Va Bar - Wills And Trusts

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Probate (definition)

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The court proceeding in which it is judicially determined that decedent left a validly executed will or, if the will is invalid, that the decedent died without a will and his intestate heirs are then determined.

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Personal representative (definition)

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If a valid will names a person to administer the estate, then this person is called an executor, or if no one is named or the decedent died without a valid will, then the person is called an administrator

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Testate succession (definition)

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When property passes under a valid will

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Intestate succession (definition)

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When property passes outside of any valid will, and thus according to the state statutes providing for it.

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Heirs (definition)

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The persons who take under intestate succession.

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Descendants (definition)

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Persons who take from a decedent in a descending fashion, such as children, grandchildren, etc.

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Devisees, legatees, beneficiaries (definition)

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Persons who take under a valid will (and thus under testate succession)

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Intestate decedent survived by spouse

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Spouse gets the entire estate.

Exceptions:
If the decedent has children from a previous marriage, the surviving spouse gets 1/3 of the estate and the other 2/3 is split between ALL decedent's children (both from previous marriage and new marriage).

Desertion: Willful desertion or abandonment of the decedent spouse (without cause) that continued until the decedent's death prevents the deserter from taking any of the estate (whether testate or intestate); from serving as administrator if any heir objects; from elective share, family allowance, homestead allowance, and any rights to any exempt property.

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Statutory rights of surviving spouse (REFH)

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The surviving spouse is entitled to the following statutory rights, which take precedence over any creditors' claims, and are over and above the amounts passing to the surviving spouse under any Last Will and Testament, by intestacy, or under elective share:

* Residence: If and only if (i) the surviving spouse claims an elective share, or (ii) decedent died intestate survived by descendants from a former marriage, then spouse can live in principal family residence without charge for rent, taxes, insurance, until spouse's rights in principal residence have been determined and satisfied.

* Exempt personal property up to $15K: cars, household furniture, furnishings, appliances, and personal effects. If there is not $15K worth of exempt items in the estate, spouse is entitled to cash or other assets to the extent necessary to make the $15K.

* Family allowance: amount needed for maintenance and support for one year. These must be "reasonable" and cannot exceed $18K unless petition is made for a higher allowance.

* Homestead allowance of $15K: this amount is in lieu of property passing to the spouse by will or intestate succession, and thus is available only if spouse gets less than $15K from D's estate. Also, if the spouse claims elective share there is NO homestead allowance.

NB: If decedent is not survived by spouse, MINOR children are entitled to all of the above items.

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Inheritance by descendants: per capita with representation

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Go to the first line of descendants where there are any alive, and make a per capita distribution to each of the descendants at that level; for the ones at that level who have died, their descendants split their share by representation.

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Intestate decedent not survived by spouse or descendants

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Estate goes to the first of these:
(1) Parents (but desertion of a minor or incapacitated child, continued until the child's death, bars the parent from inheriting, also can't serve as an administrator of the child's estate if any heir objects)
(2) Brothers and sisters (and their descendants)
(3) Grandparents - half to maternal grandparents' side (and their descendants), half to paternal grandparents' side (and theirs)
(4) Laughing heirs - no limit to the degree of kinship that qualifies one to be an heir
(5) Escheat - if no living relations at all, the estate passes to the kin of decedent's last deceased spouse under the above rules, or if none, then the property of the decedent will escheat to the state of VA

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Half bloods

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Half-siblings get half as much as full siblings

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Adopted children

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Stranger adoption: the child and child's descendants have full inheritance rights from the adoptive family (and vice versa), and no inheritance rights from the biological family.

Stepparent adoption: child retains inheritance rights from both biological parents and gains inheritance rights from the new adopting stepparent.

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Non-marital children

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A non-marital child has full inheritance rights from the biological mother and vice versa. The child can also inherit from the father IF paternity is proven.

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Proving paternity (MAC)

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Meet any ONE of the following:
(i) Marriage - if the father married the mother before or after the child's birth, even though the marriage is prohibited or void.
(ii) Adjudicated to be the father in filiation proceedings (aka paternity suits)
(iii) Clear and convincing evidence that the man is a BAD CAT:
Birth certificate - if he gave consent to an authorized person (other than the mother) to be named the father on the birth certificate;
Admits paternity in court or under oath;
DNA genetic tests or other medical evidence proves he is the father;
Cohabitation - if he cohabited with the mother during TEN MONTHS before the child's birth;
Allowed child to use his surname; or
Tax return or other government document filed by the father claims the child as his own.

NB: for the last four of the BADCAT tests, an affidavit asserting paternity and an action to establish paternity must be filed by or on behalf of the child w/in one year after the man's death.

