ewt outline

ESTATES, WILLS AND TRUSTS OUTLINE

INTRODUCTION TO ESTATE PLANNING

I. The Power to Transmit Property at Death; Its Justification and Limitations

a. Until the 1980s, the right to pass property at death was not natural or

constitutionally protected—it was a statutory idea

i. Estates and wills are statutory animals—until 1540 there were no statutes.

b. Hodel v. Irving

i. There is a right to transmit property upon death.

1. It is only the TESTATOR’S right to transfer (because the stick

came out of the bundle of rights to his property)—it is not the right

of a natural heir to the testator’s bounty.

ii. A restriction on the right to transfer upon death is only a taking when it is

a complete abolition of the right (otherwise a restriction to transmit

property would be constitutional)

c. Property rights that pass as part of Decedent’s estate

i. Shaw v. CMG Worldwide

1. Under NY & Cali Law a disposition by the testator of all property

passes at the time of death. Thus, Testator (Marylyn Monroe) via

a residuary clause in will could not convey postmortem right of

publicity to testamentary legatees where statute permitting such a

disposition was not passed until 3 years after her death.

ii. Uniform Probate Code § 2-602

1. Generally, a will may pass property acquired by the estate AFTER

the testator’s death.

a. Thus, in Shaw the residual clause would have had effect as

a postmortem right of publicity.

d. Dead hand control allows a dead person, through his wealth, to influence the

behavior of others after the person’s death

i. The courts usually uphold the intent of the testator unless it conflicts with

the public interest and law.

ii. Restraints on gifts in wills: (Shapira v. Union National Bank).

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Solution to remedy a conflict: constructive trust!


1. The right to receive property in a will is not constitutionally

protected.

a. The only right is to is the father’s right to give the property

away (like Hodel)

2. Constitutionality of the restriction on marriage in the will: this is

different than Shelley v. Kraemer because in this case the court is

not being asked to enforce any restriction upon the son’s

constitutional right to marry. The court is only being asked to

enforce a testator’s restriction upon the inheritance. The right to

receive property by will is a creation of law, it is not a natural

right.

a. There is no state action so there can’t be a 14th Amendment

claim.

b. A partial restraint upon marriage is not unconstitutional.

3. Public policy: A partial restraint of marriage which imposes only

reasonable restrictions is valid.

4. Another reason a restriction will be valid if the will also provides

a second option on where the money will go if the heir does not

comply (this shows that the intent is more religious than

discriminatory)

iii. Courts tend to refuse to enforce CONDITIONS if they are unreasonable.

1. However, if a person tries to restrict marriage by saying that he

can’t marry a certain race—courts would probably not enforce this

because he is doing something bad against a certain race; instead

of promoting his religion.

2. If the conditions is negativewill not be enforced (see above

example).

iv. The Restatement says that a restraint to include a person to marry within a

religious faith is valid, if, and only if, under the circumstances, the

restraint does not unreasonably limit the transferee’s opportunity to marry.

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v. If you have a testator—you want to provide flexibility in the will so you

don’t have to run into these possible challenges of the constitionality of

the will.

1. You could appoint a third person to give a set of instructions that

help enforce the restriction. This would be valid.

vi. Courts generally support the freedom of the testator to determine who gets

the property or restraints on inheritance.

1. Total restraints on marriage are struck down

2. Total restraints on second marriages are split

3. Reasonable restrains on marriage—court is going to look to see if

the directions are CLEAR AND REASONABLE

4. Courts generally will enforce religious restraints

5. Restrictions to divorce someone will be struck down.

vii. If the court does strike down the provision of the will, that part of the will

will probably become intestate.

e. The controlling consideration in determining the meaning of a donative document

is the donor’s INTENT. (Restatement)

i. But this is curtailed to the extent prohibited or restricted by overriding rule

or law.

f. Destruction of property at death

i. If there is a provision in a will that says the house must be torn down when

the person dies; this will be struck down because it goes against public

policy—don’t want waste.

1. A person can tear down a house when he is alive

a. Difference: when it is done when the person is alive, the

person whose desire it is does it—that person bears most of

the economic consequences of the decision. But someone

else bears the burden when the person is dead.

II. Transfer of the Decedent’s Estate

a. PROBATE property: property that passes under the decedent’s will or by

intestacy.

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i. Probate statutes differ a lot from state to state

ii. UPC 3-101 : Devolution of Estate and Death; Restrictions

1. “The power of a person to leave property by will, and the right of

creditors, devisees, and heirs to his property are subject to the

restrictions and limitations contained in this Code to facilitate the

prompt settlement of estates. Upon the death of a person, his real

and personal property devolves to the persons to whom it is

devised by his last will or to those indicated as substitutes for them

in cases involving lapse, renunciation, or other circumstances

affecting the devolution of the testate estate, or in the absence of

testamentary disposition, to his heirs, or to those indicated as

substitutes for them in cases involving renunciation or other

circumstances affecting devolution of intestate estates, subject to

homestead allowance, exempt property and family allowance, to

rights of creditors, elective share of the surviving spouse, and to

administration.”

iii. Ohio Statutes:

1. Appoint a fiduciary: person representative of the state

2. Will needs to be admitted to probate (starts SOL)

3. Executor has to collect the assets together and appraise them—this

is for the probate court and taxing authorities

4. Period of time that creditors can file claims against the estate

a. May start from the day of death or when the probate is

opened.

b. However, if Medicaid—time does not run until the state

receives the death certificate.

5. Accounting and distribution of the assets to the beneficiaries of the

will.

b. NONPROBATE property: property passing under an instrument other than a will.

i. Most property is transferred at death in this manner—including:

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1. Joint tenancy property (this includes both real and personal

because the decedent’s interest vanishes at death)

2. Life insurance

3. Contracts with a POD provision (like a pension)

4. Interests in trusts

a. Testamentary trusts pass through probate;

b. Inter Vivos trusts do not pass through probate

ii. Distribution of nonprobate assets does not involve a court proceeding, but

is made in accordance with the terms of a K or trust or deed.

c. Administration of Probate Estates

i. Executor: personal representative (the person who winds up the decedent’s

affairs) when the decedent dies testate and in the will names the person

who is to execute the will and administrate the probate estate.

ii. Administrator: the person in charge of administering the estate who is not

named in the will.

iii. When a person writes a will, he can designate who is to administer the

estate. If he dies intestate, the administrator is selected from a statutory

list of persons who are to be given preference.

iv. A will can be used to refer to an instrument disposing of both real and

personal property.

v. Summary of Probate Procedure:

1. Opening of probate:

a. In Ohio no limit on when estate must be opened; however,

within 6 months creditors must make claim and con open

the estate.

b. There are four purposes:

i. It provides evidence of transfer of title to the new

owners by a probated will or decree of intestate

succession

ii. It protects creditors by requiring payment of debts

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iii. It distributes the decedent’s property to those

intended after the creditors are paid.

iv. Clears title

1. If the property is not put through probate,

there will always be a mortgage (if there was

one)—and the property will never sell.

c. Primary jurisdiction: where the decedent was domiciled at

the time of death

i. This is where the probate of the will takes place.

d. Ancillary jurisdiction: jurisdiction where the probate of the

will takes place if the real property is located in another

jurisdiction than where the decedent was domiciled.

2. In many states, the actions of the personal representative in

administering the estate are supervised by the court—this can be

timely and costly. Other states allow the administrator to handle

all of the matters without formal court supervision.

a. The UPC allows for both methods.

b. Ohio does not permit informal probate.

i. Exception for small estates, if going to surviving

spouse and < $100,000 than it can pass without

being probated.

1. If going to nephew etc., exception provides

it must be < $35,000.

c. If elects informal probate, and interested party can

intervene and request formal probate.

3. How to determine if probate is necessary

a. Probate can be avoided if the property owner during life

transfers all of his property into a joint tenancy (JT) or a

revocable or irrevocable trust or executes a K providing for

distribution of K assets to named beneficiaries on the

owner’s death.

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b. It is difficult for a rich person to transfer all of his property.

A will serves a backup function to catch overlooked

property or property acquired after the inter vivos changes

in ownership have been made.

c. Statutes in all states permit heirs to avoid probate where the

amount of property involved is small.

i. Probate can be avoided if all of the property goes to

the spouse and the amount is small—this avoids a

lot of the problems of probate because you don’t

have to do as much.

d. Many states permit close relatives of the decedent to obtain

possession of the decedent’s personal property by

presenting an affidavit to the holder of the property if the

estate does not exceed a certain figure.

e. Probate can be avoided by having right of survivorship or

trusts and not a will. But sometimes you still need a will to

go through probate if there is a lot—or as a backup.

f. If debts are more than the assets, you want it to go through

probate and hope that the creditors don’t make claims

within the SOL.

g. Rule of thumb: Anytime you have real property you are

going to want to put it through probate because of a

mortgage.

III. Professional Responsibility

a. Duties to Intended Beneficiaries.

i. A duty runs from a drafting attorney to an intended beneficiary (and that

intended beneficiary has third-party beneficiary status). Simpson v.

Calivas

1. There is an emphasis on the foreseeability of injury to the intended

beneficiary.

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a. Even though there is no privity between the attorney and

the intended beneficiary, the obvious foreseeabilty of injury

to the beneficiary demands an exception to the privity rule.

i. Most states no longer require privity, but Ohio does.

b. This would apply when the beneficiary is named—the

attorney knows who the person is.

2. RULE: a nonparty to a K has no remedy for breach of K is subject

to an exception for third-party beneficiary status. Third-party

beneficiary status necessary to trigger this exception exists where

the K is so expressed as to give the promisor reason to know that a

benefit to a third party is contemplated by the promisee as one of

the motivating causes of his making the K. (Simpson)

ii.

iii. A fiduciary duty exists when one has a special confidence in another so

that the latter, in equity and good conscience, is bound to act in good faith

(Hotz v. Minyard).

1. In this case, the attorney have a conflict of interest—he was

representing many members of the family. He should have gotten

the consent of both parties, since the parties were in conflict.

2. This area of estate planning is ripe for conflicts—most husbands

and wives come in together—if one of them tells you something in

confidence, you have to tell it to the spouse.

a. H and W have a conflict of interest—what is disclosed to

one has to be disclosed to the other.

b. Make sure you get CONSENT.

3. Where the firm is held responsible, damages may be sought (just

make a reference to punitive damages, if needed)

b. Duties of attorneys:

i. Duty to testator and intended beneficiaries (where privity has been

eliminated)

ii. Malpractice can be based on tort theories, K or both

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iii. Avoid or disclose conflicts of interest.

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INTESTACY: AN ESTASTE PLAN BY DEFAULT

The Basic Scheme

I. Introduction

a. Intestate: when a person dies without a valid will

i. This is a default rule—it is the background law that lawyers plan around.

ii. Most people don’t have a will (40% do have wills)

iii. Even people with a will still have to use intestate laws.

b. The distribution of the probate estate of a person who dies without a will, or

whose will does not make a complete disposition of the estate, is governed by the

statute of descent and distribution of each state.

i. Partial intestacy: when a will is so poorly drafted that it disposes of only

part of the probate estate.

c. UPC 2-101 : Intestate Estate: Any part of a decedent’s estate not effectively

disposed of by will passes by intestate succession to the decedent’s heirs.

d. UPC 2-103 : Share of heirs other than surviving spouse

i. Order of passing of the estate if there is no surviving spouse:

1. Decedent’s descendants by representation

2. If there is no surviving descendant, to the decedent’s parents

equally if they both survive, or to the surviving parent.

3. If there is no surviving parent, to the descendants of the decedent’s

parents or either of them by representation.

4. If none of the above but there is a surviving grandparent: ½ to each

side (or whoever survives).

5. If not, then the entire estate passes to the decedent’s relatives on

the other side in the same manner as the half.

e. UPC 2-105 : No taker (intestate estate passes to the state)

f. The Meaning of Heirs

i. In the eyes of the law, no living person has heirs

ii. Heirs apparent: the person who would be the heirs of A, when A dies. (the

person who is entitled to someone’s property upon their death)

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1. They only have an expectancy

2. But the expectancy can be destroyed by A’s deed or will.

iii. When a person has a will, an heir is determined by looking at the will

iv. When a person dies intestate, look at the laws of the state to determine

who will be an heir.

II. Share of Surviving Spouse

a. Purpose of Intestacy Statutes:

i. Carry out the probable intent of the average intestate decedent

1. UPC 2-102 : Share of spouses

a. This gives a generous share of the estate to the spouse—

usually at least one-half of the decedent’s estate.

i. The reason everything is given to the spouse and

not to children was because studies showed that in

estate with minor children, that is the usual practice

of those leaving wills.

b. 2-102(1): giving all of the money to the surviving spouse

means that a guardianship of minor children is avoided.

c. 2-102(2): the first $200K plus ¾ of any balance of the

intestate estate, if no descendant of the decedent survives

the decedent, but a parent of the decedent survives the

decedent.

d. 2-102(3): the first $150K, plus ½ of any balance of the

intestate estate, if all of the decedent’s surviving

descendants are also descendants of the surviving spouse

and the surviving spouse has one or more surviving

descendants who are not descendants of the decedent.

e. 2-102(4): the first $100K plus ½ of any balance of the

intestate estate, if one or more of the decedent’s surviving

descendants are not descendants of the surviving spouse.

ii. Family protection: preserving the economic health of the family after a

death. The marriage is an economic partnership.

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b. Comparison of UPC and OH provisions

i. Spouse survives—no descendants and no surviving parents:

1. UPC 2-102(1)(i): all goes to spouse

2. ORC 2105.06(E): all goes to spouse

ii. Spouse survives—descendants survive

1. UPC 2-102(1)(ii): all spouse only if all descendents are also S’s

and only S’s kids

a. UPC 2-102(3): $150K + ½ if descendents are also S’s but S

has others; rest goes to descendents

b. UPC 2-102(4): $100K + ½ if one or more descendent is not

S’s; rest goes to descendents.

2. ORC

a. 2105.06(B): All S only if all descendants are also S’s

b. 2105.06(C): $25K +1/2 if one surviving decedent’s of child

that is not S’s; rest goes to Children.

c. 2105.06(D): $60K + 1/3 goes to the spouse if more than

one child is surviving if the spouse is the natural or

adoptive parent of one but not all of the children; OR $20K

+ 1/3 if the spouse is the natural or adoptive parent of none

of the children; rest goes to children equally.

iii. Spouse; no descendants; surviving parents

1. UPC 2-102(2): $200K goes to spouse + ¾; the rest goes to parents

2. ORC : No provision

iv. No spouse; descendents

1. UPC 2-103(1): all goes to descendents (per capita at each

generation)

2. ORC 2105.06(A): all goes to descendents (per capital at each

generation—2105.12)

v. No spouse; no descendents; parents

1. UPC 2-103(2): all goes to parents

2. ORC 2105.06(F): all goes to parents

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vi. No Spouse, no descendents; no parents; there is a surviving sibling of

decedent; surviving descendents of decedent’s parents

1. UPC 2-103(3): goes to surviving sibling of decedent; or surviving

descendents of decedent’s parents (per capita at each generation)

2. ORC 2105.06(G): goes to surviving sibling of decedent; or

surviving descendents of decedent’s parents (per capita at each

generation)

vii. No spouse, no descendents; no parents; no surviving sibling of decedent;

surviving grandparent of decedent or surviving descendents of

grandparents

1. UPC 2-103(4): ½ to paternal grandparent; ½ to maternal

grandparent—or all to one side if no survivors on the other side

(per capita at each generation)

2. ORC 2105.06(H)(I): ½ paternal grandparent; ½ maternal

grandparent (per capital at each generation—2105.12)

viii. No Spouse, no descendents; no parents; no surviving siblings of decedent;

no grandparent or descendants of grandparents

1. UPC 2-105 : escheats to the state—therefore no laughing heirs (no

great grandparents take)

2. ORC 2105.06(I): if next of kin—to next of kin with no

representation

a. (J): if no next of kin—to stepchildren and their decedents

b. (K): if no stepchildren or descendents—escheat to the state.

c. Forced Share: UPC 2-202(a)

i. If the spouse is left out of the will, she is entitled to a certain amount.

d. Domestic Partners

i. Some statutes (but OH doesn’t) recognize common law marriages—in

those states, they will be treated the same as if there had been a ceremony.

ii. 3 states have enacted legislation granting same-sex couples inheritance

and other spousal-type rights. But Congress and many states have passed

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statutes restricting the extension of spousal rights to same-sex couples

under federal programs.

1. If you want to be sure that the partner gets the estate:

a. Have a will giving the estate to the person

b. ORC § 2105.15 can go to court and sign a document before

the probate judge and have the person become the heir at

law—once you are designated an heir, there is no will

contest.

e. ORC § 2105.10 : A parent abandoning a minor child is barred from intestate

succession when the minor child dies intestate.

f. Simultaneous Death:

i. CL: A person succeeds to the property of a decedent only if the person

survives the decedent for an instant of time.

ii. Uniform Simultaneous Death Act:

1. This originally said that if there is no sufficient evidence of the

order of deaths, the beneficiary is deemed to have predeceased the

donor. Thus, neither inherits from the other.

2. But the act was revised in 1991 after cases like Janus (how to

determine if one died before the other).

a. Janus v. Tarasewicz: USDA at that time provided that there

must be “sufficient evidence” that the person survived the

other person—this leaves it open to a lot of litigation

because it is a low burden to prove.

i. Ex: when there is evidence of a drowning, this is

not enough evidence to show that the other

survived.

b. The amendment requires survivorship by 120 hours and

changed the burden of proof from preponderance of the

evidence to clear and convincing (higher standard)

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3. Simultaneous death problems arise more in intestacy than

elsewhere because well-drafted instruments typically require a

beneficiary to survive the decedent by 30-60 days.

iii. USDA and UPC 2-104: an heir or devisee or life insurance beneficiary

who fails to survive 120 hours is deemed to have predeceased the

decedent.

1. This not only applies to intestate succession but also wills that

don’t provide and life insurance policies.

iv. In both the UPC and USDA, a claimant must establish survivorship by

120 hours by clear and convincing evidence, not merely by some

“sufficient evidence” as provided in the original language.

v. USDA is a default statute—if the will provides otherwise, the will

controls.

vi. “if he survives me”—this raises problems in wills.

vii. ORC § 2105.32 : a person who is not established by clear and convincing

evidence is deemed to have predeceased the other person.

III. Share of Descendants

a. In all jurisdictions, after the spouse’s share is set aside, children and issue of

deceased children take the remainder of the property to the exclusion of everyone

else.

b. Sons-in-law and daughters-in-law are excluded as intestate successors in virtually

all states

c. Three systems of determining representation (whether the division into shares

should begin at the generational level immediately below the decedent or at the

closest generational level with a descendant of the decedent alive)

i. ENGLISH PER STIRPES: divide the property into as many shares as

there are living children of the designated person and deceased children

who have descendants living.

1. The children of each descendant represent their deceased parent

and are moved into their parent’s position beginning at the first

generation below the designated person.

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2. For every living child (or every child that is deceased that has

children of their own), each family line gets one share.

3. This system treats each line of descendants equally

4. OH follows this.

a. ORC § 2105.11 : When a person dies intestate leaving

children and none of the children have died leaving

children, the estate shall descend to the children of such

intestate, living at the time of his death, in equal

proportions.

b. ORC § 2105.12 : When all the descendants of an intestate,

in a direct line of descent, are on an equal degree of

consanguinity to the intestate, the estate shall pass to such

persons in equal parts, however remote from the intestate

such equal and common degree of consanguinity may be.

c. ORC § 2105.13 : If some of the children of an intestate are

living and others are dead, the estate shall descend to the

children who are living and to the lineal descendants of

such children as are dead, so that each child who is living

will inherit the share to which he would have been entitled

if all the children of the intestate were living, and the lineal

descendants of the deceased child will inherit equal parts of

that portion of the estate to which such deceased child

would be entitled if he were living.

ii. MODERN PER STIRPES: one looks first to see whether any children

survived the decedent. If so, the distribution is identical to that under

English per stirpes. But where no children survive the decedent, then the

estate is equally divided at the first generation in which there are living

takers, which is usually the generation of the decedent’s grandchildren.

1. The decedent’s estate is divided into shares at the generational

level nearest to the decedent in which one or more descendants of

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the decedent are alive and provides for representation of any

deceased descendant on that level by his descendants.

2. Look for the first generation in which there is a survivor and divide

equally.

3. This system treats each line beginning at the closest living

generation equally

iii. PER CAPITAL AT EACH GENERATION (UPC 2-106(b)): The initial

division of shares is made at the level where one or more descendants are

alive, but the shares of deceased persons on that level are treated as one

pot and are dropped down and divided equally among the representatives

on the next generational level.

1. This system treats each taker at each generation equally with other

takers at that generation

2. For the testator’s descendants, each generation is treated the

same.

iv. Need to be clear in drafting—“leave estate to my children per stirpes”—

what type is the client referring to.

v. Ex: pg. 76: A has two children, B and C. B predeceases A, leaving a child

D. C predeceases A, leaving two children, E and F. E predecease A,

leaving two children, G and H, who survive A. A dies intestate leaving no

surviving spouse. How is A’s estate distributed under each of the statutes?

1. English per stirpes:

a. D: ½

b. F: ¼

c. G: 1/8

d. H: 1/8

2. Modern per stirpes: (Ohio)

a. D: 1/3

b. F: 1/3

c. G: 1/6

d. H: 1/6

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3. UPC/Per Capita at Each Generation

a. D: 1/3

b. F: 1/3

c. G: 1/6

d. H: 1/6

d. Negative Disinheritance

i. An express statement in a parent’s will disinheriting a child

ii. Few parents actually do this; but children are effectively disinherited when

their parents leave the estate to the surviving spouse rather than children.

iii. UPC 2-101(b): says that a will disinheriting someone will be enforced (but

no state has followed this)

iv. If you die intestate, you cannot disinherit children.

IV. Shares of Ancestors and Collaterals

a. When the intestate decedent is survived by a descendant, the decedent’s ancestors

and collaterals do not take. When there is no descendant, after deducting the

spouse’s share, in nearly half the states the rest of the intestate’s property is

usually distributed to the decedent’s parents, as under the UPC.

b. *If there is no spouse or parent, the decedent’s heirs will become more remote

ancestors or collateral kindred.

i. Collateral kindred: all persons who are related by blood to the decedent

but who are not descendants or ancestors

1. First line collateral: through your parents

2. Second collateral line: through the grandparents

c. If the decedent is not survived by a spouse, descendant or parent, in all

jurisdictions intestate property passes to brothers and sisters and their

descendants.

d. If there are no first-line collaterals (descendants of the decedent’s parents), the

states differ as to who is next in the line of succession.

i. Parentelic succession: the intestate estate passes to grandparents and their

descendants.

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ii. Degree of relationship: the intestate estate passes to the closest of kin,

counting degrees of kinship.

iii. Mass law: follows a degree of relationship system but provides for a

paretelic preference to break a tie between kin of equal degree.

e. All states recognize that if you die without a spouse or descendants—goes to the

first collateral line.

f. OH and UPC both recognize the second collateral line

i. UPC 2-103 : does not permit inheritance by intestate succession beyond

grandparents and their descendants.

ii. ORC § 2105.03 : Determination of next of kind in intestate succession is

determined by the degrees of relationship computed by the rules of civil

law.

g. Ex: Problem 1, pg. 96: The decedent is survived by his mother, his sister and two

nephews (children of a deceased brother). How is the decedent’s estate

distributed?

i. UPC 2-103 : The mother receives all of the estate because she is still living

ii. OH: mother receives all of the estate (every statute recognizes the first

collateral line)

h. Ex: Problem 2, pg. 96: The decedent is survived by one first cousin on his

mother’s side and by two first cousins on his father’s side. How is it distributed?

i. UPC 2-103:

1. M’s cousin: ½

2. D’s 2 cousins: ¼ to each

ii. ORC § 2105.06

1. Same as UPC (every state recognizes the first collateral line)

i. Ex: Problem 3, pg. 96: The decedent is survived by A, the first cousin of he

decedent’s mother, and by B, the granddaughter of the decedent’s first cousin.

How is it distributed?

i. UPC 2-103:

1. First cousin of decedent’s mother—third collateral line (chart, pg.

79)

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2. Granddaughter of the decedent’s first cousin—second collateral

line

3. Granddaughter gets everything because she is closer

ii. OH 2015.06: Same as UPC

iii. Massachusetts law looks to the degrees of separation

1. First cousin of the mother is closer in degrees, so that person gets

the estate.

j. If the intestate leaves no survivors entitled to take under the intestacy statute, the

intestate’s property escheats to the state.

k. Half-Bloods

i. UPC 2-107 : a relative of a half-blood is treated the same as a relative of

the whole-blood

1. OH follows this as well.

ii. In some states, a half-blood is given a half-share

iii. In other states, a half-blood takes only where there are no whole-blood

relatives of the same degree.

