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106 Cards in this Set
- Front
- Back
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What are the three essential functions of probate? |
1. Clears title: makes property marketable. 2. Creditor protection: pays off decedent's debts. 3. Distribution: implements the decedent's donative intent for distribution of property that remains. |
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What are the three elements of a valid gift? |
Donative intent, delivery, and acceptance. |
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What constitutes donative intent on the part of the Donor (for a gift)? |
Some indication that the transferor meant to make a voluntary, gratuitous transfer of interest in the property.
Capacity.
Present Interest Test. |
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What constitutes "delivery" for the purpose of a valid gift? |
Delivery must occur during the donor's lifetime.
Delivery should be as perfect as the nature of the property and the circumstances reasonably permit.
Must vest the donee with, and divest the donor of, dominion and control over the property. |
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What are the three types of "delivery" for a gift? |
Physical deliver.
Constructive delivery. (donor delivers something that gives donee access to the place where the property is located)
Symbolic delivery. (donor delivers something symbolic of the property, such as a written instrument of gift) |
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Exceptions to the "delivery" requirement? |
Formal Writing.
Deed of gift.
Real property.
Delivery through 3rd person. |
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If the third person fails to deliver the property to the donee, the gift may nevertheless be valid if... |
...the third person was acting on behalf of the donee rather than the donor. |
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What is an example of a conditional gift? |
A gift of an engagement ring; marriage is the implied condition.
Fault Rule: inquiry is who is at fault for breaking off the engagement.
No Fault Rule: donor gets the ring back no matter what. |
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What are the the elements of a "gift causa mortis"? |
Gift of personal property. Made in apprehension of imminent death. From an existing sickness/peril. Donor dies from the peril. Without having revoked the gift. Donative intent, delivery, and acceptance still required! |
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Who can challenge the making of a gift? |
1. The transferor, or the transferor's legal representative during the transferor's life.
2. Someone with standing after the transferor's death. Standing exists when a person will receive a direct pecuniary benefit if the challenge succeeds. |
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What are the 2 types of challenges to gifts? |
1. Incapacity
2. Undue Influence |
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To have mental capacity to make a gratuitous transfer, a person must... (3 things)? |
1. Understand the nature and extent of his or her property.
2. Know the natural objects of his or her bounty. (close friends and relatives.
3. Understand the disposition of the property the person is making. |
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What is undue influence, for the purposes of challenging a gift or transfer? |
Influence that overcomes the free will of the donor, and substitutes the will of another person.
If there is undue influence, there is no donative intent, and the gift is therefore invalid. Wh |
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When does a presumption of undue influence arise in relation to the making of a gift or transfer? |
1. Donee dominated the donor;
2. Confidential relationship existed;
3. If the donor is dependent on and makes a gift to the donee that strips the donor of all or virtually all assets. |
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What is a testamentary transfer in relation to gifts? |
A transfer intended to transfer ownership only at the transferor's death.
Such a transfer is considered effective only if made by will, and made in compliance with statutory formalities. |
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What are will substitutes? |
Non-probate property that does not need a will to pass ownership to a successor at death.
Life insurance, Pension accounts, Joint accounts with right of survivorship, Revocable Trusts. |
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What is a trust? |
An arrangement under which one person (trustee) holds legal title to property (res or corpus) and manages that property for the benefit of one or more individuals (trust beneficiaries) who are considered to have an equitable interest in the property. |
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What are the reasons that people use trusts? |
1. To assure proper financial management (incapacity, to hold property for minors)
2. To avoid probate
3. To add flexibility
4. To save taxes |
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What are the elements of a trust?? |
Settlor; Some manifestation of intent to create a trust; Trust property; Trustee; One or more beneficiaries; Lawful purpose; A trustee must have legal title to the property before he can manage the property for the benefit of the trust beneficiaries. |
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What is an honorary trust? |
A trust that is not enforceable by an identifiable beneficiary, but is treated as valid so long as the trustee chooses to carry out (honor) the trust purpose. When the trustee no longer wishes to do so, the trust terminates.
Pets. |
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What is a Power of Appointment? |
Authority to designate who will receive beneficial interests in a particular property; can be done in a will or a trust.
A Power is discretionary, and the donee is not required to exercise the power. |
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Where a POA requires a "specific reference" to be exercised, can it be exercised through (1) a blending clause, or (2) a general residuary clause? |
No. |
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Where a POA does not require a "specific reference" to be exercised, can it be exercised through (1) a blending clause, or (2) a general residuary clause? |
Yes under blending clause
No under a general residuary clause. |
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Can creditors of a settlor reach trust property of a trust in which the settlor has access? |
Yes, to the same extent that the settlor had access. |
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Can creditors of a beneficiary reach trust income or principal that the beneficiary is entitled to receive? |
Yes, but only to the extent that the beneficiary can receive the trust income or principal, at the time that the beneficiary is entitled to it.
