Barbri Ca Wills And Trusts

Front 1

What is required for Valid Capacity to make a will?

Back 1

Capacity to make a will is the lowest capacity recognized at law
1) 18 yrs old
2) Able to understand the extent of her property
3) Must know the natural objects of her bounty
. .a) Spouse/ Domestic Partner
. .b)Issues
. .c)Parents
. .d)And those whose interest are affected by the will.
4) Testator must know the nature of her act

Front 2

What are the consequences of no capacity?

Back 2

Entire will is invalid and prop will past by intestacy

EXCEPTION:
Will attempts to revoke a valid prior will - Then prior will is still in effect.

Tips showing Incapacity:
Conservator appointed or mental disorder
- But either alone insufficient to show incapacity. Relevant to establish incapacity but apply the test.

Front 3

What is an Insane Delusion?

And what is the Effect of insane delusion?

Back 3

Insane Delusion:
1) False Belief
2) Product of Sick Mind
3) No evidence to support
4) Affected the will

Result:
Only that part of the will affected by insane delusion is invalid.

Front 4

What types of fraud may invalidate a will?

Back 4

Fraud in the EXECUTION
1) Forges Signature, or Signs not knowing it is a will
2) whole will invalid

Fraud in the INDUCEMENT
1) Effects the contents of the will
2) only the portion affected by fraud is invalid.
. .a) Use CONSTRUCTIVE TRUST where otherwise, wrongdoer would benefit

Fraud to prevent REVOCATION
1) Prevents T from revoking will
2) Whole will invalid, possible CONSTRUCTIVE TRUST

Front 5

What is Undue influence?

And what ways can it be established?

Back 5

Testator's free agency is subjugated. Established 3 ways
1) Prima facia case
2) Presumption
3) Statutory

Difference from fraud = a lie. In undue influence you would go through with threat.
NOTE- Always discuss all three

Front 6

What is Undue influence - prima facia case?

Back 6

Testator has a weakness such that he is able to have his free will subjugated.
1) SUSCEPTIBILITY: Any weakness or predisposition
2) OPPORTUNITY: wrongdoer has access to testator
3) ACTIVE PARTICIPATION: or disposition to exert influence
4) UNNATURAL RESULT: i.e. wrongdoer taking devise were that person would ordinarily take nothing.

Effect: only that part of the will affected by undue influence is invalid.

Front 7

What is the Presumption of undue influence?

Back 7

1)CONFIDENTIAL RELATIONSHIP - A/C, doctor/patient, guardian/ward. Or a relationship of TRUST i.e. two close friends
2)Active participation
3)Unnatural rest

Effect: only that part of the will affected by undue influence is invalid.

Front 8

What is Statutory undue influence?

Back 8

Generally statutory undue influence prevents gifts to the drafter of the will or their family

EXCEPTION:
Person drafting is related to T
There is an independent counsel

Effect: transferee does not take the gift, but only to extent that it exceeds intestate.

Front 9

What is a mistake in content?

Back 9

Wrong beneficiary is named or wrong gift is made.

Omission:
DOES NOT REWRITE will. But potential relief under dependent relative revocation

Addition:
Where mistake of addition, court may strike out mistaken addition since that is not REWRITING

Front 10

What is a mistake in execution?

Back 10

Signs wrong document, happens in two cases:
1) Mistakenly signs believing it is not a will
. .a) Will is not probated. Lacks intent
2) Reciprocal Wills - Husband and Wife draft will together
. .b) Court may reform in this unique situation

Front 11

What is a mistake in inducement?

Back 11

Gift made or not made based on testators erroneous belief.

Rule: No gift unless intent and mistake clear on face of will:
-i.e. nothing to john because he dead. If he not dead, he gets $1000.

Front 12

What is a mistake in description?

Back 12

Occurs where nothing fits the description or more than 1 thing fits the description.

Latent requires outside evidence to show the ambiguity while Patent does not.

Historically: No outside evidence to determine intent in patent ambiguity.

**CA**
PAROLE EVIDENCE ADMISSIBLE TO RESOLVE ANY AMBIGUITY

Front 13

What is Dependent Relative Revocation?

