Wills & Trusts

Front 1

Capacity required for a valid will

Back 1

1. > 18

2. understand extent of property

3. know natural objects of her bounty (spouse or domestic partner, issue, parents, those whose interest are affected by the will)

4. know nature of act (must know it’s a will at least)

Front 2

Effect of lack of capacity on a will

Back 2

entire will is invalid

(goes by intestacy or earlier (improperly) revoked will)

Front 3

Examples of testator who lacks capacity

Back 3

look for a testator who has a conservator appointed, or one who has been diagnosed with a mental disorder.

Front 4

Things that invalidate capacity

Back 4

1. Insane Delusion

2. Fraud

3. Undue Influence

Front 5

Elements of Insane Delusion

Back 5

i. false belief

ii. that is the product of a sick mind

iii. no (zip) evidence to support belief

iv. decision must have affected T’s will

Front 6

Results of insane delusion

Back 6

only part of will affected by delusion is invalid => goes to residuary

Front 7

Elements of fraud

Back 7

i. There must be a representation

ii. of material fact

iii. known to be false by the wrongdoer

iv. for the purpose of inducing action or inaction

v. in fact induces the action or inaction desired

Front 8

Three types of will fraud

Back 8

1. fraud in execution

2. fraud in inducement

3. fraud in prevention

Front 9

Fraud in the execution

Back 9

forging T’s signature to a will or claiming document isn't a will even though it is (ie told its power of atty but actually will), entire will is invalid. T does not intend the document to be his will.

Front 10

Fraud in the inducement

Back 10

wrongdoer’s misrepresentations affects contents of will only that part of will affected is invalid => (to residuary or constructive trust if needed it to keep from going to bad guy)

Front 11

fraud in preventing testator from revoking

Back 11

the court will not probate will, and thus the property goes to the heirs / constructive trust

Front 12

Elements of undue influence

Back 12

i. susceptibility: T has a weakness of free will (psychological, financial, physical, etc)

ii. opportunity: wrongdoer had access (always met)

iii. active participation: wrongful act that gets the gift (fact)

iv. unnatural result: e.g. unrelated person gets something good, T’s employee blackmails T so that the employee gets everything, and T’s family gets nothing.

Front 13

Case law presumption of undue influence if…

Back 13

i. if confidential relationship exists (attorney-client, doc-patient, guardian-ward, clergy-penitent, trustee-beneficiary, in California close friends);

ii. active participation; and

iii. unnatural result

Front 14

Consequence of undue influence

Back 14

only that part of the will affected by the undue influence is invalid, goes to residuary/heirs/ constructive trust.

Front 15

California statutory presumption of undue influence

Back 15

CA invalidates donative transfers to a person who drafted will (or relative/friend of drafter), someone in a fiduciary relationship w/ drafter who transcribes the will, or a care custodian of a dependent adult (someone 64+ or 18+ w/ disability)

Front 16

Exceptions to California statutory presumption of undue influence

Back 16

i. drafter is related to, married to, or lies w/ T

ii. if will is reviewed by an independent lawyer who counsels T

iii. the court determines by clear & convincing evidence that will wasn’t product of wrongdoing

Front 17

Consequences of California statutory presumption of undue influence

Back 17

transferee doesn’t take gift but only to the extent of his intestate share

Front 18

Mistake in content

Back 18

1. omission (words left out): no remedy, courts don't rewrite wills (but see relief under DRR)

2. addition (words accidentally added): ct may strike extra terms (not rewriting, just excising)

Front 19

Mistake in execution

Back 19

1. T signs will thinking it isn’t a will; will not probated

2. Reciprocal/mutual wills: 2 T’s, each leaves everything to other, but each signs wrong one (equitable to fix, court will enforce)

Front 20

Mistake in inducement

Back 20

particular gift is made/not made based on T’s erroneous beliefs. if left out of will, no relief. BUT if both mistake & gift T would’ve given appear on face of will, gift is valid.

Front 21

Mistake in description

Back 21

1. latent ambiguities: on the face of will, no ambiguity. Introduce parol evidence to establish ambiguity, then again to establish T's intent.

2. patent ambiguity: ambiguity apparent on face of will, introduce parol evidence to fix.

