Ca Bar Exam - Wills & Trusts

Front 1

wills issues checklist (7)

Back 1

Validity

components

revocation

revival

distribution

intestate distribution

K's relating to wills

Front 2

wills-issues checklist- long

Back 2

Validity (execution-intent/capacity-choice of laws)

components(integrated-incorporation by reference-acts of ind. legal significance- codicil-pour over will)

revocation (physical act-subsequent will-operation of law-DRR)

revival

distribution (classification of gifts-abatement- ademption- exoneration-laps/antilaps-survivor's right-bars to succession)

intestate distribution

K's relating to wills

Front 3

Will Opening Shot

Back 3

A will is a testamentary instrument which devises one's assets and property to beneficiaries upon death. In order for a will to be valid, it must have testamentary intent, capacity by the testator and follow CA Probate rules of construction formalities. The formalities of a will require upon death that the will be in writing, with testamentary intent, signed by testator and witnessed by two disinterested parties.

Front 4

execution-Attested Will

Back 4

The will:

1) Must be in writing

2) Signed by testator, or legally authorized person +in his presence

3) Signing done in presence of two witnesses who know it's T's will

4) Witness must sign will (does not have to be in presence of testator) during T's lifetime.

Front 5

attested wills- if witness requirements not satisfied

Back 5

will can still be treated as properly executed if the proponent of the will establishes by clear and convincing evidence that T intended the doc to be his will when he signed it.

Front 6

Attested Will - Interested WItnesses

Back 6

rebuttable presumption of duress menace, or undue influence.

will is invalid unless there are two other disinterested witnesses, OR, devise is made solely in a fiduciary capacity.

If W-beneficiary fails to rebut, she takes the amount as does not exceed what would be given in intestacy.

Front 7

Holographic Will

Back 7

1) Must be signed by the testator

2) The material provisions must be in testators handwriting

**Extrinsic evidence admissible to show intent

**Series of letters can be a will

**If no date, another, inconsistent will takes precedence

Front 8

Intent - Capacity

Back 8

At time of execution, testator must be:

1) 18yo, &

2) of sound mind, i.e.

a)be able to understand the extent of her prop

b) know the natural objects of her bounty

c) Know the nature of her act

**entire will is invalid**

Front 9

Intent - Insane Delusion

Back 9

1) testator had a false belief;

2) that belief was a product of a sick mind;

3) there is no evidence to support the belief

4) delusion must have affected testators will

**Only the part of the will that was effected is invalid, it will go to residuary devisee**

Front 10

intent- no duress, menace, fraud, or undue influence

Back 10

Execution or revocation of all or part of a will is ineffective to the extent that it was procured by duress, menace, fraud, or undue influence

Front 11

Intent - Fraud

Back 11

1) Representation or concealment;

2) Of a material fact;

3) known to be false by the wrongdoer;

4) for the purpose of inducing action/inaction; AND

5) Does induce action/inaction (but for test)

Fraud can be in the execution, inducement of a gift, or preventing testator from revoking.

Front 12

fraud in:

a) execution

b)inducement

c)preventing a revocation

Back 12

a)entire will is invalid

b)fraudulent provisions are invalid

c) court will still probate will and wrongdoer will take under a constructive trust

Front 13

Intent - Undue Influence - Prima Facie

(always discuss all three types)

Back 13

1) Testator has a weakness such that she is susceptible;&

2) the wrongdoer has access to the testator;&

3) It is the wrongful act that gets the gift;&

4) An unnatural gift.

**Only the part of the will that is affected by undue influence is invalid**

Front 14

Intent - Undue Influence - Presumption

burden of proof shifts to D.

Back 14

1) A confidential relationship between testator and wrongdoer;

2)wrongdoer present when will is executed

3) the wrongful act gets the gift; AND

4) An unnatural gift

Front 15

Intent - Undue Influence - Statutory UI CA

Back 15

CA invalidates a donative transfer from testator to:

1) Person who drafted the instrument;

2) Person who is related to, married to, or cohabitates w/, or is an employee of the drafter;

3) A person who is in a fiduciary relationship w/ the testator and who transcribes the testamentary instrument.