Transfers to Children

I. Meaning of Children

a. Adopted Children

i. Hall v. Vallandingham: court says that the kids have no constitutional

right to receive property (only the right to give away is constitutional)

1. The court says that allowing the children to adopt from their

adopted parents and real parents would give them a superior status

a. There is no dual inheritance.

2. This case would be different under the UPC.

3. OH has no statute like the statute in this case—OH would allow

dual inheritance (still allowed to inherit from the natural parent).

a. Practical problem: adoption records are sealed, so you can’t

adopt from natural parents.

ii. UPC 2-113 : Individuals Related to Decedent through two lines

1. Only entitled to a single share (whichever share is larger)

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iii. UPC 2-114 : Parent and Child Relationship

1. Subsection (2) allows a child who is adopted by a step-parent to

still inherit from their natural parents.

iv. In a stepparent adoption, the children can inherit from their natural

relatives, but the natural relatives cannot inherit from them.

v. The overwhelming majority of inheritance statutes draw no distinction

between the adoption of a minor and the adoption of an adult.

1. If a person wishes to leave property to a friend, under some

circumstances it might be wise to adopt the friend as a child

vi. In most states, an adult person, married or unmarried, may adopt any other

person, minor or adult, but the adoption of a spouse or lover may not be

allowed.

1. Why someone would adopt an adult:

a. Avoid a will contest

b. Graph someone into the family tree

vii. If a child adopts his spouse just so that person can be included in a will, it

is not allowed. The adoption of an adult for the purpose of bringing that

person under the provisions of a pre-existing testamentary instrument

when he clearly was not intended to be so covered should not be permitted

(Minary v. Citizens Fidelity Bank & Trust)

1. In this case, the court will look at the intent of the testator v. the

language of the statute.

a. Courts generally try to carry out the testator’s intent.

2. If the court had wanted to follow the statute, they could have

created a constructive trust (to ensure that she was not unjustly

enriched).

viii. Equitable adoption: this is an informal type of adoption that can also

determine the distribution of property in intestacy (O’Neal v. Wilkes)

1. Equitable adoption is recognized by about half of the states (OH is

not one of them)

2. Two theories:

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a. Contractual model: someone with authority contracts with

someone else to adopt the child

b. Equitable argument: if you care for the person and love

them and hold them as your child—it is an equitable

adoption.

3. Equitable adoption may be recognized in a state where H and W

take a baby into their home and raise A as their child but do not

formally adopt A.

4. Equitable adoptions permit an equitable adopted child to inherit

from the foster parents. But the foster parents cannot inherit from

the child.

5. If you want to ensure that there will be a recognized adoption, go

through the formal proceedings.

b. Posthumous Children

i. Woodward v. Commissioner of Social Security

1. Balancing test to consider whether the children resulting from a

pregnancy by inception (sperm bank) after death, gives the

children inheritance rights of natural children under MASS law.

a. Three factors:

i. Best interest of Child – legislature said all children

should be treated the same regardless birth.

ii. State’s interest in orderly administration

iii. Deceased Reproductive Rights – Parent must have

consented to reproduction, burden on the surviving

parent.

ii. This occurs when the child is conceived before the death, but is born after

her father’s death

1. Law: it is to a child’s advantage to be treated as in being from the

time of conception rather than from the time of birth, and the child

will so be treated if born alive.

iii. Usually the child has to be born within 280 days of the father’s death.

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iv. UPC § 2-108 : An individual in gestation at a particular time is treated as

living at that time if the individual lives 120 hours or more after birth.

v. ORC 2105.14 : Descendants of an intestate begotten before death, but born

thereafter, in all cases will inherit as if born in the lifetime of the intestate

and surviving him; but in no other case can a person inherit unless living

at the time of death of the intestate.

1. ** “Begotten” means conception in Ohio. Thus, must have been

conceived before death.

vi. Rebuttable presumption

1. If the child claims that the conception dated more than 280 days

before birth, the burden of proof is on the child

vii. Uniform Parentage Act: raises the amount of time to 300 days.

c. Posthumous Children & “Vitro” fertilization

i. Modern rule (NY) & Restatement – where vitro fertilization occurs after

the death of a beneficiary of a trust, if funds are intended to pass to

decedent’s “issue” and “descendants” the court will look at intent of the

trust document itself, to determine if the children are conceived and born

after beneficiary dies. Thus, child will be part of a class even if conceived

and born after beneficiary/grantor’s death. (In re Martin B)

ii. UPC – A posthumously conceived child of A is included in a class gift in

a will or trust by T to the “children,” “issue,” “descendants,” or “heirs” of

A if (1) A consented to posthumous conception in a signed writing or A’s

consent is otherwise proved by clear and convincing evidence; and (2) the

child is living on the distribution date or is in utero not later than 36

months after or is born not later than 45 months after the distribution date.

d. Nonmarital Children

i. Modern—all jurisdictions permit inheritance from the mother, but the

rules respecting inheritance from the father vary.

ii. Most states permit paternity to be established by:

1. evidence of the subsequent marriage of the parents

2. acknowledgement by the father

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3. an adjudication during the life of the father

4. clear and convincing proof after the death

iii. Uniform Parentage Act: the parent-child relationship extends to every

parent and child, regardless of the marital status of the parents. When not

married, a parent-child relationship is assumed to exist, if:

1. While the child is less than 2, the father lives in the same

household and openly holds the child out as his natural child

2. The father acknowledges his paternity in a writing that is filed with

an appropriate court

iv. CL: if a man and woman are living together and have a child, it is held

that the child is that man’s.

1. This is rebuttable only by clear and convincing evidence.

v. ORC § 2105.17 : Children born out of wedlock shall be capable of

inheriting or transmitting inheritance from and to their mother; and from

and to those from whom she may inherit, or to whom she may transmit

inheritance, as if born in lawful wedlock.

vi. If father wants to claim that he is the father—can show this by(OH):

1. Marrying the mother

2. Adopting the child

3. Acknowledging the paternity (supporting the child)

4. Designating the child as an heir at law.

5. Putting them in will

vii. ORC § 2105.25 : A file can declare the alleged fatherhood of an adult

child. The father, mother and child must go to the court together.

viii. ORC § 2105.26 : The probate court will determine that the man is the

father when requested under the above section if:

1. the order was freely and voluntarily requested

2. no person is designated as the father on the birth certificate of the

adult child

3. genetic test results show that the man is the father of the adult

child.

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4. It is in the best interests of the man and adult child that the order be

issued.

ix. Reproductive Technology and New Forms of Parentage

1. Woodward v. Commissioner of Social Security

a. Children were conceived 2 years after the father died.

b. OH has a bright-line test: child has to be conceived before

the father died in order to get estate.

c. Have to determine if the father had consented to supporting

these children.

II. Surrogates

a. Surrogate is simply the surrogate, not the parent. Based on contract law.

III. Assisted Reproduction and Same-Sex Couples

a. UPC 2-120 – child conceived by assisted reproduction other than gestational

surrogacy is in a parent-child relationship (and thus entitled to inherit by, from, or

through) the child’s birth mother. There can also be a parent-child relationship

with another person if the other person either consented in writing to assisted

reproduction by the birth mother with the intent to be the other parent of the child

or functioned as a parent of the child w/in two years of the child’s birth.

IV. Advancements

a. Applies only to intestate estates

b. CL: any gift given to a child by a parent was presumed to be an advancement and

that amount would be taken out of the estate.

i. Ex: 4 children—20K given to child 1 during life; 80K left at death.

1. AT death, 100K divided among the children—so child 1 doesn’t

get any money.

ii. Gifts are not advancements (like paying for a wedding, paying for college,

supporting a disabled child)

c. To avoid the application of this doctrine, the child has the burden of establishing

that the lifetime transfer was intended as an absolute gift that was not to be

counted against the child’s share of the estate.

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d. Many states have reversed the CL presumption of advancement because of the

problems of proof of the donor’s intent.

i. In those states, a lifetime gift is presumed not to be an advancement unless

it is shown to have been intended as such.

ii. Usually there has to be a writing to show that it was an advancement.

e. UPC 2-109 : Advancements

i. (c): changes the common law if the recipient does not survive the

decedent. In that case, the advancement is not taken into account in

determining the share of the recipient’s issue.

ii. UPC pretty much eliminates the doctrine of advancements from the law of

intestate succession because it requires the formality of a WRITING to

evidence an advancement.

f. ORC § 2105.051 : Advancements-time of valuation

i. When a person dies, property that he gave during his lifetime to an heir

shall be treated as an advancement against the heir’s share of the estate

only if declared in a contemporaneous writing by the decedent, or

acknowledged in writing by the heir to be an advancement.

V. Guardianship and Conservatorship of Minors

a. A minor has neither the legal capacity to manage property nor the power to make

most choices about how and where to live—therefore people with young children

need to consider the possibility of their children being orphaned.

b. Guardian of the person:

i. This person has the responsibility of the minor child’s custody and care

(makes the personal decisions of the child)

ii. As long as one parent of the child is living and competent, that parent is

the natural guardian of the child’s person.

iii. If both parents die without a will and the child is a minor, the court will

appoint a guardian of the person from among the nearest relatives.

iv. This terminates once the child enters the age of majority.

c. Property Management Options

i. A guardian of the person has no authority to deal with the child’s property

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ii. There are many types available:

1. Guardianship of the Property

a. They make all the decisions with finances—everything has

to be approved by the court.

b. This person has the duty of preserving the specific property

left to the minor and delivering it to the ward at age 18.

c. They need the court’s approval to do anything (such as

change investments)

d. Strict court supervision is burdensome and time-consuming

2. Conservatorship

a. This person is given title as trustee to the protected person’s

property, as well as investment powers similar to those of

trustees.

b. More flexibility than a guardianship of the property

c. Ends at age of majority.

3. Custodianship

a. Person who is given property to hold for the benefit of a

minor under either the Uniform Transfers to Minors Act or

the Uniform Gifts to Minors Act (if you leave a gift to a

child or grandchild, need to have a guardian for the child).

i. Some form of these has been enacted in every state

—property may be transferred to a person as

custodian for the benefit of the minor.

b. He has the right to manage property and to reinvest it.

c. He is a fiduciary and is subject to the standard of care that

would be observed by a prudent person dealing with

property of another.

d. There would only be a court accounting if the custodian

uses the money for his own benefits.

e. Distribution at age 21.

f. Very easy to create—not good for big gifts.

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4. Trusts

a. This is the most flexible

b. A trust can be tailored to family circumstances and the

testator’s particular desires.

c. Can postpone when the children will receive the money.

d. Usually drafted in wills for children who are fully grown

for a minor beneficiary.

iii. A guardianship is required of all minors

1. The terminology in a will matters

2. Even moderate amounts of money require a guardianship

Bars to Succession

I. Homicide

a. A slayer cannot benefit from his intentional, felonious act.

i. Intent is the key

b. If someone who was entitled to a trust kills a person: a CONSTRUCTIVE

TRUST will be created (the slayer has legal title but equity holds him in a

constructive trust).

c. Almost all states have statutes dealing with the rights of a killer in the estate of a

victim

i. UPC 2-803 : bars the killer from succeeding to nonprobate as well as

probate property.

1. The killer is treated as having disclaimed the property

2. (g) provides that a criminal conviction of a felonious and

intentional killing is conclusive that the convicted individual is the

decedent’s killer. Acquittal is not dispositive of the acquitted

individual’s status as slayer.

ii. ORC § 2105.19 : if there is murder or voluntary MS, the wrongdoer is

treated as though he predeceased the dead.

d. Since the killer can’t take, the usual view is that the killer is treated as having

predeceased the victim.

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e. CL: if you are never convicted, can still go to civil court to try to avoid the slayer

from being entitled to the benefits of the wrongdoer.

II. Disclaimer

a. This is a very important part of estate planning

b. Definition: when an heir or devisee declines to take the property by filing the

appropriate writing with the probate court. The person is treated as though he

predeceased and the property passes to the next in line.

c. An individual may disclaim an interest devolving her, the effect of which is to

treat the disclaiming individual as if he predeceased effective the date of the

instrument granting the interest.

d. The most common motivations are to reduce taxes or to keep property from

creditors. Other reasons:

i. Cure defective estate planning

ii. Make gifts to children (ex: parents leave you money, you don’t need it—

you disclaim, and it goes to your children—passes without the tax

consequence)

e. Individual creditors cannot reach disclaimed assets, but government can.

f. A disclaim cannot be used for the sole purpose to qualify for Medicaid (Troy v.

Heart)

g. CL: an intestate successor cannot prevent title from passing to him or her. If the

heir does refuse to accept the inheritance, the CL treats the renunciation as if title

had passed to the heir and then from the heir to the next intestate successor.

h. UPC § 2-801: Disclaimer of Property Interests

i. A person to whom an interest devolves by whatever means may disclaim it

in whole or in party by delivering or filing a written disclaimer.

i. Uniform Disclaimer of Transfers by Will, Intestacy or Appointment Act

i. A person may disclaim by delivering a written disclaimer.

ii. This is treated as if the person predeceased the decedent.

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WILLS: CAPACITY AND CONTESTS

Mental Capacity

I. The Test of Mental Capacity

a. There is not a lot of statutory authority

i. UPC 2-501: An individual 10 or more years of age who is of sound mind

may make a will.

ii. ORC 2107.02 : A person of the age of 18 years, or over, of sound mind and

memory, and not under restraint, may make a will.

b. Requirements to make a will:

i. Adult (18+)

ii. Must be capable of knowing and understanding in a general way

iii. The nature and extent of his property,

iv. The nature objects of his bounty and

v. The disposition that he is making of that property

vi. And capable of relating these elements to one another and forming an

orderly desire regarding the disposition of the property

c. Legal presumption is always in favor of sanity, especially after attestation by

subscribing witnesses (In re Estate of Wright). It is the duty of the subscribing

witnesses to be satisfied of the testator’s sanity before they subscribe the

instrument.

i. 4 elements (low threshold):

1. nature of the act he is performing

2. understanding his assets

3. understand who has natural claims to his bounty

4. appreciate relationship of his family.

d. It is unethical for lawyers to draft a will for an incompetent person. But the

lawyer can rely on her own judgment regarding the capacity.

e. Capacity to make a will is governed by a different legal test and requires less

mental ability than to manage one’s investments, to make a K, or to make a gift.

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So even if a person has been put under a conservator, that doesn’t mean they have

the incapacity to make a will.

f. Other factors that may be considered to determine if a person is capable: ability to

read/write; feebleness.

g. Why we require mental capacity:

i. A will should give effect only if it represents the testator’s true desires

ii. The mental capacity requirement is that a mentally incompetent person is

not defined as a person

iii. The law requires mental capacity to protect the decedent’s family.

II. Insane Delusion

a. Delusion: a false conception of reality

i. An insane delusion is one to which the testator adheres against all

evidence and reason to the contrary.

b. This is a legal, not mental, capacity

c. A person may have sufficient mental capacity generally to execute a will but may

be suffering from an insane delusion so as to cause a particular provision in a will

—or even the entire will—to fail for lack of testamentary capacity.

i. Only the part of the will caused by the insane delusion fails (because the

person has the general capacity to make a will).

d. MAJORITY TEST: a delusion is insane even if there is some factual basis for it if

a rational person in the testator’s situation could not have drawn the conclusion

reached by the testator.

e. In re Strittmater—court found that the woman was insane because she only left

her money to the women’s party because she hated men.

i. Today, this case would not have come out the same—there has been more

acceptance of mental disorders and a person will not be considered insane

if she has one (this case had more to do with the mores of the time)

f. Elements to prove (In re Honigman)

i. That there was an insane delusion

ii. How this affects the determination of the assets (insane delusion causes an

unnatural disposition).

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g. In re Honingman

i. Majority (what most states follow): there can be minimal showing of

cause that will then shift the burden back to the proponents of the will to

provide a basis for the alleged delusion.

ii. Dissent: there has to be a showing of cause by the people contesting the

will.

h. Many courts impose upon testators a duty to provide for those whom the court

views as having a superior moral claim to the testator’s assets. Wills that fail to

provide for those individuals typically are upheld only if the will’s proponent can

convince the fact finder that the testator’s deviation from normative values is

morally justifiable.

i. An insane delusion is different than a mistake

i. A mistake will not be reformed by the court.

j. Statutes in 3 states (including OH) permit probate of a will during the testator’s

lifeLIVING PROBATE

i. These authorize a person to institute during life an adversary proceeding to

declare the validity of a will and the testamentary capacity and freedom

from undue influence of the person executing the will

ii. ORC 2107.081 through 2107.085 : testator can initiate the process of

probate before he dies.

1. He has to petition the court

2. Notify all the people listed in the will; heirs at law

3. Court makes a finding whether the will is duly executed; whether

there was capacity; whether it is free or undue influence or insane

delusion.

iii. As long as the testator doesn’t change his will, after he dies, the will

cannot be contested.

1. But if the will is later changed, still need to determine if it was

duly executed; capacity; free from outside influence.

iv. Advantage: anyone who contests the will can be written out of it (if you

revise the will after it is probated while you are alive)

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v. Disadvantage: doesn’t help family relationships to do this ahead of time;

costly.

Undue Influence

I. Estate of Lakatosh—elements of undue influence:

a. Confidential relationship

b. The person enjoying such relationship received the bulk of the estate

c. The decedent’s intellect was weakened

II. Burden of proof (used with the above elements)

a. The proponent of a will has the burden of proving its validity, but this is easily

done in most cases by showing due execution (clear and convincing evidence).

The person contesting the will then has the burden of proving undue influence

directly or by proving facts that would give rise to a presumption of undue

influence (clear and convincing evidence).

III. The minority of states follow the Restatement which lists factors to determine if there

has been undue influence:

a. The extent to which the donor was in a weakened condition, physically, mentally

or both, and therefore susceptible to undue influence

b. The extent to which the alleged wrongdoer participated in the preparation or

procurement of the will or will substitute

c. Whether the donor received independent advice from an attorney of from other

competent and disinterested advisors in preparing the will or will substitute

d. Whether the will or will substitute was prepared in secrecy or in haste

e. Whether the donor’s attitude toward others had changed by reason of his or her

relationship with the alleged wrongdoer

f. Whether there is a decided discrepancy between a new and previous wills or will

substitutes of the donor

g. Whether there was a continuity of purpose running through former wills or will

substitutes indicating a settled intent in the disposition or his property

h. Whether the disposition of the property is such that a reasonable person would

regard it as unnatural, unjust or unfair.

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IV. Lipper v. Weslow

a. This case uses DIRECT EVIDENCE that the testator is susceptible to undue

influence

b. There are two ways to establish undue influence:

i. Direct evidence: contestants of the will have to provide evidence that the

substituted his mind and will for that of the testatrix.

1. There are 4 elements:

a. The testator was susceptible to undue influence

b. That the influencer had the disposition or motive to

exercise undue influence

c. The influencer had the opportunity to exercise undue

influence

d. The disposition is the result of the influence

ii. Shifting presumption (the burden of proof discussed above)

1. Confidential relationship

2. Unnatural disposition

3. Or Restatement test (suspicious circumstances)

V. No contest clause in a will

a. These clauses provide that a beneficiary who contests the will shall take nothing,

or a token amount, in lieu of the provisions made for the beneficiary in the will.

b. This discourages unmeritorious litigation and family quarrels.

c. UPC 2-517 : probable cause rule

i. A provision in a will purporting to penalize an interested person for

contesting the will or instituting other proceedings related to the estate is

unenforceable if probable cause exists for instituting proceedings.

d. Minority of courts enforce no-contest clauses unless the contestant alleges forgery

or subsequent revocation by a later will.

e. If you have a no-contest clause, make sure you leave something to the person.

VI. Bequests to Attorneys

a. Many courts hold that a presumption of undue influence arises when an attorney-

drafter receives a legacy, except when the attorney is related to the testator.

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b. Model Rules: “A lawyer shall not prepare an instrument giving the lawyer or a

person related to the lawyer as parent, child, sibling, or spouse any substantial gift

from a client, including a testamentary gift, except where the client is related to

the donee.”

c. Have to be careful of a conflict of interest—attorney cannot prepare document

giving himself a gift unless he is a relative.

VII. In re Will of Moses

a. This court shifts the burden—there was a confidential relationship; and there is an

unnatural disposition because all of the assets go to him.

b. This case dealt with the mores of the time.

c. Sexual relations cast a suspicion of deceit and cautions the court to examine the

evidence with unusual care.

d. Courts rule diffierently when it is a younger woman and an older man

VIII. In re Kaufmann’s Will

a. Once again this is a case that deals with the mores of the time (gay relationships

were not accepted).

IX. Attorney’s Ethical Obligations

a. It is alright for an attorney to witness a will—but not a good idea because if

something goes wrong it falls on the attorney who witnessed the will.

b. H and W come into office—have a conflict if they want to make trusts.

i. If one comes into your office alone, you have the duty to diclose it to the

husband.

Fraud

I. Definition

a. This occurs when the testator is deceived by a misrepresentation and does that

which the testator would not have done had the misrepresentation not been made.

b. The misrepresentation must be made with both the intent to deceive the testator

and the purpose of influencing the testamentary disposition.

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c. Provision in will procured by fraud is invalid, the remaining portions of the will

stand unless the fraud permeates the entire will or the portions invalidated by

fraud are inseparable from the rest of the will.

d. Elements—contestator must show that testator was deceived in the:

i. Contents of the wills (fraud in the execution) OR

ii. The circumstances surrounding the making of the will (fraud in the

inducement) OR

iii. Facts material to a disposition.

e. Fraud in the inducement: occurs when a person misrepresents facts, thereby

causing the testator to execute a will, to include particular provisions in the

wrongdoer’s favor. (misrepresenting facts)

f. Fraud in the Execution: occurs when a person misrepresents the character or

contents of the instrument signed by the testator, which does not in fact carry out

the testator’s intent. (misrepresenting character of the instrument)

g. Puckett v. Krida

i. Difference between undue influence and fraud:

1. Fraud tries to conceal the acts and tell untrue facts or

circumstances

2. Undue influence:

a. Two tests

3. Fraud

a. Intentionally deceiving someone through

MISREPRESENTATION.

Duress

I. Definition: a donative transfer is procured by threats or wrongful acts that coerce the

donor into making transfer

a. There must be COERCION. It is only when the will of the person who becomes a

testator is coerced into doing that which she does not desire to do.

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b. A donative transfer is procured by duress if the wrongdoer threatened to perform

or did perform a wrongful act that coerced the donor into making a donative

transfer that the donor would not otherwise have made.

c. Don’t see these cases very often

II. Constructive trust

a. Definition: this is an equitable remedy (not a trust) to prevent unjust enrichment.

i. When property has been acquired in such circumstances that the holder of

the legal title may not be in good conscience retain the beneficial interest,

equity converts him into a trustee.”

b. May be extended in these situations (Latham v. Father Divine)

i. Will executed under duress passes under the will; however, equity, in

order to defeat fraud, raises a trust in favor of those intended to benefit by

the testator, and compels the legatee, as trustee to turn over the gift.

Tortious Interference with Expectancy

I. Definition

a. Includes intentional interference with an expected inheritance or gift as a valid

cause of action.

b. must prove that the interference involved conduct tortious in itself, such as

fraud, duress, or undue influence.

c. Most prove the following:

i. the existence of an expectancy

ii. a reasonable certainty that the expectancy would have been realized bu for

the interference.

iii. Intentional interference with that expectancy

iv. Tortious conduct involved with the interference

v. Damages

d. Because persons do not have a “right to inherit” this is a derivative of a contract

remedy, an “expectancy.”

e. Schilling v. Herrera

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i. Although the general rule is that all remedies must be exhausted in probate

court, in this instance, Plaintiff was fraudulently misled when D did not

inform him that his sister had died and Plaintiff probated the will. Thus,

the tortous conduct was unde influence and fraud, and because fraud was

not discovered until after probate, Pl could bring this action.

II. Marshall v. Marshall (Ann Nicole Smith)

a. A person might file this instead of a will contest because you can get punitive

damages.

b. Only can get this in a minority of states.

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WILLS: FORMALITIES AND FORMS

Execution of Wills

I. Attested Wills

a. The Function of Formalities

i. There are four functions:

1. Ritual function: the courts need to be convinced that the statements

of the transferor were deliberately intended to effectuate a transfer.

2. Evidentiary function: the requirements of transfer may increase the

reliability of the proof presented to the court.

