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155 Cards in this Set
- Front
- Back
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What capacity is required to make a will?
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At the time of execution, T must:
(1) Be at least 18 (2) Understand the extent of her property (3) Know the natural objects of her bounty (spouse, issue, parents, and those whose interests are affected by the will) (4) Know the nature of her act |
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What is the consequence if T lacked capacity at the time of execution?
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Entire will is invalid and estate passes through intestacy.
Exception: If T had a valid prior will it will be probated. |
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What is required to establish that T suffered from an insane delusion?
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If at the time of execution
(1) T had a false belief (2) That false belief was the product of a sick mind (3) No scintilla of evidence to support the belief, AND (4) Delusion affected T's will |
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What are the consequences of T's insane delusion?
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Only that part of the will that was affected by the delusion is invalid
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What are the elements of fraud in the context of wills?
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1) A representation
2) Of material fact 3) Known to be false by the wrongdoer 4) For the purpose of inducing action or inaction, AND 5) In fact induces the action or inaction |
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What are the three types of fraud in the context of wills?
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1) Fraud in the execution
2) Fraud in the inducement 3) Fraud in preventing T from revoking |
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When is there fraud in the execution of a will?
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(1) Someone forges T's signature to a will, OR
(2) T is given a document to sign that is purportedly not a will but it is Note: Consequence = entire will is invalid |
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When is there fraud in the inducement in the context of a will?
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The wrongdoer's representations affects the contents of T's will.
Note: Consequence = only that part of the will affected by the fraud is invalid (i.e. pass to residuary, intestate, or constructive trust) |
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What is the consequence of fraud in preventing T from revoking?
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Court will not probate the will and estate will pass by intestacy, BUT court will set up a constructive trust with the heir as the trustee whose sole duty is to transfer property to the intended beneficiary.
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When is there undue influence in the context of a will?
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T's free agency is subjugated.
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What is the prima facie case for undue influence in the context of a will?
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(1) Susceptibility: T has a weakness such that his free will can be subjugated (e.g. age, health, finances, etc.)
(2) Opportunity: wrongdoer had access to T (3) Active participation: the wrongful act that gets the gift (4) An unnatural result |
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When is there a presumption of undue influence for a will?
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(1) A confidential relationship exists between T and the wrongdoer (whenever one person reposes trust in another)
(2) Active participation (3) Unnatural result |
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What is the consequence of finding undue influence in a will?
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Only the affected part of the will is invalid. Part affected goes to residuary or intestate AND constructive trust is created.
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What is the difference between fraud in the inducement and undue influence for a will?
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1) Fraud = a lie
2) Undue influence = wrongful conduct but no lie |
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When is there statutory undue influence in the context of a will?
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Where there is a donative transfer to
(1) The drafter (2) Spouse, partner, etc. of drafter (3) A person in a fiduciary relationship with T that transcribes, OR (4) A care custodian of T Note: Doesn't apply if T is married to or cohabitates with drafter, an independent attorney counseled the transfer, or a court approves it. |
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What is the consequence of finding statutory undue influence?
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The transferee does not take, but only to the extent that the gift exceeds her intestate share.
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What result if there is a mistake in omission in a will?
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No remedy (courts don't rewrite wills). Possible exception: DRR.
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What result if there is a mistake of addition in a will?
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The court may strike out the mistaken addition.
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When is there a mistake in the execution of a will?
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T signs the wrong document.
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When is there mistake in the inducement of a will?
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A particular gift is made or not made on the basis of T's mistaken belief.
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What result if there is a mistake in inducement for a will?
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No relief is given. Exception: If both the mistake and what T would have done but for the mistake appear on the face of the will.
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When is there a mistake in the description of a will?
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When no one or nothing fits the description OR two or more persons or things fit.
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What is the difference between a patent and a latent ambiguity?
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1) Latent: doesn't appear on the face of the will (parol evidence needed to establish)
2) Patent: appears on the face |
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When will parol evidence be introduced to resolve an ambiguity in a will?
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For any type of ambiguity (latent or patent).
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When does Dependent Relative Revocation apply?
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Where T revokes Will 1 thinking that Will 2 is effective (but is mistaken). Court will ignore revocation of Will 1.
Note: Will 2 must be substantially identical to Will 1. ALSO, there must be an independent act of revocation for Will 1 (because Will 2 is invalid and thus cannot revoke). |
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What is the possible interaction between DRR and a mistake in omission?