If the trust is wholly discretionary, then the beneficiary cannot demand anything, and neither can creditors. |
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A spendthrift provision will bar a beneficiary's creditors from reaching trust property, except...? |
Necessities.
Taxes.
Dependents.
Tort Victims. |
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What are the elements of a "disclaimer" for gift, devise, or inheritance by will? |
Must be in writing;
Must be done within the required time period;
Must not accept any benefits;
Must not designate alternate takers. |
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When can a settlor revoke an irrevocable trust? |
If all of the beneficiaries consent either personally or through (1) guardian ad litem or (2) virtual representation. |
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When can trust beneficiaries alone terminate a trust? |
1. When all the beneficiaries consent, and
2. No material purpose of the settlor is frustrated. |
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What is a guardianship of the person for a minor? |
A guardian of the person has authority to make decisions about daily life (food, clothing education, etc) but no authority to manage financial resources.
Terminates at age of majority. |
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What are the 3 ways to plan for financial management of a minor child? |
1. Conservatorship
2. Custodianship
3. Contingent Trust for minors (best) |
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What is a conservatorship? |
A fiduciary arrangement established and supervised by the probate court, pursuant to state statute, until the minor reaches the age of majority.
Advantages: not many
Disadvantages: court supervised, costly, ends at age of majority, required for each child. |
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What is a custodianship? |
A fiduciary relationship established under and regulated by state statutes. The legal title to the minor's property is vested indefeasibly in the minor, but authority to manage the property for the minor's benefit is conferred to a fiduciary known as a "custodian."
Advantage: no court supervision, can last until age 21 or 25.
Disadvantage: inflexible b/c statutory. Separate one required for each child. |
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When does a contingent trust for minors come into being? |
If both parents have died, and the children are still below the age specified in the trust instrument.
Advantages: no court supervision, flexible (lasts till desired age), no need to have separate trusts for separate kids, avoids probate if child dies.
Disadvantages: cost, complicated to set up, not feasible for small amounts. |
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What us a supplemental needs trust, and when is it used? |
A trust established for a disabled person by a settlor who has no legal duty support the beneficiary. Purpose is to permit beneficiary to receive trust distributions to improve quality of life, while remaining eligible for government benefits. |
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How should a supplemental needs trust be drafted? |
1. distribute only for special (supplemental) needs
2. prohibit distributions for necessities
3. distribute only to supplement, not supplant government assistance
4. give trustee sole discretion to distribute
5. direct trustee to consider beneficiary's other resources |
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What trusts are considered to be available and what trusts are considered unavailable for Medicaid purposes? |
Discretionary trusts: unavailable
Support trusts: available
Supplemental Needs Trusts: unavailable |
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What are 2 options to avoid having assets treated as available resources under government assistance program? |
Disclaim
Transfer $ outright to others. (under federal law, transfer of assets for less than FMV may cause a period of ineligibility if the transfer occurred within a certain lookback period) |
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What is a Power of Attorney? |
A written instrument designating an agent (attorney in fact) to act on behalf of the principal.
The principal must have capacity when the instrument is executed.
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What is a Durable Power of Attorney? |
A power that remains effective despite the principal's incapacity. Most states require an explicit statement that the agency continues after incapacity. |
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What are the three risks associated with Power of Attorney? |
1. risk of abuse
2. doesn't avoid probate (principal has sole legal title so everything still has to go through probate)
3. third parties may not honor the POA, especially if it's "stale" |
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What are the advantages of a revocable living trust? |
Settlor can manage own financial affairs if capable.
Avoids probate.
Flexible.
Settlor's affairs remain private.
Chooses which state's law governs. |
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What are the three types of Advance Medical Directives? (written documents specifying how health care decisions will be made after incapacity) |
Living Will.
Durable Power of Attorney for Health Care.
Advance Health Care Directive. |
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What is the difference between PA suicide and active euthanasia? |
PA suicide: a 3rd party physician provides the patient with a means to kill self, like lethal medication dose.
Active Euthanasia: 3rd party actually administers the agent that causes death. |
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What is the "double effect" in relation to assisted suicide? |
It's ok to administer large doses of pain meds where the doctor's intent is to relieve pain, even if the medication has the unintended though not unexpected effect of hastening the patient's death. |
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What is intestate succession? |
Process by which the probate property of an intestate decedent passes at the decedent's death to the decedent's successors (heirs).