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Simultaneous deaths

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VA has adopted the Uniform Simultaneous Death act. To be considered a survivor, the beneficiary must survive the decedent by at least 120 hours (5 days).

Example: if joint tenants die within 5 days of each other, the right of survivorship is not triggered.

NB: this can be overridden (usually the time is lengthened) in a will.

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Advancements

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Inter vivos gifts to children from parents of significant value when viewed from the perspective of the parents' estate. Any significant gift creates a presumption of advancement, and that is taken out of that child's portion of the estate when the parent dies ("hotchpot").

ONLY applies for intestate succession.

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Ademption by satisfaction

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Like an advancement, but for testate succession. If a testator provides a bequest in a will and then makes an inter vivos gift to the same person, it's presumed that that gift is in "satisfaction" of the bequest. However, it's really hard to satisfy a will's bequest via inter vivos transfer in VA (aka, this is a very weak presumption, I guess?)

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Disclaimer (3 requirements)

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An intestate heir or Last Will beneficiary can disclaim or renounce any interest, in whole or in part, that he would otherwise receive. The disclaimed interest passes as though the disclaimant predeceased the decedent..

To validly disclaim, it must be:
(i) In writing and signed
(ii) Must be delivered to personal representative of estate
(iii) Time limits apply only in reference to tax benefits: must be done within NINE MONTHS to escape fed gift tax consequences, for example.

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Slayer statute

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Can't benefit from murder.

Applies if either:
(i) Person is convicted in criminal court of law of the murder or voluntary manslaughter of the decedent; OR
(ii) Person is found to be a murderer by the preponderance of the evidence in a civil proceeding where the person is not available for prosecution by reason of his/her death.

The slayer is just treated as predeceased, though--aka his/her descendants can still inherit through them.

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3 Valid types of wills in VA

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(1) Witnessed wills
(2) Holographic wills
(3) Nuncupative wills (for soldiers and sailors--don't worry about these (I think???))

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Harmless error in execution of a will

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(effective July 1, 2007)

If a document was not executed in compliance with formalities required, it can still be an effective will if the proponent of the will can establish by clear and convincing evidence that the decedent intended that the document constitute any of the following:
(i) A will;
(ii) A partial or complete revocation of any will;
(iii) A codicil or modification of a will; or
(iv) A partial or complete revival of the decedent's formerly revoked will (or a portion thereof).

What it CANNOT fix: it may not excuse compliance with requirements associated with the testator's signature. Exceptions: (1) if two people mistakenly sign each other's wills; or (2) if a person signs a self-proving affidavit instead of the will itself. In these cases, clear and convincing evidence can rescue the document.

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4 Witnessed will requirements

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1. Age - Testator must be 18 (unless emancipated).
2. Signed by the testator (or by someone at T's direction and in his presence--proxy signature).
3. Presence requirement: T must sign the will (or acknowledge an earlier signature) in the presence of both witnesses, both present together at the time of T's signing/acknowledgement. Note, though, that witnesses need not be in each other's presence when they sign the will as witnesses.
4. Number of witnesses: 2. (One can suffice under the harmless error statute if there's clear and convincing evidence.)

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Interested witnesses

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Not disqualified from being witnesses to a will in VA.

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Codicils

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Additions to an earlier will, meant to complement it. They must meet the same requirements as a full will. They are also subject to the harmless error statute in the same way as wills.

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Holographic will requirements (4)

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Must be:
(1) Handwritten;
(2) Signed by the testator;
(3) Wholly in T's handwriting, and this must be proved by at least TWO disinterested persons; and
(4) Must contain an indication (death talk) that the instrument is intended to be a will.

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Proof of wills in probate (2 things to know)

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(1) Burden of proof of due execution is on will proponents. Only issue at probate hearing is whether or not it is a will.

(2) If the will is self-proved, it is accepted as if it were ore tenus (oral testimony) in court.

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Self-proved will (3 requirements)

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Happens when:
(1) The testator acknowledges the will;
(2) The witnesses acknowledge the will;
(3) Before a notary public.

The effect is to allow for the probate of the will as properly executed and thus it may not be challenged as lacking in any formalities if the formalities were recited in the self-proving execution.

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Anti-lapse statute (2 requirements)

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At common law, if a will left property to anyone who predeceased the testator, the bequest "lapsed" and went instead to an alternate taker or to the residuary estate of the testator.