Front 16

CA statutory undue influence- exceptions

Back 16

a. The T is related to, married to or co-habitats w/ the drafter, or

b. If the instrument is reviewed by an indep. atty who counsels T, or

c. gift is under $5k

Front 17

choice of laws

– a will can be admitted to probate in Cal. if any of the following 3 rules is satisfied

Back 17

a. The will complies w/ California’s formalities of execution

b. The will complies w/ the formalities of the place where the will was executed.

c. The will complies w/ the formalities of the place where T was domiciled at the time of execution.

Front 18

Mistake-in content

wrong ben. named or wrong gift

Back 18

i. If words are accidentally left out – no relief is given, courts do not re-write wills (but DRR may be an option)

ii. If words are accidentally added – remedy may be given – ct may strike out extra words

Front 19

mistake- in execution

T signs the wrong document

Back 19

i. If T sings the will believing it is a non-testamentary instrument – the will is not probated b/c T did not intend the document to be a will.

ii. It H & W have reciprocal wills and each mistakenly signs the wrong one – court may reform the will and substitute the correct names. Reasoning: it is equitable.

Front 20

mistake- in inducement

particular gift is given/not given based on T's erroneous belief

Back 20

i. No relief is given.

ii. Except – one narrow circumstance – when both the mistake and what T would have done but for the mistake appear on the face of the will – then court will give relief.

Front 21

mistake- in description (ambiguity)

no one or nothing fits the description, or, 2 or more people or things fit the description

Back 21

Court will allow introduction of extrinsic evidence for any type of ambiguity – latent or patent – to determine what the T’s intent was.

Front 22

Mistake - Pretermission

Back 22

1.A child is pretermitted if born or adopted after all testamentary instruments are executed and not provided for in any testamentary instrument=Child takes intestate share.

2. If after the child is born there is subsequent republication of the will by codicil, the omitted child may NOT take b/c (i) the codicil republished the will, and in the alternative (ii) the codicil itself is a testamentary instrument, thus the birth took place before the codicil was executed.

3.If child born before all testamentary instruments are executed and is not provided for is not pretermitted unless the only reason the child was not provided for was because the child was thought to be dead or non existent

Front 23

Components of the will - integration

Back 23

Refers to which papers make up the will

1) Intent: testator must have intended for the papers in question to be part of the will;

2) Presense: the paper must have been actually/physically present at time of execution.

Front 24

Components of the will - Incorporation by reference

Back 24

Allows a non integrated writing to become part of the wil if:

1) The document existed at execution

2) the document is clearly identified in will

3) Testator intended to incorporate

Front 25

Components of the will -acts of Ind. Significance

Back 25

Who a beneficiary is, or what gift is given may be given meaning by acts of significance ind. from the will.

**Allows the court to fill the gaps**

Front 26

Pour Over Wills

Back 26

a will that identifies a trust created by T that he can use to pour-over his probate assets into and thus avoid going through probate if the assets are less than $100,000. Example: “I give the rest and residue of my estate to the trustee of my inter vivos trust, to hold and distribute pursuant to its terms.”

i. Pour-over provision effectuated by incorporation by reference, or acts of inde. Significance.

ii. A pour-over will is valid if:

1. The trust is identified in the will,

2. The terms are set forth in an instrument other than the will,

3. The trust was executed concurrently or before the will execution.

Front 27

Codicil

Back 27

A testamentary instrument executed in compliance w/ the CA probate code which modifies, amends or revokes a will. (same formalities as will or holographic will)

revocation of codicil= will remains valid

revocation of will= both will and codicil are revoked

Front 28

Revocation - Physical Act

Back 28

1) Must be burned, torn, cancelled, destroyed or obliterated (material part of will)

2) Intent to revoke

3) Act must be done by testator or at T's directions and in his presence

Front 29

presumed revoked if

Back 29

T's will was will last in his possession, and he was competent until death, and neither the will nor a duplicate can be found at T's death (presumed destroyed by T)

Duplicate Wills: If T, or someone in T’s presence and at hisdirection, revokes by physical act one of the duplicate originals, then theother duplicate original is also revoked as a matter or law.