3. Protective function: some of the requirements of the statutes of

wills have the stated prophylactic purpose of safeguarding the

testator, at the time of the execution of the will, against undue

influence or other forms of imposition

4. Channeling function: it is easier to determine a person’s wishes at

death if they are channeled into a will with standardized

formalities.

ii. Most basic formalities for an attested will:

1. Writing

2. Signature by the testator

3. Attestation by witnesses

iii. Statute of Frauds:

1. Writing

2. Signature

3. Attestation and subscription (the will must be signed at the end of

the will) by three witnesses

iv. Wills Act:

1. Writing

2. Subscription

3. Attestation and signature by two witnesses

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a. UPC § 2-505 : An individual generally competent to be a

witness may act as a witness to a will.

v. UPC 2-502 : this is one of the broadest and most general will statutes

1. Writing

2. Signature

3. Attestation and signature by two witnesses, signed within a

reasonable time after he witnessed either the signing of the will or

the testator’s acknowledgement of his signature.

a. No contemporaneous signing requirement

vi. ORC § 2107.01 : a will includes codicils to wills admitted to probate, lost

or destroyed wills, but it does not include inter vivos trusts or other

instruments that have not been admitted to probate.

vii. ORC 2107.03

1. Ohio requires two witnesses; more restrictive than UPC.

2. Testator either has to sign in their presence or acknowledge in their

presence; witnesses also have to sign in the presence of each other

or acknowledge

3. Ohio allows oral wills (this is unique)ORC § 2107.60

a. Allowed in last sickness; if it is reduced to writing within

10 days by two individuals who heard the testator say that

it was to be his will

b. Can’t dispose of real estate in an oral will.

b. The Formalities in Action

i. UPC 2-502 : Execution; Witnessed Wills; holographic wills

1. This sets form the requirements of a will

ii. Courts are usually very strict in making sure that the formalities are

followed

iii. The traditional (and MAJORITY) rule is that courts will not reform wills,

and that the requirements of the wills statutes must be strictly complied

with)

1. In re Groffman

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a. The will statute required that the witnesses had to be in the

same room at the same time—because it wasn’t strictly

complied with, the will has to be thrown out.

b. If the UPC was applied, it would have been valid because it

was signed by the witnesses within a reasonable amount of

time

c. If ORC was applied, statute that requires the two witnesses

would have been ok if they heard the testator acknowledge

his signature.

2. Stevens v. Casdorph

a. Mere intent is not enough—need to meet the formalities as

well

b. There is a small exception: if a witness acknowledges his

signature on a will in the physical presence of the other

subscriving witness and the testator, then the will is

property executed.

c. Meaning of presence:

i. Line of Sight Test: the requirement that the witness

sign in the presence of the testator is only satisfied

if the testator is capable of seeing the witnesses in

the act of signing. Testator does not actually have

to see the witness sign but must be able to see them

were the testator to look. (minority)

ii. Conscious Presence Test: the witness is in the

presence of the testator if the testator, through sight,

hearing or general consciousness of events,

comprehends that the witness is in the act of

signing. (majority)

iii. UPC 2-502 : dispenses with the requirement that the

witnesses sign in the testator’s presence.

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iv. In almost every state, if the individual can’t sign his whole signature—as

long as the individual makes the mark himself, it is sufficient for a

signature

1. In OH, if you tell your child to sign your name, it is valid. But

they cannot sign your name for you without your consent.

2. Can be denied probate if the child helps the testator sign and the

testator did not ask for assistance.

a. Under the UPC, the dispensing power will take care of this

if there is intent.

v. Digitalized signatures are not effective

1. Rubber stamps are not effective.

vi. Ex: if witnesses sign after the testator. And then the testator adds

something at the end…

1. If the handwritten line was added after the testator signed the will,

the will would be admitted to probate, and the line would be

ineffective as a subsequent unexecuted codicil.

2. If the will hadn’t been signed at the end:

a. The whole will is ineffective (if it was a dispositive

provision—changing all the terms of the will)

b. If it was a non-dispositive provision, the writing at the

bottom gets thrown out but the rest is valid.

vii. Attestation clause: recites that the will was duly executed

1. It is malpractice not to include one.

2. This establishes prima facie evidence that the will was duly

executed.

viii. “Writing” and Video or electronic Wills

1. Restatement (3rd) – Will need not be on paper, all that is required is

a reasonably permanent record of the markings that make up a will.

a. Thus, electronic will may be proper, as substantially

compliant.

ix. UPC 2-505(b) : Purging statutes

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1. An interested witness does not forfeit a devise under the will.

2. Reason for this is that a person getting a benefit under the will can

still be a good witness.

x. Purging statutes of many states purge the witness only of the benefit the

witness receives that exceeds the benefit the witness would have received

if the will had not been executed.

1. Definition of purging statutes: purges the part of the will that went

to the interested party.

2. If statute provides that cannot have two witnesses that benefit, if

one benefits (w/o intestate share) but the other actually would

receive more intestate (has option) the former’s will not be void

because the latter did not actually benefit. (Estate of Morea)

xi. ORC 2107.15 : purging statute

1. “If a devise or bequest is made to a person who is one of only two

witnesses to a will, the devise is void. The witness shall then be

competent to testify to the execution of the will, as if the devise

had not been made. If the witness would have been entitled to a

share of the testator’s estate in case the will was not established, he

takes so much of that share that does not exceed the bequest to

him.”

2. If there are two witnesses: if you are a family member and a

witness—would not lose bequest as a witness if your share did not

exceed what you would have gotten intestate

a. Supernumerary witness - If there are three witnesses and

the third one is interested, it wouldn’t make a difference

(you can pick and choose who are the witnesses)

xii. You NEVER want to have an interested witness—it makes it easier in the

long run.

c. Recommended Method of Executing a Will:

i. Have the following parts:

1. Three witnesses

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2. Notary public

3. Attestation clause: statement by a witness saying that they signed

the will in the presence of the testator and other witnesses.

4. Self-proving affidavit

ii. UPC § 2-515: allows a will to be deposited by the testator with any court

for safekeeping. The will must be kept sealed.

iii. UPC 2-506 : most states have statutes recognizing as valid a will executed

with the formalities required by the state where the testator was domiciled

at death; the state where the will was executed; or the state where the

testator was domiciled when the will was executed.

iv. UPC 2-504 : two types of self-proving affidavits

1. Combined attestation clause and self-proving affidavit: the testator

and witnesses sign their names only once

2. A self-proving affidavit to be affixed to a will already signed and

attested, an affidavit that must be signed by the testator and

witnesses in front of a notary public after the testator has signed

the will and the witnesses have signed the attestation clause.

d. If a will is lost, most states presume it to be revoked

i. This is not an easy presumption to overcome.

ii. ORC 2107.26 : lost, spoiled or destroyed wills

1. The will can be admitted to probate if:

a. The will was executed with the formalities

b. The person can show by clear and convincing evidence the

contents of the will

e. In re Pavlinko’s Estate: court held that when the H and W signed the other

person’s will, this was not valid—need to follow the formalities requirements.

i. This court followed strict construction

f. In re Snide: When H and W signed the other’s will, this was valid because was

intended was very clear.

i. A minor exception was allowed in this case because they were mutual,

reciprocal wills.

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ii. They also met clear and convincing evidence.

iii. A guardian will always contest a will because they have a fiduciary duty

for the child until they become of legal age.

g. Curative Doctrines

i. The traditional rule is that the formalities required by the Wills Act must

be complied with strictly; and almost any mistake in execution will

invalidate a will.

1. A minority or statutes and courts adopt this.

ii. UPC 2-503 : departs form the tradition by giving a court the power to

dispense with formalities if there is clear and convincing evidence that

the decedent intended the document to be his will.

iii. In re Will of Ranney: the will may be admitted to probate if it substantially

complies with these requirements.

1. SUBSTANTIAL COMPLIANCE: functional rule designed to cure

the inequity caused by the harsh and relentless formalism of the

law of wills.

a. Definition: clear and convincing evidence that the will

substantially complies with statutory requirements

i. Does the noncomplying document express the

decedent’s testamentary intent?

ii. Does the form sufficiently approximate Wills Act

formality to enable the court to conclude that it

serves the purposes of the Wills Act?

b. When formal defects occur, proponents should prove by

clear and convincing evidence that the will substantially

complies with statutory requirements.

c. Courts are more likely to apply this doctrine because it

carries out the intent of the legislature.

iv. In re Estate of Hall: DISPENSING POWER

1. Provides for the probate of a document that was not properly

executed if the court is satisfied that there can be no reasonable

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doubt that the deceased intended the document to constitute his

will.

2. UPC 2-503

a. Courts are directed to look not at whether the purposes of

formalities were served, but rather that decedent intended

the document or writing to constitute the decedent’s will.

b. Clear and convincing evidence that testator meant

document to be a will.

v. Difference between substantial compliance and dispensing power:

1. Substantial compliance: court doctrine that allows a will to be

admitted to probate when the purposes of the formalities were

served despite a defective execution

2. Dispensing power: provides for the probate of a document that was

not properly executed if the court is satisfied that there can be no

reasonable doubt that the deceased intended the document to

satisfy his will.

II. Holographic Wills

a. It is a will written by the testator’s hand and signed by the testator; attesting

witnesses are not required

i. It must be in the testator’s handwriting

b. Permitted in over half of the states (minority rule)

i. OH not included.

c. Holographic wills are often written in extremis—when the testator is close to

death

d. It may be signed at the end, beginning or anywhere in the will, but if not signed at

the end, there may be a doubt about whether the decedent intended his name to be

a signature

e. Kimmel’s Estate: in order to be a valid holographic will, there has to be an

INTENT to be a valid will.

i. Conditional wills: says what you want to happen if something happens to

you.

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1. Generally, the condition is not enforceable—courts ignore the

condition.

2. The will is enforced if nothing happens at that time, but something

happens later.

f. How to determine how much of the holographic will must be signed in the

testator’s handwriting:

i. First generation statutes: “entirely, written, signed and dated”

1. Required holographs be entirely written, signed and dated by the

testator

ii. Second generation statutes: “material provisions”

1. The signature and material provisions of the holograph had to be in

handwriting

iii. Third generation: “material portions” and extrinsic evidence is allowed

1. UPC 2-502(b)

2. This allows the probate of a holographic will even if immaterial

parts such as the date or introductory wording is printed.

3. This also allows extrinsic evidence to be used to establish

testamentary intent, this further encouraging courts to look at the

printed words in addition to the handwritten ones.

4. Muder—court looked at intent.

g. In re Estate of Kuralt: Hoffman thinks this decision was wrong

i. He did not intend the letter to be a will

ii. In order to be a valid holographic will, need INTENTION!!

iii. You must look at the intent of the document at the time is made—was it

supposed to be a will?

h. Codicils

i. This is a testamentary instrument that amends a prior will; it does not

replace it.

i. Dispensing statute of the UPC can be applied to this as well.

Revocation of Wills

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I. Revocation by Writing or Physical Act

a. A will is subject to modification or revocation by the testator during his lifetime

b. All states allow revocation of a will in one of two ways to revoke:

i. By a subsequent writing with testamentary formalities

ii. By a physical act such as destroying or burning the will

c. UPC 2-507 : Revocation by writing or by act

i. A will is revoked by executing a subsequent will that revokes the previous

will or part expressly or by inconsistency

ii. By performing a revocatory act on the will, if the testator’s intent is to

revoke the will; another individual can do this action if performed in the

testator’s conscious presence and by the testator’s direction.

1. the burning, tearing or canceling is revoking the will; no matter

whether it touches any words of the will.

d. UPC 2-701 : will can be revoked by a subsequent writing or by a physical act

e. ORC 2107.33 : revocation of wills

i. Testator can revoke a will in a number of ways:

1. Testator tearing, canceling, obliterating or destroying

2. By having someone else tear the will in your presence

3. By another will

4. By a separate will that has the same execution requirements of a

will.

f. Revocation of a codicil does not revoke a will—but the revocation of a will does

mean that all of the codicils are also revoked.

g. Harrison v. Bird—rebuttable presumption

i. If the evidence establishes that a person had possession of the will before

her death, but the will was not found among the personal belongings after

her death, it is presumed that the will was destroyed

ii. There exists a presumption that the will was destroyed and revoked. The

burden then shifts to present sufficient evidence to rebut that presumption.

iii. Under ORC, the result would be different because the attorney did not

revoke in her presence.

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h. If a will is a filed stating “revoked will”—this does not mean that the will was

destroyed; it only shows intent which is not enough.

i. Most states hold that if you revoke a will by written words—the words have to be

written over the will.

i. UPC does not require the words to be written over the will.

j. Lost wills

i. In the absence of a statute, a will that is lost, or is destroyed without the

consent of the testator, or is destroyed with the consent of the testator but

not in compliance with the revocation statute can be admitted into probate

if the contents are proved.

k. Partial revocation by physical act

i. Although UPC 2-507 and the statutes of many states authorize partial

revocation by physical act, in several states a will cannot be revoked in

part by an act of revocation; it can be revoked in part only by a subsequent

instrument.

II. Dependent Relative Revocation and Revival

a. Doctrine of dependent relative revocation: if the testator purports to revoke his

will upon a mistaken assumption of law or fact, the revocation is ineffective if the

testator would not have revoked his will had he known the truth (Revocation of all

or part of a will is ineffective if the revocation is based on mistake)

i. The doctrine involves presumptive intent, not actual intent

1. It can only be applied where the clear intent of the testator is

shown to be that the revocation of the old is made conditional upon

the validity of the new.

ii. This is entirely common law.

iii. This requires clear and convincing evidence.

iv. LaCroix v. Senecal:

1. If a testator cancels or destroys a will with a present intention of

making a new one immediately and as a substitute and the new will

is not made or for some reason fails, it will be presumed that the

testator preferred the old will to intestacy, and the old will is to be

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admitted to probate in the absence of evidence overcoming the

presumption.

v. This doctrine can apply to the entire instrument or it can only partially

apply.

vi. Courts have set limits as to when this applies:

1. Where there is an alternative plan of disposition that fails

2. Or where the mistake is recited in the terms of the revoking

instrument, or possibly, is established by clear and convincing

evidence.

b. Revival

i. Ex: Testator executed will 1. Later executed will 2, which revokes will 1

by an express clause. Later testator revokes will 2. Is will 1 revived?

1. Three views:

a. English CL that will 1 is not revoked unless 2 remains in

effect until the testator’s death.

b. Will 2 legally revokes will 1 at the time 2 is executed

i. Upon revocation of will 2, will 1 is revived if the

testator so intends (majority)

ii. A revoked will cannot be revived unless reexecuted

with testamentary formalities

2. UPC 2-509 : Revival of Revoked Will

a. (a): if a subsequent will that wholly revoked a previous will

is thereafter revoked, the previous will remains revoked

unless it is revived.

b. (b): if a subsequent will that partly revoked a previous will

is thereafter revoked, a revoked part of the previous will is

revived unless it is evident from the circumstances

c. (c): if a subsequent will that revoked a previous will in

whole or in part is thereafter revoked by another, later, will,

the previous will remains revoked in whole or part, unless

it or its revoked part is revived.

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3. ORC 2107.38 : If a testator executes a second will, the destruction,

cancellation or revocation of the second will shall not revoke the

first will unless the terms of such revocation show that it was such

testator’s intention to revive and give effect to his first will or if the

testator republishes his first will.

III. Revocation by Operation of Law: Change in Family Circumstances

a. Most states have statutes providing that a divorce revokes any provision in the

decedent’s will for the divorced spouse

b. UPC 2-804 : Revocation of Probate and Nonprobate transfers by Divorce

i. All instruments are revoked upon the divorce from the spouse (probate

and nonprobate property)

ii. It also revokes any provisions from the spouse’s relatives.

c. ORC 2107.33(d), (e)

i. If the couple remarries, the will is revived.

d. U.S. Supreme Court

i. Held that federal law preempts the application of state revocation on

divorce statutes to federally regulated pension benefits.

e. Marriage

i. If a testator executes a will and then later marries, a majority of states have

statutes giving the spouse her intestate share, unless it appears that the

omission was intentional

ii. UPC 2-301 : revokes the premarital will to the extent of the spouse’s

intestate share

iii. ORC § 2107.37 : A will executed by an unmarried person is not revoked

by a subsequent marriage.

f. Birth of Children:

i. Minority: CL rule that marriage followed by birth of issue revokes a will

executed before marriage

ii. Almost all states have pretermitted children statutes, giving a child born

after execution of the parent’s will, and not provided for in the will, a

share of the parent’s estate

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iii. UPC 2-302 : If a testator fails to provide in his will for any of his children

born after or adopted after the execution of the will, the omitted after-born

or after-adopted child receives a share of the estate as follows:

1. Testator had no child living when he executed the will, the omitted

child receives a share in the estate equal in value to that which the

child would have received had the testator died intestate

2. If the testator had one or more children living when the will was

executed, and the will devised property or an interest in property to

them, an omitted after-born child is entitled to share in the

testator’s estate as follows:

a. The portion of the testator’s estate in which the omitted

after-born child is entitled to share is limited to devises

made to the testator’s then-living children under the will.

b. The omitted after-born child is entitled to receive the share

of the testator’s estate that the child would have received

had the testator including all omitted after-born children

with the children to whom devises were made under the

will and had given an equal share of the estate to each

child.

c. It must be of the same character as that devised to the

testator’s then-living children.

d. However, this does not apply if the omission was

intentional or the after-born child was provided for outside

of the will.

Components of a Will

I. Integration of Wills

a. Definition: all papers present at the time of execution, intended to be part of the

will, are integrated into the will

b. Fasten all the papers together to the will

II. Republication by Codicil

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a. Definition: a prior, validly executed will is treated as reexecuted (republished) as

of the date of the codicil.

b. It is not applied automatically but only where updating the will carries out the

testator’s intent.

c. This is different than incorporation by reference

i. Republication only applies to a prior validly executed will

ii. Incorporation applies to incorporate into a will language or instrument that

have never been validly executed

III. Incorporation by Reference

a. Definition: a writing in existence at the time of execution of a will may be

incorporated by reference if sufficiently described and the will manifest such an

intent.

i. a will can add into its provisions any document or paper not so executed

and witnessed, whether the paper referred to be in the form of a mere list

or memo, if it was in existence at the time of the execution of the will, and

is identified by clear and satisfactory proof as the paper referred to (Clark

v. Greenhalge).

b. Elements:

i. The document must have been in existence at the time the will was

executed

ii. The will must expressly refer to the document in the present tense

iii. The will must describe the document to be incorporated so clearly that

there can be no mistake as to the identity of the document referred

iv. The testator must have intended to incorporate the extrinsic document as

part of the overall testamentary plan.

c. The purpose is to enact the intent of the testator.

d. Most hold that the actual writing that was in existence at the time—not a

document that might exist at the time, but writing is added later.

e. Need to refer to the document explicitly and saying that the testator is

incorporating the doctrine by reference in the will.

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f. Simon v. Grayson—court held that the letter found in the safe box was

incorporated by will and became an integral part of the will, even though it was

not the correct date.

g. Johnson v. Johnson—Hoffman thinks this case was wrong

i. Court held that the whole will was valid because it is incorporated by

reference

ii. But this case was wrong because in order to have a republished will, you

have to have a validly published will to begin with (this was a holographic

will), which wasn’t in this case.

1. There also wasn’t an identification sufficient to indicate the

document and incorporation language.

h. UPC 2-510 : Incorporation by Reference

i. Any writing in existence when a will is executed

ii. Language of the will manifests this intent

iii. Describes the writing sufficiently to permit its identification

i. ORC 2107.05 : incorporation by referencean existing document, book, record or

memo may be incorporated in a will by reference, if referred to as being in

existence at the time the will is executed. This document shall be deposited in the

probate court when the will is probated.

j. UPC 2-513 : Separate Writing Identifying Bequest of Tangible property

i. A will may refer to a written statement or list to dispose of items of

tangible personal property not otherwise specifically disposed of by will,

other than money. The writing must be signed by the testator and must

describe the items and the devisees with reasonable certainty. The writing

may be referred to as one to be in existence at the time of the testator’s

death; it can be prepared before or after the execution of the will.

IV. Acts of Independent Significance

a. Definition: If the beneficiary or property designations are identified by acts or

events that have a lifetime motive and significance apart from their effect on the

will, the gift will be upheld under this doctrine (acts or events references in a will

that have lifetime significance can result in changes to disposition made by a will)

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b. E.g. Decedent gives to any charitable trust that her brother may establish; brother

establishes . . . ; issue is that we have a future act or recipient not otherwise

identified. Here, act on its own has such independent significance that it is not

being used to undermine the will.

c. UPC 2-512 : Events of Independent Significance

i. A will may dispose of property by reference to acts and events that have

significance apart from their effect upon the dispositions made by the will

ii. Ex: Throwing things into the drawer is not an act of significance—so not

entitled to it.

1. However, if only the testator has access to the drawer, this is an act

of independent significance.

Contracts Relating to Wills

I. Introduction

a. A person may enter into a contract to make a will or contract not to revoke a will

b. Contract law applies

c. If, after the K becomes binding, a party dies leaving a will not complying with the

K, the will is probated but the K beneficiary is entitled to a remedy for the broken

K.

d. ORC 2107.04 : an agreement to make a will only valid if it is in writing.

II. Contracts to Make a will

a. Many states subject Ks to the SoF

b. But even if this is not fulfilled, the beneficiary may be entitled to restitution of the

value to the decedent of services rendered

III. Contracts Not to Revoke a Will

a. Joint will: one instrument executed by two persons as the will of both (one will

for two people)

b. Mutual wills: separate wills of two or more persons that contain similar and

reciprocal provisions

c. Joint and Mutual will: a joint will in which the respective testators make similar

or reciprocal provisions.

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d. UPC 2-514 : Contracts Concerning Succession

i. A K to devise to make a will or devise, or not to revoke a will or devise, or

to die intestate, if executed after the effective date, may be established

only by (1) provisions of a will stating material provisions of the K, (2) an

express reference in a will to a K and extrinsic evidence proving the terms

of the K or (3) a writing signed by the decedent evidencing the K.

e. A K not to revoke a will is breached if, after the K becomes binding, a party dies

leaving a will that does not comply with the K.

f. Via v. Putnam

i. Minority: the rights of beneficiaries under a K to make a will are limited

by the possibility that the survivor might remarry and that the subsequent

spouse might elect against the will

1. Three exceptions:

a. Provision has been made for, or waived by, the spouse by

prenuptial or postnuptial agreement

b. When the spouse is already provided for in the will

c. When the will discloses an intention not to make provision

for the spouse

ii. Majority: the 3rd party beneficiary prevails over the second wife.

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CONSTRUCTION OF WILLSrules of construction apply unless the intent of the will is to

the contrary.

Mistaken or Ambiguous Language in Wills

I. The Traditional Approach—No Extrinsic Evidence, No Reformation

a. Plain meaning rule/no extrinsic evidence rule (majority rule): extrinsic evidence

may be admitted to resolve some ambiguities, but the plain meaning of the words

of the will cannot be disturbed by evidence that another meaning was intended

i. RULE: Wills act requires that will terms be in attested writing and parol

evidence cannot be admitted to vary the written will.

ii. Circumstances surrounding the testator (not declarations of testator) at the

time and the will was executed are admissible.

b. No reformation rule:

i. Reformation is an equitable remedy, that, if applied to a will, would

correct a mistaken term in the will to reflect what the testator intended the

will to say.

ii. The justification for refusing to reform the will is that the court is thereby

compelled to interpret the words that the testator actually used, not to

interpret the words that the testator is purported to have intended to use.

c. Mahoney v. Grainger—a will duly executed and allowed by the court must under

the statute of wills be accepted as the final expression of the intent of the person

executing it.

i. When there is no doubt as to the property bequeathed or the identity of the

beneficiary there is no room for extrinsic evidence .

ii. The idea behind the plain meaning rule is that statements by the testator

are suspected; don’t want them changing the will.

iii. The fact that it was not prepared in conformity to the instructions given to

the draftsman who prepared it does not authorize a court to reform or alter

it.

d. Patent ambiguity: an ambiguity that appears on the face of the will

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i. Most states allow extrinsic evidence to aid in interpreting a patent

ambiguity

ii. Extrinsic evidence of facts and circumstances are admissible but not the

testator’s declarations.

iii. If we can see it right out in the open (common law) than it could not have

been amended, unlike Latent, where you can add terms.

e. Latent ambiguity: an ambiguity that does not appear on the face of the will, but

manifests itself when the terms of the will are applied to the testator’s property or

designated beneficiaries.

i. There are two types:

1. A will clearly describes a person or thing and two or more persons

or things exactly fit that description

a. Equivocation: admission of extrinsic evidence to clarify a

latent ambiguity first began in these cases

b. Courts reasoned that extrinsic evidence did not add

anything to a will, but the evidence only made the terms of

the will more specific

2. A will clearly describes a person or thing and no person or thing

exactly fits that description, but two or more persons or things

partially fit.

a. This is more common.

ii. Extrinsic evidence, including the testator’s declarations, are admissible to

determine the meaning.

f. If there is no ambiguity in the will, no evidence can be admitted to show the

intent.

g. Sometimes it is hard to tell a difference between a latent and patent ambiguity

i. Ex: to the university in Southern California known as the UCLA.