However, VA has an anti-lapse statute, which provides that unless a contrary intention appears in the will, if the devisee or legatee is
(1) a relative of the testator, and
(2) is dead at the time of the execution of the will or at the time of death of the testator,
The descendants of the deceased devisee/legatee who survive the testator take in place of the deceased devisee/legatee by representation. NB: the devisee/legatee cannot give the bequest to anyone else, the anti-lapse statute names the takers.

This applies only to wills, not to intestate succession.

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Class gifts

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Surviving members of a class will take the gift when one class member predeceases; conversely, a class member will get less when more members are added to the class.

Rule of Administrative Convenience: Group becomes closed when some member of the class is entitled to a distribution. In VA, children born within 10 months of the death of a testator are class members.

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Omitted spouse (rule and 5 exceptions)

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If a testator executes a LWAT, then later marries, the new spouse receives what they would have received if the testator had died intestate.

Exceptions:
(i) T stipulates otherwise in LWAT;
(ii) T executes another will after the marriage and that is the operative one;
(iii) New spouse disclaims any interest in T's estate through a valid pre-nup; OR
(iv) New spouse does not survive the testator by at least 5 days.

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Testator divorces after will is executed

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If no provision made for otherwise, a final decree of divorce or annulment after the execution of a will has the effect of revoking any disposition or appointment of property made by the will to the former spouse. Former spouse is treated as having predeceased T. Will is not revoked, just those portions that would have gone to the former spouse.

If the couple remarries, the provisions are revived.

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Pretermitted child (2 possible scenarios)

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If T has a child after will is executed, there are two possibilities:
(i) If T had no other children living when the will was executed, then the pretermitted child receives what s/he would have received under intestate succession. However, if s/he dies before 18, unmarried and w/o issue, then the portion obtained reverts back to those devisees and legatees who provided the intestate portion.
(ii) If the testator has a child living when the will was executed and the will made a bequest to that child then in existence, then any other child born or adopted afterwards will receive the lesser of what the child would receive if the testator had died intestate OR the equivalent of the largest bequest to any child made in the will. If the pretermitted child dies before reaching 18, unmarried and w/o issue, this portion shall revert to whomever would have received it under the will.

This can be overridden by the testator in his/her LWAT.

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Revocation (3 ways)

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Three ways to do it:
(i) Physical act of destruction;
(ii) A valid subsequent will that expressly or impliedly revokes the previous will and its codicils; or
(iii) Divorce or annulment revokes by operation of law any provisions in favor of the former spouse.

NB: harmless error statute also applies to revocations of wills, aka clear and convincing evidence can make up for a problem in a formality (except for T's signature).

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Revocation by proxy

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Wills can be revoked via the physical act of another, so long as it is done (1) at the testator's request and (2) in T's presence.

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Presumptions regarding physical act revocation (2)

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1. Where a will can be traced to T's possession or control and cannot be found after T's death, a presumption arises that T revoked the will by physical act. Can be rebutted by C&CE.

2. Mutilation of the will works the same way--presumption is that T mutilated it and thus revoked it.

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Revival of revoked wills

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Must be done pretty strictly in VA: you have to re-execute the original will again (or execute a codicil to it).

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Dependent relative revocation

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If a will is revoked by physical act, but that act was dependent on the probate of another will that was never probated, then the revocation of the destroyed will is cancelled, aka the destroyed will is revived.

Example: Will #1 leaves everything to grandson Gil. Will #2 revokes that will and leaves everything to grandson Bob. Then later T destroys Will #2 with intent to revive Will #1. However, that revival is invalid--it would need to be re-executed or a codicil to it would have to be executed. So rather than leave everything to G and B's mom, who T wanted to disinherit, DRR can apply to revive the second (destroyed) will--better than intestate succession, the thinking goes!

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Implied revocation

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Second will is treated as a codicil to the first to the extent possible, but revokes the first will to the extent of inconsistent provisions.

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Changes on face of will after signed and witnessed

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Partial revocations (think crossing out a line) are valid. However, just changing the numbers in a bequest is not a valid change--needs to meet the formalities required, though those requirements can just be the ones for a holographic will.

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4 types of testamentary gifts

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Four types (take from them in reverse order to satisfy decedent's debts):

(1) Specific bequest: "I devise Blackacre to my son John."
(2) Demonstrative legacy: A general amount from a specific source, e.g., "I bequeath $25K, to be paid from the proceeds of sale of my Shell Oil stock, to Sally."
(3) General legacy: "I bequeath $10K to my nephew Ned."
(4) Residuary gift: "I give the rest, residue, and remainder of my estate to Betty."