Mutilated Wills: If a will is found in a mutilated condition at T’s death, and when last seen it was in T’s possession → rebuttable presumption that T intended to revoke it.

Front 30

Revocation - Subsequent Written Instrument

Back 30

Can be expressed or implied(total or partial)

**Revival may occur if testator manifests intent to revive first will

Front 31

Revocation - Operation of Law

Back 31

omitted child

omitted spouse

subsequent domestic partner

devises to previous spouse after divorce or annulment

Front 32

revocation by operation of law- omitted child

Back 32

A will executed prior to the birth or adoption of a child which omits that child is revoked as to that child. Unless:

(1) decedent’s failure to provide for the child was intentional, and that intention appears from the testamentary instrument;

(2) D evidenced a plan that child’s other parent would take financial care of all children that they have together;

(3) D provided for the child outside the testamentary instrument w/ intent that the transfer is in lieu of any testamentary provision.

Omitted child receives an intestate share of assets decedent owned at death plus any assets held in an intervivos trust. Other gifts are abated or reduced

Front 33

revocation by operation of law- omitted spouse/domestic partner

Back 33

a will executed prior to marriage, and which omits the surviving spouse is revoked as to that spouse: . Unless:

(1) failure to provide was intentional, and intent appears on the instrument;

(2) D provided for the spouse by some other transfer,

(3) omitted spouse signed a valid waiver of her right to share in T’s estate.

Front 34

revocation by operation of law- omitted spouse/domestic partner

what does omitted spouse get?

Back 34

Omitted spouse receives a statutory share of assets decedent owned at death plus any assets held in any intervivos trust. Statutory share includes:

a. ½ of the CP and ½ of the quasi-CP (thus the spouse ends up with 100% of the CP and quasi-CP)

b. A share of the SP equal to that what she would have received if the decedent had died w/out a will, but never more than ½ the SP estate.

Front 35

revocation by operation of law- divorce/ annulment

Back 35

Disposition of property to a former spouse in a will executed before divorce/annulment is revoked by dissolution unless the will provides otherwise.

Front 36

revocation - DRR

also under mistake

Back 36

Where T revokes on the mistaken belief that another testamentary disposition will be effective (and but for the mistake, would not have revoked),but it is not effective, the court may ignore the revocation and allow the first will to take effect.

Front 37

DRR- if 2nd will invalid due to fraud, duress, menace, undue influence, or ineffective execution

Back 37

then revocation of the first will was never valid so DRR is not applicable

Front 38

revival

Back 38

when a will is revoked by a physical act or subsequent will and then the subsequent will is revoked as well, the first will is revived if T intends for it to revive. Extrinsic evidence is allowed when revocation is performed by a physical act

Front 39

classification of gifts

Back 39

Specific: A devise or gift of a particular item of prop distinct from all other objects in the testator's estate

General: A gift of a general economic benefit, payable out of the general assets of the estate.

Demonstrative: general gift that specifies the property, or a particular fund from which the gift should be made

Residuary: what remains of the estate after all other gifts are satisfied

Front 40

special rules for stocks

Back 40

1. If stock was never owned, then executor buys it

2. If stock was owned and language is specific (“my 100 shares of stick”) then gift is specific → ademption arises.

3. If stock splits after execution of will then gift is specific and beneficiary talks all

4. Stock dividends →courts are split. Generally Ct. looks at T’s intent and whether he owned the stock at the time of his death

Front 41

Ademption (only applies to specific gifts)

Back 41

A legacy will fail if no longer owned by testator at death. However, in CA ademption depends on whether the testator intended to adeem (revoke) the gift when he disposed of the prop.