1. Court said that it was a latent—but it looks like a patent.

II. Slouching Toward Reformation: Correcting Mistakes Without the Power to Reform

Wills

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a. The rule against reformation (not allowing the correcting of an innocent mistake

in the terms of the will) is at odds with routine practice in other areas of the law of

wills (like including extrinsic evidence to show undue influence or fraud)

b. A review of cases reveals a trend toward admitting extrinsic evidence not merely

to resolve ambiguities, but also to correct mistakes in view of the actual intent of

the testator

c. Arnheiter v. Arnheiter: court changed the will so that the description was more

general and the will was still valid because the testator only owned one piece of

property on that street.

i. Where a description of a thing or person consists of several particulars and

all of them do not fit any one person or thing, less essential particulars

may be rejected provided the remainder of the description clearly fits.

ii. Court applies the doctrine of misdescription: falsa demonstration non

nocet doctrince (mere erroneous description does not vitiate).

iii. Court wanted to carry out the intent of the testator.

d. Estate of Gibbs: no ambiguity in this case—but the court corrected the mistake.

i. Details of identification are highly susceptible to mistake and should not

be granted such sanctity as to frustrate an otherwise clearly demonstrable

intent.

ii. There needs to be a high degree of certainty.

iii. Court says that they aren’t reforming it, but they really are.

III. Openly Reforming Wills for Mistaken

a. This is still the MINORITY position

b. Applies to scrivner’s errors.

c. Need clear and convincing evidence to correct mistakes to conform to the T’s

intent.

d. This is the view of the Restatement:

i. Two things need to be proven by clear and convincing evidence:

1. That a mistake of fact or law, whether in expression or

inducement, affected specific terms of the document and

2. The donor’s intent.

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e. Erickson v. Erickson

i. Court makes a narrow exception: can reform the will only if there is a

scrivner’s error.

f. This shows the changes from the CL no reformation rule.

g. UPC § 2805 – Reformation to Correct Mistakes

i. Court may reform the terms of a governing instrument, even if

unambiguous, to conform the terms to the transferor’s intention if it

proved by clear and convincing evidence that the transferor’s intent and

the term of the governing instrument were affected by a mistake of fact or

law, whether in expression or inducement.

Death of Beneficiary Before Death of Testator

I. Introduction

a. Rule: If a devisee does not survive the testator, the devise LAPSES (fails)

b. All gifts made by will are subject to a requirement that the devisee survive the

testator, unless the testator specifies otherwise.

i. This is why you should always have an alternative disposition of where

the devise should go.

c. Antilapse statutes: substitute another beneficiary for the predeceased devisee.

d. Default rules that apply if the devisee predeceases the testator (these apply if there

are no anti-lapse statutes, but they should never apply because you should say

who takes if the person dies):

i. Specific or general devise: if a specific or general devise lapses, the devise

falls into residuary.

ii. Residuary devise: if the devise of the entire residue lapses, because the

sole residuary devisee or all the residuary devisees predecease the testator,

the heirs of the testator take by intestacy.

1. If a share of the residue lapses, at CL the lapsed residuary share

passes by intestate to the testator’s heirs rather than to the

remaining residuary devisees.

a. This is called no-residue-of-a-residue

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b. In the majority of states, this rule has been overturned

i. UPC 2-604(b) : if the residue is devised to two or

more persons, the share of a residuary devisee that

fails for any reason passes to the other residuary

devisee, or to other residuary devisees in proportion

to the interest of each in the remaining part of the

residue.

iii. Class gift: if the devise is to a class of persons, and one member of the

class predeceases the testator, the surviving members of the class divide

the gift.

iv. Void devise: where a devisee is dead at the time the will is executed, or

the devisee is a dog or cat or some other ineligible taker, the devise is

void.

1. Same rules govern this as govern lapsed devises.

II. Antilapse statutes (apply if allowed by state statutes and the will does not have an

alternative for a lapsed gift):

a. Definition: substitute other beneficiaries (usually issue) for the dead beneficiary if

certain requirements are met

b. It usually provides that if a devisee is of a specified relationship to the testator and

is survived by issue who survive the testator, the issue are substituted for the

predeceased devisee.

c. This applies to a lapsed devise only if the devisee bears the particular relationship

to the testator as specified in the statute.

d. This supercedes the CL rule

e. UPC 2-605 : Antilapse, Deceased Devisee, Class Gifts

i. If a devisee fails to survive the testator and is a grandparent, a descendant

of a grandparent, or a stepchild of either the testator or a donor of a power

of appointment exercised by the testator’s will:

1. A substitute gift is created in the devisee’s surviving descendants.

ii. This applies to beneficiaries who are lineal descendants of a grandparent

who survive 120 hours.

Analysis: 1. CL rule 2. Antilapse statute3. But antilapse doesn’t apply in all situations, so CL rule still applies

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iii. Applies to wills and all nonprobate documents.

f. UPC 2-603(b) - “Words of Survivorship”

i. Such as in a devise to an individual “if he survives me” or in a devise to

“my surviving children” are not, in the absence of additional evidence, a

sufficient indication of an intent contrary to the application of this section.

g. ORC 2107.52

i. This applies to blood relatives (much more broad than UPC)

1. If a devise of real property or a bequest of personal property is

made to a relative of a testator and the relative was dead at the time

the will was made, leaving issues surviving the testator, those issue

shall take by representation.

ii. Applies to wills and trusts

iii. This statute is similar to most states

1. Applies if beneficiary dies before testator or survives less than 120

hours (simultaneous death) or disclaims

2. Beneficiary has to be testator’s blood relative

3. One of those descendants of the deceased has to survive for 120

hours

4. Get rid of no residuary of a residuary

5. Applies to class gifts

III. Class Gifts

a. If a class member predeceases the testator, the surviving members of the class

divide the total gift, including the deceased member’s share

b. The purpose of construing a gift in a will as a class gift is to reach the

consequences intended by testator.

c. Test of whether it is a class gift: whether the testator is “group minded”

d. Beneficiaries described by their individual names, but forming a natural class,

may be deemed a class if the court decides, after admitting extrinsic evidence, that

the testator would want the survivors to divide the property.

e. Dawson v. Yucus—

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i. A class gift is a gift of an aggregate sum to a body of persons uncertain in

number at the time of the gift, to be ascertained at a future time, and who

are all to take in equal or in some other definite proportions, the share of

each being dependent for its amount upon the ultimate number of persons.

ii. To determine if it’s a class gift: look at the language of the will.

iii. In other cases similar to this, courts will go out of their way to find a class

gift in order to avoid intestacy. The purpose was to carry out the intent of

the testator.

f. Almost all states apply their antilapse statutes as class gifts and most statutes

expressly so provide.

g. Cy Pres Doctrine – Court will permit deviation in the administration of terms of

a trust – private or charitable – when compliance would defeat or substantially

impair the accomplishment of the purposes of the trust on account of changed

circumstances not anticipated by the donor.

i. More specifically, if purpose becomes illegal or impracticable, court may

direct donation to another charity. Court looks to settlor’s intention,

instead of letting it last altogether, next best thing.

Changes in Property After Execution of Will

I. ADD CASES

II. Ademption by Extinction

a. Definition: when a will includes a specific devise of an item of property that does

not exist at the time of death.

b. Only applies to specific devises (disposition of a specific item of the testator’s

property)

c. Two theories may be applied:

i. Identity theory (traditional approach): if a specifically devised item is not

in the testator’s estate, the gift is extinguished (subject to limited

exceptions)

ii. Intent theory: if the specifically devised item is not in the testator’s estate,

the beneficiary may still be entitled to the cash value of the item.

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d. Wasserman v. Cohen

i. Courts have long adhered to the rule that when a testator disposes, during

his lifetime, of the object of a specific legacy or devise in his will, that

legacy or devise is held to be adeemed, whatever may have been the intent

or motive of the testator in doing so.

ii. The doctrine seeks to give effect to the testator’s probable intent by

presuming he intended to extinguish a specific gift of property when he

disposed of that property prior to his death.

e. Ademption requires a voluntary action on the part of the testator.

i. In this case, the beneficiary would be entitled to the cash replacement.

f. Ex: what if the property was for sale but hadn’t been sold yet when the testator

died

i. Identity theory: the property is still in the estate, so he can get the proceeds

from the sale

ii. Intent theory: the intent was that the testator was trying to sell it and didn’t

want that person to have the proceeds.

g. Ex: what if testator changes the property into a corporation—still owned at the

time of her death. Is it adeemed?

i. Intent: it was not her intent for the beneficiary to have a corporation

h. Ex: What if it was a C.D. in Chase Bank? It is given to a beneficiary and then

before her death she cashes it in and moves it to another bank?

i. Identity: this is adeemed because it is just a change of form.

i. UPC 2-606 : Nonademption of Specific Devises; Unpaid proceeds of Sale,

Condemnation or Insurance, Sale by Conservator or Agent

i. 1990 UPC abandoned the identity theory and adopted the intent theory,

but creates a presumption in favor of ademption

1. “A specific devisee has a right to specifically devised property in

the testator’s estate at the testator’s death and to any balance of the

purchase price owed by a purchaser at the testator’s death by

reason of the sale of the property…or any real property or tangible

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personal property owed by the testator at death which the testator

acquired as a replacement.”

ii. The party opposing ademption (party claiming that the property shouldn’t

be devised) has the burden of proving that ademption is consistent with the

testator’s intent.

iii. Includes a list of circumstances when there is not ademption

j. ORC 2107.501 : follows CL identity theory

i. One exception: if the piece of property had been sold on an installment

basis and part of those payments had not been paid off, beneficiary is

entitled to the balance of the installment payments.

III. Stock Splits and the Problem of Increase

a. This occurs when 100 stocks (for example) become 300 shares

b. Modern courts follow that, absent a contrary showing of intent, a devisee of stock

is entitled to additional shares received by the testator as a result of the stock split.

IV. Satisfaction of General Pecuniary Bequests

a. Satisfaction applies when a testator makes a transfer to a devisee after executing

the will.

b. If the testator is a parent of the beneficiary and after execution of the will transfers

to the beneficiary property of a similar nature to that given by the will, there is a

rebuttable presumption that the gift is in satisfaction of the gift made by the will.

c. UPC 2-609 : requires that the intention of the testator to adeem by satisfaction

must be shown in writing.

i. This applies when a testator gave property in his lifetime to a person, this

is treated as a satisfaction of a devise in whole or part, but only if the will

provides for the deduction of the gift and it is in writing.

d. ORC 2105.501 : if it is a close family member, it is thought to be an advancement

and taken out of will

i. Under OH law, what to do to have it not be treated as a gift but have it

counted toward inheritance:

1. There must be a contemporaneous writing by the decedent (at the

time the advancement is made) OR

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2. Acknowledge in writing by the heir to be an advancement

V. Abatement

a. Occurs when the estate has insufficient assets to pay debts as well as the devises;

some devises must be abated or reduced

b. Dividing in the following order:

i. Residuary devises are reduced first

ii. General devises

iii. Specific and demonstrative devises are the last to abate and are reduced

pro rata

c. UPC 3-902 : Order of abatement done in the following order:

i. Property not disposed of by the will

ii. Residuary devises

iii. General devises

iv. Specific devises.

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NON-PROBATE TRANSFERS AND PLANNING FOR INCAPACITY

An Introduction to Will Substitutes

I. More money transfers pass under non-probate than wills and testate combined.

a. The purpose for this is to avoid probate.

b. This is the most common way for property to pass.

i. Trusts

ii. Life Insurance

iii. Pension Plans

iv. Joint and survivorship property

v. Pay on death property

vi. Transfer on death deeds

c. Most non-probate transfers are similar to a will in that it is a gratuitous transfer

and there is no change in the individual’s rights in that the non-probate document

is established.

i. Exception: joint and survivorship property

1. There is a change the beneficiary does have rights in the

property.

d. Will substitutes v. Wills

i. Tend to be asset specific

ii. Avoid probate

iii. Will substitute not required to satisfy wills act

e. There are 4 main will substitutes:

i. Life insurance

1. Functionally indistinguishable from a will

ii. Bank, Brokerage and Mutual Fund Accounts

1. These are accounts over which the depositor retains explicit

lifetime dominion while designating beneficiaries to take on his

death.

2. Joint bank account: the owner creates a present interest in his

donee-cotenant. Each cotenant can withdrawal the full amount.

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iii. The Revocable Inter Vivos Trust

1. Either by declaration of trust or by transfer a third-party trustee, the

appropriate trust terms can replicate the incidents of a will. The

owner who retains both the equitable life interest and the power to

alter and revoke the beneficiary designation has used the trust form

to achieve the effect of testation.

Revocable Trusts

I. Introduction

a. This is the most flexible of all will substitutes because the donor can draft both

the dispositive and the administrative provisions precisely to the donor’s liking.

i. Different than a trust in a will:

I. UPC § 2-511 : A will may validly devise property to the trustee

of a trust established or to be established (i) during the

testator’s lifetime by the testator or (ii) at the testator’s death

by the testator’s devise to the trustee.

b. The typical revocable inter vivos trust involves a deed of trust

i. The settlor (creator of the trust), transfers legal title to property to another

person as trustee pursuant to a writing in which the settlor retains the

power to revoke, alter or amend the trust and the right to trust income

during lifetime.

ii. On the settlor’s death, the trust assets are to be distributed to or held in

further trust for other beneficiaries.

c. Revocable declaration of trust: the settlor declares himself trustee for the benefit

of himself during lifetime, with the remainder to pass to others at his death.

d. UTC § 603(a): Settlor has control (power to revoke) and the only person that the

trustee has any obligation to while the trust is revocable is the settlor.

e. UTC § 604 : Person may bring suit to challenge a revocable trust, but only after

the trust becomes irrevocable by reason of the settlor’s death.

f. A trust is a management relation where the trustee manages property for the

benefit of one or more beneficiaries.

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i. The trustee holds legal title to the property and can sell trust property and

replace it with property thought more desirable.

ii. The beneficiaries hold equitable title.

iii. Trustee has fiduciary duties.

iv. The trustee can be one of the beneficiaries of the trust. However, if the

trustee is the sole beneficiary, there is no trust.

g. Difference between trust and wills:

i. Once property is transferred into a trust, there is a transfer of legal

ownership to the trustee.

ii. This is why some rules don’t apply to trusts that apply to rules.

h. If the trust agreement provides a certain way that the trust can be revoked, it must

be followed that way to effectively revoke the trust (In re Estate and Trust of

Pilafas—simply not being able to find the trust when the trust agreement says that

it has to be revoked in writing does not revoke the trustthis is different from the

laws of wills).

i. Examples:

I. If the settlor is his own trustee, and a later wills says that it

revokes the trust.

a. This is like a codicil, so the trust is revoked

II. There is a third-party trustee have to revoke the trust by

notifying the trustee in writing. If the settlor then says that he

revokes the trust in his will

a. This is not effective.

III. There is a third-party trustee; the trust agreement says nothing

about how the trust can be revoked. The settlor then says that

he revokes the trust in his will.

a. This is effective and the trust is revoked.

b. Could be the case even if the trust document was torn into

pieces.

c. The court looks at the intention (if there is no provision as

to how it is going to be revoked).

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IV. There is a third-party trustee and the trust says that it can be

revoked by notifying the trustee in writing. The will then says

that revocation is done.

a. Under UTC § 602(c): it can be revoked through the will;

unless the trust says that it can only be revoked a certain

way.

i. Unless the terms of a trust expressly provide that

the trust is irrevocable, the settlor may revoke or

amend the trust.

i. Creditors can gain assets in a revocable trust upon death. (State Street Bank &

Trust v. Reiser)

i. Caveat: a lot of statutes say that only after probate assets have been taken

can you go to the trusts.

ii. UPC 6-215 : permits the decedent’s creditors to reach P.O.D. bank

accounts and joint bank accounts, if the probate estate is insufficient.

j. Gift (inter vivos trust) v. Will

i. “Present interest test” – No firm test, however, inter vivos means that it

vests during lifetime, thus even if revocable, said to be “vested subject to

defeasance.”

II. Pour Over Wills

a. Example of definition: O sets up a revocable inter vivos trust naming X as trustee.

O transfers to X, as trustee, his stocks and bonds. O then executes a will devising

the residue of his estate to X, as trustee, to hold under the terms of the inter vivos

trust.

b. The pour-over by will of probate assets into an inter vivos trust is a useful device

where O wants to establish an inter vivos trust of some of his assets and wants to

merge after his death his testatmentary estate, insurance proceeds, and other assets

into a single receptacle subject to unified trust administration.

c. There can be non-probate transfers into the trust

d. This is a common estate planning technique:

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i. Individuals use trusts because it is privateit isn’t public record, so

people can’t see what you own

ii. Allows a uniform way of disposing of property

I. Most people know what they want to do with property, so by

using, it all flows into a single document and is uniformly

disposed of.

e. UPC § 2-511 : allows for pour-over trusts.

i. Even if the trust is not funded, it is still effective of going over to the trust.

ii. The statute specifically says that the property held in the trust is non-

testamentary. This keeps it out of probate court.

I. Testamentary trusts (trusts included in the body of a will) are

subject to the probate court and public records.

f. Uniform Testamentary Additions to Trusts Act: permits the trust instrument to be

executed after the will.

i. The trust has to be in writing, but amendments can be in any form that the

trust provides or through the intention of the testator.

g. Like a will, when the trustee and beneficiary divorce, the divorce cuts out the

former married beneficiary and the interest is revoked. (Clymer v. Mayo)

i. Other beneficiaries receive the share that the divorced spouse would have

received.

ii. UPC § 2-804 : provides that divorce revokes dispositions in favor of the

divorced spouse in revocable inter vivos trusts as well as in other will

substitutes (life insurance, pension plans, P.O.D., T.O.D.)

III. Use of Revocable Trusts in Estate Planning

a. Introduction

i. Revocable trust can be created two ways:

I. Declaration of trust: the settlor becomes the trustee of the trust

property.

a. In the trust instrument, the settlor should name a successor

trustee to take over the trusteeship upon the settlor’s death.

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b. Where the trust is to end on the settlor’s death, and the trust

is merely a means of avoiding probate, the death

beneficiary should ordinarily be named a successor trustee.

II. Deed of trust: names a third party as trustee.

ii. The terms of a revocable trust may call for distribution of the trust assets

at the settlor’s death.

b. Pilafas – wills are presumed revoked if they are lost, common law presumption

unless rebutted; however, trusts, unlike a will, involves transfer of present

interest. Thus, it can only be revoked under the terms of the will, in Pilafas, the

trust provided that it must be revoked in writing. Accordingly, where the inter

vivos trust was not located, it was not revoked it lacked evidence that it was

revoked.

i. Under UTC & UPC – exclusivity is generally not presumed; so the trust

must provide expressly that it must be revoked in writing for that to

actually be required. In some instances, it will be presumed.

c. Consequences During Life of Settlor

i. A third party trustee may be selected to manage a funded revocable trust.

ii. A revocable trust is useful in keeping separate and apart property that a H

and W or both want not to be commingled with their other assets.

iii. A revocable trust can be used in planning for the contingency of

incapacity.

I. The settlor may be co-trustee, with the trust instrument

providing that either trustee alone may act on behalf of the

trust.

d. State Street Bank – Creditor can reach a revocable trust in order to satisfy debt

where the settlor has retained the ability to control or revoke to the extent that he

is able. Thus, cannot reach in trust if not revocable

e. Consequences at Death of Settlor: Avoidance of Probate

i. Assets transferred during life to a revocable trust avoid probate because

legal title to the assets passes to the trustee, and there is no need to change

the title to the trust assets by probate administration on the settlor’s death.

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ii. Under a revocable trust, income and principal can be disbursed much

quicker than under a will.

iii. There is no short-term SOL applicable to revocable trusts; the limitations

period is the normal one applicable to the particular claim.

iv. A will is public record and an inter vivos trust is not recorded in a public

place.

v. The elective share of wills does not extend by statute to revocable trusts

created by the decedent spouse. But courts with equity powers have

permitted the surviving spouse to reach the assets in a revocable trust

created by the decedent spouse.

vi. Testamentary trust: a trust created by a will. But an inter vivos trust is

created during the settlor’s lifetime and is not subject to any court

supervision.

vii. While a revocable will can have a contest for lack of capacity, etc, it is

more difficult to set aside a funded revocable trust than a will on these

grounds.

viii. When one spouse wants some assurance that the surviving spouse’s

property will be disposed of in accordance with a mutual estate plan, both

spouses can create a revocable trust of their property—to become

irrevocable upon the death of one spouse.

Life Insurance, Pension Accounts, Bank Accounts, and Other Payable-on-Death

Arrangements

I. Life Insurance

a. Two types:

I. Term life: there is no savings feature. Once the current term expires,

the insurance policy is no longer in force unless it is renewed. The

beneficiary only gets money if the insured dies during the period.

II. Whole life: person insured is covered for his entire life.

b. Traditional rule (only followed by a few states): P.O.D. designations in many

contracts other than life insurance are invalid. (Wilhoit v. Peoples Life Insurance

Co).

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c. UPC § 6-101 : nonprobate transfers on death (law in almost every state).

I. These are non-testamentary and are not controlled by the wills

statute.

II. Includes: T.O.D. insurance policy, contract of employment, pension

plan, individual retirement plan, employment benefit plan, trust.

III. UPC 2-706 : this is an antilapse provision for P.O.D. designations

when the beneficiary is a close relative of the benefactor, which

substitutes the issue of the named beneficiary who does not survive

the benefactor.

1. UPC 6-101 does not require survivorship by P.O.D. beneficiaries

of contracts.

d. A partner of a partnership can transfer his interest to his wife in a trust. (Estate of

Hillowitz).

e. Effects of Divorce (Cook v. Equitable Life Assurance Society)

I. When the life insurance beneficiary is the ex-spouse, you have to

follow the provisions of the plan in order to change the beneficiary.

II. Simply changing the beneficiary of the will does not affect the

change.

III. Public policy requires that the insurer, insured and beneficiary alike

should be able to rely on the certainty that policy provisions

pertaining to the naming and changing of beneficiaries will control

except in extreme situations.

II. Pension Accounts

a. Definition: this is a tax-qualified savings for retirement.

b. Egelhoff v. Egelhoff (this is a very important case!!!)

I. Most life insurance policies are NOT covered by ERISA.

II. ERISA: pre-empts state law when the pension plan relates to ERISA

(Employee Retirement Income Security Act) when it applies to the

payment of benefits—whether forced shares, revocation upon

divorce and augmented estates.

III. When talking about retirement benefits, the federal law applies.

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III. ORC § 5302.22 : Transfer on Death Deed Form

a. Upon the death of the grantee, the deed vests the interest of the decedent in the

beneficiary.

b. This can be created by any person who owns real property or any interest in real

property as a sole owner or as a tenant in common.

c. The deceased owner’s interest shall be transferred only to the transfer on death

beneficiaries who are identified in the deed by name and who survive.

d. ORC § 5302.23 : Any deed containing language that shows a clear intent to

designate a transfer on death beneficiary shall be liberally construed to do so.

I. This does not apply to real property (see above statute)

II. But otherwise, same rules as above.

IV. Multiple-Party Bank and Brokerage Accounts

a. This includes:

I. Joint and survivor accounts

1. Ex: A and B, as joint tenants with the right of survivorship. Both

A and B have the power to draw on the account and the survivor

owns the balance of the account, which will not pass through

probate.

II. P.O.D. accounts

1. This allows a second person to get the balance upon the death of

the person who sets up the account.

III. Agency accounts

IV. Savings account trust

b. When Joint bank account with right of survivorship is created by gift from one

person, donative intent is presumed; only rebutted by clear and convincing

evidence to the contrary. (Varela v. Bernachea)

I. HO case Brousseau v. Brousseau – exception, court looked to

donative intent, court adopted rule that the mere joint titling of

property without consideration does not conclusively give right to

gift interest . . . in this case, mother said she did it for convenience of

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estate planning, not as a gift to mother. Court held that trial court

failed to take into account the mother’s lack of donative intent.

c. The burden of proof to overcome that a contract is a convenience account is clear

and convincing evidence (Franklin v. Anna National Bank of Anna).

I. UPC follows this approach.

d. UPC provisions

I. 6-203 : An account may be for a single party or multiple parties. A

multiple-party account may be with or without a right of

survivorship between the parties. Either a single-party account or a

multiple-party account may have a POD designation.

II. 6-204 : a contract of deposit form should tell the type of account

established. If the form doesn’t establish it, pick the type that most

clearly conforms to the depositor’s intent.

III. 6-205 : By writing signed by all parties, the parties may designate as

agent of all parties on an account a person other than a party.

IV. 6-211 : Ownership During Lifetime

1. During the lifetime of all parties, an account belongs to the parties

in proportion to the net contribution of each to the sums on deposit,

unless there is clear and convincing evidence of a different intent.

As between parties married to each other, in the absence of proof

otherwise, the net contribution of each is presumed to be an equal

amount.

2. A beneficiary in an account having a POD designation has no

rights to sums on deposit during the lifetime of any party.

V. 6-212 : Rights at Death

1. On death of a party sums on deposit in a multiple-party account

belong to the surviving party or parties.

a. If two or more parties survive and one is the surviving

spouse of the decedent, the amount to which the decedent,

immediately before death, was beneficially entitled to

belongs to the surviving spouse.

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2. In an account with a POD designation:

a. On death of one of two or more parties, the rights in sums

on deposit are governed by the rule in (1).

b. On death of the sole party or the last survivor or two or

more parties, sums on deposit belong to the surviving

beneficiary.