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Abatement of legacies to pay debts and expenses: personal property before real property

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Personal property first. Pay debts from personal property in the following order: (1) intestate property, if there is a partial intestacy for some reason; (2) out of residuary assets; (3) out of general and demonstrative legacies; and finally (4) out of specific bequests.

If after all personal property in the estate is exhausted and there are still debts and claims, then real property abates in the same order.

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Equitable apportionment of estate taxes

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Estate taxes are treated specially: they are equitably apportioned among ALL estate beneficiaries pro rata.

Exception: gifts that qualify for the marital deduction or charitable deduction are not subject to apportionment because they do not generate any tax.

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Specifically devised or bequeathed property not in estate at death--ademption by extinction (rule and 3 exceptions)

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If T tries to specifically devise/bequeath something that isn't in their estate at their death, it is "adeemed by extinction" aka it's just gone, beneficiary gets nothing.

Exceptions:

(i) If T devises Blackacre to B but then sells Blackacre for installment payments and then dies, VA has abolished equitable conversion in this instance (which under common law would say B gets nothing here) and B will get the remaining payments for Blackacre.

(ii) If the item to be bequeathed is stolen and insurance pays for it AFTER the testator's death, then the legatee can have the money for the item.

(iii) Guardian or conservator who sells a specifically bequeathed item after T has been adjudicated incompetent but before T dies--legatee can get the money from that sale; otherwise, a guardian could change a will by deciding what to sell.

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Incorporation by reference (3 requirements)

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Any document extrinsic to a will can be incorporated by reference if:
(i) The extrinsic writing was in existence when the will was created;
(ii) Will must show an intent to incorporate the writing; and
(iii) Will must describe the writing with reasonable certainty so that there can be no mistake as to the document referred to in the will.

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Legal list (5 requirements)

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Will can refer to a separate list of personal property to pass items to named recipients. Similar to incorporation by reference except that the list can come into existence either before OR after the execution of the will.

A legal list:
(i) Can only refer to tangible personal property, not money or the like;
(ii) the list may be in existence at the time of the will's execution or afterwards;
(iii) the list must describe the items with reasonable certainty;
(iv) the list must be signed by the testator; and
(v) the will must refer to the list and the will must be valid.

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Acts of independent significance

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Membership in a class can change over time, as can the specific car that "my car" refers to--that's OK, just fix the meaning upon T's death.

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Mistakes or ambiguities in the will and trying to fix them (two types)

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If a mistake results in a valid, plain reading language, it can't be changed (e.g., 200 stocks instead of the intended 300 stocks).

"Favorite nephew" and "twenty-five dollars ($25,000)" are latent ambiguities. Extrinsic evidence is admissible to cure them, including "facts and circumstances" evidence and T's declarations of intent. If it's still ambiguous after all of that, the gift fails for ambiguity.

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Attorney liability for negligence

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None. Though action can be brought against the attorney under the bar disciplinary code.

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Bequests of "all personal property"

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Includes both tangible AND intangible property. However, ejusdem generis can limit it in specific instances.

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Powers of appointment - definition and exercise

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T can give someone else a life estate, and then let them pick who receives the remainder--this is called giving someone a power of appointment.

To exercise that power of appointment, though, the chooser has to specifically mention it in his/her own will. I.e., saying "all my property to X" does not include the property she had the power to appoint to take.

A special power of appointment is when the donee can pick but only from a limited number of people, e.g., one of her descendants.

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Contracts and Wills

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Contracts and wills are governed by separate law, so if there is a violation of a contract re: a will, the law of wills deals with the will on its own terms as normal--the remedy for breaking the contract will have to sound in contract law.

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Non-probate assets (aka Will Substitutes) (4 examples)

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Non-probate assets are interests in property that are not subject to disposition by will or by intestacy. They don't generate inheritance taxes and do not pass through a person's probate estate for purposes of administration.

Main examples:
(1) Survivorship accounts - property passing by right of survivorship (joint bank accounts, tenancies by the entirety, etc.)
(2) Payable on Death or Transfer on Death transfers. These would include property passing by contract, e.g., life insurance benefits and employee retirement benefits paid to a beneficiary other than the insured's executor or estate.
(3) Inter vivos trusts: property held in trust is governed by trust law, not probate.
(4) Powers of appointment: Property over which the decedent held a power of appointment does not pass through their probate estate.

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Elective share statute

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By statute, to prevent a decedent from abusing non-probate assets too much, VA has in some ways enlarged what counts as a decedent's "estate" in some ways. The state seeks to provide equity to a spouse whose share of the couple's wealth has been transferred by the decedent spouse to another.