Front 22

Dependant Relative Revocation

Back 22

: mistake in validity of subsequent testamentary instrument, allows a court to disregard a revocation of earlier will caused by mistake.

Front 23

Pretermission

Back 23

1. a child pretermitted if born/adopted after all testamentary instruments (TIs) are executed & isnt provided for in any TI (TIs = wills, codicils, revocable inter-vivos trusts)

2. A pretermitted child takes an intestate share of estate

3. Corollary : if child born before all TIs and omitted: child takes nothing

4. Exception: child born before all TIs executed & not provided for is treated as if pretermitted if only reason child wasn’t provided for was bc T thought child dead/nonexistent

Front 24

Integration of will papers

Back 24

1. intent: T must have intended papers to be part of will

2. presence: papers must have been physically present at time of execution.

3. to prove: establish a physical connection among pages (staple) or a logical connection (words)

Front 25

Requirements for incorporation by reference

Back 25

1. document or writing (doesn't have to be valid for what it purports to stand for, e.g. a deed, K, another invalid will)

2. in existence when will was executed

3. clearly identified in the will

4. intended to be incorporated into will (if 1-3 met, 4 will be implied by court)

Front 26

Facts of independent significance

Back 26

facts of independent significance allow us to fill in blanks of T's will w/ trustworthy parol evidence.

1. test for use of doctrine: ask "even w/o will, would this fact have existed?" if so, PE allowed.

2. not allowed: "I leave my estate to people I name in a note tomorrow". Not independent fact.

Front 27

Requirements for disposal of property under CPC 6132

Back 27

1. writing must be referred to in will, dated, & signed or handwritten by T (but dated, signed & handwritten aren't required if extrinsic evidence can prove T's intent to include the document)

2. writing must describe items and B with reasonable certainty

3. writing may be executed before or after will

4. writing directs disposition of tangible personal property, non-business, non-cash & <$5k/item or $25k total

5. NOTE: if an item is worth > $5k, 6132 doesn’t apply & item passes to intestate or residual. If person designated to receive property in writing dies before T, property passes as directed in writing or (if not specified) lapses. T can edit writing w/o witnesses. Inconsistencies between writings determined by last (most recent) writing.

Front 28

Pour-over will

Back 28

part/all of T’s estate devised to trustee of inter-vivos trust, to be administered by trustee.

Front 29

Ways to determine pour-over trust terms

Back 29

1. Incorporation by reference: a) trust instrument (in writing), b) in existence when will was executed, c) clearly identified in will, d) T intended to incorporate trust instrument into will. Trust instrument admitted into probate, and pour-over provision will be validated by incorporation by reference.

2. Independent significance: even w/o will, we'd have trust instrument, so trust is of independent significance, and pour-over provision validated on the theory of independent significance.

3. UTATA: if you have a valid trust in existence when will is execution, pour-over provisions are valid bc the statute says they are valid.

Front 30

Traditional formalities for attested wills

Back 30

1. Wills must be in WRITING (no oral wills)

2. Will must be SIGNED by 1 of the follow 3 people)

---i. T (nicknames/X ok)

---ii. 3p if by T’s direction if T incapacitated

---iii. by conservator by ct order

3. T must sign in PRESENCE OF TWO WITNESSES, both present at same time (different than T). Or T may just acknowledge signature or will to satisfy.

4. WITNESSES MUST SIGN during T’s lifetime (anywhere in will)

5. WITNESSES UNDERSTAND that the instrument they sign is T’s will

Front 31

After 1-1-2009

Back 31

if T dies after 2009 & 3, 4 or 5 not met, will can still be admitted into probate if clear & convincing evidence proves T intended the will to be his will.

Front 32

California standards

Back 32

: witnesses don't have to sign in presence of each other,

witnesses don’t have to sign in presence of testator,

T doesn’t have to declare to witnesses "this is my will" but witnesses must understand it is T's will,

witnesses & T can sign anywhere on will.

Front 33

Does T have to sign before witnesses sign?

Back 33

If T dies before 2009, write "if there is no fraud or mistake, the will should be valid under CA's 'substantial compliance' doctrine.

If T dies after 2009, do above analysis & say "if proponent establishes by clear & convincing evidence that T intended the will to be his will, the document should be admitted into probate".