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T executes Will 1, then Will 2. Will 2 is valid (thus revoking will 1), but includes a mistake of omission. Court may use DRR to probate Will 1.
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May a lost or accidentally destroyed will be probated?
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Yes, if at least one witness can testify to the terms of the will (e.g. drafting attorney).
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What is a pretermission in a will?
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An accidental omission.
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When is a child pretermitted?
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If the child is born or adopted after all testamentary instruments are adopted and not provided for in any instrument.
Note: Pretermitted child takes intestate share. |
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When is a child born BEFORE all testamentary instruments are executed treated as if pretermitted?
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When the ONLY reason the child was not provided for was because T erroneously believed the child to be dead or nonexistent.
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What are the requirements for papers to be integrated into the will?
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1) T's intent, AND
2) Presence: paper must have been actually or physically present at time of execution |
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What does integration refer to in the context of wills?
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It refers to which papers make up the will.
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What are the ways to prove integration in the context of wills?
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1) Physical connection (e.g. papers stapled together)
2) Logical connection (e.g. last word on p.2 makes sense in relation to first word on p.3). |
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What is the theory of incorporation by reference for wills?
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Incorporation by reference gives a non-integrated writing testamentary effect and makes it part of the will.
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What are the elements of incorporation by reference for wills?
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1) A document or writing
2) The document must have been in existence when will executed 3) Document must be clearly identified in will, AND 4) T intended to incorporate document into will Note: If 1-3 established, 4 will be implied by the court |
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What is the theory of facts of independent significance for wills?
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Who a beneficiary is, or what gift is given, may be given meaning by facts (parol evidence) of significance independent from T's will.
Note: Does the fact have significance independent of the will? |
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What does Section 6132 of the CA Probate code do?
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A document, whether or not it can be incorporated by reference or is a fact of independent significance, may be admitted into probate IF:
1) The writing is referred to in the will and is dated and signed by T 2) Describes property and recipient with reasonable certainty 3) Directs the disposition of tangible PERSONAL property (not cash) not used in T's business and not worth more than $5k each ($25k total) |
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Where there is a pour over provision in a will, what methods should be discussed to validate the provision?
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1) Incorporation by reference
2) Facts of independent significance 3) Uniform Testamentary Additions to Trust Act (UTATA): as long as there is a valid trust, in existence before or at the time the will was executed, the pour-over provision is valid. |
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What are the elements for an attested will?
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1) Must be in writing
2) Signed (or acknowledged) by T, third person in T's presence, or conservator pursuant to court order 3) In the presence of two witnesses present at the same time 4) Witnesses must sign during T's lifetime, AND 5) Witnesses understand the instrument they sign is T's will |
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What are the consequences of finding and interested witness to a will?
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Will is NOT invalid, but there is a presumption that the witness-beneficiary secured the gift by wrongdoing. If cannot rebut, witness-beneficiary cannot take more than intestacy share.
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What are the elements for a valid holographic will?
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(1) Signed by T (anywhere on will), AND
(2) Material provisions must be in T's own handwriting (ONLY gifts and beneficiaries) Note: Holographic = handwritten |
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Is extrinsic evidence admissible to determine T's testamentary intent for a holographic will?
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Yes
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May a statement of testamentary intent in a holographic will be made as part of a commercially printed form will?
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Yes
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Is a date required in a holographic will?
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No. BUT, if the undated holographic
(1) is inconsistent with the provisions of another will (dated holographic, undated witnessed, dated witnessed), the undated holographic is invalid to the extent of the inconsistency, OR (2) If it is established that T lacked capacity at any time during which the undated holographic will MIGHT have been executed, it is invalid unless established otherwise |
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When can a will executed in another jurisdiction be admitted into probate in CA?
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If ANY one of these is true:
1) Will complies with CA formalities of execution, 2) Will complies with formalities of place where executed, OR 3) Will complies with formalities of the place where T was domiciled at time of execution |
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What is a codicil?
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A testamentary instrument, executed in compliance with the CA Probate Code, which modifies, amends, or revokes a will.
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What does it mean that a codicil republishes a will?
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A codicil causes the will to speak from the date that the codicil is executed.
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What are the alternative theories regarding the effect of a codicil on down-dating a will to allow pretermission?