**extrinsic evidence allowed to show intent**

Front 42

- Satisfaction

Back 42

An inter vivos gift to the bene is deducted from the devise, where the testator expressed in a written document that she intended the gift to be in satisfaction of the devise.

Front 43

abatement

Back 43

occurs when gifts are reduced to enable the estate to pay the debts and credits it would otherwise not be able to pay.

Front 44

abatement- order if omitted child/spouse/domestic partner

Back 44

1. First abate property not passing by D’s will or revocable inter-vivos trust

2. Then abate from all beneficiaries of T’s will and revocable inter-vivos trust pro rata to the value of the gift received

Front 45

abatement- order to pay off general debts

Back 45

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 46

exoneration

Back 46

applies when a gift of property is made that is subject to an encumbrance, and the will requires that the devisee takes property free and clear of the encumbrance.

i. The general rules of abatement apply to enable exoneration.

ii. A specific gift of other property cannot be abated for the purpose of exonerating another gift of specific property.

Front 47

Distribution - Lapse(traditional view)

Back 47

If the bene does not survive testator, bene's gift lapses, or fails, unless testator expresses a contrary intent in the will.

**If the devise is a class gift, only surviving class members take b/c the will speaks at the time of the testators death. Deceased class members share will have deemed to lapse.

Front 48

Anti Lapse (modern and in CA)

Back 48

If bene predeceases testator and gift lapses, then under CA anti lapse statute if the deceased bene is a blood relative of the testator, testator's spouse, or domestic partner, then the issue of the predeceased bene will take bene gift.

unless contrary intention appears in will.

issue will take per capita, or per capita by representation

anti laps also applies to class gifts

Front 49

Simultaneous Death

Back 49

When two people die at the same time and time of death cannot be established, prop of each decedent is treated as if he predeceased the other.

Beneficiary treated as if he predeceased T, so laps/antilaps applies

Front 50

Widow's election

Back 50

If D spouse attempted to dispose of more than 1/2 of CP or QCP, surviving spouse may elect to keep his devised share under D's will or his statutory share of 1/2 of CP and QCP

Front 51

bars to succession

Back 51

no contest clause (penalizing bene if he contests the will)

killers

Front 52

bars to succession- no contest clause

Back 52

generally not enforced in CA, unless

a)it is a direct contest brought w/o probable cause, (see definition), or

2. Challenging transfer of property on the grounds that it was not the transferor's property at the time. or,

3. Filing a creditor's claim

Front 53

bars to succession- no contest clause- direct contest w/o probable cause

Back 53

a. Direct contest is one that alleges invalidity based on forgery, lack of due execution, lack of capacity, menace, duress, fraud, or undue influence, revocation, disqualification of a beneficiary because of interested witness, gift to a drafter, or gift to a care custodian of a dependent adult transferor.

b. Probable cause is defined as "at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted".

Front 54

bars to succession- killers

Back 54

intentional or felonious killers don’t take under will or intestacy and are treated as having predeceased the T and anti-lapse provisions don’t apply.

Front 55

Contracts

Back 55

Testator can contract to make, not to make, revoke or not revoke a will, contract law controls.a. K must be established by:

i. Provisions in will stating material terms of K;ii. An express reference in the will to the K & extrinsic evidence

iii. A writing signed by T evidencing the K

iv. Clear and convincing evidence of an agreement or promise between the D and another person for claimant’s benefit.

CA holds, that the execution of a joint or mutual will does not create a presumption of a K not to revoke the will.