Front 34

Must T sign in presence of witnesses

Back 34

Sight presence, conscious presence (T signs or acknowledges w/in witnesses hearing and knowing".

But if T dies after 2009, lack of presence can be fixed by clear & convincing evidence.

Front 35

Interested witness problem

Back 35

1. Will is not invalid

2. Gift is presumed invalid, unless there are 2 other disinterested witnesses,

3. Interested witness can rebut the presumption of wrongdoing & take the gift

4. If interested witness cannot rebut, then he only takes intestacy share

5. Presumption of wrongdoing doesn't apply if witness only takes in fiduciary capacity (ie as a trustee)

Front 36

Elements of a HOLOGRAPHIC WILL

Back 36

1. testamentary intent (but it need not be on face of will or in T's handwriting).

2. must be signed by T (anywhere on it)

3. material provisions must be in T’s own handwriting (gifts made, beneficiaries names).

Note: Introductory clauses, appointment of executor not material & you don’t need witness signatures

Front 37

Choice of law when T dies in California

Back 37

Will can be probated in California if it:

i. will complies w/ CA’s formalities of execution (CA)

ii. will complies w/ formalities of place it was executed

iii. will complies w/ formalities of place where T was domiciled at time of execution

Front 38

Codicil

Back 38

Testamentary instrument executed in compliance w/ California Probate Code that modifies, amends, or revokes a will

Front 39

Republication

Back 39

a codicil republishes a will, causing it to be executed at a later date ("down-dating")

Front 40

Revocation of codicils

Back 40

1. If T executes a will, then executes a codicil, and later revokes the codicil, there is a rebuttable presumption that T intended to revoke only the codicil.

2. If T executes a will, then executes a codicil, and later revokes the will, there is a rebuttable presumption that T intended to revoke both the will AND the codicil.

Front 41

Revocation by physical act (elements)

Back 41

1. Will burned/torn/cancelled/destroyed/obliterated (example of obliterating = erasing)

2. T has simultaneous intent to revoke (ie destroyed THEN acceptance = not revocation)

3. Destruction act must be done by T or someone directed to by T

Front 42

Interlineation (formal will)

Back 42

): T wills $1000 gift to Mary, then crosses out "$1000" and writes "$1500". Not a holographic codocil bc both Mary's name AND the $1500 has to be in T's handwriting. Moreover, crossing out $1000 is cancellation, so Mary takes nothing!

i. BUT using DRR: bc the revocation of $1000 was conditional and dependent on the $1500 gift, Mary's $1000 was never revoked.

ii. Exception: you can't use DRR if interlineations reduced the gift.

Front 43

Interlineation (holographic will)

Back 43

crossing out $1000 and writing $1500. This is a valid holographic codicil bc all material terms are in T's own handwriting (even if T didn't sign again, since T's first signature would be adopted).

Front 44

Cancellation of duplicate wills

Back 44

If two duplicate wills are both signed by witnesses and T, and T or someone at T's direction revokes one copy, the duplicate is also revoked.

Front 45

Cancellation of mutilated will

Back 45

if will found in mutilated condition at T’s death, and last seen in T’s possession, there is a rebuttable presumption that T mutilated the will with intent to revoke.

Front 46

Revocation by instrument

Back 46

1. Express revocation: will 2 expressly revokes will 1

2. Implied revocation: will 2 revokes will 1 by implication if will 2 totally disposes of T's estate

3. Revival:

1. T executes W1, then W2 which revokes W1 (either expressly or implied). Later T revokes W2, is W1 revived? NO, unless T manifests an intent to revive W1 (oral statements are allowed)(requires an explicit intent to revive W1)

2. T executes W1, then executes W2 which revokes W1. T then executes a codicil which revokes W2. Is W1? No, unless it appears from the terms of the codicil that he wanted W1 revived.

Front 47

When omitted child will not be entitled to an intestate share

Back 47

1. it appears from TI that decedent intentionally left child out

2. at time of execution decedent had a child & transferred substantially of his estate to parent of child. A later born child won't take, since T intended parent to care for kids.