3. Sums on deposit in a single-party account without a POD

designation, or in a multiple-party account that, by the terms of the

account, is without right of survivorship, are not affected by death

of a party, but the amount to which the decedent, immediately

before death, was beneficially entitled to is transferred as part of

the decedent’s estate.

a. POD designation on a multiple-party account without right

of survivorship is ineffective.

VI. 6-213 : Rights at death of a party under 6-212 are determined by the

terms of the account at the death of the party. A party may alter the

terms by a notice signed by the party and given to the financial

institution.

1. A right of survivorship or a POD designation may not be altered

by will.

VII. 6-216 : A deposit of community property in an account does not alter

the community character of the property or community rights in the

property, but a right of survivorship between parties married to each

other arising from the express terms of the account may not be

altered by will.

VIII. 6-307 : On death of a sole owner or the last to die of all multiple

owners, ownership of securities [share, participation, or other interest

in property, in a business, or in an obligation of an enterprise or other

issuer] registered in beneficiary form passes to the beneficiary who

survives all owners.

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1. Multiple beneficiaries surviving the death of all owners hold their

interests as tenants in common.

Joint Tenancies in Realty

I. This is different than joint tenancies in personal property

II. This is the most common way of avoiding the cost and delay of probate.

a. Upon death of one joint tenant, the survivor owns the property absolutely.

III. Rule:

a. Upon the established joint tenancy in real estate, there is an immediate transfer in

ownership.

i. There are immediate legal consequences:

1. The person who establishes it cannot revoke or sell without the

consent of the other parties.

2. The creation of a joint tenancy in land gives the joint tenants equal

interests upon creation.

b. A creditor of a joint tenant must seize the joint tenant’s interest during life.

i. At death of the JT’s interest vanishes and there is nothing for the creditor

to reach.

Planning for Incapacity

I. The Durable Power of Attorney

a. This is helpful to plan for incapacity, just like a revocable trust.

b. Once the person who grants a power of attorney becomes disabled, the power is

no longer effective, unless you have a durable power of attorney [which continues

until the principal dies].

i. UPC §§ 5-501-5-505 .

ii. Attorney in fact – Durable power of attorney creates agency relationship

whereby agent is attorney in fact (often not a lawyer), given a written

authorization to act on behalf of the principal.

c. Where express terms of power of attorney unambiguously grant the attorney in

fact the authority to create a trust and to add assets to said trust, person with POA

has authority according to its terms. (Kurlmeyer v. Kurleyer)

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d. Attorney in fact with (POA) owes fiduciary duty to principal. The fiduciary duty

is implied so self-dealing would be a breach of such duty.

i. E.g. Must determine whether sale by attorney in fact breached fiduciary

duty when attorney in fact gifted property at issue into trust created by

agent when principal was incapacitated. (Kurlmeyer 2)

e. The document needs to specifically state that the power will continue after the

person becomes incapacitated.

f. No power is implied with a power of attorney. The power has to be expressly

granted. (Franzen v. Norwest Bank Colorado)

i. Need to be very specific in the written document that gives the powers.

g. The principal, if competent, can terminate the agency and durable power at any

time, and the agent owes the principal the fiduciary duties of loyalty, care, and

obedience.

h. Durable power of attorney:

i. May be used to avoid a guardianship of the estate

ii. But it is not the same as a trust

1. A trust has a lot of implied powers

2. Trust carries on when the principal dies—power does not

iii. Third parties more willing to deal with trustees because they have more

powers.

iv. UPC: someone dealing with a trustee is exonerated from liability

v. Power of attorney is better than a trust for retirement benefits.

II. Advanced Directives

a. “Substituted Judgment standard” – standard of what the patient has chosen or

would have chosen in that situation, best interest of patient.

b. In the absence of advance directives, decisions are authorized to be made by:

i. Spouse, unless separated;

ii. Adult child;

iii. Parent;

iv. Adult brother or sister.

c. Living wills: individual says that they don’t want to be maintained on life support

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d. Disposition of body: every states has some statute allowing for giving body parts

upon death.

e. Ohio says that you can lay out, in writing, how you want your body disposed of.

f. Appointed guardian will make the decision to take person off life support if

establishes by clear and convincing evidence that is the decision the incapacitated

would make. (Schiavo)

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RESTRICTIONS ON THE POWER OF DISPOSITION: PROTECTION OF THE

SPOUSE AND CHILDREN

Rights of the Surviving Spouse

I. Introduction to Marital Property Systems

a. Two basic marital system in America:

i. Separate Property: H and W own separately all property each acquires

(except those items one spouse as agreed to put into joint ownership with

the other).

1. To fix the problem of protecting a spouse that earns less money

than the other from being disinherited, most separate property

states give the surviving spouse, by statute, an elective share

(forced share) in the estate of the deceased spouse.

a. The elective share is not limited to a share of property

acquired with earnings, it applies to all property owned by

the decedent spouse at death.

b. It is easy to confuse what the spouse is entitled to in

intestacy and forced shares

i. Intestacy typically gives the spouse a larger share.

c. Forced shares vary from state to state.

ii. Community Property: H and W own all acquisitions from earnings after

marriage in equal undivided shares.

1. Generally western states

2. Provides tax incentive of “stepped up” basis.

3. Each spouse is the owner of an undivided one-half interest in the

community property.

4. The death of one spouse dissolves the community property.

5. The deceased spouse owns and has testamentary power over only

his one-half community share.

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6. However, property acquired before marriage and property acquired

during marriage by gift, devise, or descent is the acquiring

spouse’s separate property.

7. This is adopted by the Uniform Marital Protection Act.

8. Includes: salary, property purchase, most everything

notwithstanding property brought into the marriage.

II. Rights of Surviving Spouse to Support

a. Social Security: These are retirement benefits from the federal government which

are paid to a worker and his surviving spouse.

i. Each working spouse is entitled to thison death, the surviving spouse is

entitled to the greater of what either the dead one received or the one still

living received.

ii. A divorced ex-spouse of the worker has a right to benefits if the marriage

lasted for 10 years or longer.

b. Private Pension Plans: these are either funded by employers or jointly funded by

employer and employee contributions.

i. There are two types:

1. Defined contribution plan: typically funded by contributions from

both the employer and the employee. At retirement, the employee

is entitled to the assets in the fund held in her name, including any

investment returns that have accrued over the years.

2. Defined benefit plan: typically funded by the employer. At

retirement, the employee is entitled to a defined benefit.

ii. ERISA pre-empts state law to the extent that they are inconsistent.

1. ERISA requires that the spouse of an employee must have

survivorship rights if the employee predeceases the spouse.

a. The living spouse would get all of the benefits of a pension

plan.

2. ERISA allows for benefits after divorceif no change in

beneficiary is made, then the ex-spouse is still entitled to it.

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a. However, upon a second marriage under ERISA, the new

spouse is entitled to take all of the pension plan (unless it is

waived)—even if there hasn’t been a paperwork change.

c. Homestead: these are laws that are designed to secure the family home to the

surviving spouse and minor children, free of the claims of creditors.

i. Generally, the surviving spouse has the right to occupy the family home

for his lifetime.

ii. ORC § 2106.10 : A surviving spouse may elect to receive the entire

interest of the decedent spouse in the mansion house.

iii. UPC § 2-402 : allows a $15,000 for the homestead exemption to protect

the surviving spouse. If there is no surviving spouse, each minor child and

each dependent child of the decedent is entitled to an allowance

amounting to $15K divided by the number of children.

iv. The decedent has no power to dispose of a homestead so as to deprive the

surviving spouse of statutory rights therein.

v. The right to occupy the homestead is given in addition to any other rights

the surviving spouse has in the decedent’s estate.

d. Personal Property Set-Aside: This is the right of the surviving spouse (and

sometimes minor children) to have set aside certain tangible personal property of

the decedent up to a certain value.

i. UPC § 2-403 : sets the limit at $10,000 for household furniture, cars,

furnishings, appliances, and personal effects.

ii. These items are exempt from creditors’ claims.

iii. It usually includes household furniture and clothing, but may also include

a car.

iv. ORC § 2106.11 : allows for personal property, including the car.

e. Family Allowance: Every state has a statute authorizing the probate court to

award a family allowance for maintenance and support of the surviving spouse.

i. This allowance is in addition to whatever other interests pass to the

surviving spouse.

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ii. UPC § 2-404 : allows a reasonable allowance, which cannot continue

beyond one year if the estate is inadequate to pay creditors.

iii. ORC § 2106.13: The surviving spouse can receive $40K as an allowance

for support.

f. Dower and Curtesy: At CL, a widow had dower in all land of which her deceased

husband had been seized during marriage and which was inheritable by the issue

of the husband and wife. Dower entitled the widow to a life estate in 1/3 of her

H’s qualifying land. This has been abolished in most states.

i. Ohio still has this: entitled to 1/3 of the property in a life estate.

1. The surviving spouse must elect to take a dower, or to take a

statutory share of the decedent’s estate, or to take a share under the

decedent’s will.

ii. Dower also applies when the W dies; the husband gets title to the land.

iii. This only applies to property when it is owned individually.

III. Rights of Surviving Spouse to a Share of Decedent’s Property

a. The Elective Share and Its Rationale

i. Introduction:

1. This only occurs in separate property states

a. And the statutes widely vary from state to state.

2. The living spouse can either:

a. Take under the will

b. Or renounce the will and take a fractional share of the

decedent’s estate under the elective share statute.

3. Policy justification: the surviving spouse contributed to the

decedent’s acquisition of wealth and deserves to have a portion.

a. Statutes mimize transaction costs, negotiating bequest

instead of statutes.

4. ORC § 2106.01 : allows for the election by the surviving spouse.

a. The elective share is taken out of the net probate estate

(debts and expenses are taken out first).

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b. Elective share is 1/3 of the probate estate when two or more

of the decedent’s children or their lineal descendants

survive.

i. Otherwise it cannot exceed ½.

5. ORC § 2106.04 : If the surviving spouse dies before probate of the

will and fails to make the election, it is presumed that the spouse

has elected to take under the will.

6. ORC § 2106 .05: If the surviving spouse elects to take under the

will, the surviving spouse shall be barred of all right to an intestate

share of the property passing under the will.

7. ORC § 2106.08 : If there is a legal disability of the surviving

spouse, the court shall appoint a suitable person.

ii. UPC, Article II, Part 2

1. UPC § 2-212 : the right of election may be exercised only by a

surviving spouse who is living when the petition for the elective

share is filed.

2. § 2-202 : this is a sliding scale determining the elective share based

on how long the spouses have been married (ex: 3% for being

married one year up to 50% for 15 years of marriage).

a. Most states do not have this, but instead it is based on the

amount of children.

3. Based on an augmented estateUPC § 2-204

a. This is the probate estate combined with certain nonprobate

transfers.

b. The value of the augmented estate includes the value of the

decedent’s probate estate, reduced by funeral and

administration expenses, homestead allowance, family

allowances, exempt property, and enforceable claims.

c. UPC § 2-205 : The value of the augmented estate includes

the value of the decedent’s nonprobate transfers to others.

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i. Ex: Property owned by the decedent before death

that passed outside probate at the decedent’s death;

property transferred in something like an

irrevocable transfer during marriage.

d. UPC § 2-206 : The value of the augmented estate includes

the value of the decedent’s nonprobate transfers to the

decedent’s surviving spouse.

e. Ex: an inter vivos trust created by the decedent is included.

iii. To be eligible for Medicaid, you have to take and use the resources that

are available to you. (In re Estate of Cross). Therefore, if a spouse’s

share leaves everything to someone besides the spouse, the spouse is

entitled to receive an election to ensure that Medicare eligibility remains.

1. However, one is not required to take the election if the creditor is a

general creditor (such as Visa).

a. This is a personal election on the spouse, and no one else

can force it.

b. ORC and UPC both say that only the spouse can determine

to make the election.

iv. The language of a “surviving spouse” means a husband or wife, not a

homosexual lover. (In re Esate of Cooper)

1. This is because the purpose of marriage is procreationnot

allowing homosexuals to marry is rationally related to this end.

2. Defense of Marriage Act: Passed by Congress and said that no

state shall be required to give effect to a same-sex marriage

contracted in another state.

3. However, 3 states enacted legislation granting same-sex couples

inheritance and electives hare rights.

b. Property Subject to the Elective Share

i. Original elective share statutes:

1. Gave the surviving spouse a fractional share of the decedent’s

estate, which meant the probate estate.

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2. Question of whether this should be extended to nonprobate

transfers.

ii. In most states, the elective share is based on the net estatetaken out after

the claims of creditors.

iii. Judicial Responses

1. An inter vivos trust created during the marriage by the deceased

spouse over which he alone had a general power of appointment

exercisable by will or deed is treated as part of the estate assets.

(Sullivan v. Burkin).

a. This test involves consideration of the motive or intention

of the spouse in creating the trust.

2. If the trust was created by a third party, it is not subject to the

elective share. (Bongaards v. Millen)

3. OH law: if the assets are in a trust, it is not subject to the elective

share, no matter who creates it.

4. Illusory Transfer Test: an illusory revocable trust is not invalid, but

it does count as part of the decedent’s assets subject to the elective

share; the trustee may have to contribute some of the trust assets to

make up the elective share.

a. This is the most widely adopted of the judicial tests for

subjecting non-probate property to the elective share.

b. Life insurance policies are not included in the probate

estate.

c. Joint tenancy: not covered by the illusory transfer because

the Ts have immediate rights.

5. Intent to Defraud Test: to determine whether the decedent intended

to defraud his surviving spouse of her elective share, some courts

look to subjective or objective evidence of intent; factors:

a. Objective- control retained by transferor, amount of time

between the transfer and death, degree to which surviving

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spouse is left without an interest in the decedent’s property

or other means by support.

b. Subjective - Present donative intent to transfer an interest

in property, not on what transferor retained, rather the

transferor intended to make a present gift, factors are

similar to objective.

c. Karsenty v. Schoukroum – Highly fact sensivite test, in

short, lawyers should advice clients to exercise extreme

caution in making nonprobate transfers without the other

spouses consent that might have the effect of diminishing

the other spouse’s elective share.

6. UPC 2-202(d): provides that the law of the decedent’s domicile

shall govern the right to take an elective share of property located

in another state.

a. However, the UTC clearly indicates that the law in the trust

agreement controls if the trustee is located there or

substantial business is conducted there.

i. So if you want to make sure that your assets are not

controlled by a disfavorable forced share

statutemake it in another state.

iv. Majority Rule – revocable trust created by the decedent spouse is included

in determining the surviving wife’s share.

1. Minority (Ohio) – revocable truss and other such nonprobate

transfers are not subject to the elective share.

v. NY law: “Net estate approach” – decedent’s net estate is subject to

elective share, including not probate transfers:

1. Gifts causa mortis; gifts made w/in one year of death, except those

exceeding the amount of gift tax exclusion ($13k); Savings

account (Totten) trust; joint bank accounts to extent of decedent’s

contribution; joint tenancies and tenancies in the entireties to

extent of decedent’s contribution; property payable on death to

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someone other than decedent; inter vivos trusts; pension plans; any

property decedent had general power of appointment enabling him

to appoint the property to whomever he pleases.

vi. Del law: “estate tax approach” – whether or not estate tax return is filed,

any property includible in decedent’s gross estate under federal estate tax,

is included in estate; subject to elective share.

1. Includes revocable trusts, POD contracts, and joint tenancies.

vii. The 1990 UPC:

1. Steps to determine the assets that are included in the election:

a. Determine the elective-share percentage of the augmented

estate UPC 2-202

i. This is determined by looking at the sliding scale

for the length of marriage

b. Determine the value of the augmented estate:

i. UPC 2-203 : value of the augmented estate is

determined by adding up the value of four

components:

1. Value of the decedent’s net probate estate

2. Value of the decedent’s nonprobate transfers

to others, consisting of will-substitute-type

inter vivos transfers made by the decedent to

others than the surviving spouse.

3. Value of the decedent’s nonprobate transfers

to the surviving spouse, consisting of will-

substitute-type inter vivos transfer made by

the decedent to the surviving spouse.

4. Value of the surviving spouse’s net assets at

the decedent’s death, plus the surviving

spouse’s nonprobate transfers to others

c. Determine the elective share amount

i. = Augmented amount * elective-share percentage.

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viii. Uniform Probate Code (1990, as amended by 2008)

1. §2-202 Elective Share: The surviving spouse of a decedent who

dies domiciled in this state has a right of election, under the

limitations and conditions stated in this Part, to take an elective

share amount equal to 50 percent of the value of maritalb property

portion of augmented estate.

a. Purpose of 1990 UPC was to redesign elective share and

augmented estate to achieve results closer to those of a

community property system. Based on % and length of

marriage.

b. 2008 amendments specifically - Elective share provides for

an equal split of marital property, but proportion of each

spouse’s property that is deemed marital, included in

augmented estate is phased in based on length of

marriage.

i. Also, supplemental elective share was increased to

$75k, subject to adjustment.

c. §2-2-2(d): law of the decedent’s domicile shall govern the

right to take an elective share of property located in another

state.

d.

2. §2-203 Composition of the Augmented Estate; Marital Property

section.

a. Value of augmented estate . . . consists of the sum of the

values of all property, whether real or personal, movable or

immovable, tangible or intangible, wherever situated, that

constitute:

i. The decedent’s net probate estate

ii. Decedent’s nonprobate transfers to others

iii. Decedent’s nonprobate transfers to the surviving

spouse; and

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iv. Surviving spouse’s property and nonprobate

transfers to others

b. Value of the marital property portion of the augmented

estate consists of the sum of values of the four components

of the augmented eEstate as determined under subsection

(a) multiplied by the following percentage:

i. < Year = 3%

ii. 2 < 3 years = 6%

iii. 3 but < 4 = 12%

iv. 4 but < 5 = 24%

v. 5 but < 6 = 30%

vi. 6 but < 7 = 36%

vii. 7 = 42%; 8 = 48%; 9 = 54%; 10 = 60%; 11 = 68%;

12 = 76%; 13 = 84%; 14 = 92%; 15 = 100%.

viii. Thus; 50% of appropriate % based on time x

(times) augmented estate = elective share

c. “Charges” against elective share

i. will substitutes are credits against the value of

elective share

ii. Spouse does not need to take life estate and can

elect to take share in fee simple, so not charged for

value of life estate.

ix. Once the amount of the elective share has been determined, when the

surviving spouse elects against the will, she is usually credited with the

value of all interests given her by the will. If the amount of the bequests

to the surviving spouse does not satisfy the elective share, the difference

must be made up either by pro rat contributions from all the other

beneficiaries or from the residuary estate.

c. Waiver

i. The typical waiver occurs in a premarital agreement. In it, the spouse

agrees to waive the survivor’s elective share.

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ii. Premarital agreements cannot waive benefits under ERISA.

iii. Uniform Premarital Agreement Act: recognizes the enforceability of

premarital agreements.

1. Every separate property state recognizes the validity of premarital

agreements, enforcing waiver of the right of election.

iv. UPC § 2-213 : Waiver of Right to Elect and of other rights

1. Says that the right of election of a surviving spouse and the rights

of the surviving spouse to homestead, exempt property and family

allowance may be waived, before or after marriage, by a written

contract signed by the surviving spouse.

a. However, the waiver may not be enforceable in certain

situations:

i. For example: when the waiver was not voluntary;

unconscionable.

2. This incorporates the standards under the Uniform Premarital

Agreement Act.

3. This has been adopted in nearly every state

v. Reece v. Elliot

1.

vi. Majority rule (old book): A duly executed antenuptial agreement is given

the same presumption of legality as any other K. It is presumed to be

valid in the absence of fraud. (In re Estate of Garbade)

1. Burden of proof: the party attacking the validity of the agreement

has the burden of coming forward with evidence of fraud.

2. There has to be full disclosure.

3. This prevents a spouse from later trying to renege on the

agreement.

vii. However, the above position can be shifted. The contestant of a prenup

agreement must establish a fact-based, particularized inequality before a

proponent of a prenup agreement suffers a shift in the burden to disprove

fraud or overreaching. (In re Grieff).

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1. In cases where there is a strong disparity in wealth the burden of

proof may shift.

2. Despite this case, courts are willing to enforce a one-sided

agreement if disclosure was adequate.

IV. Rights of Surviving Spouse in Community Property

a. Basic Information

i. This is in 8 states

ii. This is a community of acquests: H and W own the earnings and

acquisitions from earnings of both spouses during marriage in undivided

equal shares. Whatever is bought with earnings is community property.

All property that is not community property is the separate property of one

spouse or the other.

1. Separate property includes property acquired before marriage and

property acquired during marriage by gift or inheritance.

iii. Distribution when one spouse dies:

1. The deceased spouse can dispose of his half of the community

assets.

2. The surviving spouse owns the other half, which is not subject to

testamentary disposition by the deceased spouse.

3. So the living spouse gets ½ of the property.

V. Migrating Couples and Multistate Property Holdings

a. Moving from a Separate Property State to a Community Property State

i. When moving, this remains separate property unless it is co-mingled.

ii. The law of the state of domicile at date of death governs the disposition of

movable property.

1. Therefore, the surviving spouse may lose protection from the

elective share system provided by the state where the movable

property was acquired and is not protected by the system of

community property.

2. However, community property states have a remedy to this

problem:

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a. Quasi-community property: this is property owned by the H

or the W acquired while domiciled elsewhere which would

have been characterized as community property if the

couple had been domiciled in the community property state

when the property was acquired.

i. During the rest of the marriage, quasi-community

property is treated for most purposes as the separate

property of the acquiring spouse. However, upon

the death of the acquiring spouse, ½ of the quasi-

community property belongs to the surviving

spouse; generally the other half is subject to

testamentary disposition by the decedent.

b. Moving from a Community Property State to a Separate Property State

i. A change in domicile from a community property state to a separate

property state does not change the preexisting property rights of the H or

W.

ii. Community property continues to be community property when the couple

and the property move to a separate property state; unless the spouses have

agreed to convert it into separate property.

VI. Spouses Omitted from a Premarital Will

a. In re Estate of Prestie

b. (old book)A pretermitted statute applies when the testator fails to provide by will

for his surviving spouse who married the testator after the execution of the will

(Estate of Shannon).

i. A general provision in a will that the testator intentionally omitted all of

his heirs who were not specifically mentioned, intending thereby to

disinherit them, may not be construed as mentioning a subsequently

acquired spouse in such a way as to show an intention not to make

provisions for the spouse, where the testator at the time of the will was

executed had no spouse who could become an heir.

1. There are exceptions:

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a. Failure to provide for the spouse was intentional

b. Testator provided for the spouse outside of the will and the

intention was to be in lieu of a testamentary provision

c. Spouse waived the rights to share in the estate.

c. UPC § 2-301 : Entitlement of Spouse; Premarital Will

i. If a testator’s surviving spouse marries the testator after the will is created,

the surviving spouse is entitled to receive no less than the value of the

share she would have received if the testator had died intestate as to that

portion of the testator’s estate; to the extent that the decedent’s issue gets

the property, then the spouse doesn’t get it.

ii. This only applies to what the non-issue would get.

d. There is no pretermitted statute in OHthe spouse would get the elective share.

e. This is an area ripe for malpractice.

Rights of Issue Omitted from the Will

I. Protection from Intentional Omission

a. In most of the US, a child or other descendant has no statutory protection against

intentional disinheritance by a parent. There is no requirement that a testator

leave any property to a child.

b. However, a will disinheriting a child virtually invites a will contest.

II. Protection from Unintentional Omission

a. Pretermission statutes protect the unintentional disinheritance of descendants.

b. Only the probate estate applies to omitted children, not the augmented estate.

c. When a will is made before the birth of a child, but then there is a codicil to that

will after the child is born, if the child is not mentioned in the codicil, she is

disinherited. (Azcunce v. Estate of Azcunce).

i. However, the argument can be made that a codicil to a will has the effect

of republishing the prior will as to the date of the codicil if it goes against

the testator’s intent.

d. UPC § 2-302 : Omitted Children (pretermitted children)

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i. This statute determines the share of the omitted child (if the child was

born after the will).

1. If no child was living when the will was executed: receives a share

in the estate equal to the value the child would have received if the

testator had died intestate.

2. If one or more children were living when the will was executed:

a. Limited to the devises made to the testator’s then living

children under the will.

b. The devises to the children living at the time will be abated

ratably.

3. However, this rule does not apply if:

a. The omission was intentional

b. Testator provided for the after-born child outside of the

will.

c. Mistake – believed child dead

ii. If the children living at the time the will was executed are to receive an

unequal amount, the share of the later born child is proportion to the

amount between the other children.

iii. Problem on 533:

1. T executes will, two living children, A and B. Will devises $7500

to each child. T has another child, C, T dies. What is C entitled to

under 2-302?

a. $5k.