Front 56

Intestate succession

Back 56

CP: surviving S inherits the D's 1/2 of the CP and 1/2 of quasi CP

SP: If no issue, parents, sibling - all to surviving spouse

**If survived by one child or issue of deceased child - 1/2 to child, 1/2 to spouse

**If survived by 2 or more children or issue of deceased children, 1/3 to spouse 2/3 to children

Front 57

intestate- succession order

(when no surviving S and/or remaining portion after S takes his share)

Back 57

i. To issue;

ii. To parents

iii. To issue of parents (decedent’s siblings);iv. To grandparents or issue of grandparents (decedent’s aunts and uncles);

v. To issue of predeceased spouse (step-children)

vi. To next of kin

vii. To parents of predeceased spouse (in-laws) or issue of parents of predeceased spouse (siblings-in-law)

viii. Escheats to the state.

Front 58

120-hour rule

Back 58

Simultaneous death is defined differently under intestacy than under a will: survival must be by at least 120 hours, or the deaths will be considered simultaneous.

When passage of title to property depends on priority of death and there is insufficient evidence (less than clear and convincing) that persons have died other than simultaneously, property of each person passes as if he survived. "Other than simultaneously" is defined as surviving by 120 hours.

Front 59

advancement

Back 59

the intestate equivalent of "satisfaction"

An intervivos gift does not represent an intestate share (an advancement) unless there is a writing either by T (contemporaneous) or by the heir acknowledging it as such.

If advancement, then to calculate distribution, add all shares (including the advancement) to get the hotchpot (total). Divide by the number of intestate takers.

Front 60

distribution methods_ per capita, stireps...

Back 60

.....

Front 61

Increased Value of Prop

END OF WILLS

Back 61

During testators lifetime: Stock dividends or splits paid during testators lifetime go to the bene if still owned at death

During Probate: Bene receive increase only if specific

Front 62

Trust Definition

Back 62

A fiduciary relationship with respect to prop whereby one person holds legal title for the benefit of another and which arises out of a manifestation of intent to create if for a legal purpose.

Front 63

Creation

Back 63

1) Declaration by owner.Must use mandatory words and not precatory words (hope and desire).Oral trust only for personal prop

**precatory + parol evidence=trust**

2) transfer of property by owner during his lifetime to trustee

3) transfer by owner in will.If trust to take effect at settlor's death must comply w/ local probate rules

4. power of appointment

5. enforceable promise

Front 64

trust limitations

Back 64

real prop needs writing

oral trust is by clear and convincing evidence

performed by trustee only

invalidation (see wills-fraud, undue influence, capacity)

Front 65

Creation Inter Vivos

Back 65

Transfer in trust (3rd party trustee): For a trust of RP, S must execute and deliver a deed transferring title to the trustee. For PP, S must deliver trust prop to the trustee

Declaration in trust (S as trustee): For RP, writing to satisfy SoF which indicates S is trustee. For PP, look for present manifestation of intent.

Front 66

validity requires

Back 66

settlor's intention

trust property

legal purpose

ascertainable bene.

court can appoint trustee

Front 67

Intent

Back 67

Settlor must manifest intent to create a trust

Front 68

Trustee

Back 68

A trust must have a trustee but the court will appoint one if there is none. A trust will not fail if there is no trustee. court will appoint one.

Front 69

Beneficiary

Back 69

An ascertainable person or group of people can be the bene, including a corp or association.

Front 70

Trust Res (property)

Back 70

Any presently existing interest in prop that can be transferred can be the corpus of a trust.

Front 71

Purpose

Back 71

Trust must have a valid purpose not contrary to public policy or illegal

Front 72

types of trust-13 of them

Back 72

express

testamentary

pour over

secret

semi-secret

spendthrift

support

discretionary

charitable

honorary

totten

resulting

constructive

Front 73

pour over

Back 73

a trust that is structured to receive and dispose of assets at the S's death. often established by through S's will

Front 74

secret trust

Back 74

no bene./intent on the face of trust

S leaves a gift to the bene. on the face of his will, without indicating an intent to create a T in the will, but does so in reliance that bene. will hold the prop in trust for another

Front 75

semi-secret trust

Back 75

no bene. but intent exists

S leaves a gift in his will to a person in trust, but doesn't name bene.