Back 13

Applies where testator revokes will #1 thinking that will #2 EFFECTUATES HIS INTENT. But in fact will #2 IS INVALID or does NOT effectuate his INTENT.

Result: Court will reinstate will #1.

Notes:
1) Must be substantially the same
2) Prior will can be admitted through testimony of anyone familiar with contents

Front 14

How is a child omitted by a will treated?

Back 14

Rule: A child born or adopted AFTER all testamentary instruments (trusts included) are executed and is not provided for will get an INTESTATE SHARE.

EXCEPTION: A child born BEFORE all instruments can get the same treatment if they were though DEAD.

Front 15

What is integration?

Back 15

Integration refers to which papers make up the will.

Requires:
1) Intent that all papers make up the will
2) All papers present when will executed

Prove integration by:
1) physical connection - Stapled together
2) logical connection - Last word on page 1 fits with first word on page 2

Front 16

What is incorporation by reference?

Back 16

Non-integrated writing given testamentary effect if incorporation by reference met.

Requires:

1) Doc or writing
2) In EXISTENCE at execution
3) Clearly IDENTIFIED in the will
4) Testator INTENDED to incorporate the doc.

NOTE: If 1-3 are met, 4 can be implied.

Front 17

What are facts of independent significance?

Back 17

Identity of recipient beneficiary or what gift is intended may be given meaning by facts of significance INDEPENDENT FROM WILL
- i.e., to my church. Or to all my employees at time of my death.

1) Must be a fact WOULD HAVE EXISTED even without the will.
2) Can be an event or fact before or after will is drafted

Basically allows outside parole evidence to prove what stuff is.

Front 18

What is a writing disposing of Limited Tangible Personal Property?

Back 18

Requires:
1) Referred to in the Will
2) Dated
3) Signed or Handwritten, Exception if extrinsic evidence establishes intent.
4) Describe items and Beneficiaries with specificity
5) Drafted before or after will
6) No asset more than $5,000 and not more than $25,000 in aggregate

Front 19

What is a pour over will provision?

Back 19

Part or all of estate devised to trustee of INTER VIVOS TRUST. Problem that trustee and terms of trust not explicit on face of will.

Ways to get it in:
1) Incorporation by reference - CANNOT change trust after then (must exist before will).
2) Independent Significance
3) UTATA -Statutory, as long as trust is valid and existed before will. Trust CAN be modified.

NOTE: Discuss all three theories on exam.

Front 20

What are the requirements of an attested will?

Back 20

1) Writing
2) Signed by testator, conservator ok
3) In the presence of 2 witnesses, present at the same time
. .i) Only need acknowledge signature, can be signed already.
4) Witnesses KNOW testator is signing his will.

Notes:
i) Witnesses do not have to sign at same time or in presence of testator
ii) Testator sign first? Write: 'if there is no issue of fraud or mistake, the will should be deemed valid under California 'substantial compliance' doctrine.'

Front 21

Who is an interested witness? And how does it affect a will?

Back 21

Where witness is beneficiary under the will

Presumption that the gift to the witness is not valid. Unless 2 other disinterested signatures or rebuts presumption.

Result: Interested witness cannot get more than would have received in intestate.

Front 22

What is a conditional will?

Back 22

Conditional wills i.e. this is my will if I die in Europe on vacation. May be formal or holographic will

Front 23

What are the requirements of a holographic will?

What happens if it is undated?

Back 23

1) Must be signed by testator. Sig can be anywhere in will.

2) MATERIAL PROVISIONS must be in testator's own handwriting. (gifts made and the beneficiaries)

NOTES:
a) Testamentary can be preprinted.
. .i) if there are issues extrinsic evidence as to intent is allowed.
b) Series of letters may be will under integration.
c) Date not required.
. .i) If conflicts - Dated wins unless undated can be established as after
. .ii) If both undated, then unresolved inconsistent is thrown out
. .iii) If Testator may have been incapacitated during time will was drafted then invalid.

Front 24

How do you determine the choice of Law?

Back 24

Choice of law:
1) Actually complies with California formalities
2) Complies w formalities of state where executed
3) Complies with state of domicile at time it was drafted.

Front 25

What is a codicil?

What is the major concern regarding one?

Back 25

Testamentary instrument executed with required formalities of the code, which modifies, amends, or revokes a will.