3. T intended to & did provide for child outside of TI (ie annuity)

Front 48

Omitted spouse’s statutory share

Back 48

1. One-half of community property or quasi-community property (therefore ends up with 100% of CP or QCP)

2. share of separate property spouse would have received if decedent had died intestate (but not more than half)

When omitted spouse will not be entitled to statutory share

Front 49

Types of devises

Back 49

1. specific devise: gift of a particular unique item (antique, real property, "100 of my shares to Bob" of a company, shares w/ serial numbers, shares of non-publicly traded company). T must have intent to give specific devises (look to objective manifestations of T's intent).

2. general devise: nonunique, payable out of general assets of estate (“100 shares of Microsoft to Bob”). May either give general devise or FMV of gift.

3. demonstrative devise: hybrid between a general & specific gift. It is a gift from particular fund, but if there’s not enough, can pay out of general property. (To John, $100,000 of my account at B of A.)

4. residuary devise: everything not expressly disposed of in will. (I leave the residue of my estate to Mary.” or “I leave the balance of my estate to Mary.”)

Front 50

Ademption by extinction

Back 50

when a specific gift fails because T did not own property at T’s death. intent important in classifying property as general or specific & again when determining whether T intended the gift to fail. There is no ademption by extinction in CA if T didn’t intend gift to fail:

Front 51

Ademption by satisfaction

Back 51

T gives B an intervivos down payment on devise (ie will leaves $1000, T gives B $100 downpayment… $100 is the satisfaction)

Front 52

How to prove ademption by satisfaction

Back 52

i. will itself provides for deduction of intervivos gift

ii. T declares in contemporaneous writing the satisfaction

iii. B acknowledges the satisfaction

iv. property given in satisfaction is the same as the specific gift to the beneficiary (this is also ademption by extinction since T no longer owns the property)

Front 53

Advancement

Back 53

intervivos down payment made by an intestate to an heir apparent (ie no will).

Front 54

How to prove an advancement occurred

Back 54

i. intestate declares in a contemporaneous writing the gift is an advancement; or

ii. heir acknowledges in writing (at any time) its an advancement

Front 55

Community property

Back 55

all property acquired during marriage while domiciled in CA that isn't separate property

Front 56

Separate property

Back 56

property acquired before marriage or during marriage by gift, bequest, devise and descent along w/ accompanying rents & profits

Front 57

Quasi-community property

Back 57

all personal property wherever situated and all real property in CA acquired by decendent while domiciled elsewhere that would have been CP if decedent had been domiciled in CA when acquired.

Front 58

Four rules to protect surviving spouse:

Back 58

i. T can only dispose of half of CP (surviving spouse owns the other half)

ii. T can dispose of only half of quasi-CP (surviving spouse owns other half) if T acquired the QCP. If not, T can't dispose of acquiring spouses QCP.

iii. Widow's Election: arises when T attempts to dispose of more than half of CP or QCP. Survivor can elect to take under the will (take the gift given in the will, renounce share to half of CP and QCP), or take against the will (take rights to half of CP and half of QCP, renounce gift in will)

iv. Illusory transfers of QCP & Widow's Election: an inter-vivos transfer by decedent (the acquiring spouse) of QCP to a 3rd person w/o consideration IS allowed. Exception: transfer is NOT allowed when transfer is "illusory", occurs when decedent retained some interest of control of property (ownership, a use, a co-tenancy, etc.). Widow can require transferee to restore half of QCP to decedent's estate.

Front 59

Unworthy heirs (killers)

Back 59

1. Those who feloniously and intentionally kill decedent get no benefit under will or intestacy.

2. Proof: Convictions (including a guilty plea) are conclusive. Otherwise, probate court determines guilt by preponderance of evidence.

3. Consequence: Killer is deemed to have predeceased decedent & anti-lapse statute doesn’t apply. This is a legal way of saying the killer doesn't take & the issue of the killer don’t take.