Elective share only applies when the transfer was without the consent of the surviving spouse, was for less than full consideration, and if the transfer was *to* the surviving spouse then that should be taken into account in providing recompense to the survivor.

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Elective share -- how much do you get?

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If the decedent was survived by children or their descendants (whether by this marriage or an earlier one) the surviving spouse's share of the augmented estate is ONE THIRD.

If the decedent was not survived by any children or their descendants, then the surviving spouse gets ONE HALF of the augmented estate.

A spouse who takes an elective share is also entitled to interest at 6 percent from date of decedent's death until the elective share is satisfied.

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Procedure for election by spouse (4 steps)

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(1) Time: spouse must file notice of election within 6 months after (i) will is admitted to probate, or, (ii) if no will, after administrator of intestate estate is appointed.

(2) Who: If the surviving spouse is incapacitated, the court (not the spouse's guardian or conservator!) may make election on his behalf. But if spouse dies before election is made, any right of election dies with him.

(3) Contribution to share from other beneficiaries: all beneficiaries contribute ratably. Note that this is different than what happens with expenses.

(4) Public policy: just like with intestate shares, exempt property, and family allowance, willful desertion/abandonment without cause that continued until decedent's death disqualifies him from an elective share.

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Elective Share: Computing the Augmented Estate (3 steps)

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(1) Probate estate: the augmented estate includes property owned and passing at death by will or intestacy, after payment of debts and expenses.

(2) Transfers to the spouse: Augmented estate includes lifetime gifts by the decedent to the surviving spouse (including gifts made before marriage) to the extent owned by the survivor at the decedent spouse's death; and includes non-probate transfers to the surviving spouse at the decedent's death.

(3) Transfers to third parties: Augmented estate includes *certain* lifetime absolute gifts and non-probate transfers that benefit third parties. To remember what should be included, use the mnemonic Stringy LEGS:
* Strings-attached lifetime transfers: transfers in which the decedent retained the right to income, power to revoke, or the right to consume, invade, or dispose of the property. tl;dr Revocable trusts are included in the augmented estate.
* L - Life Insurance paid to a third party by reason of the decedent's death.
* E - Employee Death Benefits under any retirement plan, other than Social Security or anything else pre-empted by federal law.
* G - Gifts in Excess of $10,000 if made within the calendar year of the decedent's death or any of the five preceding calendar years to the extent that the aggregate value of the transfers to the donee exceeds $10,000 in that calendar year.
* S - Survivorship Estates: joint and survivor bank accounts, joint tenancies.

Exceptions: Augmented estate does not include JOG:
* J - Joinder: transfers with spouse's joinder or written consent.
* O - Old transfers: irrevocable transfers to third parties before January 1, 1991.
* G - Gifts to deceased spouse from someone other than surviving spouse as long as it was maintained as separate from decedent's other assets.

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Will contests - who?

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Who can bring contest: Only an interested party, defined as a person with economic interest that would be adversely affected by the will's probate.

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Will Contest: Lack of testamentary capacity (rule and 4 step test)

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Will is to be denied probate if T lacked testamentary capacity at the time of execution of the will.

For witnessed wills, it's pretty easy to prove T had capacity because there is a presumption thereof when it's done in compliance with the requisite formalities. Since there aren't any such formalities, really, for holographic wills, it can be harder to prove capacity there.

Burden of proof is on the proponent of the will, must be proved by a preponderance of the evidence.

Test: Did T have sufficient capacity to:
(i) Understand the nature of the act?
(ii) Know the extent of his/her wealth?
(iii) Know the natural objects of his or her bounty? (WTF???)
(iv) Able to interrelate the above three?

NB: an adjudication of incompetency of T before executing his will is not sufficient to establish that he lacked capacity--different tests!

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Will Contest: Undue influence

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Unlike with lack of testamentary capacity, if this contest is successful then only the elements of the will affected by the undue influence will be denied probate, not the entire will.

Burden of proof: begins with the contestant, who must prove suspicious circumstances, conduct on the part of the will beneficiary that demonstrates a desire to overcome the mind and will of the testator, and that the provisions in the will are a product of this conduct exerted by the beneficiary.

These things, standing alone, are not enough:
* Mere opportunity to exert influence.
* Mere susceptibility to influence due to illness or age.
* Mere fact of unnatural disposition (aka one child given much more than others).

The burden shifts to the proponent of the will if contestant can prove the testator and the beneficiary were in a "Confidential Relationship," that there was benefit to the person in the relationship with the testator, and that there were suspicious circumstances--a presumption of undue influence then arises.

This presumption must be rebutted by a preponderance of the evidence centered on the testator's "mind, as able to resist."

