiary, courts will allow the intended trust beneficiary to offer extrinsic evidence of the agreement.
    • If the agreement is proved with clear & convincing evidence, a constructive trust is imposed on the named beneficiary.
    • Named beneficiary = secret trustee
    • Elements:
    • 1) will makes a gift on its face to a A [secret trustee]
    • 2) but the gift is given on the basis of an *oral promise* by A to use the property for the benefit of B
  14. Semi-Secret trust - elements?
    • If a gift in trust is made to an unnamed beneficiary, it is a semi-secret trust.
    • A semi-secret trust is unenforceable becuase it does not comply with the statute of wills.
    • Parol evidence is inadmissible for a semi-secret trust.
  15. Semi-secret trust vs. secret trust?
    Depends on whether the court characterizes the devise as a secret or semi-secret trust. This affects the admissiblity of the oral testimony, proving the actual beneficiary and the intent by the testator to give to the actual beneficiary.
  16. What happens if T gets rid of property before he dies?
    • When a specific gift is no longer owned by T at the time of death, the gift is adeemed, and the beneficiary is not entitled to the proceeds of the specific gift or any property in lieu of the gift.
    • In some states, if there has been a complete extinction of the property, the intention of T is irrelevant, the gift is considered adeemed.
    • In CA, however, ademption depends on T's intent to adeem at the time he disposes of specific property.
  17. Revocation?
    • 1. Physical act
    • 2. Subsequent written instrument
    • 3. Operation of Law
  18. Revocation by physical act?
    • 1. Will must be burned, torn, cancelled (lined out), destroyed, or obliterated (erased)
    • 2. T must have simultaneous intent to revoke
    • 3. Act must be done by T or someone in T's presence at his direction
  19. Revocation by subsequent written instrument?
    • 1. Express - new will says "i revoke all old wills"
    • 2. Implied - new will disposes of all of T's estate, leaving nothing for old will to act upon
  20. What gets probated if there is a revocation of a codicil, that itself revoked a prior will?
    Under CA law, if a codicil is revoked, it does not revoke the prior will. The prior will gets probated.
  21. Revival of a devise?
    • CL: if a codicil (revoking a gift in a prior will) is revoked, the revocation of the codicil revives the original gift.
    • CA: revival of the devise depends on T's intent. extrinsic evidence is admissible to prove T's intent to revive the devise in the will.
  22. Trustee's Powers
    • A trustee can only exercise express or implied powers.
    • The terms that created the trust grant the express powers to ____.
    • In addition, the trustee can exercise certain implied powers that will be examined below.
    • Certain powers that were implied at CL are now expressly conferred by the Uniform Trust Code (UTC).
  23. Standard of care required of trustee?
    • A trustee is in a fiduciary relationship to the trust and its beneficiaries.
    • The trustee must exercise that degree of care, skill, and prudence that would be exercised by a reasonably prudent person in managing her own property.
  24. What is the Duty of loyalty owed by trustee?
    A trustee owes a duty of undivided loyalty to the trust and all its beneficiaries.
  25. How should the trustee allocate assets?
    • All assets received by the trustee must be allocated to the trust principle or income.
    • Traditionally, cash dividends, interest income, and net business income are treated as income.
    • Traditionally, stock dividends, stock splits, and net proceeds on the sale of a trust asset are allocated to the trust principal.
    • However, under the Uniform Principal & Income Act, the trustee has an adjustment power to reallocate investment portfolio return.
  26. Uniform Principal & Income Act, what is adjustment power?
    • Trustee's allocation of assets, which may be improper under the traditional rules, may be proper if:
    • 1. necessary to carry out the trust purposes, and
    • 2. allocation is fair and reasonable to all beneficiaries
  27. Fact patterns When the adjustment power should be used?
    • trust purpose suggests a deviation from traditional rules should be used
    • some indication there needs to be a reallocation of investment portfolio returns
  28. Purchase of a trust asset by trustee? Remember to state the remedy.
    • A trustee (or relative) cannot purchase any trust property. It is self-dealing.
    • Even if he pays full FMV, regardless of any good faith by trustee that he was acting in trust's best interests.
    • Remedy: set aside the transaction, recover the asset, and recover any profits (interests, dividends) made from the asset during the time it was sold.
  29. Trustee makes a bad investment. what duties breached?
    • Trustee has a duty of care (of trust property), includes:
    • Trustee has a duty to preserve and protect the trust corpus. Implied in this duty is the duty to make the trust property productive.
    • Prudent investor rule: soundness of the trustee's investments is measured by the prudent investor rule, which requires that a trustee act in good faith, with reasonable prudence, sound discretion, and care in making investments.
    • Trustee must invest as would a prudent business person in managing her own funds, considering hte probable income and probable safety of capital.
  30. What is an express trust?
    • Trust is
    • 1) a fiduciary relationship
    • 2) with repsect to property where
    • 3) one person, the trustee, holds the legal title to the trust property (res)
    • 4) subject to enforceable equitable rights in another, the beneficiary
  31. requirements of an express trust?
    • 1) intent: manifest intent by settlor to create a trust
    • 2) trustee: trustee must be appointed
    • 3) res/property: identified and transferred to the trustee
    • 4) beneficiary exists: to enforce the trust
    • 5) public policy: cannot be contrary to public policy
  32. how do you argue intent to create a trust?
    argue that it was precatory language, and not manifest intent
  33. trustee's duties?