Front 60

Intestate succession: surviving spouse

Back 60

1. Q/CP: surviving spouse inherits decedent’s 1/2 (so she owns 100% total)

2. SP:

i. if no issue, parents, siblings or issue of siblings, surviving spouse gets all SP

ii. if survived by 1 child or issue of child, half goes to surviving spouse, half goes to child/issue

iii. if survived by 2 or more children or issue of children, 1/3 to spouse, 2/3 split among children & issue of children

iv. if no issue but parents or siblings, half to surviving spouse, half to parents/others

Front 61

Intestate succession (no surviving spouse)

Back 61

1. Issue

2. Parents

3. Issue of parents

4. Grandparents

5. Issue of grandparents

6. Issue of predeceased spouse (ie decedent's former step-children)

7. Decedent's next of Kin

8. Parents of predeceased spouse (decedent's former in-laws)

9. Issue of decedent's former in-laws

10. Escheat (to state)

Front 62

Per capita with representation

Back 62

1. Issue taking by intestacy: issue of the same degree take per capita (equally) in their own right. You go to the first generation someone is living and distribute equal shares among the living and dead. The dead's issue then split the dead's share. This is required by sect. 240 of CPC.

Front 63

Per stirpes

Back 63

Will calls for distribution "per stripes", "by right of representation" or by "representation". This is governed by sect. 246 of CPC. The first generation takes equal shares, even if everyone is dead.

Front 64

Stepchildren/foster children

Back 64

i. relationship began during child's minority

ii. it continued throughout the parties' lifetimes, AND

iii. its established by clear & convincing evidence that step/foster parent would have adopted but for a legal barrier (ie biological parent doesn't consent to adoption)

Front 65

Equitable adoption

Back 65

(adoption by estoppel): arises when parties hold themselves out as parent-child

Front 66

Rule of lapse

Back 66

if B does not survive T, B’s gift lapses (the dead don’t take, unless will says otherwise). The gift goes to the residuary or intestacy.

Front 67

California’s anti-lapse statute

Back 67

if anti-lapse statute applies, rule of lapse does not apply.

i. Anti-lapse applies if B who died before T was kindred (blood relative, NOT a spouse) or T or kindred of spouse/ partner (alive or dead) of T, and B leaves issue; the issue step into the shoes of B (gets B's gift… the gift DOES NOT lapse).

ii. Issue who take under anti-lapse statute take according to CPC 240.

Front 68

120 hour rule

Back 68

heirs must survive intestate by 120 hours; if an heir doesn't, the heir doesn't take, and the other heirs divide his share.

(Doesn’t apply if property would escheat)

Front 69

Order of abatement to pay for statutory share for omitted child or omitted spouse

Back 69

i. property not passing by T's will or trust

ii. property passing to all B's of T's will and trust pro-rata (proportionally to gift received's value)

iii. no distinction is made between specific, general or residuary gifts.

iv. exception: court can exempt specific gifts if abating specific gift would defeat the obvious intent of T; must appear from language in which specific devise is created, or from general terms of the will or trust.

v. no favoring of relatives over non-relatives.

Front 70

Order of abatement for general debts of decedent

Back 70

i. intestate property

ii. residuary gifts

iii. general gifts to non-relatives

iv. general gifts to relatives

v. specific gifts to non-relatives

vi. specific gifts to relatives

Front 71

Gift causa mortis (definition)

Back 71

a gift made in contemplation of imminent death.

Only personal property (not real property) can be a gift causa mortis.

Requirements for a gift causa mortis

Front 72

Private Express Trust

Back 72

"A fiduciary relationship with respect to property whereby one person, the trustee, holds legal title for the benefit of another, the beneficiary, and which arises out of a manifestation of intent to create it for a legal purpose"

Front 73

Property of a trust

Back 73

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

1. Examples: fee simple absolute, future interests (e.g. contingent remainders), life insurance policy, bonds, stocks, etc.

2. Illusory interests that can't be corpus of trust: future profits of a business, debt that settlor owes B (debit is a liability, not property), mere expectancy (what a settlor expects to inherit or receive… not property)

Front 74

Who can be a beneficiary

Back 74

any ascertainable person or group can be B (including a legal person, corporation)

1. unincorporated associations: CL no, Modern yes

2. class gifts (unless its too large to be administered, ie “people of California”)

3. child conceived when interest was created, later born is ascertainable

Front 75

Trustee requirement

Back 75

trust must have a trustee, but court will appoint one if there isn’t one present (till then settlor/estate holds legal title). Court won't let trust to fail just bc no trustee is named.

Front 76

Manifestation of intent

Back 76

must be a present manifestation of trust intent (can't manifest an intent for a trust to arise in the future)

1. no magic words, settlor doesn't have to use words trust, trustee, beneficiary, etc.