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No contest clauses in wills (AKA an "in terrorem" clause)

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A clause that says that if anyone contests the will, that person forfeits whatever it is that he or she would have been able to take under the will.

Majority rule: not enforceable as long as the contest was made in good faith and there was probable cause to contest it.

VA rule: it's unsettled, but it probably enforces these clauses strictly, aka any contestant forfeits his legacy even if he had probable cause to contest it.

NB: election, petition for an omitted spouse, or a petition to become a pretermitted child are not contests and so will not trigger a no contest clause's penalties.

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Jurisdiction for probate

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Enter a will for probate in the county where the decedent was domiciled at the time of her death.

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5 Requirements for creation of a trust

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1. Settlor - the person who creates the trust.

2. Trust property - legal title to a specific interest in property must be fully conveyed to the trustee. No property = no trust.

3. Trustee - can be an individual, a group, or a corporation, but must have legal capacity to exercise a fiduciary responsibility towards the property. If no trustee is named, that's totally OK! As long as there's intent, the court will appoint a trustee (unless settlor clearly stated no one but the named person could be trustee and they're unavailable--then the trust fails). Trustee can accept by signature or conduct.

4. Intent to create a trust - must be intent for a trust, not a gift or a loan or anything else. If enforceable duties that can be supervised were attached to the transfer of the property then a trust was intended.

5. Beneficiaries - three types

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Rule Against Perpetuities (RAP)

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No future interest is good unless it must vest, if it does vest, not later than 21 years after some named life in being at the creation of the trust.

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Uniform Statutory Rule Against Perpetuities

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Allows for any court to wait and see what actually occurs after 90 years from the creation of the interest. VA has adopted this law.

In VA, there's also a weird rule that RAP does not apply to any trust, or any interest created in personal property held in trust, or to any power of appointment over personal property held in trust, or to any power of appointment over personal property granted under such trust, when the trust instrument itself *provides that the RAP will not apply to the trust*.

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Trusts must have a lawful purpose

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Any trust, the purpose of which is to further commission of a crime, or calling for the destruction of property as wasteful, is invalid as against public policy. Also, any unlawful conditions imposed by the terms of the trust are unenforceable.

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Oral trusts

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Oral trusts of all property, both real and personal, are valid if the terms of the trust are proven by clear and convincing evidence.

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Inter vivos trusts

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A regular trust, but made inter vivos.

It is revocable, if made by the settlor, unless explicitly made irrevocable and nonmodifiable by the settlor. If made by a conservator of an incapacitated settlor, the guardian may revoke it only if (i) expressly authorized by the trust, or (ii) if authorized by the court for good cause shown.

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Pour over devices

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You can pour over assets from inter vivos arrangements, like IRAs, life insurance, and trusts, into a LWAT so as to pass under probate. In other words, a life insurance policy can be payable to the decedent's estate at his death; this makes the will or intestate scheme the beneficiary of the decedent's life insurance. Also works vice versa, aka your last will & testament can name an existing, inter vivos trust as a beneficiary.

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Self-declaration of trust

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A settlor can name him/herself as trustee and beneficiary, with another remainder beneficiary. Can be used to avoid probate costs.

A self-settled trust *can* now be a spendthrift trust. I think.

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Contest of trusts

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An action challenging the validity of a trust must be brought within the earlier of (1) two years after the settlor's death, or (2) six months after the trustee sent the person commencing the judicial proceeding a copy of the trust instrument, the trustee's name and address, and a notice of the time allowed for contesting the trust.

Trustee liability: a trustee may proceed to distribute the trust property in accordance with the terms of the trust and not be subject to liability unless:
(i) The trustee knows of a pending judicial proceeding contesting the validity of a trust, or
(ii) A potential contestant has notified the trustee of a possible judicial proceeding and a judicial proceeding is in fact commenced within sixty days after the contestant sent the notification.

Beneficiary liability: beneficiary of a trust that is determined to have been invalid is liable to return any distribution received, but no other liability.

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Charitable trusts

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Not subject to the RAP.

Enforcement of the terms of the trust rests with the attorney general of the state, or, if the settlor is alive, she may maintain a proceeding to enforce it.

When the stated charitable purpose can no longer be accomplished, it may be reformed in a judicial proceeding under the doctrine of cy pres.

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Honorary trusts

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For pets and cemeteries. The trustee should do the "honorable" thing and follow the terms of the trust even though the beneficiary can't complain if she doesn't.

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Constructive trusts

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Not really a trust, but an equitable device meant to remedy a bad act, like fraud, murder, and willful breach of a fiduciary duty. They arise automatically and do not require the 5 elements of a normal trust.