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1) Codicil republishes the will so that the child born (or marriage) after the will but before the codicil will be pretermitted
2) Alternatively, because the codicil is itself a testamentary instrument, the fact that the child was born before the codicil was executed independently precludes pretermission. |
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What are the rules regarding the revocation of codicils?
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1) T executes will first, then codicil, then revokes codicil: rebuttable presumption that T intended to revoke codicil ONLY
2) T executes will, then codicil, then revokes will: rebuttable presumption that T intended to revoke BOTH |
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What are the elements for revocation by physical act?
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1) Will must be burned, torn, cancelled (lined out), destroyed, or obliterated (erasing),
2) T must have simultaneous intent to revoke, AND 3) Act must be done by T, or by someone in T's presence and at his direction |
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What's a interlineation of a will?
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Writing between the lines. H
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Hypo: T executes a typed, valid will that leaves $1k to A. T later takes out a pen and crosses out the $1k and writes in $1,500. Result?
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A gets nothing!
(1) No holographic codicil because the material provisions are not in T's own handwriting (gift is, but beneficiary is not) (2) And the original $1k gift has been revoked by a physical act (cancellation) BUT, A's original gift may be saved by DRR if the interlineation is higher (i.e. the revocation of the original gift was dependent on the new gift being effective). If it is lower, A gets nothing. |
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What is the consequence of finding a mutilated will?
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There is a rebuttable presumption that T mutilated with intent to revoke IF:
(1) The will is found in a mutilated condition at T's death, AND (2) When last seen was in T's possession |
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When will a subsequent will revoke a previous will by implication?
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If Will 2 totally disposes of T's estate.
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Hypo: Will 1 is revoked by Will 2. Later, T revokes Will 2 by physical act. Is Will 1 automatically revived?
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No. Will 1 is only revived if T manifested an intent to revive it (oral statements okay, but must be CLEAR).
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Hypo: Will 1 is revoked by Will 2. Later, T revokes Will 2 by codicil. Is Will 1 automatically revived?
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No, unless it appears from the terms of the codicil that T wanted Will 1 revived.
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What are the consequences of finding an omitted or pretermitted child?
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Child takes her intestate share of decedent's estate at death PLUS the assets held in any revocable intervivos trust.
Exceptions: 1) D's failure to provide for the omitted child was intentional and the intention appears in the instrument 2) At the time of execution, T had one or more children and transferred substantially all of the estate to parent of omitted child, OR 3) T provided for the omitted child by a different transfer with intention that it be in lieu of testamentary transfer |
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What is an omitted spouse in the context of a will?
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(1) A surviving spouse,
(2) Who married the decedent after execution of all testamentary instruments and (3) Is not provided for in any testamentary instrument. |
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What is the consequence of finding an omitted spouse?
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Spouse receives statutory share of assets decedent owned at death PLUS assets held in any revocable intervivos trust.
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What is the statutory share of an omitted spouse?
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1) 100% of the community property (half she already owned plus decedent's half)
2) 100% of the quasi-community property (same), AND 3) Share of separate property she would have received if T died intestate (but never more than one-half of the value of the property) |
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What are the exceptions to an omitted spouse taking her statutory share?
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1) D's failure to provide for the omitted spouse was intentional and the intention appears in the instrument
2) T provided for the omitted spouse by a different transfer with intention that it be in lieu of testamentary transfer, OR 3) Omitted spouse signed a waiver |
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What are the elements for an waiver in the context of an omitted spouse?
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1) Must be in writing, signed by waiving spouse
2) Full disclosure by decedent of decedent's finances, AND 3) Independent counsel by waiving spouse Note: Waiver still enforceable without 2 or 3 if waiving spouse should have knowledge of decedent's finances, or waiver was fair (e.g. spouse got some consideration in return). |
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What the definition of a waiver in the context of an omitted spouse?
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A voluntary relinquishment of a known right, whether signed before or during marriage.
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What are the elements for domestic partnership in CA?
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1) Partners must be of the same sex OR at least one person must be 62, AND
2) Partners must have filed declaration of domestic partnership with Secretary of State |
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What are the rules for testamentary gifts after final dissolution of marriage?
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1) Revocation of any devise to a spouse if there is an annulment or final dissolution of marriage (legal separation does not count)
2) Devise is reinstated if will is not changed and they remarry 3) These rules don't apply if will expressly says otherwise |
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What is a specific devise?