Maj.= semi-secret T is invalid, apply a resulting a trust

Min.= extrinsic evidence allowed to prove the trust.

Front 76

Charitable Trust

Back 76

1) Charitable purpose (look to effect not motive) and benefits society

2) No ascertainable beneficiary

Cy pres: If S manifests a general charitable intent but that intent is no longer possible, the court may use cy pres.

**Extrinsic evidence allowed**

If cy pres doesn't fulfill S's intent, court will apply resulting trust

Front 77

Honorary Trust (i.e., pet trust)

Back 77

A trust which has no ascertainable bene and confers no substantial benefit on society.

1)generally invalid, unless for a pet or maintaining cemetery plots

2) Trustee not required to carry out S's goals but has the power to.

3) If trustee refuses, trust fails

4) if pet dies, resulting trust is applied

Front 78

Tottent Trust

Back 78

A tenative bank acct. whereby the named bene takes whatever is left in the acct. at the death of owner of acct.

Front 79

Spendthrift Trust

Back 79

A trust which prevent the bene from transferring his right to future payments of income or principal and creditors cannot attach the bene's right to future payments

**Cant create a spendthrift trust to insulate oneself from creditors**

Front 80

Spendthrift - Voluntary Alienation

Back 80

Generally, the bene cannot ever voluntarily transfer his rights to future payments:

1) Sometimes a court will recognize the assignment on the ground that the bene merely has given the trustee a direction or order to pay the bene's agent or rep.

2) Prior to payment the bene would have the right to revoke the order or direction

Front 81

Spendthrift Trust - Involuntary Alienation

Back 81

Generally, creditors cannot attach bene's right to future payment

1) Preferred creditors can attach bene's right to future payments ( gov. creditors, those who provide necessities of life, child support, alimony)

2) In some juris. any creditor has right to attach surplus as measured by the bene's station in life.

Front 82

Support Trust

Back 82

A trust which allows the trustee to pay only so much income or principal as necessary for the bene's health, support, maintenance or ed.

**Bene cannot voluntarily transfer right to future payments**

**Only preferred creditors can attach future payments**

Front 83

Discretionary Trust

Back 83

A trust which gives the trustee sole and absolute discretion in determining how much to pay the bene and when to pay the bene, if ever.

**If assigned, assignee steps into shoes of bene

**Creditors cant attach but if trustee has notice of debt he must pay creditor**

Front 84

Resulting Trust

Back 84

An implied in fact trust based upon the presumed intent of the parties. will transfer property to S or his estate when:

1) PET ends by its own terms and there is no provision for res.

2)PET fails b/c there is no bene

3) Charitabel trust ends due to impossibility, and cy pres not applicable

4) PET fails due to illegality

5) Excess res in PET

6) PMRT (Purchase money resulting trust)

7) there's a semi-secret trust

Front 85

Constructive Trust

Back 85

An equitable remedy to prevent fraud or unjust enrichment. Arises when:

1) Trustee of PET or charitable trust makes a profit b/c of self dealing

2) Fraud in inducement or undue influence

3) There is a secret trust

4)oral real estate trusts are created

Front 86

Trustee Powers

Back 86

In addition to powers expressed in trust, state law, or by the court, trustee may:

1) Sell trust prop, incur expenses, lease, borrow money, as necessary for purpose of trust.

2) Trustee may not encumber trust prop

3) May sue 3rd parties who damage trust prop

4) Joint trustees need unanimous agreement

Front 87

duties of a trustee

8 of them. AND I DID SLIDE

Back 87

1) Account

2) Not Delegate duties

3) be Impartial

4) Due care ( Investigate and Diversify investments)

5) Segregate and earmark

6) Loyalty

7)prudently Invest

8) Defend and Enforce actions

Front 88

Trustee Duties - Loyalty

Back 88

Duty of Loyalty

The trustee must administer the trust for the benefit of the bene's, having no other consideration in mind. avoid conflicts of interest.No self dealing. Must turn over ill gotten profits to bene. must treat benes. equally.