2. Suppose D devised $10k to A and $5k to B, what is C entitled to?

a. 1/3 of total, so taken proportionately from A and B.

iv. Gray v. Gray under this statute:

1. Under UPC 2-302 – Jack gets nothing because other children did

not receive anything in will.

e. Minority position:

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i. Some pretermitted statutes provide that operate in favor of children alive

when will was executed as well as afterborn children. Failure to name all

testator’s children invites challenge under the statute.

f. ORC § 2107.34 : this is a Missouri-type statute (a type of statute that is given to

the benefit of children not named or provided for in the will. It must appear from

the will itself that the omission of the child or other heir was intentional).

i. The omitted child gets the intestate share, after giving an amount to the

spouse.

ii. This is different than the UPC (here, the omitted child gets up to the

intestate share that a child would get).

iii. In OH, this only applies to the children—and not issue born to the

children.

g. Gray v. Gray – Strict interpretation of statute; add more

h. A testator who specifically names one heir in an effort to disinherit him has

referred to the issue of that heir for the purposes of the estate. (In re Estate of

Laura)

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TRUSTS: CREATION AND CHARACTERISTICS

Introduction

I. Background

a. Definition: A trust is a device whereby a trustee manages property as a fiduciary

for one or more beneficiaries.

i. UTC § 402 : Requirements for a trust:

1. Settlor has the capacity to create a trust

2. Intent to create a trust

3. Identifiable trust property (at some point of time)

4. One or more ascertainable beneficiaries (except charitable trusts,

honorary trusts, certain short-term non-charitable trusts).

5. The trustee has duties to perform

6. The same person is not the sole trustee and the sole beneficiary.

7. Written trust agreement only if required by the SoF.

ii. A trust can either be:

1. Inter vivos

2. Testamentary (set up through the terms of a will and still subject to

the review of probate).

b. Trusts are very useful and flexible.

c. Trusts can be used for asset protection to protect the assets from creditors.

d. Trusts help protect against will contests

e. Trusts are used to avoid probate

f. Can be used to save on estate taxes

g. Can choose the law that will govern the trust

h. 5 common uses:

i. revocable trust

ii. testamentary marital trust

iii. trust for incompetent person

iv. trust for minor

v. discretionary trust

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II. The Parties to a Trust

a. One person can wear one, two, or even all three hats of a trust.

a. However, Sole trustee cannot be sole beneficiary

b. The Settlor

i. This is the person who sets up the trust

ii. It can either be set up:

1. Inter vivos: created during the settlor’s life

a. Declaration of trust: settlor declares that he holds certain

property in trust

i. This is often used as a will substitute.

ii. The settlor is the trustee.

iii. This requires neither delivery nor a deed of gift.

iv. There just needs to be a manifestation of intent.

b. Deed of trust: settlor transfers property to another person as

trustee.

i. This occurs when the settlor is not the trustee.

ii. It must be delivered and accepted by the trustee.

2. Testamentary: created through a will

a. Trustee will be someone other than the settlor.

c. The Trustee

i. This person holds legal title to the property and usually can sell the trust

property and replace it with property thought more desirable.

1. Can be more than one person

2. Can be an individual or a corporation (individuals are cheaper but

may not know what they are doing. A corporation has more

experience).

3. May be the settlor or a third party, or the trustee may be a

beneficiary.

ii. A trust will not fail for the lack of a trustee.

iii. Held to a fiduciary standard of conduct (duty of loyalty, prudence and

subsidiary rules).

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iv. In order to have a trust, the trustee must have some duties to perform. If

the trustee has no duties at all, then there is no recognizable trust.

1. At this point, the beneficiaries hold legal title.

v. The law does not impose upon a person the office of trustee unless the

person accepts.

1. CL: once a person accepts the office of trustee, the person can be

released from liability only with consent of the beneficiaries or by

a court order.

2. UTC § 701 :

a. A person, by taking no action, is considered to have

disclaimed his right to be his trustee, but he has to protect

the assets until a trustee is determined.

3. UTC § 705 : modifies the rule to allow for resignation by the

trustee with 30 days notice to all interested parties.

4. If a person does not want to be a trustee, he has to safeguard the

assets until a trustee is determined.

vi. Selection of trustee:

1. This is very important

2. Need to make sure an individual is of age and competent.

3. Need someone who is honest, good judgment, experience and skill,

be aware of legal issues involved, impartial, longevity

(corporations usually last longer than an individual), proximity

(expense and familiarity of the assets), someone with lack of

distractions.

4. Individuals:

a. This is usually a trusted friend or relative of the settlor.

b. They are familiar, but most of them don’t have a lot of

experience.

c. Conflict of interest.

5. Corporations:

a. In the case of breach, they have deep pockets

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b. Systems in place to take care of the trust

c. Can be expensive

d. May not want to deal with family business.

d. The Beneficiaries

i. This person holds equitable title and is entitled to payments from the trust

income and sometimes from the trust corpus too.

ii. Either currently or in the future they will receive a benefit.

iii. They have a personal claim against the trustee for breach of trust.

iv. Personal creditors of the trustee, other than the trust beneficiaries, cannot

reach the trust property.

v. Beneficiaries can recover if the trustee wrongfully disposes of the trust

property.

vi. Thus the creation of a trust involves the creation of one or more equitable

future interests as well as a present interest in the income.

e. A Trust Compared with a Legal Life Estate

i. A legal life tenant has possession and control of the property, whereas a

trustee has legal title to the trust property. (both is a life estate)

ii. A life estate may be wanted since they are less costly. However, there are

lots of advantages of a trust and disadvantages in life estate:

1. Life tenant has no power to sell a fee simple unless such a power is

granted in the instrument (by creating a power of attorney).

2. In a life estate, any restraint on alienation is likely to be void.

3. During the lifetime of a life tenant, the property cannot be

mortgage (unless all the remaindermen consent—but you don’t

know who they all will be).

4. In a life estate, problem in renting because you don’t know how

long the life term is going to be.

5. In a life estate, waste actions by the remaindermen if the life

tenants don’t deal with the property properly.

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6. The life tenant has the duty to pay taxes and keep the property in

repair, but only to the extent the income from the property is

adequate to cover those charges.

7. When you give a life estate to someone, it is subject to the claims

of the creditors. But the value is very little. (In a trust, not subject

to creditors).

Creation of a Trust

I. Intent to Create a Trust

a.Introduction:

i. There has to be an intent to create a trust. UTC § 402: settlor first has to

have an intention to create a trust.

ii. Even though a trust is generally a contract, the capacity is the same as that

to make a will (so look at undue influence, etc).

b. CL: if a trust is created and there is no trustee (in a will), the executor becomes

the trustee. (Lux v. Lux).

a. Trust never fails for lack of trustee.

c.No specific words are necessary to create a trust. (Jimenez v. Lee).

d. Precatory language (like wish, hope or recommend) is not a valid trust.

e. An invalid gift (either no intent or delivery) can become a trust (declaration of

trust since that does not require delivery—so the settlor has to be the trustee).

i. In order to be a trust, there must be an intention to impose upon himself

the enforceable duties of a trust nature. Therefore, an invalid gift cannot

just become a trust because it fails as a gift. (Hebrew University

Association v. Nye I).

b. UTC § 407 : A trust need not be evidenced by a trust instrument, but the creation

of an oral trust may be established only by clear and convincing evidence.

f. Types of delivery: (The Hebrew University Association v. Nye II)

i. Constructive: gives the donee the means of obtaining the property (like a

key)

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ii. Symbolic: Gives the donee something symbolic of the object (like a deed).

iii. If there is delivery coupled with other acts which clearly show an intention

to give and to divest herself of any ownership of the property, that is

sufficient to complete the gift.

II. Necessity of Trust Property

a. A trust cannot exist without trust propertyres.

i. It doesn’t have to refer to just a piece of land or a chunk of money. It can

be any interest in property that can be transferred.

b. The language must be certain enough so that a court can declare that a trust exists.

(Unthank v. Rippstein).

c. UTC § 402 : There is no requirement for trust property

i. But UTC § 401 says that a trust does not become effective until property is

given to the trust.

d. There can be no trust because nothing was put into the trust, even though he had

an intent to create a trust. (Brainard v. Commissioner). Also is not valid

because it is only an oral trust.

e. If there is a possibility for the rights to ripen into reality, then there is a valid res.

(Speelman v. Pascal).

f. Differences between a trust and a debt:

i. Trust: Beneficiary has an equitable interest in the trust property. Debt: is

only a promise to pay.

ii. Trust: beneficiary receives the increase/decrease of the trust assets. Debt:

three is a finite amount owed.

iii. Trust: Creditors can’t get assets. Debt: Creditors can attach her interest.

iv. Trust: SOL continues to run until there has been an accounting. Debt:

different SOL.

v. The major factor distinguishing the two: whether the recipient of the funds

is entitled to use them as his own and commingle them with his own

monies.

III. Necessity of Trust Beneficiaries

a. UTC § 402 : this is the third requirement for a valid trust

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i. (b) and (c) allow the trustee to select from an indefinite pool.

b. There must be one or more ascertainable beneficiaries. This is because there has

to be a person to whom the trustee owes a fiduciary duty.

c. The beneficiaries of a private trust may be unborn or unascertained when the trust

is created.

d. If at the time the trust becomes effective the beneficiaries are too indefinite to be

ascertained, the attempted trust may fail for want of ascertainable beneficiaries.

e. The term “friends” is not sufficiently certain to create a beneficiary. (Clark v.

Campbell)

f. When a trust is invalid for lack of a beneficiary, the trustee holds it and it may be

disposed of through the residuary estate.

g. UTC § 409 : A trust may be created for a noncharitable purpose without a definite

ascertainable beneficiary and is only valid for 21 years.

h. An honorary trust is a trust that binds the conscience of the trustee, since there is

no beneficiary capable of enforcing the trust. (In re Searight’s Estate).

1. A trust set up for one specific animal is not valid, unless it is only an

honorary trust.

i. This is because pets are themselves property and hence ineligible to

take under a will. And pets do not qualify as a beneficiary whose

existence can validate a trust.

ii. However, if there is a trust for animals in general, it is valid as a

charitable trust.

2. Although the transferee is not under a legal obligation to carry out the

purpose, if she declines she is then said to hold the property upon a

resulting trust and the property must be returned to the settlor or to the

settlor’s successors. (Ex: if the woman who was to take care of the dog

refused, then she would not be entitled to the money).

3. An honorary trust can be set up for any purpose, as long as it is not

capricious.

4. Have to make sure the honorary trust does not violate RAP.

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5. UTC § 907 : if a trust is for a specific lawful noncharitable purpose or a

lawful noncharitable purpose and there is no definite ascertainable

beneficiary, the trust may only be performed for 21 years.

i. any money over and above what is reasonable to carry out the trust,

is given back to the settlor.

b. UTC § 408 : A trust may be created to provide for the care of an animal alive

during the settlor’s lifetime. The trust terminates upon the death of the

animal.

IV. Necessity of a Written Instrument

a. UTC 407 – permits evidence of oral trusts & property (I think)

b. An inter vivos oral declaration of trust of personal property is valid. However, the

SoF requires that any inter vivos trust of land to be in writing.

c. Oral Inter Vivos Trusts of Land

1. The oral creation of an inter vivos trust for land is not valid unless there is

a confidential relationship (such as parent-child). (Hieble v. Hieble).

2. If this occurs, then a constructive trust is created.

d. Oral Trusts for Disposition at Death

1. Statute of Wills requires a testamentary trust to be created by a will.

2. Secret trust: occurs when the will indicates no trust.

i. Courts allow admitting evidence of the promise for the purpose

preventing the person from unjustly enriching himself.

ii. Ex: A leaves a legacy to B absolute on its face, without anything in

the will indicating an intent to create a trust, a promise by B to A to

use the legacy for C would be enforceable by a constructive trust

imposed upon B.

3. Semisecret Trust: occurs when the will does not name a beneficiary but

does name a trustee.

i. Ex: A’s will indicates that B is to hold the legacy in trust but does

not identify the beneficiary.

ii. Since the will shows on its face an intent not to benefit B personally,

it is not necessary to admit evidence of B’s promise in order to

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prevent his unjust enrichment. Such evidence is excluded, and the

legacy to B fails.

iii. (Olliffe v. Wells).

4. Restatement of Trusts § 24: If somebody conveys property to a third

person which doesn’t comply with the SoF, the trustee can voluntarily

carry out, be forced to carry out if there has been substantial performance:

i. There is a constructive trust if there is a confidential relationship.

ii. Constructive trust hopes to avoid unjust enrichment.

Rights of the Beneficiaries to Distributions from the Trust

I. Introduction

a. Different types of trusts:

i. Mandatory Trust: the trustee must distribute all the income to the

beneficiaries.

ii. Discretionary Trust: the trustee has the discretion over payment of either

the income or the principal or both.

1. The discretion may be limited by an ascertainable support

standard. Or the trustee may be given wide discretion.

2. Discretionary trusts give more flexibility.

3. UTC § 814 : trustee shall exercise a discretionary power in good

faith in accordance with the trust.

II. Marsman v. Nasca (this case is very important) shows the beneficiaries rights under a

discretionary support trust.

a. RULE: There is as breach of fiduciary duty when the trustee had the duty to

actively find out what the needs were of the beneficiary and the trustee does not

do this.

i. When a trust says something like: the beneficiary is entitled to as much as

the trust that the trustees deem advisable for his comfortable support and

maintenancetrustee then has a duty to inquire into the needs and

circumstances of the beneficiary.

b. Normally, a beneficiary who should have received funds, but cannot receive them

because the assets have been sold, can pursue the trust assets.

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i. However, this rule does not apply when the person is a bona fide

purchaser for value.

c. When there is a clause for a discretionary distribution, trustee are likely to be very

conservative.

i. They are less likely to make distributions to a lifetime beneficiary.

1. Then if they are underpaid, they will bring a cause of action

against the trustee.

2. But if the beneficiary is overpaid, the remaidermen bring a cause

of action and there may not be any money left.

ii. Since the settlor will probably want the lifetime beneficiaries to get the

money (because it is usually the spouse and children), draft the trust so

that it says that it is your intention to prove for the spouse and children and

there is no liability for the trustee in distributing to them (unless done in

bad faith).

d. Exculpatory clause: excuses the trustee from liability except for willful neglect or

default.

i. CL: the clause is valid unless there is evidence of overreaching or

unfairness by the person drafting the document. has the burden to show

that it is not valid because it is overreaching.

ii. UTC § 1008 : The burden is on the trustee to show that there is no

overreaching.

1. The burden is presumed that an exculpatory term drafted or caused

to be drafted by a trustee is invalid as an abuse of fiduciary or

confidential relationship.

2. Then the burden shifts to show that there was overreaching and

unfairness.

3. Factors to consider to determine if the clause is fair (this can also

apply to the CL rule—only the person who has the burden

switches):

a. Fair and communicated to the settlor

b. To determine if it is fair:

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i. Whether the settlor received independent advice

ii. Relationship between settlor and trustee

Rights of the Beneficiary’s Creditors

I. Introduction

a. Both the discretionary trust and the spendthrift trust makes the property available to

the beneficiary, but not to the beneficiary’s creditors.

b. UTC § 501 : As long as it is not a spendthrift provision, the court may authorize a

creditor to reach the beneficiary’s interest by attachment.

c. UTC § 507 : Trust property is not subject to personal obligations of the trustee, even

if the trustee becomes insolvent or bankrupt.

II. Discretionary Trusts

a. RULE: no creditor has the ability to force distribution of the trust this is because no

beneficiary has the right to force a distribution.

b. A creditor can attach the distribution of a trust, if and when it is made (Hamilton v.

Drogo).

i. Exception: if there is an ascertainable standard (such as giving the trustee

the ability to make distributions for education), creditors cannot attach.

Unless it is for necessities.

1. Exception: Spouse and children can attach to get child support and

alimony (The UTC says that spouse and children are creditors that

can attach the beneficiary’s interests).

c. UTC § 504 : Discretionary Trusts

i. This eliminates the distinction between purely discretionary trusts and trusts

with an ascertainable standard.

ii. Creditors cannot attach a beneficiary’s interest in a trust and a creditor

cannot force the distribution.

1. Exception: spouse and children (as ordered by the court).

iii. It does not matter if there is a spendthrift provision.

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d. Minority: Restatement of Trusts: a creditor of a beneficiary is entitled to receive or

attach any distributions the trustee makes or is required to make in the exercise of

that discretion.

i. But you have to take into consideration what is in the best interest of the

beneficiary.

III. Spendthrift Trusts

a. Introduction:

i. This is created by imposing a disabling restraint upon the beneficiaries and

their creditors.

ii. A beneficiary of a spendthrift trust cannot voluntarily alienate her interest.

1. This is an exception to the rule that there cannot be a restraint on

alienation.

iii. Creditors cannot reach the interest in the trust.

1. Even if there is a mandatory distribution, creditors cannot reach it.

iv. There are two exceptions:

1. Where the beneficiary is the settlor and the trust is not a special

needs trust

2. Where the assets were fraudulently transferred to the trust.

v. This is recognized in almost all states.

vi. The provision needs to be expressly stated that it is a spendthrift provision.

vii. Ex: T devises property to X in trust to pay the income to A for life and upon

A’s death to distribute the property to A’s children. A clause in the trust

provides that A may not transfer her life estate, and it may not be reached by

A’s creditors. By this trust A is given a stream of income that A cannot

alienate and her creditors cannot reach.

b. Tort creditors: Statutes to do intend to shield assets from tort creditors (Scheffel v.

Krueger).

c. When public policy considerations outweigh the right of the beneficiary not to have

his interest attached by creditors, a creditor may reach the assets. Such a case

would be when a child is trying to receive child support. (Shelley v. Shelley).

d. UTC §§ 502, 503 : Spendthrift trusts

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i. 502: Valid only if it restrains both voluntary and involuntary transfer of a

beneficiary’s interest.

1. Provision must include the words “spendthrift trust”

2. A beneficiary may not transfer an interest in a trust in violation of a

valid spendthrift provision, and a creditor may not reach the

interest or a distribution by the trustee before its receipt by the

beneficiary.

ii. 503: allows a former spouse or child to receive money upon court order.

1. This section also says that a spendthrift provision is unenforceable

against a claim of the State or the United States.

b. If there is no specific spendthrift provision, the creditor can always attach the

mandatory income.

c. Creditor’s view of spendthrift v. discretionary trusts

i. Creditors would prefer a discretionary trust because they can attach the

assets once they have been distributed.

ii. However, if you are a beneficiary you would prefer a spendthrift trust.

d. ERISA:

i. Benefits aren’t assignable and creditors cannot attach them.

ii. Benefits may be reached for child support and alimony.

e. A beneficiary’s interest in a spendthrift trust cannot be reached by creditors in

bankruptcy.

IV. Self-Settled Asset Protection Trusts

a. Introduction:

i. A person cannot shield his assets from creditors by placing them in a trust

for his own benefit.

1. But the exception is a self-settled asset protection trust.

ii. Creditors can reach the maximum amount that the trustee could pay the

settlor or apply for the setttlor’s behalf.

iii. UTC § 505 : Whether or not the terms of a trust contain a spendthrift

provision, the following rules apply:

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1. If the trust is irrevocable, the creditor can attach anything that the

settlor could receive a payment from.

2. The property of a revocable trust is subject to claims of the settlor’s

creditors.

iv. However, A self-settled asset protection trust insulates the trust fund from

the settlor’s creditors.

1. Several jurisdictions have now enacted statutes validating these

trusts.

b. There is no protection against creditors when you have a self-settled trust and you

are the trust protector because creditors can reach what the settlor could get paid out

of (FTC v. Affordable Media).

i. If the settlor still has control, then the creditor can reach the account.

c. If there is a way for the settlor to retain control, then the off-shore account is

invalid. (In re Lawrence).

d. Under fraudulent conveyance law: a transfer to an off-shore account to evade

creditors is an actual fraud and an attorney cannot be involved in setting up an

account in this situation.

e. Trusts for the State-Supported (important because it’s going to come up a lot in

practice)

i. A person qualifies for Medicaid and public support benefits only if the

individual has financial resources less than a few thousand dollars.

ii. Occurs when someone tries to protect assets from Medicaid claims and

provide support for dependents who are accepting state assistance.

iii. Self-settled trusts:

1. A trust is created by the individual applicant if assets of the

individual were used to form all or part of the corpus of the trust and

the trust was established by the individual, by the individual’s souse,

or by a person or court with legal authority to act on behalf of, or on

request of, the individual or the individual’s spouse.

2. If the trust is revocable by the individual, the corpus and all income

of the trust are considered resources available to the individual.

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3. The state, in determining what assets go toward eligibility, can

include all assets that the settlor can have access to right away.

4. If distributions are even purely discretionary, if it is self-settled, the

entire trust can be accounted.

5. One thing that can be done (but not for the purpose of avoiding

Medicaid eligibility), if none of the principal can go to the settlor but

all of the income ca, that money does not count.

a. There is a 5 year waiting period

6. Exceptions:

a. If set up for a disabled individual (by themselves or a

guardian) and provides only supplemental needs (needs that

Medicaid can’t cover), and once the person dies the money

goes to the state to settle accounts, then this is allowed.

b. A discretionary trust created by the will of one spouse for the

benefit of the surviving spouse is not deemed a resource

available to the surviving spouse.

iv. Trusts established by 3rd Parties:

1. Trust income or principal is considered available both when actually

available and when the application or recipient has a legal interest in

a liquidated sum and has the legal ability to make such sum available

for support and maintenance.

2. Assets will not be accountable assets so long as the beneficiary

themselves cannot force a distribution.

a. This is a different rule than a normal creditor.

b. Never mention the word “support” or any other ascertainable

standards that show that the distribution can be forced.

3. If a mandatory trust is created, wherein the beneficiary has the legal

right to income, such income is treated as a resources available to the

beneficiary.

4. CL: a spendthrift trust is not valid against the state because the state

is furnishing necessities to the institutionalized beneficiary.

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Modification and Termination of Trusts

I. Introduction

a. Rule for an irrevocable trust: if the settlor and all the beneficiaries consent, an

irrevocable trust may be modified or terminated.

i. Of course, this most occur while the settlor is still living

b. Rule for a revocable trust: it can always be amended by the settlor.

c. When the settlor is dead:

i. Claflin Doctrinestill followed by most states

1. A trust cannot be terminated or modified prior to the time fixed for

termination, even if all the beneficiaries consent, if termination or

modification would be contrary to a material purpose of the settlor.

2. This is because courts want to carry out the intent of the testator

because they have a right to dispose of their property as they please.

d. Irrevocable trusts have proved difficult to amend or terminate without the settlor’s

consent, something that is hard to obtain from the settlor of a testamentary trust.

II. Modification

a. Where the purposes for which a trust has been created have been accomplished and

all of the beneficiaries are sui juris, a court will, on the application of all the

beneficiaries or of one possession the entire beneficial interest, declare a

termination of the trust. (In re Trust of Stuchell).

i. This only applies to administrative changes—not dispositive terms.

b. Equitable Deviation: Changes can be made to administrative or distributive

provisions if: (1) circumstances have changed since trust creation; and (2) the

modification or deviation will further the purpose of the trust. (In re Riddell)

c. UTC § 412 : Modification or Termination Because of Unanticipated Circumstances

or Inability to Administer Trust Effectively.

i. Can modify administrative or dispositive terms

ii. In accordance with the settlor’s probable intent

iii. If under circumstances that were not anticipated

iv. Or, Under (b): only have to show that it would be impractical or wasteful to

continue on with the terms of the trust.

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d. Courts have been liberal in permitting trustees to deviate from administrative

directions in the trusts, because of change of circumstances, than they have been in

permitting modification of dispositive provisions.

i. Ex: In re Pulitzer: Court said that even though the trust said that the asset

(shares in newspapers) could not be sold, this was administrative, and

because of the change of circumstances, it could be sold because the trust

property was in jeopardy.

e. Restatement: This goes farther than the UTC and says that a trust can be modified if

unanticipated events occur or it is wasteful.

i. But the trust can only be changed.

ii. Places the burden on the trustee and makes the trustee liable if the trustee

knows, or should have known, of circumstances to change the trust.

f. Decanting

i. Where trustee has a discretionary power to distribute the trust corpus to a

beneficiary, may be possible to form a new trust that has updated terms or

that is subject to the terms of the other state.

g. Trust Protectors

i. This is a third person, other than the trustee, who can be given powers to

affect certain powers of the trust.

ii. This allows for more flexibility.

iii. It can change the powers of the trustee, especially if there are unexpected

changes.

iv. There are still fiduciary duties and it is harder to make dispositive changes.

v. Settors frequently hesitate to give someone this type of power.

1. This is because there is the possibility of them changing the

dispositive provisions the settlor had worked hard on.

vi. They are becoming more popular because the settlor cannot foresee all of

the problems or opportunities that the family might face after the gift is

made.

vii. UTC § 808: ratifies the use of trust protectors.

III. Termination

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a. Applies the same rules as the modification of trusts.

i. Claflin doctrine applies.

b. Cannot be terminated if it would be contrary to the purposes of the settlor.

c. Situations where a trust usually cannot be terminated:

i. It is a spendthrift trust

ii. If the beneficiary is not to receive the principal until attaining a specified

age

iii. If it is a discretionary trust

iv. If the trust is for support of the beneficiary.

d. A trust will not be terminated if there is still a material purpose left, even though

one purpose (such as education) has been fulfilled. (In re Estate of Brown).

e. Some states, including OH, allow that if all beneficiaries consent, regardless of

whether there is a material purpose left, the trust can be terminated or modified.

i. All conceivable representatives have to be interested

ii. Guardian ad litem for unborn children.