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A particular gift of a particular item (e.g. real property). T must have the intent that the beneficiary take this particular thing.
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What is a demonstrative devise?
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A hybrid between a general and specific devise. It is a gift from a particular fund, but if there is not enough, executor can resort to general property.
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What is a residuary devise?
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All other property not expressly disposed of in the will.
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What is ademption by extinction?
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A devise will fail when:
1) T does not own the SPECIFIC property at his death, AND 2) T intended that the gift would fail (circumstantial evidence okay) |
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What is ademption by satisfaction?
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Testator gives beneficiary an inter vivos down payment on a devise. Result: B will only take the balance of the devise.
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How is ademption by satisfaction established?
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1) Will itself provides for deduction of intervivos gift,
2) T declares in contemporaneous writing that gift is a satisfaction 3) B acknowledges in a writing (any time) that the gift is a satisfaction 4) Property given in satisfaction is a specific gift |
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What is an advancement in the context of wills?
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An intervivos down payment made by an intestate to an heir apparent (similar to a satisfaction).
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What result if there is a contract between T and B not to revoke, and T does revoke?
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Upon T's death, B may sue T's estate for breach of contract.
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If T's will makes an express reference to a contract, can extrinsic oral evidence be used to establish the terms of the contract if it involves the transfer of real property?
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Yes, and the SOF is not a problem.
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When does the cause of action arise in the context of a contract to make (or not make) a will or devise?
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When T dies (rationale is that T could always change his mind during lifetime). Exception: The cause of action may arise during T's lifetime if she is engaging in conduct which would be fraud on the promisee.
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What is the difference between joint wills and mutual wills?
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1) Joint will: will of two or more people on one document
2) Mutual will: separate wills of two or more people which are reciprocal |
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What is quasi-community property in the context of wills?
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All personal property (anywhere) and all real property in CA, acquired while decedent was domicile outside CA that otherwise would have been community property.
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How much of the community property can T dispose of at his death?
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Half.
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What is the widow's election in the context of wills?
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Surviving spouse has the option of either:
1) Accept the gift given in T's will in lieu of her statutory right, OR 2) Renounce all benefits given in the will and taker her statutory rights (1/2 all community and quasi-community property) |
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Is an intervivos transfer by T of the quasi-community property to a third person without consideration allowed?
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Generally yes, because the survivor had a mere expectancy rather than a property interest. Exception: transfer will not be allowed if the transfer is deemed illusory (T retained some control over the property post-transfer). In that case, survivor may require transferee to restore 1/2 of the quasi-community property to the estate.
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When is a heir unworthy?
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Those who feloniously and intentionally kill the decedent. Proof required:
1) Conviction or guilty plea, OR 2) Probate court determines guilt by preponderance of evidence Consequence: killer and killer's issue do not take |
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What result if one joint tenant feloniously and intentionally kills another joint tenant?
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Severance of joint tenancy, but killer retains her 1/2 interest.
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What is the order of priority in intestacy if there is no surviving spouse?
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1) Issue of decedent
2) Parents of decedent 3) Issue of parents 4) Grandparents 5) Issue of grandparents 6) Lots more |
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How much of the separate property does a surviving spouse take under intestacy?
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1) Nobody but spouse: all to spouse
2) One child (or her issue): half to each 3) Two or more kids (or their issue): 1/3 to spouse, 2/3 to kids (or their issue) |
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What is the rule for per capita distribution?
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Distribution occurs at first level where someone is living. Thus:
(1) Give equal shares to all living people at that generation, AND (2) To deceased members of that generation who leave issue (issue will split that person's equal share) |
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When does the per capita distribution rules apply?
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(1) Whenever issue take by intestacy, OR
(2) If a will or trusts provides for issue to take without specifying the manner |
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How are assets distributed under a per stirpes or right of representation scheme?
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The distribution occurs at the first level, even if everyone is dead, so long as they left issue.
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When does a stepchild treated as adopted in the context of wills?
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1) The relationship began during child's minority
2) It continued through the parties' lifetime 3) It is established by clear and convincing evidence that stepchild would have been adopted but for a legal barrier (e.g. biological parent does not give consent to adopt). |
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What is the rule for half-bloods in CA?
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Half-bloods (e.g. half-siblings) inherit the same whole bloods.
