Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
113 Cards in this Set
- Front
- Back
|
allocation of trust expenses to income account
|
ordinary expenses incurred in the productionn of income (repairs, interest, taxes, etc) are charged to income account
AND half of trustee's fee |
|
|
allocation of trust expenses to principal
|
extraordinary items, capital improvements, and income taxes incurred on sale of trust property are charged to principal
AND half of trustee's fee |
|
|
power to adjust
|
if it's necessary to comply with trustee's duty of impartiality, he can adjust the classification of expenses (so he doesn't screw the person left with a depleted principal, etc)
Uniform Principal and Income Act |
|
|
trust income - includes...
|
interest, rents, dividends on stock that are paid in cash
|
|
|
trust principal - includes...
|
proceeds from teh sale of trust assets, stock splits, and dividends that are paid in stock
|
|
|
trustee's duty of fairness to all beneficiaries
|
trustee must administer the trust impartially except to the extent that trust or will manifests intent that one or more beneficiaries is to be favored
|
|
|
liability of 3d parties to the trust
|
* beneficiary or trustee can set aside transactions that are breaches of trust if property is not in hands of BFP (acquired property for value without notice of trust)
* knowing participant in a breach of trust is liable for resulting loss to the trust estate only trustee can sue (unless trustee participated in breach, has left jurisdiction, or fails to sue in tort or K) - beneficiaries can bring a suit in equity to compel the trustee to sue |
|
|
powers of trustee
|
IF instrument speaks to the issue - it controls
otherwise, MO UTC allows trustee to do almost anything a fee simple owner can due corporate trustee can take title to stock in name of nominee (but is liable for acts of nominee) trustee can invest in common trust funds (no breach for commingling) |
|
|
remedies for trustee breach of trust
|
court may
* enforce specific performance of trustee's duties * enjoin the trustee from committing a breach fo trust * compel trustee to pay money or restore property (surcharge action) * suspend the trustee beneficiary can also * ratify the transaction and waive the breach * trace and recover the property for the trust |
|
|
damages to beneficiaries for breach of trust
|
trustee is liable for larger of
* amount necessary to restore trust property and distributions to what they would have been absent the breach * trustee's profit from the breach |
|
|
trustee insulation from liability
|
not liable IF:
* he acted in reasonable reliance on terms of trust * OR beneficiary consented to conduct, released trustee from liability, or ratified the transaction |
|
|
exculpatory clauses
|
void if they
* relieve trustee of liability for breach of trust committed in bad faith or with reckless indifference * OR appear in the trust instrument because of the trustee's abuse of a confidential relationship with the settlor |
|
|
trustee liability to 3d parties
|
trustee can be sued in contract or tort in representative capacity
BUT can only be sued in K personally if he failed to reveal his representative capacity and identify the trust AND BUT can be sued personally in tort if personally at fault (no respondeat superior) |
|
|
trustee's duty of loyalty
|
no self-dealing by fiduciary
breach of a fiduciary duty is an automatic wrong - good faith / reasonableness is no defense or justification only issue is the measure of damages |
|
|
trustee's duty to invest prudently
|
unless otherwise provided by trust instrument - trustee must manage property as a prudent investor would
he should consider the purposes, terms, distribution requirements, and other circumstances of the trust and pursue an overall investment strategy reasonably suited to the trust elements: * duty to keep trust productive (reasonable rate of return) * duty to balance return with potential risk * duty to diversity investments * duty not to commingle (duty to segregate, not earmark) compliance measured by portfolio view (look at total return of overall portfolio) |
|
|
trustee's duty to preserve and protect trust property
|
must insure property against casualty losses
EXCEPT trustee is not responsible for tangible personal property that are not in the possession or control of the trustee |
|
|
trustee's duty to account and inform
|
duty to account periodically to beneficiaries and keep them reasonably informed about the administration of the trust
|
|
|
trustee's duty to administer trust
|
trustee has a duty to administer the trust in good faith and in a prudent manner in accordancw ith terms and purposes fo the trust instrument and interests of the beneficiaries
higher standard if trsutee has special skills or expertise |
|
|
summary of trustee's fiduciary obligation
|
trustee must be authorized to perform the act by instrument law, or implication
AND the act must be performed with appropriate care, skill, and caution |
|
|
trust requirements - statute of frauds
|
you need a signed (by trust-creator) writing to create a trust of personal property
otherwise invalid oral trust of land may be enforced by imposing a constructive trust parol evidence allowed if writing is ambiguous |
|
|
testamentary trust - source for intent and terms
|
intent and terms are ascertained from will itself, from a writing incorporated by reference intot he will, from facts having indepdent legal significant, or from exercie of power of appointment created by the will
|
|
|
secret trust
|
IF will makes a gift that is absolute on its face...