Front 89

trustee duties- due care

Back 89

Trustee must act as a reasonably prudent person dealing w/ his own affairs, which includes his duty to investigate any investment, and a duty to diversify investments.

Front 90

Trustee Duties - Duty to prudently Invest

Back 90

State Lists

in absence of directions, trustee must follow a list of good investments: Gov't bonds, fed insured certs of deposit, 1st DOT, stocks (maybe)

Common law prudent person

Requires trustee to act as a reasonably prudent person would in his own prop. Each investment is scrutinized. Good investments same as list.

Uniform Prudent Investor Act

Performance is measured by the entire portfolio.

Front 91

Trustee Duties - Duty to Separate and Earmark

Back 91

Earmark

Trustee must label trust prop as trust prop.

Liable only if loss resulted from failure to earmark

Separate

Trustee cannot commingle his own funds w/ trust funds. If breached, can be removed and held liable for any loss.

Front 92

Trustee Duties - Duty not to delegate

Back 92

Trustee can rely on prof. advisers in reaching a decision, but cannot delegate decision making to the advisers. i.e., money manager

liable for breach if :T fails to use reasonable care in selecting agents or, T fails to remedy improper acts or, T improperly delegates(may delegate only purely ministerial functions, but not discretionary powers.)

Front 93

Trutee Duties - Duty to Account

Back 93

Trustee must give bene a statement of trust income and expenses on a regular basis.

Front 94

duty to be impartial

Back 94

when dealing with the income benes and the remainderman benes.

Front 95

duty to defend the trust

Back 95

against actions that may result in a loss to the trust, and enforce claims that are part of the trust property.

Front 96

Trustee Duties - Remedy for breach

Back 96

1) damages

2) constructive trust

3) tracing and equitable lien on prop

4) ratify the transaction if good to the bene

5) Remove trustee

Front 97

Liability of trustee to 3rd party - contract

Back 97

1. Common law: trustee is sued in her personal capacity, so her personal assets are at stake. But trustee can get indemnification from trust assets if acting w/in her powers and was not personally at fault.2. Modern law: If the other person to the K knows that the trustee is entering into the K in her representative capacity, the trustee must be sued in her representative capacity, and her personal assets are not at stake.

transfer of prop. to BFP cuts off bene's interest. but if not BFP, bene. can set aside transaction.

Front 98

Liability of trustee to 3rd party - torts

Back 98

Only personally liable if the trustee is personally at fault, otherwise sued in rep. capacity

Front 99

allocation of trust

Back 99

trustee must be fair to all benes. unless trust states otherwise, allocated as follows:

to income benes: entitled to interest income, cash dividends, and net busi. income. But must pay interest on any loan debt, taxes or minor repairs

to remainderman: principal from the net proceeds of sale of asset, stock dividends, profit from sale of stocks. but must pay for the principal part of the loan debt and major repairs

trustee can exercise his best judgment, so can even disregard the above to follow S's intent

Front 100

Modification by Settlor

Back 100

maj.:Settlor can modify the trust only if the settlor expressly reserves the power to modify the trust

min. and CA: trusts are revocable unless stated otherwise

Front 101

Modification by court

Back 101

1) Court can modify charitable trust

2) Court can modify pursuant to its deviation power to change the administrative or mgmnt provisions of the trust if:

**Unforeseen circ. on the part of the settlor

**Necessity

Front 102

Termination of Irrevocable Trust

Back 102

1) Settlor and all bene's agree to terminate

2) All benes are competent and all agree to terminate and all material purposes have been accomplished

3) By operation of law. courts can terminate if purpose becomes frustrated/impossible/ illegal, or if there are changed circ's.

**If PET of RP and trustee has only passive duties, the trust terminates under the statute of uses and the bene gets legal title by operation of law.