1. They may not agree to the termination because they are concerned

about their own liability.

f. Generally, a trust cannot be terminated or modified even with the consent of all

beneficiaries, if the termination or modification is contrary to a material purpose of

the settlor. However, there are exceptions in states enacting the UTC. UTC

provisions for modification and termination of trusts:

i. UTC § 410 : A trust terminates to the extent the trust is revoked or expires

pursuant to its terms, no purpose of the trust remains to be achieved, or the

purposes of the trust have become unlawful, contrary to public policy, or

impossible to achieve.

ii. UTC § 411: if the settlor and all beneficiaries consent, the trust can be

modified or terminated, even if it is inconsistent with a material purpose of

the trust.

iii. If all the beneficiaries consent and the settlor is deceased, the trust can be

terminated if the material purpose has been fulfilled.

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iv. UTC § 412 : can be modified if there are unanticipated events. To the extent

possible, the modification must be made in accordance with the settlor’s

probable intent.

v. UTC § 414 : termination for un-economic trusts

1. If the trust is less than $100K, beneficiaries can petition for the

termination of the trust because it is not sustainable.

vi. UTC § 415 : reformed for mistakes

1. Similar to UPC for wills

vii. UTC § 416 : allows modifications for settlor’s tax objectives (to avoid

adverse tax consequences)

1. This is because tax laws change.

g. Revocable Versus Irrevocable Trusts

i. In most states, a trust created by a written instrument is irrevocable unless

there is an express or implied provision that the settlor reserves the power to

revoke.

ii. Minority rule: a trust is revocable unless declared to be irrevocable.

IV. Trustee Removal

a. This is a remedy as opposed to a modification of a trust

b. UTC § 706 same as CL. This applies when:

i. if the trustee has repeatedly breached fiduciary obligations.

ii. Lack of cooperation among cotrustees that substantially impairs the

administration of the trust

iii. Persistent failure of the trustee to administer the trust effectively.

iv. Substantial change in circumstances and requested by all beneficiaries.

1. OH does not include this provision.

c. It is difficult to remove a trustee if they are faithfully carrying out their obligations.

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BUILDING FLEXIBILITY INTO TRUSTS: POWERS OF APPOINTMENT

Introduction

I. Types of Powers

a. Power of appointment right to designate the new owner of property.

I. These are powers that give the beneficiaries the ability to choose who next will

take the beneficial interest in the property subject to the power.

II. These are routinely found in trusts because through them the settlor is able to

postpone or delegate decisions about who should receive a future interest in the

trust.

III. This allows for greater flexibility with changing circumstances in the future.

b. Donorperson who creates the power

c. Doneeperson who holds the power

d. Objectspersons in whose favor the power may be exercised

e. Appointeethe person when the power is exercised in favor of him

f. Takers in default of appointmentthe people who take if the donee fails to exercise the

power.

g. General powera power which is exercisable in favor of the decedent [donee], his

estate, his creditors, or the creditors of his estate.

I. Ex: T devises property to X in trust to pay the income to A for life, or until such

time as A appoints, and to distribute the principal to such person or persons as A

shall appoint either by deed during A’s lifetime or by will; if A does not

exercise the power of appointment, at A’s death X is to distribute the principal

to B. T is the donor. A is the donee of a general power of appointment

exercisable by deed or will. B is the taker in default of appointment.

h. Special power a power not exercisable in favor of the donee, his estate, his creditors,

or the creditors of his estate.

I. This can include any other individuals.

II. The most common situation is the power to appoint among the issue of the

donee.

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III. Ex: T devises property to X in trust to pay the income to A for life, and on A’s

death to distribute the principal to such one or more of A’s issue as A shall

appoint by will; if A does not exercise the power of appointment, at A’s death X

is to distribute the principal to A’s then living issue, such issue to take in per

stirpes.

i. Testamentary powerwhen the power is exercisable only be will

j. Lifetime powerwhen the power is exercisable during life.

k. A power can be created in anyone.

II. Does the Appointive Property Belong to the Donor or the Donee?

a. CL: If a person has a general power of appointment that he has not yet exercised, he has

no title to the property and it cannot be attached by creditors. (Irwin Union Bank &

Trust v. Long).

I. A power of appointment is better than a spendthrift trust because a spendthrift

has exceptions for children and spouse.

b. UTC § 505(b): Creditors of a donee of a general power presently exercisable are

permitted to reach the appointive property.

I. This is treated the same as a revocable trust.

c. It has been held that where a life beneficiary of a trust has a special inter vivos power to

appoint trust principal to his descendants, children of the donee who have a support

order may reach the trust principal even though the trust contains a spendthrift clause.

I. Majority: when there is a general power of appointment the children can attach

the assets if their parent holds the power.

II. Minority: If there is a special power the children can attach if they are

permissible appointees when their parent holds the power.

Creation of a Power of Appointment

I. Intent to Create a Power

a. A donor must have the intention to create a power, like a trust

b. No special words are required

c. Precatory words (I wish), just like in the trust context, are not enforceable because they

only express desires.

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d. A power of appointment confers discretion on the donee, who may choose to exercise

the power or not, and it is to be distinguished from a direct nondiscretionary disposition

by the donor.

I. Ex: Aunt Fanny executes a will in 2001 bequeathing her tangible personal

property ‘to my niece Wendy, to dispose of in accordance with a letter

addressed to Wendy dated Jan 4, 2000, which is in my safe-deposit box.’ Aunt

Fanny has incorporated the letter by reference and the tangible personal

property must be distributed in accordance therewith. Wendy does not have a

power of appointment.

II. Power to Consume

a. This means the ability to withdraw from a general power of appointment.

b. Rule of repugnancy is followed by most states: where there is a grant, devise or bequest

to one in general terms only, expressly neither fee nor life estate, and there is a

subsequent limitation over what remains at the first taker’s death, if there is also given

to the first taker an unlimited and unrestricted power of absolute disposal, express or

implied, the grant, devise, or bequest to the first taker is construed to pass a fee. The

attempted limitation over, following a gift which is in fee with full power of disposition

and alienation, is void…the purported gift over merely being an invalid repugnancy.

(Sterner v. Nelson).

I. Short of the matter: If there is a fee simple absolute the person can do with the

property whatever she wishes.

Release of a Power of Appointment

I. Introduction

a. The donor of a life estate coupled with a testamentary power usually intends to protect

the donee from an indiscreet or unwise exercise of the power during life: that the power

is testamentary ensures that the donee is free to exercise discretion up until the moment

of death.

i. Hence, the donee of a testamentary power of appointment cannot enter into an

enforceable K to make an appointment in the future.

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b. CL: However, a power of appointment can be released. If a power is released, the

uncertainty it creates as to the ultimate takers is removed.

i. It goes the default takers

ii. Ex: A separation agreement provision is too strained to be held as the same as a

release of the power of appointment (Seidel v. Werner).

Exercise of a Power of Appointment

I. Exercise by Residuary Clause in Donee’s Will

a. Majority: residuary power will exercise neither specific nor general power of

appointment without express reference to the power of appointment.

I. This prevents an unintentional exercise of the power of appointment.

b. Minority: The residuary clause of a will should be presumed to have exercised the

power of appointment (Beals v. State Bank & Trust).

c. UPC §§ 2-608, 2-704

I. 2-608: A general residuary clause in a will expresses an intention to exercise a

power of appointment held by the testator only if:

1. (i): the power is a general power and the creating instrument does not

contain a gift if the power is not exercised and

2. (ii): the testator’s will manifests an intention to include the property

subject to the power.

II. 2-704: if a governing instrument creating a power of appointment expressly

requires that the power be exercised by a reference to the power or its source, it

is presumed that the donor’s intention was to prevent an inadvertent exercise of

the power.

d. An antilapse statute does not apply in these situations.

e. Blending clause: The mere use of a blending clause (such as “A gets the residuary and

all property over which I had a power of appointment”) is ineffective to exercise the

power because it does not make a specific reference.

II. Limitations on Exercise of a Special Power

a. A donee of a general power of appointment can appoint outright or in further trust and

can create new powers of appointment.

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b. A donee of a special power may not be able to appoint in further trust, meaning that the

donee would have to appoint the property outright to the objects of the power, unless

the creating instrument expressly permits appointment to a trust for the benefit of the

objects of the power.

c. Two types of special powers:

I. Exclusive: donee can exclude one or more objects of the power

II. Nonexclusive: donee must appoint some amount to each permissible object.

III. Fraud on a Special Power

a. An appointment in favor of a person who is not an object of the power is invalid.

b. An appointment to an object for the purpose of circumventing the limitation on the

power is a fraud on the power and is void to the extent it is motivated by such purpose.

IV. Ineffective Exercise of a Power

a. When the donee intends to exercise a power of appointment, but the exercise is

ineffective for some reason, it may be possible to carry out the donee’s intent through

the doctrines of allocation and of capture.

b. Allocation of Assets

I. Doctrine of allocation: applies when appointive assets and assets owned by the

donee are disposed of under a common dispositive instrument (usually the

donee’s will).

1. Its purpose is to try to allocate these assets to different provisions under

the donee’s will to give effect to the donee’s intent when the

appointment assets cannot go where the donee intended.

2. RULE: if the donee blends both the appointive property and the donee’s

own property in a common disposition, the blended property is allocated

to the various instruments in such a away as to increase the effectiveness

of the disposition.

3. This applies to general and specific powers.

c. SOL – even if untimely a WILL with effecting power of appointment past SOL will be

valid to fultill intent.

d. Capture

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I. When the donee of a power makes an ineffective appointment, and the donee’s

intent cannot be given effect through allocation of assets, the general rule is that

the property passes in default of appointment or to the donor’s estate.

1. The exception to this rule is capture which captures the property for the

donee’s estate.

II. RULE: occurs when the donee of a general power manifests an intent to assume

control of the appointive property for all purposes and not merely for the limited

purpose of giving effect to the expressed appointment.

Failure to Exercise a Power of Appointment

I. Introduction:

a. If the donee of a general power fails to exercise it, the appointment property passes in

default of appointment. If there is no gift in default of appointment, the property

reverts to the donor’s estate.

b. If the donee of a special power fails to exercise it, and there is no gift in default of

appointment, the appointive property may—if the objects are a defined limited class—

pass to the objects of the power.

II. Loring v. Marshall

a. The court in this case said that if there is a gift in default, then it goes to the takers in

default if there is a failure to exercise the power.

i. If there is no gift in default and it is a general powergoes to the donor’s estate.

ii. If it’s a specific powergoes to the objects of the power.

b. However, other courts say that it is imperative that the power be exercised.

i. A special power is imperative when the creating instrument manifests an intent

that the permissible appointees be benefited even if the donee fails to exercise

the power. If a special power is imperative, then donee must exercise it or the

court will divide the assets equally among the potential appointees.

ii. In most cases it does not matter if the court adopts an implied gift in default

theory or an imperative power theory.

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CONSTRUNCTION OF TRUSTS: FUTURE INTERSTS

Introduction

I. Whenever a life estate is given, a future interest is also created.

Classification of Future Interests

I. Types of Future Interests

a. Interests in the transferor:

I. Reversions

II. Possibility of Reverter

III. Right of entry

b. Interests in the trasnferee:

I. Vested remainder

II. Contingent remainder

III. Executory Interest

c. Future interest: the person who holds one of them is not entitled to present possession

or enjoyment of the property but may or will become entitled to possession in the

future.

I. But future interests are presently existing interests.

II. A person who has a future interest has present rights and liabilities.

II. Future Interests in the Transferor

a. Reversionmost important

I. A reversion is the interest remaining in the grantor, or in the successor in

interest of a testator, who transfers a vested estate of a less quantum than that of

the vested estate which he has.

II. If the reversion is retained by a will, it is retained in the testator’s heirs who are

substituted by law for the dead transferor.

III. It is never created; it is a retained interest that arises by operation of law when

the transferor has conveyed away a lesser estate than the transferor had.

IV. These are vested interests.

b. Possibility of Reverter

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I. Future interest that remains in the grantor who conveys a fee simple

determinable.

II. It becomes possessory automatically upon expiration of the determinable fee.

III. Almost never encountered in a trust.

c. Right of Entry

I. Future interest that is retained by the grantor who conveys a fee simple subject

to a condition subsequent.

II. It does not automatically occur—TO has the option to exercise it.

III. Almost never encountered in a trust.

III. Future Interests in Transferees

a. Remainders

I. A remainder is a future interest in a transferee that will become possessory, if at

all, upon the expiration of all prior interests simultaneously created.

1. A remainderman waits patiently until the preceding estate expires, and

then, if the remainder is not contingent, the remainderman is entitled to

possession.

2. It must only be possible, not necessarily certain, that the future interest

will become possessory upon the termination of the preceding estate.

II. Remainders are either vested or contingent.

1. Vested if:

a. (1) it is given to a presently ascertained person and

b. (2) is not subject to a condition precedent (other than the

termination of the preceding estates).

c. Ex: O conveys a fund in trust “For A for life, and then to B.”

2. Contingent if:

a. (1): it is not given to a presently ascertained person or

b. (2) it is subject to a condition precedent.

c. Ex: O conveys a fund in trust “For A for life, and then to B if B

survives A.” B has a remainder, for it is possible (but not

certain) that B will take the property upon A’s death.

III. Vested Remainder Subject to Partial Divestment:

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1. This occurs when a remainder is given to a class of persons, some but

not all of whom are ascertained, and the remainder is not subject to a

condition precedent.

2. Ex: O conveys a fund in trust ‘For A for life, and then to A’s children.’

If A has no children at the time of the conveyance, the remainder is

contingent because the takers are unascertained. On the other hand, if A

has a child (B), B has a vested remainder subject to partial divestment.

If A has any more children, B’s share will be diminished. The class

remains open until A dies.

3. A class gift is not vested subject to partial divestment if it is subject to a

condition precedent.

IV. Vested Remainder Subject to Divestment

1. A remainder given to an ascertained person, with a proviso that the

remainder will be divested if a condition subsequent happens.

2. This usually occurs when the remainder is given, and then words of

divestment are added.

3. Distinction between this and a contingent remainder:

a. Ex: O conveys a fund in trust “for A for life, then to B if B

survives A, and if B does not survive A, to C.” B has a

contingent remainder because the words “if B survives A” are

incorporated into B’s gift. C has an alternative contingent

remainder.

b. Ex: O conveys a fund in trust “for A for life, then to B, but if B

does not survive A, then C.” B has a vested remainder subject to

divestment by C’s executory interest. There is a condition

subsequent to B’s gift introducing the divesting gift over to C.

b. Executory Interests

I. This differs from a remainder because it is a divesting interest.

1. A remainder never divests a preceding estate prior to its expiration.

II. An executory interest that may divest another transferee if a specified event

happens is called a shifting executory interest because, if the event happens, the

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exeturory interest will shift the property from one transferee to another

transferee.

III. An executory interest that may divest the transferor in the future if a specified

event happens is called a springing executory interest because, if the event

happens, the property will spring out from the transferor to the transferee.

IV. Usually occur in 2 situations:

1. Executory interest divesting a possessory fee simple upon an uncertain

event

a. Ex: O conveys Blackacre “to A, but if A dies at any time without

issue surviving her, to B.” A has a fee simple subject to

divestment by B’s shifting executory interest. B’s executory

interest is subject to a condition precedent and is not certain to

become possessory.

2. Executory interest divesting a vested remainder

a. Ex: O conveys a fund in trust “For A for life, and on A’s death to

B, but if B is not then living, to C.” B has a vested remainder in

fee simple subject to divestment by C’s shifting executory

interest. C’s executory interest is subject to a condition

precedent and is not certain to become possessory.

V. Executory interests are treated the same as contingent remainders.

Construction of Trust Instruments

I. Preference for Vested Interests there is a strong preference in the law of trusts for vested

remainders and not contingent remainders (partly because a vested remainder is not subject to

RAP).

a. Acceleration into Possession

i. CL: vested remainders accelerate into possession when the preceding estate

ends.

ii. CL: a contingent remainder does not accelerate because the remaindermen are

not entitled to possession until they are all ascertained and any condition

precedent has occurred.

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iii. Modern Law: Renunciation statutes: occurs when a person disclaims the share

of the property he is entitled to receive. (In re Estate of Gilbert).

1. When a person disclaims, it looks as though that person has predeceased

the person that set up the trust.

2. If the person had issue when it was disclaimed, the property would

transfer to the issue.

3. However, if the person who disclaimed had later born children: the class

would already be closed because he had already disclaimed and later

born children would not be entitled to the estate.

4. Under the UPC: there is no limit on the disclaimer and all issue would

be treated as having predeceased the testator.

5. A disclaimer is not effective if you cut off other family member’s

children.

b. Transferability

i. At CL, vested remainders, including defeasibly vested ones, were transferable

inter vivos.

1. A contingent remainder and an executory interest were not transferable.

2. However, today, only 9 states follow the CL rule.

ii. Modern: vested remainders, contingent remainders and executors interests are

transferable.

iii. Future interests in a trust, however, may still be made inalienable by a

spendthrift clause.

iv. Reversions, remainders, and executory interests are descendible and deviseable

at death in the same manner as possessory interests.

v. A future interest contingent upon surviving to the time of possession is not

transferable at death.

c. Requiring Survival to Time of Possession

i. CL: survival is not an implied condition of the gift. There is no requirement

that a remainderman live to the time of possession.

1. If the remainderman dies before the life tenant, the remainder passes to

the remainderman’s estate.

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2. This is a rule of construction, so the testator may expressly require

survival.

ii. A vested remainder in a trust passes to the estate of the remainderman at his

death unless the instrument provides expressly that the remainder is divested by

his death. (First National Bank of Bar Harbor v. Anthony).

1. Courts do not imply survival requirements in gifts to single-generational

classes, such as children or brothers and sisters.

2. Exception to the general rule: there is a condition to survive when you

use the words issue, heirs or descendants.

a. The word issue may be ambiguous in draftingbe careful and

define it.

3. Lapse is not a trust concept, it is a wills concept.

iii. Clobberie’s Case3 rules are generally followed in the US:

1. A gift of the entire income, with principal payable at a designated age,

vests the principal

2. (The second rule is not followed in the US).

3. A bequest to A to be paid (or payable at) at a given age is vested subject

to postponed enjoyment.

II. Gifts to Classes

a. Introduction:

i. A class gift arises when the donor is group minded.

ii. Donor is thought to be group minded if she uses a class label describing the

beneficiaries.

b. Gifts of Income

i. General RULE: in the absence of a contrary intent expressed in the will or a

controlling statute stating otherwise, members of a class are joint tenants with

rights of survivorship (so if one dies, their interest does not pass to their

children. (This is a rule of construction).

ii. If the will manifests an intent contrary to a class gift with rights of survivorship

can overcome the general rule (Dewire v. Havelesdoes not follow the general

rule/rare).

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1. The Restatement would make the result in this case more common.

c. Gifts to Children, Issue, or Descendants

i. Restatement § 14.1: Provides that a gift to children usually excluded

grandchildren and more remote descendants, but may mean issue if coupled

with language of representation or other reasons for interpreting so.

ii. The law presumed that the word children means only the immediate offspring of

the parent and does not include grandchildren.

iii. Descendants and issue mean that there is a possibility of multi-generational

gifts.

d. Gifts to Heirs

i. CL: preference for early vesting. Absent evidence of the testator’s intent to the

contrary, the identity of “heirs” entitled to trust assets must be determined at the

date of the death of the named ancestor who predeceased the life tenant, not at

the date of the death of the life tenant. (Estate of Woodworth).

1. This is a rule of construction and can be overcome by intent.

ii. UPC § 2-711: Future Interests in “Heirs” and Like (changes the rule above)

1. If there is an intervening life estate, heirs are determined at the time of

possession (when the disposition takes effect).

2. The heirs are designated individuals entitled to estate under intestate

succession law of the designated individual’s domicile.

3. Most states that have adopted the UPC have not adopted this rule

because it turns the CL upside down.

iii. The Doctrine of Worthier Title

1. When a settlor transfers property in trust, with a life estate in the settlor

or in another, and purports to create a remainder in the settlor’s heirs, it

was conclusively presumed that the settlor intended to retain a reversion

in himself and not create a remainder in his heirs.

iv. The Rule in Shelley’s Case

1. If land were conveyed to a grantee for life, then to the grantee’s heirs,

the attempted creation of a contingent remainder in the heirs was not

recognized. Instead, the grantee took the remainder. The life estate

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merged into the remainder, giving the grantee a possessory fee simple

absolute.

e. The Class-Closing Rule

i. RULES:

1. A class will close whenever any member of the class is entitled to

possession and enjoyment of his share (Rule of Convenience)

2. No person both thereafter can share in the gift to the class

3. There is an exception to Rule 1 if no members of the class have been

born before T’s death.

4. If a class gift is postponed until a life tenant dies, the class will not close

until the time for taking possession.

ii. Lux v. Lux: applies the Rule of Convenience; the trust distribution can be made

when the youngest of the then living grandchildren has attained the age of 21.

When that milestone is reached, there is no longer any necessity to maintain the

trust to await the possible conception of additional members of the class.

iii. Gifts of Specific Sums

1. If a specific sum is given to each member of the class, the class closes at

the death of the testator regardless of whether any members of the class

are then alive.

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TRUST DURATION AND THE RULE AGAINST PERPUTITIES

Introduction

I. Summary of the Rule

a. “No interest [in real or personal property] is good unless it must vest, if at all, not later

than 21 years after some life in being at the creation of the interest.”

b. It does not apply to charitable trusts

c. Only applies to contingent interests.

i. Not given to a presently ascertained person or

ii. It is subject to a condition precedent.

d. It applies to contingent remainders and executory interests.

e. The purpose is to forbid dead hand control; and marketability of interest

f. The rule is a rule of proof: A contingent remainder is void from the outset, if it is not

certain that the interests will either vest or fail—one or the other must happen—within

21 years.

i. There must be a life that works to make the proof required. This person is

called the validating life.

g. When Lives in Being are Ascertained

i. The validating lives must be in being when the perpetuities period starts to run.

ii. Will: the validating life must be in being at the testator’s death

iii. Deed/Irrevocable trust: the validating life must be persons in being when the

deed or trust takes effect.

iv. Revocable inter vivos trust: the validating life must be in being when the power

to revoke terminates. (this usually occurs at the settlor’s death).

II. RAP Today

a. Most states have amended the rule somehow

b. OH: allows people to opt-out of RAP.

i. But it is still important to know because of wills and trusts drafted before the

state and wills and trusts that may come from other states.

III. Basic Rules

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a. RAP limits the time during which property can be subject to contingent interest to

“lives in being plus 21 years”

i. Once an interest is vested, RAP does not apply

b. Only talking about contingent interests created in transferees (not transferor)

c. A contingent interest is void from the outset if it will not vest or fail within “lives in

being plus 21 years.”

d. The validating life must be in being when the perpetuities period starts to run (when the

instrument takes effect).

i. If the instrument is revocable, then the validating lives are persons in being

when the power to revoke terminates (at the settlor’s death).

e. Any interest that violates RAP is struck and the valid interests are left in place (subject

to the doctrine of infections invalidity).

The Requirement of No Possibility of Remote Vesting

I. The Fertile Octogenarian

a. This usually appears in a two-generation trust.

b. This presumes that a woman, as long as she is living, is always fertile.

c. Some states have limited this by saying that a woman can only have a child until age 65

and eliminates the option of adoption.

II. The Unborn Widow

a. Where a conveyance refers to a designated person’s widow, there is a tendency to

assume that the reference to the widow must be the person’s current spouse. However,

this is not the case with RAP. The person could divorce and remarry. The designated

person may remarry someone who is not even alive when the future interested is

created.

b. Where a conveyance grants a future interest to a widow, there is a good chance the

future interest following the future interest to the unborn widow violates RAP.

Application of the Rule to Class Gifts

I. Basic Rules:

a. A class gift cannot be partially valid and partially void.

b. Question 1: When will the class close?

i. How to determine when a class will close:

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1. When will the class close physiologically (like when the parents die).

2. If the class does not close within perpetuities period physiologically,

when will the class close under the Rule of Convenience?

a. The class will close when any member of the class is entitled to

immediate possession and enjoyment.

ii. If it closes within the perpetuities period, go to Question 2.

iii. If it won’t close, it violates RAP

c. Question 2: When will all contingencies be resolved?

i. If the class will close And all contingencies will resolve (either vest or fail),

within the perpetuities periodthe gift is good

d. EXCEPTION to the class rule:

i. Gifts to subclasses

1. If the ultimate takers are not described as a single class but rather as a

group of subclasses, and if the share to which each separate subclass is

entitled will finally be determined within the period of the rule, the gifts

to the different subclasses are separable (American Security & Trust v.

Cramer).