    • 1) duty of care
    • 2) duty of loyalty
    • 3) duty to preserve trust property (make trust property productive, invest with reasonable care)
    • 4) prudent investor rule
    • 5) duty to separate and earmark property
    • 6) duty to diversify investments
    • 7) duty to follow settlor's instructions
  34. what due care does a trustee owe?
    • trustee must exercise the degree of care that a reasonable prudent person would exercise in manging their own property
    • bad decision by the trustee? try breach of due care
  35. what is the trustee's duty of loyalty?
    • trustee owes a duty of undivided loyalty to the trust and its beneficiaries.
    • cannot engage in self-dealing.
    • cannot borrow from or encumber trust funds.
  36. what is trustee's duty to preserve property?
    implied in the duty to preserve the trust property is a duty to make the trust property productive and to invest with reasonable care.
  37. what is prudent investor rule?
    Under the prudent investor rule, trustee must invest as would a prudent business person in making a permanent disposition of her own funds, considering both the probable income and the probable safety of capital.
  38. what is trustee's duty to earmark trust property?
    • trust assets must be kept physically separate from the trustee's personal assets and assets of other trusts.
    • trustee is strictly liable for any losses to the trust.
    • if the trust funds are commingled with the trustee's personal funds, it will be presumed that the personal funds were expended before the trust funds
  39. what is trustee's duty to diversify trust assets?
    duty to diversify trust assets.
  40. what is trustee's duty to follow settlor's instructions?
    although trustee has some discretion in carrying out the trust's directions, trustee can breach her duty to follow settlor's instructions
  41. innocent donee who spends trust property not knowing of the trust?
    • innocent donee not liable for damages, but must restore any trust funds
    • any funds spent must be returned to the trust
  42. co-trustee, is he liable for breach by fellow co-trustees? how does he terminate his position?
    • yes, liable. co-trustee cannot delegate to a co-trustee powre to invest or manage the property
    • how to terminate his position?
    • 1) refuse appointment
    • 2) resign as trustee
  43. What is integration of a will?
    • Integration is the process of bringing together separate papers into a single, entire will.
    • 1) all papers physically present when the will was executed
    • 2) T intended all papers be part of the will
  44. what is incorporation by reference of a will?
    • A document may be incorporated into the will by reference when:
    • 1) doc in existence at time will was executed
    • 2) doc sufficiently described in the will so that it's ID is clear
    • 3) sufficient proof that the document is the document that was described in the will
  45. Act of independent significance?
    • Doctrine of independent significance permits a court to: fill in certain blanks in the will by
    • 1) referring to documents or acts
    • 2) during T's lifetime
    • 3) for primarily nontestamentary motives
  46. What is a codici?
    • testamentary instrument executed subsequent to the execution of a will.
    • ordinarily intended to modify, alter, or expand the will.
    • requires: same formalities required for execution of a will.
  47. what is a pour-over trust?
    • Testator adds or "pours" his estate into an inter vivos trust.
    • Such trusts violate the requirement that the trust res be immediately delivered to the trustee, courts have sustained such trusts on two theories:
    • 1) Incorporation by Reference
    • 2) Acts of Independent Significance
    • 3) Uniform Testamentary Additions to Trusts Act - pour over trusts are valid if trust is ID'd in the will, and in existence when the will was executed
  48. pretermitted children?
    • Under CA's pretermitted statute, pretermitted children take the same share they would have received had the testator died intestate unless...
    • 1) omission was intentional [CA, must be on the face of the will]
    • 2) T had more than 1 child, and gave most of hte estate to the other parent of hte omitted child
    • 3) T provided for the child outside the will [must be accompanied by language indicating the transfer is in lieu of a testamentary bequest]
  49. What happens if beneficiary predeceases T?
    • Under CL, a gift lapses where the beneficiary predeceases T.
    • However, CA has an anti-lapse statute which allows T's kindred to take by representation.
  50. what is the remedy for a trustee's breach of duty?
    • 1) liable to the trust estate for all losses resulting from the breach
    • 2) liable for any profits that would have accrued to the trust, but for the breach
    • 3) liable for any profits made by the trustee as a result of the breach, plus interest
    • ***losses due to breach cannot be offset by gains resulting from another breach!
  51. how are investment decisions evaluated?
    • Under the Uniform Prudent Investor Act (UPIA) each investment decision must be evaluated in the context of the entire trust portfolio as part of an overall investment strategy.
    • A prudent investor seeks overall return, not merely income.
  52. what is the trustee's adjustment power?
    • trustee has the power to reallocate investment portfolio return.
    • a trustee's reallocation between principal and income may be proper if:
    • 1) necessary to carry out the trust purposes and
    • 2) fair and reasonable to all of the beneficiaries
  53. what if the trustee delays in selling unproductive property?
    • 1) Trustee has a duty to sell unproductive property
    • 2) some portion of the sale proceeds should be given to the income beneficiary when the property is finally disposed of.
    • 3) however, each investment decision must be evaluated in the context of the entire trust portfoilo, and the trustee has reallocation power so it might be okay not to allocate some portion of the proceeds to the income beneficiary
  54. what is undue influence for a will?
    • a will is invlaid if it is obtained through menace, duress, or undue influence
    • undue influence is mental or physical coercion that deprives a testator of her free will and substitutes the will of another
    • 1) Susceptible: T was susceptible to undue influence
    • 2) Opportunity: the person who committed undue influence had an opportunity to exercise it
    • 3) Disposition: the person who committed undue influence had the dispoition to influence T for the purpose of personal benefit
    • 4) Unnatural: provisions of the will appear to be unnatural and the result of undue influence
    • When undue influence is shown, the will may fail entirely, or just a part that was affected is deemed invalid.

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