BUT was really made in reliance on beneficiary promise (either before or after will) to hold the property in trust for another IF promise can be proven by clear and convincing evidence (doesn't have to prove intent), constructive trust will be imposed |
|
|
semi-secred trust
|
IF will makes a gift in trust but fails to name beneficiaries - gift fails
trustee holds property on resulting trust for testator's heirs |
|
|
trust v. will
|
does the transfer create a present gift?
|
|
|
inter vivos trust validity
|
valid even if settlor retains:
* power to revoke * ower to appoint income or rincipal of the trust by deed or will * power to add or withdraw property from the trust * power to remove trustee and apoint new ones * right to income of the trust |
|
|
pour-over gift from will to revocable trust
|
trust need NOT be in existence at will's execution and can remain unfunding during life
trust CAN be unfunded and/or amended during before testator death trust MUST be clearly identified from language in the will |
|
|
merger of title - trust
|
occurs where sole trustee is also the sole beneficiary
terminates trust |
|
|
assignment of interest in trust
|
unless provision (in statute or trust instrument) otherwise, beneficiary may freely transfer his inerest in the trust
|
|
|
rights of creditors against trust
|
creditors may, without a court order, reach the trust beneficiary's interest by attachment of present or future distributions to the beneficiary
|
|
|
spendthrift trusts
|
precludes beneficiary from voluntarily or involuntarily transferring his interest in the trust
creditors are precluded from reaching it to satisfy claims (have to wait until income is paid beneficiary) |
|
|
spendthrift trust for settlor
|
IF revocable, invalid
IF irrevocable, valid IF: * transfer is not in fraud of creditors * settlor is not the sole income or principal beneficiary * settlor has irrevocably divested herself of all other rights, interests, and powers of the trust |
|
|
spendthrift exceptions
|
child support
alimony services provided to protect beneficiary's interests claims by government |
|
|
discretionary trusts and income
|
IF trustee has the discretion to pay, accumulate, or appoint income among several beneficiaries - beneficiary has no right to the income until trustee exercises his power
|
|
|
creditors of trustee
|
CANNOT reach trust property to satisfy claims
|
|
|
automatic termination of trust
|
generally terminates automatically upon the expiration of the term specified in the instrument or when all purposes of the trust have been accomplished or have become unlawful, contrary to public policy, or impossible to achieve
|
|
|
modification and termination by beneficiaries
|
beneficiaries -
can terminate or modify with consent of settlor and all beneficiaries (even if modification/termination conflicts with material purpose of the trust) |
|
|
modification and termination by court
|
by court -
* trust could have been modified/terminated if all beneficiaries had consented * interests of nonconsenting beneficiaries will be adequately protected * AND no material trust purpose will be frustrated OR IF * unanticipated circumstances threaten the purposes of the trust * continuation of the trust on its existing terms is impracticable or wasteful, * OR value of trust is insufficient to justify cost of administration or achieve tax objective |
|
|
modification and termination by settlor or trustee
|
settlor -
can revoke or amend a trust created after 1/1/2005 unless irrevocable by its terms trustee - can terminate if trust property is less than $100K and amount is insufficient to justify cost of administration (must provide beneficiaries with notice) trustee can combine several trusts into one or divide one into several IF that doesn't frustrate purpose of the trust or impair rights of beneficiary |
|
|
integration
|
stuff present and time will was executed, compromising decedent's last will
|
|
|
codicil - requirements
|
must be executed with same testamentary formalities as a will
|
|
|
republication of will by codicil
|
will is treated as having been executed on date of last validly executed codicil thereto
republication changes child's status with respect to pretermission |
|
|
incorporation by reference
|
extrinsic document incorporated IF:
* in existence at the time will was executed * will refers to it as being in existence * it is clearly identifiable from the will * AND the intent to incorporate the document is shown BUT oral instructions cannot be incorporated by reference (although if devisee agreed to follow instructions, parol evidence admissible to show fraud in the inducement) |
|
|
incorporation of tangible personal property list
|
will can refer to written list disposing of items of tangible personal property, other than money or intangible property or property used in a trade or business
MUST be dated and signed and described items and devisees with reasonable certainty CAN be prepared before or after execution |
|
|
acts of independent significance
|
will can dispose of property by reference to acts and events that have significant apart from effect on dispositions made by the will (ex: my house and it's contents to Sarah)
|
|
|
nonprobate assets and wills
|
will cannot dispose of nonprobate assets - e.g. interests that pass at death other than by will or intestacy (life insurance, employee benefits, survivorship, TOD property, and property held in trust)