2. "precatory words" are not enough to form trust (words of wish/hope/desire). Precatory words aren't mandatory words, which are required for a trust.

Front 77

How to create a private trust upon death

Back 77

i. T must comply w/ statute of wills (CPC)

ii. Thus, settlor is really a T, & part of T's will must have a provision for a testamentary trust which takes effect at T's death
i. 3rd party is trustee

ii. for real property: settlor must execute & deliver a deed transferring title to trustee (writing requirement bc of SoF)

iii. for personal property: must be delivery of property at the time settlor manifests an intent to create the trust. This can Trust created during settlor's lifetime: transfer in trust be actual, symbolic or constructive deliver. A promise to deliver in the future IS NOT a trust.

Front 78

Trust created during settlor's lifetime: declaration in trust

Back 78

i. Settlor is trustee

ii. for real property: writing is needed to satisfy SoF indicated settlor is trustee

iii. for personal property: no transfer is needed since settlor already has property. only need a manifestation of intent to create trust.

Front 79

What if trust is illegal at creation (e.g. settlor creates a trust for A on condition A divorce his spouse. Such a trust is against public policy)

Back 79

i. try to excise bad from good: ie condition is stricken, A takes trust free of condition.

ii. if not possible to strike condition, court can either invalidate trust at creation (trust not recognized, settlor remains owner of property) OR give trustee property (as punishment to settlor who doesn't have clean hands). Court will pick option that ends in best result.

Front 80

What if trust becomes illegal after creation

Back 80

a resulting trust is decreed (implied in fact trust based on presumed intent of parties).

Once a court decrees a resulting trust, the trustee has one obligation: to transfer property back to settlor if he's alive, or his estate if he isn't.

Front 81

Charitable trust

Back 81

any trust which confers a substantial benefit upon society.

1. Examples: helping the poor, advance education, help the sick, promote religion

Front 82

What if the beneficiary is a small group of people… charitable trust or private express trust?

Back 82

i. ie "to alleviate poverty among my poor relatives"; split authority

ii. maybe a private express trust bc only a few people are getting a benefit

iii. maybe a charitable trust bc whenever poverty is eliminated, society benefits

Front 83

What if the charitable trust is impossible to carry out?

Back 83

Two solutions

i. resulting trust: returned to settlor if alive or settlor's estate

ii. Cy Pres: means "as nearly as possible".

Front 84

Cy Pres

Back 84

if settlor manifests a general charitable intent but mechanism for effectuating the intent isn’t possible or practicable, court can modify mechanism "cy pres", as nearly as possible, to effectuate S's general charitable intent.

Front 85

How do know if settlor's charitable intent was general (so cy pres can be used) or specific (so trust fails & we have a resulting trust)?

Back 85

i. Introduce both intrinsic evidence (trust instrument) & extrinsic evidence to ascertain settlor's intent.

ii. Example: settlor creates trust to benefit UI med school. UI med school ceases to exist after settlor's death. Must determine if settlor had specific intent to benefit UI med school (if so, then resulting trust & property is returned), or a general intent to benefit health science (cy pres would allow a trust to benefit UI's biology dept.)

iii. look at things like did settlor go to UI med school, was he involved there, did he donate exclusively there during his life, etc.

Front 86

Honorary Trusts

Back 86

a trust w/ no ascertainable B and confers no substantial benefit to society (just a goal of settlor).

1. because no ascertainable B, it isn't a private express trust, bc no substantial benefit to society, not a charitable trust.

2. Trustee isn’t required to carry out settlor's goal, but has power to carry it out (he is on his honor only)

Front 87

Problems with honorary trusts

Back 87

i. trustee may refuse to carry out settlor's goals, trust then fails, resulting trust to settlor or estate. This NEVER happens in a private express trust or charitable trust; court just appoints new trustee.

ii. almost always violate RAP, courts will either strike trust at inception or after 21 years (Restatement's approach), and a resulting trust results.

Front 88

Totten Trust

Back 88

tentative bank account trust: named B takes whatever is left in account at death of owner. Not a true trust because depositor-trustee owns the account during his lifetime & owes no fiduciary duty to B.

Front 89

Wording of Totten trust

Back 89

"Mary Smith as trustee for John Jones".

Front 90

When does settlor/trustee do something during her lifetime to elevate the Totten Account w/ no fiduciary duties at all to a full-blown private express trust w/ all fiduciary duties of a trust?