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When does a devise normally lapse?
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When the beneficiary predeceases T.
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When does CA's Anti-Lapse Statute apply?
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When the devisee (that predeceases T) is a blood relative of T or T's spouse or domestic partner.
Note: The statute does NOT apply if the devisee is the spouse or domestic partner. |
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Who takes if CA's Anti-Lapse Statute applies?
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The issue of the deceased beneficiary under the per capita system.
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Hypo: What is the test established by the Uniform Simultaneous Death Act?
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If it cannot be established by clear and convincing evidence that the beneficiary survived T (e.g. plane crash), then it is deemed that the beneficiary did not survive T.
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What happens to a gift that would otherwise go to a beneficiary but for a simultaneous death problem?
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The gift lapses or is distributed under CA's Anti-Lapse Statute.
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What happens to the property of joint tenants with the right of survivorship that die simultaneously?
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Joint tenancy severed and the property is divided among each tenant's estate.
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What happens to the community and quasi-community property of spouses or domestic partners that die simultaneously?
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Half the community and quasi-community property is distributed through one spouse's estate and the other half through the other spouse's estate.
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What happens to life insurance proceeds where the insured and the beneficiary die simultaneously?
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1) It goes to any alternative beneficiary named, OR
2) To T's estate or by intestacy if no residuary Note: If the premiums were paid with community property and the beneficiary was a spouse, the proceeds are split between each of the spouse's estates. |
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What is the simultaneous death rule for heirs?
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It must be shown by clear and convincing evidence that the heir (intestacy) survived the decedent by 120 hours. If not, heir is deemed to have predeceased.
Note: 120 hour rule does not apply if property would escheat. |
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What is the rule for after-acquired property in the context of wills?
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A will passes all property the testator owned at death, including after-acquired property.
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What is after-acquired property in the context of wills?
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Property acquired after the will was executed.
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What happens to increases on specific devisees after T's death but before distribution?
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All increases (e.g. stock dividends, stock splits, rents, etc.) go to the beneficiary.
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What is abatement in the context of wills?
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The process by which certain gifts are decreased.
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When does abatement arise in the context of wills?
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When it is necessary to pay for the share of an omitted child, spouse, or domestic partner.
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What is the order of abatement for omitted children, spouses, or domestic partners?
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1) First, abate all property not passing by T's will or revocable intervivos trust
2) Then, abate from all beneficiaries from T's will and revocable intervivos trust pro rata (proportion to value of gift) Note: Court MAY make an exception for specific devises if abatement would defeat the obvious intention of T. |
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What is the order of abatement for paying of the general debts of T?
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In order:
1) Intestate property 2) Residuary gifts 3) General gifts to non-relatives 4) General gifts to relatives 5) Specific gifts to non-relatives 6) Specific gifts to relatives |
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What is the rule for exoneration in the context of wills?
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Exoneration = extinguishing a debt or encumbrance
Rule = Devisee takes gift subject to the encumbrance (e.g. mortgage on property), unless will states specific gift is to be exonerated. |
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What is a gift causa mortis?
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A gift made in contemplation of imminent death.
Note: Only personal property. |
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What types of delivery are acceptable for a gift causa mortis?
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1) Actual
2) Symbolic (e.g. writing evidencing ownership) 3) Constructive delivery (where donor has done everything possible to effectuate delivery and no fraud or mistake) |
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What is a private express trust?
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A fiduciary relationship with respect to property whereby one person (trustee) holds legal title for the benefit of another (beneficiary), and which arises out of a manifestation of intent to create it for a legal purpose.
Note: MEMORIZE THIS |
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What can make up the property of a trust?
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Any presently existing interest in property that can be transferred (e.g. FSA, future interest, life insurance, stocks, etc.).
Note: Illusory interests cannot (e.g. future profits in a business or other mere expectancy). |
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Who can be the beneficiary of a private express trust?
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Any ascertainable person or group of people (including legal persons).
Note: Group must not be too large to be administered. |
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Must a trust have a trustee?
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Yes, but the court will not allow the trust to fail for lack of a trustee (it will appoint one).
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What is required for a trust?
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1) Property: presently existing interest in property
2) Beneficiary: any ascertainable person or group of persons 3) Trustee: court will appoint if necessary 4) Present manifestation of trust intent: no magic words, but must be mandatory not precatory |
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Are precatory words sufficient to create a trust?