Example: if a husband shoots his wife and they own land as tenants by the entirety, a constructive trust prevents the husband from taking the wife's half via right of survivorship; it descends to her estate. However, the husband does get to keep his half.

Example 2: witnesses who don't like their share under a will that's about to be executed prevent the testator from signing it and she dies soon thereafter. No valid will was created, but a constructive trust springs up and does what the will would have done if not for the witnesses' bad act.

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Resulting trust

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Like constructive trusts, not a real trust. Example: if Jeff places $1 million in trust to pay for David's law school education and David dies before all of the money is expended, the remaining assets of the trust "result back" to Jeff because of the impossibility of completing the trust purpose.

Example 2: Purchase money resulting trust. A presumption, rebuttable by C&CE, arises that there was a PMRT when A buys land for B, a stranger, for no reason.

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Spendthrift trust

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A trust where the settlor has added a clause that seeks to restrict the ability of a creditor of the beneficiary from reaching the trust assets, whether income or corpus. VA enforces these provisions unless (1) it's a self-settled trust (except now I think those *are* allowed); or (2) for public policy reasons.

NB: no specific words necessary to create a spendthrift trust.

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*** Trustee's obligations ***

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No self-dealing (benefitting the trustee or those close to her) unless there is consent by beneficiary after complete and full disclosure. ***This is true even if the beneficiaries would gain by the self-dealing of the trustee!***

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Trustee obligations -- statute of limitations for suing a trustee

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A. One year if the trustee gives the beneficiary an accounting (report) that (i) discloses facts that show existence of a potential breach of trust, and (ii) informs beneficiary of the time allowed for commencing an action.

B. For all other causes of action against a trustee, five years after the first to occur of:
(i) trustee's removal, resignation, or death;
(ii) termination of the beneficiary's trust interest; or
(iii) termination of the trust.

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Trustee obligations -- waiver by settlor

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A settlor can waive the prohibition on the trustee self-dealing if the settlor is aware of the consequences. Also, cannot waive the rules against (1) reckless indifference to the purposes of the trust or the interests of the beneficiaries; or (2) acts resulting from an abuse of a confidential relationship.

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Duties of a Trustee (10--may God have mercy on your soul)

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1. Duty to act prudently.
2. Duty of impartiality in relation to income beneficiaries and remaindermen in investing and managing the trust property.
3. Duty to control and protect trust property, including acquiring liability insurance on trust assets if a prudent person would do so.
4. Duty to collect trust property and enforce and defend claims.
5. Duty to segregate trust property from trustee's own property and earmark trust property by taking title in trustee's name.
6. Duty to keep adequate records.
7. Duty to keep beneficiaries reasonably informed about the material facts necessary for them to protect their interests.
8. Duty to furnish copy of trust instrument upon request of a beneficiary.
9. Irrevocable trusts 60 day notice duty - within 60 days of accepting trusteeship, must notify beneficiaries of (i) trust's existence, (ii) identity of settlor, (iii) their right to request a copy of the trust instrument, (iv) their right to an annual report, and (v) trustee's name, address, and telephone number.
10. Accounting duty to furnish annual reports, as well as on termination of trust.

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Trustee powers

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Basically, if a fee simple owner of the property can do it, a trustee can do it (as long as there's no self-dealing).

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Prudent investments

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VA has adopted the Uniform Prudent Investor Act, which utilizes a portfolio theory of diversified investments, each element of which was deemed prudent, not individually, but in reference to the portfolio, the beneficiary's needs, and the terms specified by the settlor, at the time of investment (aka not in hindsight).

Trustee must be prudent and exercise reasonable care, skill, and caution. (Though if a trustee was selected because she had special skills or expertise, she will be held to that level of expertise in the evaluation of prudence.)

Certain assets, such as VA bonds and obligations, that VA regards as always prudent.

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Adjustment powers of the trustee

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To minimize friction between income beneficiaries and remainder beneficiaries, the trustee can exercise her adjustment power and allocate capital gains to income (they would normally be added to the corpus of the trust, not distributed to income beneficiaries).

A good standard for the trustee under allocation is 10% to income, 90% to principal.

Half of trustee's fees are charged against income, and half against principal.

Ordinary expenses are charged against income (account expenses that come up every year, property taxes, ordinary repairs, etc.).

Capital expenses are charged against and paid from principal (extraordinary expenses, capital improvements, mortgage principal payments, etc.).

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Unitrusts

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Without court approval, a trustee can convert a trust into a unitrust, in which the income beneficiaries receive a fixed percentage of the value of the trust's assets, valued annually. Only requirement is to give notice to the qualified beneficiaries.