|
|
|
holographic wills
|
handwritten, (signed), unwitnessed
NOT valid in MO BUT if it's executed in state where testator was domiciled, has place of abode, or was a national, and is valid there - it might be admittted to probate in MO |
|
|
oral wills
|
may dispose of personal property not exceeding $500 in value
testator MUST BE in imminent peril from illness or some other cause, must eventually die from that peril, and must declare before two disinterested witnesses (one of whom makes a writing w/i 30 days) - must be offered to probate in 6 mos |
|
|
dependent relative revocation (DRR)
|
court may disregard revocation if it determines that revocation was premised on a mistake of law and would not have occurred but for the testator’s mistaken belief that another disposition was valid
to apply DRR, the disposition resulting from disregarding the revocation must come closer to effectuating what the testator tried but failed to do than would an intestate distribution |
|
|
revocation by operation of law
|
marriage after will execution - omitted souse takes amount equal to intestate share (unless wife was purposefully omitted or was otherwise provided for)
spouse in pre-marriage will whom testator did not contemplate as future spouse takes as omitted spouse |
|
|
revocation by divorce
|
divorse revokes all gifts in favor of former spouse as if predeceased
|
|
|
omitted child - revocation by law
|
child born or adopted after will is executed is entitled to intestate share
UNLESS: * appears from will child was intentionally omitted * testator had other children when will was executed and devised substantially all estate to other parent of omitted child * testator provided for child with other transfers father must have recognized the child as his child |
|
|
mistaken failure to provide for child
|
if testator fails to povide for a child born before will's execution b/c he thought child was dead - child is entitled to intestate share
IF other mistake, relief only if mistake and what would have been done without it are int eh will |
|
|
revocation by physical act
|
will can be revoked in whole or in part by burning, canceling, tearing, or oblitering it WITH intent to revoke (AT THAT TIME)
can be revoked by physical act of another if done at testator's direction and in his presence |
|
|
missing or mutilated will
|
IF will was last seen in testator's possession - presumed revoked
declarations of tesator are admissible to rebut presumption if found in mutilated condition, presumed that testator did the mutilating with intent to revoke |
|
|
duplicate wills
|
if both are executed, act of revocation on one revokes the other
|
|
|
proof of lost, destroyed, suppressed will
|
lost will can be probated IF:
* due execution is established by testimony of witness contents fo the willa re substantially proved by copy, attorney, or testimony of somebody who read it |
|
|
revival of revoked wills
|
1st will only revived if it is evident from circumstances of revocation of 2d will that testator intended to revive the 1st will
|
|
|
alterations on face of will
|
ANY addition, alteration, or interlineation made after will was signed and attested is ineffective to change the will, unless reexecuted with proper formalities
|
|
|
lapsed gift - definition
|
if a will beneficiary dies during testator's lifetime - it fails
|
|
|
MO anti-lapse statute
|
saves lapsed gift if...
the predeceasing beneficiary was a child or other blood relative of the testator who left descendants who survived the testator (take by substitution) |
|
|
lapse in residuary gift
|
failed share passes to other residuary beneficiaries in proportiont to their interests in the residue - subject to antilapse
|
|
|
class gift and lapse
|
generally, IF a class member dies during testator's lifetime, other class members take - class gift rule subjects this to the anti-lapse statute IF descendants survive the testator by at least 120 hours
|
|
|
beneficiary dead when will executed
|
gift is void BUT antilapse rules apply
|
|
|
ademption
|
IF specifically bequeathed property is not owned by the testator at death, the bequest is adeemed (it fails)
a gift can be adeemed in whole or in part does not apply to general or demonstrative legacies IF guardian of an incapacitated person sells the proeprty, the beneficiary gets the sale proceeds that are not used for testator's care |
|
|
specific gift - definition
|
fit that is particularly designated and is to be satisfied only by the receipt fo the particular property described
|
|
|
statutory exceptions to ademption
|
there are statutory exceptions relating to ademption and stocks, bonds, promissory notes
exchange of corporate stocks, bonds, or promissory notes for other stocks, bonds, or promissory notes of the same corporation or obligor or successors does not adeem a specific bequest beneficiary is entitled to stocks, bonds, ro promissory notes received by testator in exchange agreement by testator to sell specifically devised property does not adeem the devise specific, general, or demonstrative bequest of a stated numebr of shares includes stock produced by a split |
|
|
interested witnesses
|
The fact that the will makes a gift to a witness never affects the validity of a will.