A codicil REPUBLISHES A WILL. Important for:
1) Pour over wills;
2) Incorporation by reference: AND
3) Pretermission (for birth, marriage or domestic partnership)

NOTE: codicil itself is a testamentary instrument thus pretermission analysis from date of codicil. (Discuss both on Bar)

Front 26

What is the effect of a revocation of a codicil?

Back 26

Revocation of codicil only revokes codicil. Revocation of will revokes both.

Front 27

What are the requirements of revocation by physical act?

Back 27

1) Burned torn cancelled destroyed or obliterated
2) INTENT to revoke must COINCIDE w physical act
3) Physical act BY TESTATOR or by someone in his presence at his direction

Front 28

What are the concerns with cancellations and interlineations?

Back 28

1) Must meet requirements of holographic codicil: material terms in handwriting,
2) But, under dependent relative revocation, the revocation was conditional and dependent.
. .a) Therefore Original gift applies.
. .b) EXCEPTION where interlineations is less, DDR does not apply.
. . . .i) Because intent is not effectuated by #1 anymore.

Front 29

Can you use cancellation to increase a gift?

Back 29

NO

Cannot increase co-beneficiaries gift by CANCELLATION. I.e. farm to X & W, and subsequently crosses out X. W still gets only 1/2 not whole. Rest goes to residuary.

Front 30

Does a revocation of a duplicate revoke a will?

Back 30

YES

Duplicate originals, not copies. Full formalities on 2 sets of original sigs. If testator revokes by physical act one dup original, second original is revoked by implication.

Front 31

What if after testator's death you find a mutilated copy of the will?

Back 31

Rebuttable presumption that testator mutilated with intent to revoke.

Front 32

What is revocation by implication?

Back 32

Revocation by implication if subsequent will TOTALLY DISPOSES OF T's ESTATE

Front 33

What is revival?

Back 33

Revival of prior by revoking most recent will.

Intent to revive:
1) Physical act - Look for intent from surroundings at time revoked
2) By Subsequent instrument - Intent must be contained in instrument.

Front 34

What will an omitted or pretermitted child inherit?

Back 34

Rule: Child born or adopted after testamentary instruments are adopted and not provided for in any testamentary instrument.

Result:Child receives share of estate equal to intestate share plus any intervivos trust.

Exceptions:
1) Omission was intention and intention appears in testamentary instrument
2) At time of execution T had children and T leaves substantially whole estate TO SURVIVING PARENT.
3) T provided for child by transfer outside of instrument

Front 35

What will an omitted spouse inherit?

Back 35

Rule: Surviving spouse who married T AFTER execution of all testamentary instruments and is NOT provided for in any testamentary instrument.

Result: Omitted spouse receives statutory share equal to share that would have passed by intestacy.

See Intestate card.
1) But in no event more than 1/2 value of separate property.

Exceptions:
1) Omission was intention and intention appears in testamentary instrument
2) T provided for spouse by transfer outside of instrument
3) Waiver
. .a) Waiver in writing signed
. .b) Full disclosure of T's finances
. .c) Independent Counsel

Front 36

What is a domestic partner? And how is an omitted one treated?

Back 36

Define: Partners must be:
1) Same sex; OR
2) At least one person is 62 years old

Same rules for omitted spouse.

Front 37

Classification of devise in will 4 types

Back 37

4 types of devise:
1) Specific devise: real prop, unique personal prop.
2) General devise: payable out of general estate assets. Stock, money.
3) Demonstrative devise: hybrid general and specific gift. i.e. $1000 from BofA account
4) Residuary: all other property not disposed of in will. Residue to W.

Front 38

What happens in dissolution of marriage or partnership?

Back 38

By law: there is a revocation of the devise to the spouse or partner in an annulment of final dissolution of marriage.
- The devise is reinstate if the remarry.
- Can be overridden by language in devise.

NOTE: Separation does not count.

Front 39

What is ademption by extinction?

Back 39

Ademption by extinction applies for specific gifts.
Where T doesn't own the gift at DEATH. But did T intend gift to FAIL?

Following situations will not expire:
1) Securities changing form through no action of T
2) Conservator sells of property
3) Eminent Domain, Casualty award - If paid after T dies
. .i) or maybe where you can trace to one source.