Back 90

look to actions of depositor/trustee for a manifestation of trust intent.

Remember: no magic words are needed to create a private express trust!

Thus, if settlor tells B "I have created a trust for you" or something similar, settlor has manifested an intent to create the trust & has elevated Totten Account to a full-blown private express trust with a full range of fiduciary duties.

Front 91

Restraints on alienation of trusts

Back 91

B of private express trust can voluntarily alienate his interest in a trust (transfer his right to future payments); creditors can involuntarily reach future trust payments (attach or seize a beneficiary’s right to future payments).

Front 92

Spendthrift trust

Back 92

B cannot transfer his right to future payments of income or principal, & creditors cannot attach B's right to future payments of income or principal.

Front 93

Who can attach a spendthrift trust?

Back 93

Preferred creditors like:

i. govt. creditors (IRS)

ii. those who provide necessities of life to B

iii. a child for child support/spouse for spousal support/ex spouse for alimony

iv. a tort judgment creditor

Front 94

Support trust

Back 94

trustee is required to use only as much of the income/principal as is necessary for B's health, support, maintenance & education.

Front 95

Discretionary trust

Back 95

trustee given sole & absolute discretion over how much B receives (if anything) and when paid (if ever).

Front 96

Voluntary alienation of future discretionary trust payments?

Back 96

“on the one hand, no, the beneficiary may not transfer right to future payments, since B might not get anything, so hard to know what B would be assigning; but if there is an assignment, the assignee steps into shoes of B, and trustee MUST pay assignee if he decides to pay at all.

Front 97

Involuntary alienation of future discretionary trust payments?

Back 97

creditor may not attach since B might not get anything, hard to know what creditor is attaching to, but if creditor does attach & trustee pays, trustee must pay creditor

Front 98

Resulting trust

Back 98

implied in fact trust based upon presumed intent of the parties. if created by ct, resulting trustee will transfer property to settlor/settlor’s estate (ie residuary devisees) or by intestacy

Front 99

Ways that a resulting trust can arise

Back 99

1. when private express trust ends & no provision for what happens to corpus thereafter (presume settlor wants it back)

2. when private express trust fails because no B, presume settlor wants property back

3. charitable trust ends because of impossibility/impracticability and no cy pres

4. trust becomes illegal after creation

5. excess corpus in private express trust (than is necessary to accomplish purpose)

6. purchase money resulting trust (A pays consideration to B to have title property transferred to C.)

7. semi secret trust: Always a will scenario. Will makes a gift to a person to hold as trustee, but does not name B. distinguished from secret trusts: cts allow in parol evidence to find out who B is

Front 100

Constructive trust

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not a trust, rather a remedy to prevent fraud or unjust enrichment. When court decrees constructive trust, wrongdoer (constructive trustee) has only one obligation: to transfer property to intended B as determined by court. Constructive trusts requires wrongdoer to disgorge ill-gotten gains.

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Ways a constructive trust can arise

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1. when trustee of private express trust or charitable trust makes a profit because of self dealing w/ regard to ill-gotten gains. A court will find a constructive trusts.

2. fraud in inducement or undue influence in creation of a will, results in constructive trust w/ heir the constructive beneficiary.

3. secret trust in law of wills: (always a will) will makes outright gift to A but made bc of oral promise from A to give it to B. Parol evidence admissible to show beneficiary was B, and A becomes constructive trustee who has to give property to B. BUT, semi-secret trusts are invalid and result in a resulting trust. [Discuss both together!]

4. oral real estate trusts (aka "breach of promise"): S gives deed for property to A on promise that A will hold for the benefit of B. It looks like A owns property, and the SoF could be invoked by A to keep it that way.