BUT, witness-beneficiary will lose gift (gift purged) UNLESS * he was a supernumerary witness * OR he would have been entitled to an intestate share (gets the lesser of the bequest or the intestate share) |
|
|
abatement
|
process of reducing testamentary gifts where estate assets are insufficient to satisfy all bequests and devises
kill gifts in this order 1. intestate property 2. residuary bequest 3. general legacy 4. demonstrative legacy 5. specific devise or bequest (satisfied first) within each category claims are abated pro rata |
|
|
application of intestate rules
|
rules governing intestate succession apply when
* decedent left NO will * decedent's will is denied probate * decedent's will does not make a complete isposition fo the estate |
|
|
intestate share of spouse -
if decedent survived by issue who are also issue of spouse |
spouse gets first $20,000 + 1/2 of balance
decedent's issue gets remaining 1/2 |
|
|
intestate hsare of spouse - if decedent was survived by issue at leas one of whom was not the surviving spouse's issue
|
spouse gets 1/2
decedent's issue gets 1/2 |
|
|
intestate share of spouse - not survived by issue
|
spouse gets everything
|
|
|
waiver of spousal rights
|
spouse can waive rights to:
* intestate share * elective share * exempt personal property * family allowance * homestead allowance in whole or in part by written K, agreement, or waiver after full disclosure |
|
|
spouse disqualification
|
spouse barred from rights IF
* spouse abandons other spouse (1 yr) * OR spouse voluntarily leaves spouse and continues with adulterer |
|
|
intestate share of issue
|
issue's share passes per capita
divide at first generational level where there are living takers - share of each deceased person passes to his issue by representation |
|
|
intestate share of parents and siblings
|
equal shares in parents and siblings ONLY if decedent does not have issue or spouse
descendants of deceased siblings take per capita with representation half bloods only inherit half |
|
|
decedent without relatives
|
estate can pass to relatives of deceased spouse
IF NO heirs, decedent's estate escheats to the state |
|
|
adopted child inherits...
|
...from adopting parents but not natrual parents
|
|
|
stepchild or foster child inherits...
|
no inheritance rights unless equitable adoption
|
|
|
nonmarital child inherits...
|
from mother and mother's kin
from natural father IF: * fatiher and mother participated in any marriage ceremony * OR man was adjudicated to be father in paternity suit before or after death |
|
|
children conceived before death but born after death inherit...
|
as though born during lifetime
|
|
|
simultaneous death
|
person must survive decedent by 120 hours to take as intestate heir or will beneficiary (unless provision otherwise)
IF a person fails to survive by 120 hours - treated as predeceasing IF time of deaths can be determined, it's presumed the person failed to survive for the period rule does not apply to survivorship rights |
|
|
advancement of intestate share
|
advancement is lifetime gift made to heir with intent that it be applied against the heir's share of intestate inheritance
NEED contemporaneous writing by donor OR writing of acknowledgment by donee-heir IF donee fails to survive decedent, the advancement is not binding on his successors unless the writing or acknowledgment provides otherwise |
|
|
power of appointment - definition
|
authority created in or reserved by a person enabling that person to designate, within limits, the persons who will take th eproperty and the manner in which they will take it
|
|
|
takers in default - power of apointment
|
designated to take the property if the donee fails to effectively exercise the power of appointment
|
|
|
general v. special power of appointment
|
general - exercisable in favor of the donee, her estate, or her creditors
special power of apopintment is exercisable in favor of a class of persons that does not include the donee, her estate, or her creditors creditors can reach property subject to inter vivos general power of appointment but not a testatmentary or ANY type of special power of appointment |
|
|
testamentary v. inter vivos power of appointment
|
testamentary power of appointment is exercisable only by donee's will
inter vivos power of appointment is exercisable by donee during life |
|
|
failure to exercise general power of appointment
|
appointive property reverts to donor's estate and passes according to reisduary clause of donor's will or by intestacy to donor's heirs
|
|
|
exclusive v. nonexclusive special power fo appointment
|
exclusive - (presumed) may be exercised in favor of some fo the object of the power to the exclusion of others
nonexclusive if it MUST be exercised in favor of all appointees |
|
|
failure to exercise special power of appointment
|
the gift to objects of the power is implied
|
|
|
exercising power of appointment
|
UNLESS donee directs otherwise, a power of appointment can be exercised by any instrument effective to transfer title to property
residuary clause will not, by itself, exercise testamentary power (if it also mentions the power, that might be enough) blanket exercise of "any power I have" will work unless donor called for exercise by reference to the power |
|
|
exercise by implication
|
donee purports to dispose fo the property as if it's his own and does not reference the power
|
|
|
devise of encumbered property
|
IF mortgage or other lien was created before the will was executed - the lien is not exonerated UNLESS the will directs it.