In all other cases classify as general or try to trace.

Front 40

What is ademption by Satisfaction?

Back 40

Rule: T gives Beneficiary an intervivos down payment on devise, generally applies for general gifts.

Established:
1) The will itself provides for a deduction of the intervivos gift.
2) Testator declares in contemporaneous writing
3) Beneficiary acknowledges in writing; OR
4) Property given is the same property subject to specific gift.

NOTE: If predeceased passes down the inheritance line, unless stated otherwise.
NOTE: Value is value that parties agreed to or FMV

Front 41

What is an Advancement?

Back 41

Same thing as ademption by satisfaction, but for intestate.

SOLE DIFFERENCE: Does NOT pass down the inheritance line, unless stated otherwise.

Front 42

What are the requirements of a contract not to revoke?

Back 42

Contracts not to revoke:
1) Will states the material provisions of the contract;
2) There is express reference in the will to the contract;
3) A writing signed by decedent evidencing a contract;
4) Estoppel between the parties; OR
5) Estoppel to a third party.

Cause of action accrues when T dies, or evinces conduct which would be fraud on the promise. (Selling the house)

Front 43

What are joint and mutual wills and what considerations accompany it?

Back 43

Joint: Will of 2 or more people on 1 document.
- When 1st person dies the will is probated when 2d person dies the will is probated again.

Mutual: Separate wills that are mutual by their terms. Reciprocal.

NOTES
- The execution of a joint or mutual will does not create a presumption of a K not to revoke.
- But it may evidence a contract

Remedies:
1) Sue estate for damages
2) Seek specific performance
3) Constructive Trust

Front 44

What are the spousal/ domestic partner protections?

What is the widow's election?

How are illusory transfers treated?

Back 44

Testator can only dispose of 1/2 of community and quasi community property.

Widow's Election:
If the testator disposes of more than they should have, the widow has the following options:
1) Take under the will and give up statutory right; OR
2) Renounce benefit of will and take as would under statutory right.

Illusory Transfers:
Owner can dispose of without consideration. However where the transaction is illusory, the testator retained some interest:
- The surviving spouse or domestic partner may require the transferee to restore 1/2 of the property to decedents estate.

Front 45

Who is an unworthy heir?

Back 45

Killers are unworthy heirs. Feloniously or intentionally kill the decedent.

Burden of proof:
- Guilty or plea of guilty is conclusive.
- Probate court may find by preponderance

Result: Treat as if predecease and NO anti-lapse.
- Applies to Insurance proceeds too.
- However a Joint Tenant will just sever, but retain their 1/2 interest as a Tenant in Common.

Front 46

What does surviving spouse get under intestate succession?

Back 46

Spouse inherits 1/2 of Community Property, resulting in 100% of CP. Same for Quasi-CP.

Separate Property:
1) No one in column 1 or 2 - All
2) If 1 Child(or issue of child) or Parties in Column 2 - 1/2
3) If 2 Children(or issues of them) - 1/3

Front 47

What is the general Intestate scheme?

Back 47

First to kids - Column 1
Then parents - Column 2
Then issues of parents - Column 2
Then grandparents - Column 3
Then Issues of grandparents - Column 3
...more...
And finally Escheat to state.

Front 48

How is per capita with representation calculated.

Back 48

1) First find level where someone is alive.
2) Give shares to members on that line who are:
. .i) Alive; OR
. .ii) Leave an issue -
. . . .-)These are then split up equally among living issues

Front 49

How is per stirpes by representation calculated.

Back 49

Split at the first generational line, even if everyone is dead, so long as the left an issue.

Front 50

When does adoption not sever the relationship to natural parents?

Back 50

If the adoption is by the spouse of the natural parent, or after the death of either natural parent.

Front 51

When does Equitable adoption apply?

Back 51

A child is treated as being adopted if:
1) The relationship began DURING child's minority.
2) It continued THROUGH OUT the parties lifetimes
3) Would have adopted but for a LEGAL barrier.

Front 52

When do non-marital children inherit?

Back 52

When a parent-child relationship exists.