Personal property: law of the decedent's domicile applies.
Real property: law of the state where real estate is located applies. |
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What is the typical priority order for intestate succession? |
Surviving Spouse
Issue.
Parents.
Siblings and their issue.
Grandparents and their issue.
Escheat |
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What happens if the decedent leaves no surviving spouse, but leaves issue? |
The decedent's issue will take 100% |
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What are the 4 methods for Intestate Succession? |
1. Per Capita
2. Per Capita at Each generation (minority)
3. Per Capita with Representation (majority)
4. Pure Per Stirpes (old) |
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What is the "per capita" method of intestate succession? |
Decedent's estate is distributed in equal shares among all of the decedents descendants, "by the head."
No state follows this approach. |
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What is the Per Capita at Each Generation method of intestate succession? |
Step 1: determine the closest generation to the decedent that contains at least one living taker. Then, divide the decedent's estate into equal shares, counting one share for each living descendant at that generation level, and one share for each deceased descendant at that generation level who left issue who survive the decedent. Distribute a share to each living taker at this generation level.
Step 2: Recombine the remaining undistributed shares, drop down to the next generation level, and repeat the above process of dividing into equal shares. |
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What is the Per Capita with Representation method of intestate succession? |
Step 1: determine the closest generation to the decedent that contains at least one living taker. Then, divide the decedent's estate into equal shares, counting one share for each living descendant at that generation level, and one share for each deceased descendant at that generation level who left issue who survive the decedent. Distribute a share to each living taker at this generation level.
Step 2: Instead of recombining the remaining undistributed shares and dividing into equal shares at the next generation level, the share of each deceased descendant passes directly to his or her surviving descendants by representation. |
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What is the Pure Per Stirpes method of intestate succession? |
Division into equal shares always occurs at the "roots" (the level of the decedent's children), regardless of whether any child survived the decedent. The share of each "root" is then distributed to that branch of the family. |
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What is the majority/minority approach to adopted children for the purposes of intestate succession? |
Majority rule: the new relationship between the child and adoptive parents is substituted for the old one (child and natural parents).
Minority rule: the child can also inherit from natural parents, but not vice versa. |
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What is the majority approach to posthumous children for the purposes of intestate succession? |
The majority treats the child as born as of the date the child is conceived, and therefore the child is "alive" at the time of the death of the dad.
This is a rebuttable presumption. |
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What is the general rule for stepchildren for the purposes of intestate succession? |
Statutes of intestate succession generally do not provide for stepchildren to inherit from or through their stepparents, nor vice versa. |
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What is the general rule for fosterchildren for the purposes of intestate succession? |
Foster children receive nothing when their foster parents die intestate.
Exception: "equitable adoption" |
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What are the 2 approaches for if a decedent dies intestate and leaves no spouse, descendants, parents or first line collaterals? |
1. Parentelic System: estate goes to the closest "parentela" which consists of an ancestor and that ancestor's surviving descendants (estate passes to the decedent's grandparents or their surviving issue).
2. Degree of Relationship System: the person who is the fewest "steps" away wins, regarddless of parentela. |
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What are the 3 types of wills? |
Formal Will: will that must be in writing, signed by the testator, properly witnessed. All states recognize it.
Holographic Will: handwritten will signed by the testator, does not need to be witnessed. Half the states recognize it.
Nuncapative Will: oral will that is strictly regulated by statute, typically reserved for soldiers, sailors and terminally ill when death is imminent. Half the states recognize it. |
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What are the formalities of execution for a formal will? |
1. In writing
2. Signed by testator. (intent to authenticate)
3. Properly witnessed. (must be competent, must witness actual signing or testator acknowledging prior signature) |
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What is a Self-Proved Will? |
A will that has attached to it an affidavit, executed under oath by the attesting witnesses that states that all of the required testamentary formalities were satisfied when the will was executed.
Use every time! |
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What is an "attestation clause"? |
A recital found at the end of many wills, usually immediately below the testator's signature and above the witness's signatures, declaring that all the required testamentary formalities have been satisfied. Unlike a self proving affidavit, this does not make the will self-proving. |
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What if a witness to a will is an "interested party"? |
CL: entire will is void
Majority: purging statutes purge only the devise that the interested witness gets, to the extent that the devise exceeds the share the witness would have received if the testator had died intestate, and the rest of the will stands.
Modern trend: the entire will is still valid. Ok to have interested witness, but susceptible to fraud/undue influence claim. |
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What are the requirements for "incorporation by reference" in the context of wills? |
1. the other writing must actually be in existence when the will is executed.