IF the property was free of encumbrances when the will was executed and the lien was created thereafter, the beneficiary is entitled to have the lien exonerated (unless it appears the testator had different intent) |
|
|
trust beneficiary
|
must be ascertainable
Need not be identified at the time a trust is created BUT must be susceptible of identification by the time their interests come into enjoyment. may be a class if it is reasonably definite if trust fails for lack of beneficiary - resulting trust for settlor or successors |
|
|
cy pres
|
when a charitable purpose selected by the settlor is impracticable, unlawful, impossible to achieve, or wasteful - court may select an alternative
"as near as possible" ascertain settlor's primary purpose |
|
|
support trust
|
support trust would require trustee to pay so much of income as is necessary for the beneficiary’s support
beneficiary can compel distributions for support |
|
|
discretionary trust
|
trustee has discretion to make or withhold payments of income or principal
trustee has to be honest and act in good faith - can't abuse power beneficiary cannot compel any payment |
|
|
durable healthcare power / living wills - requirements
|
must be
* in writing signed by testator/principal or another at his direction * dated * and witnessed by two adults (OR wholly in the testator’s handwriting) principal must be of sound mind |
|
|
individuals eligible to act as agent under durable healthcare power
|
anyone except attending physician OR an owner, operator, or employee of healthcare facility where he is receiving care
UNLESS that person is related to the principal |
|
|
revocation of living will
|
can be revoked at any time and in any manner without regard to testator's mental or physical condition
|
|
|
revocation of durable power of attorney
|
can be revoked at any time by notifying either the agent or the principal's healthcare provider
can be oral or written execution of a valid durable healthcare power revokes any prior durable healthcare powers |
|
|
authority of durable healthcare power agent
|
can make any healthcare decisions on the principal's behalf that principal could have made himself
BUT must act in accordance with principal's expressed instructions and wishes if none, must act in best interests no criminal or civil liability if he acts in good faith |
|
|
living will (aka "declaration") - definition
|
states individual's desires regarding whether to:
* administer, withhold, or withdraw life-sustaining procedures; * provide, withhold, or withdraw artificial nutrition or hydration; and * provide treatment to alleviate pain |
|
|
durable healthcare power - definition
|
appoints an agent to make healthcare decision on behalf of the principal
BUT is not effective until the principal becomes incapacitated and it remains effective despite incapacity |
|
|
will contest time limit
|
must be filed within 6 months after first publication of the notice of the appointment of a personal representative
BUT heirs must be given actual notice |
|
|
who can contest will
|
only interested persons
someone with a financial interest that would be affected by the will's admission or nonadmission to probate |
|
|
will contest - service
|
all legatees and heirs are necessary parties and must be served within 90 days
|
|
|
testamentary capacity
|
NEED to
* understand nature of act * know nature, condition, and extent of property * know natural objects of bounty * understand scope and meaning of the provisions of the will burden on proponent adjudication of incompetency or disability raises rebuttable presumption that testator lacked testamentary capacity |
|
|
insane delusion
|
EVEN IF testator is otherwise of sound mind, a will (or a particular gift) may be denied probate if it is the product of insane delusion
insane delusion = * irrational and persistent belief in supposed facts that have no basis in fact or reason * to which testator adheres against all reason and evidence |
|
|
undue influence
|
free will of testator must be destroyed
contestant must show: * existence and exertion of influence * effect of influence was to overpower mind and free will of testator * product of influence was a will that would not have been executed but for the influence |
|
|
undue influence presumption
|
arises if beneficiary was in confidential or fiduciary relationship with testator, was given a substantial benefit by the will, and was active in procuring the will
|
|
|
fraud
|
NEED:
* false representation teh speaker knew to be false * made with intent to deceive the testator * testator's ignorance of the falsity * relying upon such representations, testator was in fact induced to act to his injury testator would not have made the gift had he known the true facts factum / execution - misrepresenting nature of instrument inducement - misrepresenting facts inlfluencing motivation |
|
|
no-contest clause / in terrorem
|
strictly construed but fully enforceable
|