A Parent-Child relationship is presumed to exist:
1) Child is born during domestic partnership; OR
2) Parents attempted to form a legal relationship AFTER and:
. .a) the non-birthing domestic partner is named on the birth certificate; OR
. .b) the non-birthing domestic partner make a voluntary promise to pay child support

Front 53

What is the rule of Lapse?

Back 53

If beneficiary doesn't survive the testator, the gift lapses and returns the residuary of the estate.

Front 54

What is CA Anti-lapse statute?

Back 54

Anti-lapse statute applies where devisee is:
1) Kindred of testator or of testators spouse and devisee predeceases testator
2) Leaving issue.

NOTE:
The anti-lapse statute applies to both wills and revocable trusts.
But the devisee CANNOT be the SPOUSE or domestic partner

Front 55

What is Simultaneous death, under a will, and how does it affect a will?

Back 55

Where it cannot be determined by clear and convincing evidence that beneficiary survived testator.
- Presumption that the devisee DID NOT SURVIVE. ASSUMED DIED FIRST.

Result:
1) Gift - the gift will lapse or pass under anti-lapse
2) Joint Tenants - Sever JT and 1/2 goes to each parties estate
3) Community Property - 1/2 through each parties estate
4) Life Insurance - Alternative beneficiary, Or to estate.
. .i)BUT: If purchased with community property money, then it falls under #3

Front 56

What is Simultaneous death, under a intestacy, and what happens?

Back 56

Intestate heirs must survive by 120 hours, must be shown by clear and convincing evidence.

NOTE: This does not apply if the property would escheat.

Front 57

What happens if there is an increase AFTER the testators death?

Back 57

Generally the devisees do not receive any increase.

EXCEPTION: General monetary gifts will get interest if over 1 year.

Front 58

What is abatement, and how do you apply it when you have an omitted party?

Back 58

The process by which certain gifts are decreased. Arises in case of omitted spouse or omitted child.

Order of abatement:
1) Any property not passing by will or trust
2) Abate all beneficiaries of will and trust on PRO RATA
. .i)NO distinction made between specific, general, and residual
. .ii)EXCEPTION - Can prevent abatement of specific gift if abatement would defeat obvious intent.

Front 59

How do you pay of the general debts of the decedent?

Back 59

Abatement, but there is a special order for debts.

Order
1) Intestate Property
2) Residuary Gifts
3) General gifts to Non relatives
4) General gifts to relatives
5) Specific gifts to Non relatives
6) Specific gifts to relatives

Front 60

What is exoneration and how does it apply.

Back 60

Exoneration: Debt it extinguished. Example: a mortgage on a house.

Common Law: If testator devised a specific gift subject to encumbrance, the executor was required to pay it off.

**CA**: No Automatic exoneration.

Front 61

What is a Gift causa mortis, and what are the limitations?

Back 61

Gift of personal property made in contemplation of eminent death.
- No gift causa mortis of real prop.
- If donor survives the peril, the gift is revoked

Requires Delivery:
Actual
Symbolic - Typically a writing evidencing ownership
Constructive delivery - A symbolic 'key' is given to donee

Front 62

What is required to create a valid trust?

Back 62

1) Settlor
2) Delivery
3) Trustee
4) Intent
5) Property
6) Beneficiaries
7) Valid Purpose

Front 63

What is a private express trust?

Back 63

Fiduciary relationship with respect to property whereby one person holds legal title for benefit of another and which arises out of a manifestation of intent to create it.

Front 64

What is property is valid subject matter for a trust?

Back 64

Any presently existing interest in property that can be transferred.

Illusory interest cannot be the subject matter of a trust:
- Future business profits
- Debt
- A mere expectancy

Front 65

Who is a valid beneficiary for a private trust?

Back 65

Any ascertainable person or group of people can be the beneficiary.

Notes:
- Including corporations
- Unincorporated under MODERN view
- Class gifts - But only if class is ascertainable

Front 66

How does a trust violate RAP?

Back 66

I.e. to bank in trust 'to A but if liquor is ever sold, then to B'

Front 67

Does a trust require a trustee?

Back 67

Trust must have trustee but need not be identified in instrument, court will appoint trustee.

Front 68

What Intent is needed to create a trust?

Back 68

No Magic Words

But Precatory words (wish, hope or desire) alone insufficient.
However, precatory words plus parole evidence may create a trust.