2. the will must show the testator's intent to incorporate the other writing.
3. the will must identify the other writing with reasonable certainty. |
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What are the grounds for contesting a will? |
1. Improper execution (formalities)
2. Lack of testamentary capacity
3. Fraud
4. Undue Influence
5. Revocation |
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Who has standing to contest a will? |
A contestant must be an interested person, one who will get a direct financial benefit if the will contest succeeds.
Ex: heir who would take by intestacy, or devisee under prior will |
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What is an "in terrorem" clause in a will? |
A provision that states that any beneficiary who contests the will gets nothing, or a token amount. Thus a beneficiary forfeits any devise that the beneficiary would have otherwise taken under the will.
Majority: no contest clause is not enforced if there is probable cause to contest
Minority: no contest clause is enforced despite PC to contest |
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What are the two elements of Testamentary Capacity for a will? |
1. Age (age of majority, usually 18 unless married or in military)
2. Mental Capacity (must be of sound mind, and not suffering from insane delusion) |
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What is the Sound Mind Rule for the purposes of will drafting? |
Testator has to know the nature and extent of his property.
Testator has to know the natural objects of his bounty.
Testator has to understand the dispository scheme of his will. |
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What are the elements of an insane delusion? |
1. testator suffered from a delusion, or false belief.
2. testator's delusion was insane; testator adheres to false belief even though it's irrational.
3. testator's insane delusion affected the disposition of the property under the will.
(doesn't invalidate entire will, just the affected portions) |
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What are the elements of fraud? |
1. A misrepresentation was made to the testator; 2. With intent to deceive the testator; 3. Testator is in fact deceived; 4. As a result, testator does what he would not have otherwise done (causation)
KEY ELEMENT IS DECEPTION. Only invalidates that part affected by the fraud. |
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What are the 2 types of fraud? |
Fraud in the Execution
Fraud in the Inducement |
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What is undue influence? |
Influence that overcomes the testator's free will , in effect substituting the will of the influencer for the testator's own desires.
Core element is COERCION.
Only invalidates that part of the will that was affected. |
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What are the methods of voluntary revocation of a will? |
1. By subsequent will.
2. By physical act.
For both, must prove: intent to revoke, compliance with formalities of revocation, legal capacity to revoke. |
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When does revocation of a will occur by operation of law? |
The law implies a revocation in order to effectuate a result that the average testator would want under the circumstances.
Marriage or Divorce. |
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If a testator gets married, and doesn't change his will...? |
Majority: the omitted spouse statute gives surviving spouse a fixed share that is equal to the amount under intestate succession, the gifts to the other beneficiaries must abate.
Minority: testator's will is revoked entirely. |
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If a testator gets divorced, and doesn't change his will...? |
Majority: divorce works a partial revocation of all provisions favoring the ex spouse; the rest of the provisions will remain valid. |
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What are the methods of reviving wills? |
1. Re-execution
2. Re-publication by codicil.
3. Revival by Revocation of Revoking Instrument.
4. Dependent Relative Revocation. |
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What is Dependent Relative Revocation? |
A legal fiction, developed to invalidate an otherwise effective revocation of an existing will, because a testator's revocation was conditional on certain facts that he assumed to be true.
3 elements: - testator's will must have been revoked - revocation was inducted by testator's mistake - revival of revoked will is in accordance with the testator's likely desires under the circumstances |
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What are the three circumstances in which DRR arises? |
1. Defective new will
2. When RRI isn't available
3. Cross out and substitution doesn't work |
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When does surviving spouse's elective share come into play? |
When a decedent leaves the surviving spouse nothing or very little under the will, the SS is given a choice to take under the will, or against the will.
Devises to others may have to abate so that the elective share can be paid to the SS. |
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Is there protection against intentional disinheritance of descendants? |
No, except for in Louisiana. |
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Is there protection for unintentionally omitted "pretermitted" descendants? |
Some, by statutes. Think about:
1. Which generations do the statutes protect 2. Does the statute cover heirs born before will is executed or only those after execution 3. Can extrinsic evidence be considered 4. What share of the testator's estate does the pretermitted heir get |
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What are the 3 types of will drafting mistakes? |
1. Drafters Mistakes (scrivener error) - courts won't likely reform a will, but may reform a trust
2. Mistake in Execution (switched wills) -courts won't correct
3. Mistake in Inducement - courts won't correct; only if fraud will they think about it |
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What are the "what if" questions to ask when drafting wills? |
What if a named beneficiary dies?