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No. However, precatory words + parol evidence may = trust.
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What result if it is found that the words purporting to create a trust are merely precatory and the parol evidence is insufficient?
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The transferee owns the property in fee simple.
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Do trusts have to be in writing?
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No for trusts involving personal property.
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What are the various types of trusts that can be created during the settlor's lifetime?
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1) Transfer in trust: third party is trustee and there must be delivery (actual, symbolic, or constructive) of the property
2) Declaration in Trust: settlor is the trustee |
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For what purposes may a trust be established?
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For any legal purpose.
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What result if a trust is for an illegal purpose or it violates public policy?
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1) Illegality at creation: try to excise the bad from the good. If not possible to excise, court may invalidate trust or allow trustee to keep property.
2) Illegality after creation: resulting trust is decreed in favor of the settlor or settlor's estate. |
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What are the issue areas that should be discussed for a private express trust?
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1) Definition
2) Property 3) Beneficiary 4) Trustee 5) Manifestation of intent 6) Creation (during life or upon death) 7) Legal purpose (illegal or violates public policy?) |
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May a settlor create a private express trust that takes effect at the settlor's death?
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Yes, but S has to comply with the CA Probate Code (i.e. provision in the will providing for a testamentary trust).
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What is a charitable trust?
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Restatements: any trust which confers a substantial benefit to society
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How is a charitable trust created?
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Same way as a private express trust:
1) Manifestation of trust intent (at testator's death by will or by transfer in trust) 2) Of a presently existing interest transferable property 3) For a legal charitable purpose |
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Why do we care if a trust is a private express trust or a charitable trust?
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1) Rule against perpetuities
2) Cy pres doctrine |
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What is cy pres in the context of trusts?
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Cy pres means "as nearly as possible."
(1) If the court finds that S had a general charitable intent (2) And only the mechanism for effectuating is not possible or practicable, (3) Court can modify the mechanism cy pres to effectuate S's general charitable intent. Example: S creates charitable trust to build free hospital for poor, but not enough money in the trust. Court can modify the mechanism (hospital) cy pres and build a clinic instead. |
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How do you know if S's charitable intent was general (cy pres available) or specific (must use resulting trust)?
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Introduce intrinsic (instrument) and extrinsic evidence to ascertain S's intent.
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Who may invoke cy pres in the context of a trust?
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ONLY the court (not the trustee).
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What is a pour-over will?
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S creates an inter-vivos trust, with a provision in her will devising part or all of the estate to the trustee of the trust.
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What is an honorary trust?
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A trust with no ascertainable beneficiary and confers no substantial benefit to society. Trustee is not required to carry out S's intent (only on his honor to do so).
Note: If trustee doesn't carry out S's intent the trust fails and a resulting trust occurs. Also, almost always a RAP problem with honorary trusts. Example: Trust to further fox hunting. |
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What is a totten trust?
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Also known as a tentative bank account trust, whereby the named beneficiary takes whatever is left in the account at owner's death.
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Does the settlor/depositor/trustee of a totten trust owe any fiduciary duties to the beneficiary?
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No. She can do anything she wants with the money (including spend it all).
HOWEVER: If the settlor/depositor/trustee manifests a trust intent, THEN she elevates the totten trust to a private express trust. |
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What is a spendthrift trust?
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It is a provision of an express private trust that says the beneficiary cannot transfer his rights to future payments of income or principal and creditors cannot attach said rights.
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May creditors ever attach a beneficiary's right to future payments where there is a spendthrift trust?
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Generally no. However, PREFERRED creditors can
(1) Government creditors like IRS, (2) Those who provide necessities of life to beneficiary (3) Child support, spousal support, alimony (4) Tort judgment creditor Note: Some jurisdictions allow any creditor to attach "surplus" income (above what's need to maintain station in life). |
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Are self-settled spendthrift trusts allowed?
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No in most jurisdictions. However, the trust itself is valid (provision ignored).
Note: Minority of jurisdictions allow self-settled spendthrift trusts. |
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What is a support trust?
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A provision of a private express trust that requires the trustee to use only so much of the income or principal as is necessary for the beneficiaries health, support, maintenance, or education.
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Can creditors ever attach B's rights to future payments where there is a support trust?