If no trust, transferee owns in FEE SIMPLE.

Front 69

When can a trust be created?

Back 69

At Testator's Death:
- Through will, therefore must comply with statute of wills.

During Testator's Lifetime:
1) Trustee is third party - Transfer in Trust
- Must deliver all property to trustee
2) Testator is Trustee - Declaration of Trust
- No delivery requirement

Front 70

What happens if a trust is illegal?

Back 70

Illegality at creation.
- Creates a trust for A on the condition that A divorce his wife.

Result:
EXCISE the ILLEGALITY if possible. Thus, trust for A w/out condition.

If impossible to excise:
1) Simply invalidate trust at inception. If trust was for improper purpose, i.e. trust to avoid creditors; OR
2) Trust invalid and trustee owns the prop. If S has unclean hands

Front 71

What are the major benefits or differences of a charitable trust?

Back 71

RAP does not apply
Cy Pres applies

Front 72

What are valid charitable purposes?

Back 72

Statute of Elizabeth: Education, poverty, sickness, orphans.

Restatement: Any trust which confers a substantial benefit on society.

Front 73

What is Cy Pres, and what are the requirements?

Back 73

If a charitable trust cannot be carried out, it can be ended and returned to settlor; OR

If there is General charitable intent, court may modify trust.
Cy Pres:
1) Impossible or Impractical to carry out trust; AND
2) General Charitable intent.
- Evidence of intent can be intrinsic and extrinsic

Front 74

What is an honorary trust?

Back 74

No identifiable beneficiary and no benefit to society.
- Simply the goal of the settlor

Example: trust to take care of settlor's pet.

Problems:
Trustee may, but IS NOT REQUIRED, to comply with terms of the trust.
- If trustee refuses to serve resulting trust in favor of the settlor
RAP problems - no measuring life. Some courts allow them to exist for only 21 years.

Front 75

What is a totten trust?

Back 75

Not a true trust. More aptly called a totten account.

Example: Mary Smith as trustee for John Jones
- Mary can do whatever she wants with account during her lifetime.

Elevation to a real trust:
- Remember no magic words. So could easily raise to level of real trust.

Front 76

What is a spendthrift provision?

What does it accomplish?

What are the exceptions?

Back 76

Beneficiary can't transfer rights to future payments of income or principal AND creditors cannot attach beneficiaries rights to future payments or principle.

Result: Generally it is unassignable and cannot be touched by creditors.
EXCEPTION Preferred creditors can touch it:
1) Government
2) Necessities of life
3) Child/ Spousal Support or Alimony
4) Tort Creditor

Front 77

Can you have a self created spendthrift/ support trust?

Back 77

Yes, it will prevent you from yourself.

But will not protect you from creditors.

Front 78

What is a support trust?

What does it accomplish

Back 78

Trustee is required to use only so much of the income or principle as necessary for the beneficiary's HEALTH SUPPORT MAINTENANCE OR EDUCATION.

Results are the same as a the SPENDTHRIFT CARD

Front 79

What is a discretionary provision?

What does it accomplish?

Back 79

Trustee given SOLE AND ABSOLUTE DISCRETION in determining how much to pay, if anything, and when to pay, if ever!

Result:
Involuntary/ Voluntary Alienation - Say this on the bar:
On the one hand, beneficiary may not transfer future rights because he may not have anything. But, assignee can step into shoes of beneficiary. While, the assignee cannot force a payment if one is made he gets it.

Front 80

What is a resulting trust?

How do they occur?

Back 80

Implied IN FACT trust based on PRESUMED INTENT OF THE PARTIES. Always back to settlor.

Arises:
1) Express trust ends by its own terms
2) Private fails for lack of beneficiary
3) Charitable ends because of impossibility or impracticability and no Cy Pres
4) Trust becomes illegal
5) Excess corpus - more than what we need to accomplish it
6) Purchase Money Resulting Trust - A pays money to B to transfer real property to C. Presume that C holds for A.
7) Semi-Secret - Through will state trustee, but no beneficiary.

Front 81

What is a Constructive trust?

How do they occur?

Back 81

Not a trust. Simply a REMEDY to prevent fraud or unjust enrichment. Constructive trustee has ONE OBLIGATION, to transfer the property to the proper beneficiary as determined by the court.

