Wills & Trusts
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Formal Will Requirements
- 1. Must be in writing.
- 2. Must be signed by the testator (or by someone at the testator's direction)
- 3. Contain the testator's signature or acknowledgement of his signature or must occur in the joint presence of at least two witnesses.
- 4. Be witnessed by persons who understand that the instrument being witnessed is the testator's will.
Joint Presence of Witnesses Requirement
Under California law, the signing by the testator must occur in the joint presence of the witnesses. For decedent's dying after Jan 1, 2009, if a will is not executed in compliance with the witnessing requriements, the will may be admitted to probate if the propornent of the will establishes by clear and convincing evidence that at the time the testator signed the will he intended the will to constitute his will.
Dependent Relative Revocation
DRR applies when a testator revokes his will upon a mistaken belief that another dispostion of his property would be effective; and but for this mistake would not have revoked the will. However, DRR is not applied when the subsequent instrument recoking the will and making the alternative disposition is defectively executed. Moreover, DRR will not be applied where to do so would defeat the testator's intent.
Characteristics of an Express Trust
A trust is a fiduciary relationship with respect to property in which one person holds the legal title to the trust property subject to enforeable equitable rights in another. A valid trust requires a trustee, res, beneficiary, trust prupose, settlor and intent to create the trust.
A testamentary trust is one that is created by will which is effective upon the testator's death.
Charitable trusts must have indefinite beneficiaries and must have a purpose that benefits the public.
The doctrine of cy pres allows the court to apply the trust property to another charitable purpose if the charitable purpose indicated by the settlor is accomplished or becomes impractical. This is allowed if the settlor is found to have "general charitable intent," which requires the court to make a determination of whther the settlor intended the trust to fail or would have instrad wanted the property devoted to a similar use.
Duties of the Trustee
A trustee can only exercise express or implied powers. Implied powers are those that the trustee can utilize that are appropriate and helful to carry out the trust purpose. Such powers include the selling of trust property, incurring expenses, power to lease, and the power to borrow.
Trustee Fiduciary Relationship
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 managing her own property.
Duty of Loyalty
A trustee owes a duty of undivided loyalty to the trust and all its beneficiaries. This implicitly prohibits self-dealing by the trustee.
Prohibition to Self Dealing
As a fiduciary, a trustee owes a duty of undivided loyalty to the trust, and cannot engage in self-dealing to the dtriment of the beneficiaries or the trust res. A trustee, or his relative, agent or representative, cannot purchase any property owned by the trust even if he pays full value.
Accounting - Allocation of Principal, Income and Expenses
Traditionally, cash dividends on corporate stock are treated as income, while stock divdends are allocable to the trust principal. Additionally, any increase in value of an asset should be credited to the principal.
However, the Uniform Principal & Income Act provides the trustee with an adjustment power to reallocate investment portfolio return. The trustee can only take advantage of this power iif it is necessary to carry out the trust purposes and the allocation is fair and reasonable to all of the beneficiaries.
Duty to Preserve Trust Property
A trustee has a duty to preserve the trust property. Implied in this duty is the duty to make the trust property productive and to invest with reasonable care.
Prudent Investor Rule
The soundness of the trustee's investments is measured by the prudent investor rule, which requires that a trustee adhere to a standard of good faith, reasonable prudence, sound discretion, and care in making trust investments. The trustee must invest as would a prudent business person in making a permanent disposition of her own funds, considering the probable income and probable safety of capital.
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