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Powers of trustee

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1. all enumerated powers

2. all implied powers appropriate to carry out trust purpose (ie to sell trust property, power to incur expenses, power to lease, and power to borrow (common law only))

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Trustee’s duty of loyalty

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trustee must administer trust for benefit of Bs; must be impartial (no other consideration). Trustee not allowed to engage in self-dealing (ie preferring one B to another, selling trust property to trustee's spouse, trustee-lawyer hires himself). Consequences of self-dealing:

i. Trustee must make good on losses

ii. Trustee must turn over ill-gotten profits to B

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Trustee’s duty to invest

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split of authority (3 rules, discuss all 3)

i. State lists (trustee must follow in absence of directions in the trust: fed govt. bonds, federally insured CDs, first deeds of trust in real estate, sometimes stocks of publicly traded corps. (never new business, never second deeds of trust in real estate, etc.)

ii. Common law "prudent person test" (if held out as having superior skill, held to that standard): duty is that of a reasonably prudent person investing his own property trying to maximize income while preserving corpus. Each individual investment is scrutinized. Good investments under CL: fed govt. bonds, first deeds of trust in real estate, fed govt. CDs, blue chip stocks, mutual funds maybe. (never new business or second deeds of trust in real estate).

iii. Uniform Prudent Investor Act (adopted by most states): act simply provides that trustee must invest as a "prudent investor". Key is that each individual investment is NOT scrutinized, rather performance is measured in context of entire t

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Trustee’s duty to earmark

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requires trustee to label trust property as trust property

i. CL: if trustee breaches duty to earmark & a loss results, trustee held personally liable even if failure to earmark didn't cause loss

ii. Modern: if failure to earmark & there is a loss, trustee personally liable but only if loss was caused by failure to earmark

Trustee’s duty to segregate

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Trustee’s duty not to delegate

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trustee can rely on advisors, but cannot delegate decision making authority to advisors

i. CL: can’t delegate duty to invest to professional money manager. Also, in absence of provision allowing otherwise, trustees must act unanimously.

ii. Modern: can delegate to professional money manager. Trustees can act by majority decision.

iii. Trustee can't delegate to another trustee.

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Trustee’s duty to account

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trustee must give B a statement of income & expenses of trust on a regular basis

i. if trustee breaches this duty, B can file an action for accounting

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Trustee’s duty of due care

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trustee must act as a reasonably prudent person handling his own affairs.

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Remedies for trustee’s breach of duties

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1. damages

2. constructive trust

3. tracing / equitable lien on property

4. B can ratify transaction if good for B

5. remove trustee

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Trustee’s liability in contract to third parties

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i. CL: trustee sued in his personal capacity (own assets at stake) but can get indemnification if acted within powers & was not personally at fault. Only time trustee would be sued in representative capacity (personal assets not at stake) was if the K explicitly said that trustee would be sued in representative capacity

ii. Modern: if other party to K knows trustee entered into K in his representative capacity, must sue him in that capacity, and trustee's personal assets not at stake.

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Trustee’s liability in tort to third parties

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i. CL: trustee always sued in personal capacity, but if trustee wasn't at personal fault, could get indemnification (ie not negligent, or case is SL)

ii. Modern: trustee sued in individual capacity & is personally liable ONLY IF trustee is personally at fault (ie if liability is due to agent or case is SL, trustee sued in representative capacity).

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Modification of trust by settlor

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settlor can modify the trust if the settlor expressly reserves the power to modify the trust.

Settlor automatically has power to modify if he has power to revoke (bc power to revoke is greatest power settlor can have).

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Ways courts can modify trusts

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1. Charitable trusts + cy pres

2. Courts deviation power (doctrine of changed circumstances)

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Court’s deviation power (doctrine of changed circumstances)

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Court changes administrative or management provisions of trust. Court is NOT changing B.

2 elements are required:

---i. if unforeseen circumstances on part of settlor AND

---ii. necessity: deviation needed to preserve the trust (ie broke + inflation)

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Termination of revocable trusts

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to retain power to revoke, settlor must expressly reserve right to revoke in trust instrument (minority: can revoke unless trust is irrevocable)

Termination of irrevocable trusts

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Life Tenant gets the following income

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i. cash dividends

ii. interest income

iii. net business income

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Life Tenant pays the following expenses

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i. interest on loan indebtedness

ii. taxes

iii. minor repairs

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Remainderman gets the following income

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i. stock dividends

ii. stock splits

iii. net proceeds on sale of trust assets

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Remainderman pays the following expenses

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i. principal part of loan indebtedness

ii. major repairs or improvements (new wing on building)

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Income v. Principal problems: trustee’s power to modify the rules

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Trustee can ignore above rules if a different allocation is necessary to distribute trust fairly