Arises:
1) Breach of Loyalty - Profits from self dealing are returned to trust.
2) Fraud in inducement or undue influence - Transfer to intended beneficiary
3) Secret Trust -
. .a) An outright gift in the will, but given on basis of an oral promise to use for benefit of another.
. .b) Parole evidence to determine who beneficiary is
. .c) Discuss both this and semi-secret on bar
4) Oral Real Estate Trusts - Deed to land, with oral agreement, typically SoF will be a defense. EXCEPT:
. .a) A fiduciary relationship between settlor and A
. .b) There was fraud in the inducement
. .c) There was detrimental reliance by B

Front 82

What are the Powers of a trustee?

Back 82

Trustee has all enumerated power and implied powers:
1) Power to sell trust property
2) Power to incur expenses
3) Power to lease
4) Power to borrow (Modern)

Front 83

What duties does a trustee owe a beneficiary?

Back 83

1) Duty of loyalty - Must administer for benefit of beneficiaries. No Self Dealing.
. .(a) Trustee SURCHARGED for losses.
. .(b) Constructive Trust for ill-gotten profits

2) Duty to invest. 3 rules, discuss all three on exam:
. .(a) State lists: fed bonds, fed insrd CDs, 1st deeds on real estate, maybe publicly traded stocks.
. .(b) Reasonably Prudent Person Standard: Same as state list, but EACH INDIVIDUAL incestment is scrutinized.
. .(c) Uniform Prudent Investor Act: Analyze investment portfolio as a WHOLE, allows SPECULATING
.i)Under any standard: Duty to diversify

3) Duty to earmark. Requires trustee label trust property as such. Modern rule applies liability only if loss caused by failure to earmark
4) Duty to segregate. No commingling personal funds w trust funds.
5) Duty not to delegate, but may rely on professional advisors. Modern: Can delegate.
6) Duty to account, requires accounting to beneficiaries on regular basis. Statement of income and expenses.
7) Duty of care. As trustee would with respect to own investments

Front 84

What are damages for breach by trustee?

Back 84

Damages:
constructive trust,
tracing
may ratify the transaction if good for beneficiary, and
REMOVE TRUSTEE.

Usually 3 or more duties breached at once. ALWAYS DISCUSS DUTY OF LOYALTY AND DUTY OF CARE

Front 85

What are the liabilities of a trustee to a third party?

Back 85

Liability on Contract:
1) Common Law
. .a) Generally sued in personal capacity but can be indemnified.
. .b) Only representative if clearly stated in contract
2) Modern
. .a) Generally sued in representative capacity if other side knew

Liability on Tort
1) Common Law
. .a) Sued in personal, if without personal fault then indemnity
2) Modern
. .a) Sued personally, only liable if at fault

Front 86

Can the settlor modify the trust?

Back 86

SETTLOR can modify if expressly reserved the power to modify, or POWER TO REVOKE. Power to revoke is the greatest power of them all!

Front 87

When can the court modify a trust?

Back 87

Under cy press COURT may modify charitable trust

Doctrine of Changed Circumstances
1) Unforeseen circumstances
2) Necessity, i.e. trust will fail or go broke w/out change.

Can only change administrative or management provisions, not beneficiaries.

Front 88

When does settlor have the power to revoke?

Back 88

Majority: To retain the power to revoke, settlor must expressly reserve the power in the instrument.

Minority: All trusts are revocable, unless trust expressly irrevocable.

Front 89

When will an Irrevocable trust terminate?

Back 89

1) Settlor and all beneficiaries agree to terminate
. .i) Make sure contingent remainders are accounted for.

2) All beneficiaries agree to terminate and material purposes have been accomplished.
. .ii) A few minor purposes can be outstanding, save small money for them

3) Operation of law
. .i) Statute of uses, there is nothing left for trustee to do.

Front 90

How does the allocation of trust income and expense work?

Back 90

Income:
1) Life tenant gets the income and interest that the property generates
2) Remaindermen get increase in value and proceeds from sale

Expense:
1) Life Tenant - Interest, taxes, minor repairs
2) Remaindermen - Principle of debt, Major repairs or improvements.