This simplifies the managing of the trust a lot.

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Delegation by trustee (3 requirements)

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A trustee may delegate trust powers and duties. Trustee not liable for any actions taken by the agent chosen if the trustee exercised reasonable care in
(i) selecting the agent;
(ii) establishing the terms of the delegation; and
(iii) periodically reviewing the agent's actions.

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Trustee liability for contracts and torts

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A trustee is NOT personally liable on a contract properly entered into by him as long as he is acting in a fiduciary capacity, disclosed his fiduciary capacity, the contract is part of administering the trust, and the contract does not state otherwise.

A trustee IS personally liable for torts committed in the course of administering the trust only if the trustee is personally at fault.

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Modification of a trust during settlor's lifetime (3 scenarios)

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This can happen in three situations:

(1) All trusts created after July 1, 2006 are revocable and hence modifiable by the living settlor unless they were expressly made irrevocable.

(2) If the settlor and all beneficiaries consent, a court can order a modification or termination of an irrevocable trust even if the modification is inconsistent with a material purpose of the trust.

(3) If all the beneficiaries, but not the living settlor, consent to the modification or termination, the court still may consent to the petition if the continuance of the trust is not necessary to achieve any material purpose of the trust.

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Modification of a trust after settlor's death (2 scenarios)

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Happens in two situations:

(1) If all beneficiaries consent, a trust can be modified if court finds that the modification is not inconsistent with a material trust purpose, and terminated if the court finds that continuance of the trust is not necessary to achieve any material trust purpose.

(2) If NOT all the beneficiaries consent to a proposed modification or termination of the trust, the court may nonetheless approve the modification if the court is satisfied that:
(a) If all the beneficiaries had consented, the trust could have been modified or terminated; and
(b) The interests of a beneficiary who does not consent will be adequately protected.

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Trustee's power to modify or terminate a trust without all beneficiaries' consent (4 scenarios)

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Can happen in four circumstances:

(1) Unanticipated circumstances: on petition by trustee or a beneficiary, a court may modify or terminate a trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust.

(2) Tax advantages: The court may modify a trust in a manner that achieves the settlor's tax objectives.

(3) Purposes: In addition to the above methods of termination, a trust may terminate if (i) no trust purpose remains to be achieved, or (ii) the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.

(4) Uneconomic: If the value of a trust is less than $100,000, the trustee may terminate the trust without court approval if the trustee concludes that the trust's value is insufficient to justify administration costs. Trustee must first give notice to the qualified beneficiaries, those who would be income or remainder beneficiaries, or would be distributees if the trust terminated on that date.

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Division or combination of trusts

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Court approval not required

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Reformation to correct mistakes

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Court may reform the terms of a trust, even if the terms are unambiguous, if it is proved by C&CE that both the settlor's intent and the trust terms were affected by a mistake of fact or law.

Cf. wills, where this CANNOT be done.

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Public policy reasons for when a spendthrift trust is no longer enforceable (6)

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(i) Child support obligations;
(ii) Lawyer who has provided legal services for protection of beneficiary's interest;
(iii) Claims of US gov't, the Commonwealth, a county, city, or town;
(iv) Claims of state agency for reimbursement for public assistance, including medical assistance; and
(v) Creditor may reach a mandatory distribution of income or principal if the trustee has not made the distribution within a reasonable amount of time.

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Statutes of limitations for probate (2)

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After will is admitted to probate (or probate is denied) in an ex parte proceeding, interested parties can challenge in one of two ways:
(i) Six months in which to appeal to the circuit court from an order made by a clerk or court deputy; or
(ii) One year in which to file a bill in equity to impeach or establish the will already filed with the court. In either case, there is a trial de novo.

There is no time limit in VA on when a will must be offered for probate. However, a bona fide purchaser of real property from an heir is protected unless the will devising such real property is probated within one year after the decedent's death.

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Will Contest: Undue influence - 5 types of confidential relationship

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There are five confidential relationships possible:
(i) Trust (??)
(ii) Priest-penitent
(iii) Doctor-patient
(iv) Guardian-ward
(v) Attorney-client

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3 types of trust beneficiaries

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(i) Private trusts - benefit private individuals. Must be definitely and ascertainably named. NB: interests must vest w/in RAP period.
(ii) Charitable trusts - cannot benefit identifiable individuals; rather, must have a charitable purpose and must benefit an indefinite group of persons. NB: these are not subject to RAP.
(iii) Honorary trusts - a little private, a little charitable. Main beneficiaries here are pets and cemeteries.