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Same rules as for spendthrift trusts (i.e. preferred creditors and surplus).
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What is a discretionary trust?
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A provision in a private express trust that gives trustee sole and absolute discretion in determining how much and when to pay B (if ever).
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May a beneficiary assign his right to future payments where there is a discretionary trust?
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Generally no. B might not get anything, so doesn't have any right to transfer. But, if the trustee has notice of an assignment and decides to pay, he must pay the assignee or be held personally liable.
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May creditors attach a beneficiary's rights to future payments where there is a discretionary trust?
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Generally no. B might not get anything, so there is no right to attach. But, if the trustee has notice of an assignment and decides to pay, he must pay the creditor or be held personally liable.
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What is a resulting trust?
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An implied in fact trust, based on the presumed intent of the parties. If decreed by the court, resulting trustee will transfer property to S or S's estate.
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What are the major examples of where a resulting trust will be created?
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1) Private express trust ends by its own terms, and no provision for what to do with proceeds thereafter
2) PET fails because there is no B 3) Charitable trust fails because of impossibility or impracticability and Cy Pres not available 4) PET fails because becomes illegal after creation 5) Excess corpus in PET 6) Purchase money resulting from trust 7) Semi-secret trusts |
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What is a constructive trust?
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A remedy to prevent fraud or unjust enrichment.
Result: Wrongdoer is named trustee and is required to transfer property to intended beneficiary. |
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What is the difference between a resulting trust and a constructive trust?
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1) Resulting trust: goes back to S or S's estate
2) Constructive trust: goes to the intended beneficiary |
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What are the situations in which a constructive trust will be created for an oral real estate trust?
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Oral real estate trust = S transfers real property to A with the oral understanding that A will hold for B's benefit. Note this violates SOF. Nonetheless, a constructive trust will be created when
(1) There is a fiduciary relationship between S and A. (2) There was fraud in the inducement by A (3) There was detrimental reliance by B |
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What are the powers of a trustee?
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1) All enumerated powers
2) All implied powers: powers that are helpful and appropriate to carry out the trust's purpose (power to sell trust property, incur expenses, lease, borrow). |
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What are the duties owed by a trustee to the beneficiary?
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1) Duty of Loyalty: T must administer trust solely for benefit of B (no self-dealing)
2) Duty to Invest (discuss all three alternatives) 3) Duty to earmark: label trust property as trust property 4) Duty to segregate 5) Duty not to delegate 6) Duty to account |
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What result if trustee self-deals?
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1) Loss: trustee is "surcharged" and must make up the loss
2) Profit: trustee is a constructive T that must turn over profits to intended B |
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What are the alternative rules for a trustee's duty to invest?
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Discuss all three:
1) State lists: some states list which investments T can make in absence of directions in trust (e.g. fed gov bonds, first deeds of trust in real estate, federally insured certificate of deposit) 2) Common law prudent person test: act as a reasonably prudent person investing own money. Each individual investment scrutinized. 3) Uniform Prudent Investor Act: must invest as a "prudent investor." Performance is measured by entire portfolio (not individual investments). Note: Duty to diversify under all three approaches. |
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What is the consequence for a trustee breaching her duty to earmark?
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1) CL: trustee is liable for any loss, even if not caused by failure to earmark
2) Modern: only liable if loss caused by failure to earmark (e.g. creditors of trustee attach property). |
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What is a trustee's duty to segregate?
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1) T cannot commingle personal funds with trust funds, AND
2) T cannot commingle funds from Trust A with funds from Trust B |
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What is a trustee's duty not to delegate?
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T can rely on professional advisors in reaching a decision, but the trustee cannot delegate decision-making authority.
Note: Modern view is that T can delegate duty to invest to professional money manager. |
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What is a trustee's duty to account?
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T must, on a regular basis, give B a statement of income and expenses of the trust.
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What is a trustee's duty of due care?
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T must act as a reasonably prudent person dealing with her own affairs.
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When is a trustee personally liable for contracts entered into in his representative capacity?
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1) CL: always, unless K itself provided that in event of breach by T he is to be sued in representative capacity (but may get indemnification from trust assets)
2) Modern: As long as third party knows T is entering into the contract in his representative capacity |
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When is a trustee personally liable in tort to third parties?
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1) CL: always, but if T without personal fault he can get indemnification from trust assets
2) Modern: Only if T personally at fault |