What if a named fiduciary can't or won't serve?
What if at death you no longer own property devised?
What if additional children or grandchildren born?
What if none of your family survives? |
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What happens if a gift "lapses"? |
CL: if a beneficiary fails to survive, the gift lapses or fails.
If Pre-Residuary devise: goes to residuary devisees
If Residuary devise: At CL, to heirs. Modernly, to remaining residuary devisees. |
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What is the purpose of an anti-lapse statute? |
To prevent the failure of a devise through normal lapse rules, to overcome the harsh effects of lapse by saving the gift.
The average testator would prefer that a devise to a deceased devisee not fail but instead be "Saved" and redirected commonly to the devisee's issue. |
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When do anti-lapse statutes apply? |
1. Is the deceased beneficiary within the category of persons protected by the statute?
2. Did the beneficiary leave issue who survive the testator?
3. Does the will reveal testator's intent to override the anti-lapse statute? |
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How can an testator overcome the application of an anti-lapse statute? |
1. by stating explicitly that a gift lapses if the beneficiary doesn't survive;
2. language requiring a beneficiary to survive testator in order to take;
3. naming an alternate taker. |
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What if the deaths are simultaneous, do gifts lapse? |
1. Who died first? - under USDA, beneficiary is deemed to die before the testator. Anti-lapse statutes require the beneficiary to die before testator.
2. Does anti-lapse statute apply? - category of people protected by statute - did beneficiary leave issue -does will show intent to override anti-lapse statute |
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What is a class gift? |
A gift to a group of beneficiaries described by their common characteristic. |
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Is there such a thing as a lapse of a class gift? |
CL: If a class member dies before a testator, the person's share does not lapse but is divided among the remaining members of the class.
A class gift only lapses if no class members survive.
Anti lapse statutes may prevent laps of gift when no class member survives, but there are children. |
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What if a gift is made to an individual PLUS a class? |
General Rule: the individual is not within the class. If the individual dies, the gift goes to the class (anti-lapse statute does not apply).
If a class member dies, anti-lapse statute might apply, and gift may go to issue.
If anti-lapse statute doesn't apply, then the other members of the class will absorb the deceased member's share.
*All the takers under this type of gift get the same fraction of the gift. |
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What are the possible changes in the testator's property? |
Ademption
Satisfaction
Stock Splits/Dividends
Exoneration of Liens
Abatement
Tax Apportionment |
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What is ademption by extinction? |
If property is SPECIFICALLY devised, and NO LONGER EXISTS in the testator's estate at the time of testator's death, then the gift fails.
Testator's intent is irrelevant.
Beneficiary gets a substitute for the property only if the will explicitly provides for one.
Specific devise is not adeemed if the property changes in form rather than substance. |
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Do we treat lifetime transfers as an absolute inver vivos gift or satisfaction? |
Modern trend: treat as an absolute inter vivos gift unless there's a writing showing that it was intended to be in satisfaction of a devise. |
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What is the modern trend for Stock Splits/Stock Dividends? |
Give the extra shares to the beneficiary without distinguishing between general and specific devises. |
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What is the CL Rule and Modern Trend for exoneration of liens? |
CL: PR is required to exonerate liens
Modern Trend: PR is NOT required to exonerate liens |
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What is the usual order of abatement in most statutes? |
Intestate property
Residue
General Devises
Specific Devises |
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What are the 3 methods of apportioning taxes in the will? |
1. charge taxes on probate assets to the probate residue, and apportion the rest (safest)
2. apportion all taxes
3. charge all taxes to the probate residue |
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What must a charitable gift have? |
Charitable purpose---must benefit the public generally rather than selected private individuals. |
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What are examples of charitable purpose? |
- relieve poverty -advance education -advance religion -promote health -government purposes -other purposes beneficial to the community |
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What favorable treatment does the law give to Charitable Gifts? |
1. Special tax treatment
2. Not subject to the RAP
3. Reformation under the Cy Pres doctrine |
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What is the Cy Pres Doctrine? |
Permits a court to modify the terms of a charitable gift that would otherwise fail. The charitable gift/trust is reformed to come as close as possible to carrying out the donor's charitable purpose, even though the donor's exact purpose cannot be achieved. |
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When is the Cy Pres doctrine used? |
1. the transfer was for a charitable purpose
2. it is impossible/impracticable to carry out the specified purpose
3. reformation is in accordance with the transferor's intent |
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What are the elements of a charitable trust? |
Settlor
Manifestation of intent to create trust.
Trust property
Trustee
Lawful & charitable purpose
***No need to have definite beneficiaries. |