2. The all or nothing rule applies to each subclass.

ii. Specific Sum to Each Class Member

1. The amount intended to be received by each member of the class is

ascertainable without reference to the number of persons in the class and

hence each gift is tested separately under the rule.

2. If the testator meant to include people grandchildren after his death, the

bequest would be valid for all the children born to the brother’s children

living at his death and invalid for all children of the brothers’ afterborn

children.

Application of the Rule to Powers of Appointment

I. General Powers Presently Exercisable

a. Validity of Power

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i. General powers presently exercisable are treated as absolute ownership for

purpose of RAP.

ii. To be a valid power, a general inter vivos power must become exercisable, or

fail, within the perpetuities period.

b. Validity of Exercise

i. The validity of an interest created by exercise of the power is determined on the

same basis as if the donee owned the property in fee simple.

ii. The perpetuities period begins to run when the power is exercised.

iii. An unconditional power to revoke in one person is treated the same as a general

power presently exercisable if the holder can exercise the power to revoke for

his own exclusive benefit.

II. General Testamentary Powers and Special Powers

a. A person holding one of these powers does not have an absolute and unlimited present

right to alienate the property, and consequently the donee is not treated as owner.

b. Validity of Power

i. In order for it to be valid, it must not be possible for the power to be exercised

beyond the perpetuities period.

ii. A discretionary power of distribution in a trustee is the equivalent of a special

power of appointment.

c. Validity of Exercise

i. Perpetuities period runs from creation of power

1. General testamentary powers are treated like special powers in

determining the validity of the appointment.

2. The perpetuities period applicable to the appointed interests runs form

the creation of the power.

ii. And look at the facts existing on the date of exercise to determine if it will vest

in perpetuities period (The second-look doctrine).

1. Any interest created by exercise of a testamentary or special power is

void unless it must vest, if at all, within 21 years after the death of some

life in being at the date the power was created.

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2. Definition: the exercise of the power is read back into the original

instrument, but facts existing on the date of exercise are taken into

account.

3. Second-look: wait and see how the donee actually appoints the property,

and then determine on the basis of facts existing at the date of the

appointment whether the appointive interests will vest within the period.

Saving Clauses

I. Estate planners incorporate these into trusts to take care of any possible violation of RAP.

a. It is not actually intended to govern the duration of the trust, except in the event some

overlooked violation of the Rule unexpectedly extends the trust too long.

b. It is simply to make sure that RAP is not violated.

II. Attorney Liability for Violating the Rule

a. It is malpractice for an attorney not to include this in a document.

III. Ex: In case of such termination, the then remaining principal and undistributed income of the

trust shall be distributed to the then income beneficiaries in the same proportions as they were,

at the time of termination, entitled to receive the income.

Perpetuities Reform

I. The Cy Pres or Reformation Doctrine

a. This occurs when a court reforms a trust that violates RAP so as to carry out the

testator’s intent within the perpetuities period.

b. This is only adopted in a few states.

c. A court might insert a savings clause.

d. The assumption that underpins these statutes is that the transferor intended the interest

to be valid, and thus instruments of transfer are to be construed to avoid the rule.

e. Ex: What if there is a gift that would be invalid because of the fertile octagenarian:

i. Court could say to her children then living

ii. Just give it to all the children.

II. The Wait-and-See Doctrine

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a. The essence of this reform is to wait and see what actually happens; an interest is not

invalidated because of what might happen.

b. This has been adopted in a majority of states

c. If there are unvested remainders at that tie, then the interests are void.

d. Disadvantages:

i. Inconveniences would arise from not knowing whether an interest was valid or

void

ii. Wait and see was a long step in extending the control of the dead hand

iii. Some critics believe the common law did not provide any measuring lives for a

wait and see period

e. Advantages:

i. It penalizes person who did not consult skilled lawyers, who avoid the rule by

savings clauses or other drafting devises.

f. Wait-and-See for the CL Perpetuities Period

i. This allows of the wait and see period to be for 21 years.

ii. This is what Ohio follows.

iii. If at the end of the waiting period, an interest has not vested, it shall be

reformed by a court to carry out the intention of the testator as far as possible in

the period.

iv. Ohio has authorized perpetual trusts, and thus made the wait and see statutes

inapplicable to most trusts.

g. The Uniform Statutory RAP

i. Uniform Statutory Rule Against Perpetuities §§ 1-5

1. This view creates an artificial wait and see period of 90 years.

2. Codified in UPC § 2-901: a nonvested property interest is valid unless…

the interest either vests or terminates within 90 years after its creation.

III. Abolition of RAP

a. A number of states have done this

b. Or some states, including OH, have an opt-out rule.

i. RAP is a default rule

1. If nothing is said in the trust, then RAP applies

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c. UTC allows modification of a trust for different reasons (like an unanticipated event).

d. Perpetual trusts: RAP does not prevent family dynasties.

i. The number of beneficiaries can multiply from generation to generation.

1. UTC grants such a power to trustees, letting them divide a trust into 2 or

more separate trusts without court approval, so long as notice is given to

the beneficiaries.

Other Durational Limits

I. The Rule Against Suspension of the Power of Alienation

a. The power of alienation is the power to convey title.

b. A suspension of the power of alienation over specified property occurs when no living

person, or living persons joined together, can convey an absolute fee.

c. This rule against suspension is directed against interests that make the property

inalienable.

d. If there is any possibility that the power of alienation will be suspended longer than any

lives in being plus 21 years, the interests causing such invalid suspension are void.

e. CL: no rule against suspension of the power of alienation apart from the rule against

remote vesting.

f. Modern law2 views

i. Wisconsin: the power of alienation is not suspended if the trustee has the power

to sell trust assets, making them alienable, or if a living person has an unlimited

power to terminate the trust

ii. New York: if a transfer is made in trust, the power of alienation is suspended if

EITHER the legal fee simple to the specific property held in trust cannot be

transferred OR the owners of all the equitable interests cannot convey an

equitable fee simple.

II. The Rule Against Accumulations of Wealth

a. This rule limits the period during which the settlor may direct the trustee to accumulate

and retain income in trust.

b. CL: a direction to accumulate income is good during the period of 21 years.

c. Modern: since this is measured by RAP, if the RAP law changes, this also changes.

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III. UTC § 409: If there is no ascertainable beneficiary, the trust can only last 21 years.

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CHARITABLE TRUSTS

Nature of Charitable Trusts

I. A charitable trust need not have an ascertainable beneficiary, but it must have a valid charitable

purpose.

II. Differences between charitable trusts and private trusts:

a. Beneficiaries

i. Private: an ascertainable beneficiary is required

ii. Charitable: an ascertainable beneficiary is not required

b. RAP

i. Private trusts subject to RAP.

ii. Charitable: not subject to RAP—meaning that they can continue forever.

c. Cy Presonly in a few states

i. Charitable trusts: this is an established principle of law adopted by the UTC.

1. It allows modification so long as there is a general charitable intent by

the settlor.

d. Enforcement of the Trust

i. Private: beneficiaries enforce it

ii. Charitable: State AG enforces it (but there is movement toward allowing the

settlor to enforce it as well)

e. Taxation

i. Private: subject to income tax to the trust or beneficiaries and estate tax

ii. Charitable: no tax

III. For a charitable trust to be valid, there has to be a valid charitable purpose:

a. UTC § 405(a) gives the CL charitable purposes, which are very broad

b. Categories:

i. Relief of poverty

ii. The advancement of education

iii. The advancement of religious

iv. The promotion of health

v. Governmental or municipal purposes

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vi. Other purposes the accomplishment of which is beneficial to the community

1. A trust is not charitable merely because it is for the benefit of a class of

persons. However, a trust may be deemed beneficial to the community

if it gives to poor school children at Christmas time. (Shenandoah

Valley National Bank v. Taylor).

c. Just because something is generous and benevolent for the community does not mean

that it has a charitable purpose.

d. It is immaterial whether the purpose is called “charitable” in the gift itself.

e. When drafting charitable gifts, always double check with the IRS because they have a

list of charities that exist, and you can find the proper name.

IV. Ways to Get Around Setting Up a Charitable Trust (Shaw’s Alphabet Trusts)

a. If you think that the trust that you set up may not meet the requirements of a charitable

trust (meaning, a charitable purpose) in one of the specific categories, then set it up in

trust with a trustee and someone else as a power of appointment. The power of

appointment is a non-fiduciary duty and this means that it can be set up for a non-

charitable purpose.

Modification of Charitable Trusts: Cy Pres

I. Definition:

a. Under this doctrine, if the settlor’s exact charitable purpose cannot be carried out, the

court may direct the application of the trust property to another charitable purpose that

approximates the settlor’s intention.

II. TEST (In re Neher)

a. First you have to determine that there is a general charitable intent.

i. If there is only a specific charitable intent, then cy pres cannot be applied.

b. If there is a general charitable intent, then the trust can be modified to carry out the

testator’s intent as much as possible.

III. Common v Modern Law:

a. CL: there was no presumption of general intent

b. UTC § 413 : allows for cy pres if a particular charitable purpose because: unlawful,

impracticable or wasteful.

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i. This shifts the burden to the party opposing cy pres

ii. Under UTC, there is a presumption of general charitable intent.

IV. Administrative Deviation – Court will permit deviation in a private or charitable trust when

compliance would defeat or substantially impair the accomplishment of the purposes of the

trust on account of changed circumstances not anticipated by the donor.

a. Focuses on rules of administration

b. UTC § 412 – Court may modify administrative or dispositive terms of the trust

i. **dispositive – modification permitted if owing to changed circumstances, such

deviation would further the purposes of the trust.

V. Ex: T devises property to X as trustee to pay the income to his niece A and, on A’s death, to

pay the principal to the dental school that T had graduated from 50 years earlier. T dies. Two

years later, while A is still alive, the dental school is closed and its resources are absorbed by a

medical school and hospital of the same university. Eight years later, A dies.

a. Have to determine if T’s gift to the university if a general or specific charitable gift.

b. If it is specific, then it can be reformed to fit the original gift as closely as possible

(which would be met when it goes to the university.)

c. If it is a specific gift, then the trust would then go to A’s heirs, since the charitable gift

cannot be fulfilled.

VI. Discriminatory Trust

a. Most racial restricting trusts are unenforceable because they are forbidden by the Equal

Protection Clause of the Constitution.

b. In turn, the courts modify in trust with the belief that the testator would prefer the

charitable trust to continue without the racial restriction.

Supervision of Charitable Trusts

I. CL: only the state Attorney General can enforce a charitable gift.

a. The donor of a charitable gift has no standing to enforce the terms of the gift except if

the donor had expressly reserved the right to do so. (Carl J. Herzog Foundation v.

University of Bridgeport).

i. It cannot be enforced by the heirs of the settlor or people with a special interest.

ii. It can only be enforced by the AG or the settlor if he has a reversion.

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II. CL rule still applies in the modern setting, but an administer may have the right to supervision

the charitable gift, along with the AG. However, this will probably only applicable when the

breach is huge regarding the purpose of the donation. Smithers v. St Luke’s Roosevelt Hospital

Center).

III. UTC § 405 : says that the settlor of a charitable trust, among others, may maintain a proceeding

to enforce the trust.

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TRUST ADMINISTRATION: THE FIDUCARY OBLIGATION

Introduction

I. History:

a. When trusts first started there were limited roles for the trustee because land could not

be embezzled.

b. But there are now expansive powers in the trustee and they have the flexibility to make

changes as circumstances change.

c. This has led to more issues about how the beneficiary can be protected.

II. Agency Costs and the Fiduciary Obligation

a. Trusts can be compared to the corporate setting.

i. But in trusts, the fiduciary duties are more seriously enforced because

beneficiaries cannot change the trustee, unlike stockholders who can just sell the

stock.

b. Agency costs are a problem in trust governance because the condition of the financial

markets and the needs of the beneficiary will change over time. The principal (settlor)

won’t know what to do, so the agent (trustee) takes over these responsibilities.

III. Powers of the Trustee

a. Historically, trustee only had those powers expressly given to a trustee.

i. This was the rule in Ohio until 2007.

b. Two approaches taken by states today that broaden the trustees’ powers:

i. An act that permits the settlor to incorporate by express reference in the trust

instrument all or some of the enumerated statutory powers. This permits a trust

drafter to omit a long and detailed list of trustee powers, incorporating the

statutory powers instead.

ii. A broad trustees’ powers act that grants to trustees basic powers set forth in the

statute, as exemplified by the Uniform Trustees’ Powers Act. Express

incorporation of statutory powers in the trust instrument is unnecessary under

this type of statute.

c. UTC § 815 : This takes the strategy of empowering the trustee to its logical conclusion.

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i. In addition to the powers conferred by the terms of the trust, this authorizes the

trustee to exercise all powers over the trust property which an unmarried

competent owner has over individually owned property and any other powers

appropriate to achieve the proper investment, management and distribution of

the trust property.

d. UTC § 816 : this enumerates more than 2 dozen specific transactional powers for a

trustee to maintain.

i. This is provided in addition to § 815 to make sure that the court interprets the

document so that certain powers of the trustee are allowed to be done by the

trustee, even if the agreement does not mention them.

e. Even if the state statute or UTC gives powers, it is still good to have a detailed schedule

of powers when drafting a will because if the law changes the trustee will still be

protected; and corporate trustees want to see the power in writing.

IV. Trustees dealing with third parties

a. CL: anyone dealing with a trustee had to specifically find out if the trustee had the

power to do what the trustee was trying to do.

b. UTC § 1012 : changes the CL by eliminating this duty and replacing it with the duty of

the third party to act in good faith.

V. Introduction to the fiduciary duties:

a. Fiduciary obligations are comprised of the duty of loyalty which forbids self-dealing

and adverse conflicts of interests, and the duty of prudence which imposes objective

reasonableness standards, and numerous subsidiary rules.

The Duty of Loyalty

I. This is the most important fiduciary duty.

a. This says that the trustee must administer the trust solely in the interest of the

beneficiaries. (UTC § 802)

II. No further inquiry rule:

a. Rule: If the trustee engages in self-dealing, good faith and fairness to the beneficiaries

are not enough to save the trustee from liability.

b. Remedies:

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i. Equates to the profits the trustee receives from the action (even if it is more

than the value of the trust assets), not just the loss of the trust assets to the

beneficiary.

ii. Restore property if transferred to trustee

iii. Trust pursuant rule (constructive trust placed on non-bona fide purchasers).

c. Defenses to self-dealing, if done in good faith and the transaction is fair and reasonable

(CL):

i. If the settlor authorized the self dealing transaction

ii. All the beneficiaries consented to it after full disclosure

iii. The court allows it

d. UTC: self-dealing is not allowed, unless authorized by trust document, by the court, or

by consent of all the beneficiariesthis is the same as CL.

III. Self-dealing is present if the trust property is sold to the trustee’s family. (In re Gleeson’s

Will).

a. Trustee selling the land to the family member:

i. CL: this is self-dealing and the no further inquiry rule is used

ii. UTC 802 : presumption that the sale is void, but it can be overcome by showing

that the transaction was fair and reasonable.

1. But this does NOT apply when the trust property goes to the trustee

himself.

b. Exceptions for an institutional trustee:

i. A bank that serves as a trustee can deposit the trust assets with its own banking

department.

ii. An institutional trustee can invest the trust assets in a common trust fund or in a

mutual fund that it operates.

IV. Conflict of Interest (In re Rothko)

a. A conflict of interest arises where the trust deals with another party with whom the

trustee has an interest that may affect the trustee’s assessment of the proposed

transaction.

i. If the transaction involves a possible conflict of interest, but not self-dealing, the

no further inquiry rule does not apply.

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ii. The transaction is assessed to see if it is reasonable and fair under the

circumstances.

b. Damages:

i. Put beneficiaries in same position they would have been but for a breach of the

duty.

ii. Ex: Use the value of the appreciation of the trust property up to the time of the

trial. This is because the beneficiaries are entitled to be put in the position they

would have been in if the breach had not occurred.

c. If a trustee knows that bad things are happening, he can resign, but he is still liable for

the wrongdoings that occurred while he was still a trustee.

i. UTC: trustee only has to given notice that he is resigning to the other trustees.

ii. CL: for a trustee to resign, had to have permission of the beneficiaries and all

co-trustees.

V. Co-Trustees

a. CL: If there is more than one trustee of a private, non-charitable trust, the trustees must

act as a group and with unanimity when making a decision, unless the trust instrument

provides to the contrary.

i. This rule is on the decline

b. Modern CL and UTC § 703: provides that a majority can act if there are three or more

trustees.

i. But if the breach is a big one, the trustee that voted against the decision is still

liable.

The Duty of Prudence

I. Introduction to the Rule:

a. This is the next great duty after the duty of loyalty.

b. A trustee is under a duty to the beneficiary in administering a trust to exercise such care

and skill as a man of ordinary prudence would exercise in dealing with his own

property. (Prudent man rule)

c. Authority and fiduciary obligations must be distinguished.

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d. UTC § 804 : “A trustee shall administer the trust as a prudent person would, by

considering the purposes, terms, distributional requirements, and other circumstances of

the trust.”

e. This applies to everything having to do with the trust administratively, not just the

investments of the trust.

II. The History of Trust-Investment Law

a. The Constrained Prudent Man Rule

i. The old rule was the prudent man rule requiring that the trustee administer the

trust as an ordinary man would when dealing with his own property.

b. Under the old rule, there was an approved list of items that a trustee could invest in.

i. Ex: government bonds, some securities

ii. If you invested in something else, you violate the law and the trustee was

surcharged for any losses that occurred.

c. This ignores the notion of risk and return

d. Obligations: (In re Estate of Collins).

i. Must do a reasonable investigation

ii. Don’t take on 2nd mortgage on property

III. Modern Trust-Investment Law

a. New Law: codified in the Uniform Prudent Investor Act

i. Looks at three things:

1. Analyze the whole portfolio, not just a single investment.

2. Risk v. return

a. Risk is allowed because it may mean a great reward

3. Eliminates any particular category as a per se violation of the rule.

b. Trustee shall take reasonable steps to verify the facts relevant to the investment and

management of trust assets.

i. look at the circumstances in the whole.

c. Sensitivity to Risk and Return

i. Uniform Prudent Investor Act § 2changes the prudent man rule to the prudent

investor standard.

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1. circumstances that the trustee shall consider when investment and

managing trust assets:

a. General economic conditions

b. The possible effect of inflation or deflation

c. The expected tax consequences

d. The role that each investment or course of action plays within the

overall trust portfolio

e. The expected total return from income and the appreciation of

capital

f. Other resources of the beneficiaries

g. Needs for liquidity, regularity of income, and preservation or

appreciation of capita

h. An asset’s special relationship or special value to the purposes of

the trust or to one or more of the beneficiaries.

ii. Analysis under the old prudent man rule: (Estate of Collins)

1. Just because the trustee has the power to do something, this does not

mean that it is prudent to be done:

2. Two part test:

a. Does the trustee have the power to do it?

b. Is it prudent to make that investment?

iii. Example of analysis under the new Prudent Investor Act:

1. Compare the risk to the reward

2. The new act does not prohibit certain types of investments

3. Is there diversification?

4. Did the trustee investigate the investment to see if it is safe?

iv. If a trust says that the trustee should only invest in one thing this only means

that there will be a lesser scrutiny of the action’s of the trustee.

1. The trustee still has to act in good faith.

v. ERISA

1. This governs the investment of all pension funds by the trustees

managing the funds.

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2. The standard governing investments is the prudent investor rule.

vi. Social Investing

1. This is a breach of the trustee’s obligations.

2. The trustee can’t invest based on some sort of social policy.

a. Ex: not investing in a corporation that pollutes.

3. This applies bother under ERISA and the Uniform Prudent Investor Act.

d. Diversification

i. Uniform Prudent Investor Act § 3

1. States that a trustee shall diversify the investments of the trust, unless the

trustee determines that, because of special circumstances, the purpose of

the trust are better served without diversifying.

ii. Under the UTC, the trust agreement can expressly eliminate this requirement.

iii. Diversification cannot eliminate market risks since the market risk is common

to all securities

1. But can eliminate firm risks or industry risks.

a. Industry risk: specific to the firms in a particular industry or an

industry grouping.

b. Firm risk: factors that tough the fortunes only of the individual

firm.

iv. A corporate trustee with a particular skill set has to use that skill set (this is in

the uniform act). This means they are held to a higher standard than an

individual trustee.

1. This is codified in UTC § 806.

v. Test when only investing in a single investment: need to look at the

beneficiaries and see if it was in their best interest.

vi. It is risky only to invest in a single security (even if it is the bluest chip, like

Kodak)

vii. Factors applicable for determining liability for failure to diversify (In re Estate

of Janes)

1. The Amount of the trust estate

2. The beneficiary’s situation

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3. The trend/cost of living

4. the prospect of inflation/deflation

5. investment market ability

6. potential tax consequences

7. the wisdom of the decision in light of the nature and objective of the

trusts.

viii. Authority v duty of prudence

1. If the trust says that the trustee should only invest in one investment, this

may help the trustee’s case, but still need to weigh this against the duty

of prudence.

2. Restatement: there is an affirmative obligation on the trustee when the

trustee believes that the investment is not in the best interest of the

trustee, the trustee can petition the court so that the investment does not

have to be done.

a. This applies when there is a change in circumstances.

ix. Calculating Damages for Imprudent Investment

1. Make whole: The core principle in trust remedy is to put the beneficiary

in at least the position that she would have been in but for the trustee’s

breach.

2. This is implemented by a three-party remedial scheme the beneficiary

can charge the trustee—

a. With any loss that resulted from the breach of trust, or

b. With any profit made through the breach of trust, or

c. With any profit that would have accrued if there had been no

breach of trust.

3. Coda: The Market-Index Measure

a. The total return measure of damages is related to a market index

measure, with which it sometimes overlaps.

b. Requires the fact finder to assemble a hypo prudent portfolio and

then to compare the actual performance of the imprudent

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portfolio against the performance that the hypo portfolio would

have experienced during the same period of time.

e. Delegation

i. CL: trustee could not delegate the duty to invest trust funds to another person.

But the trustee could get advice from someone else.

ii. CL: a trustee lacking investment experience MUST seek out expert advice, but

he must exercise his own judgment in making the final decision. (Shriners

Hospital for Crippled Children v. Gardiner)

1. If the investments are made by someone else, then the duty is breached.

iii. Uniform Prudent Investor Act § 9 and UTC § 807

1. A trustee may delegate investment and management functions that a

prudent trustee of comparable skills could properly delegate under the

circumstances

2. The trustee shall exercise reasonable skill, care and caution in:

a. Selecting an agent

b. Establishing the scope and terms of the delegation

c. Periodically reviewing the agent’s actions in order to monitor the

agent’s performance and compliance with the terms of the

delegation.

3. A trustee who complies with the requirements is not liable to the

beneficiaries or to the trust for the decisions or actions of the agent to

whom the function was delegated.

4. If the delegation is done, the trustee can still be liable if she does not use

reasonable care.

Impartiality and the Principal and Income Problem

I. This is the most litigated subrule.

II. There must be balance: the trustee must strike a fair balance between the beneficiaries, giving

due regard to their respective interests.

a. This is the CL and UTC.

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i. UTC § 803 : if a trust has two or more beneficiaries, the trustee shall act

impartially in investing, managing, and distributing the trust property.

b. Once an accounting is provided, the SOL begins to run.

i. Thus an annual accounting and full disclosure is a good way for the trustee to

protect himself.

III. A trustee can fail to act impartially when he favors the beneficiaries over the remaindermen.

(Dennis v. Rhode Island Hospital Trust Co.).

a. A court can hold that the trustee is liable for not treating the income beneficiary and the

remaindermen evenhandedly when the values of the assets don’t go up for the

remaindermen.

IV. The Principal and Income Problem

a. Under modern law, the trustee should be investing for overall return for both the

income and capital gains.

b. Two ways to deal with this:

i. Courts will allow the trustee to do either:

1. An equitable allocation of value

a. A certain amount is left to income

b. OH law allows this

2. Unitrust amount

a. Pay out x% of the trust income to the beneficiary

b. This is allowed by OH law.

V. Howard v. Howard - Despite duty of impartiality between income and remainder beneficiary,

must look to the express language of the trust to determine how the funds are to be

distributed. Here, beneficiary had income for life, remainder beneficiary contends that life

beneficiary’s assets should be taken into account. Concern was a de fact trust for the step

children who were not supposed to receive income.

a. Court holds the express language of trust controls.

VI. EPTL § 11-2.4 – “Unitrust provision” – Trustee can facilitate investment of corpus for total

return on the portfolio. (In re Matter of Heller)

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a. Trustee was also a remainder beneficiary, trustee elected a unitrust so that the corpus

could be invested. As a result, the income beneficiary received less income (because it

was invested) for the trust benefit.

b. Unitrusts – lets the settlor determine the percentage of the total return that is to be paid

to the income beneficiary, leaving it to the trustee to maximize the trust’s total return

irrespective of the form in which that return takes.

c. **Thus, reduces income beneficiary’s income greatly

Subrules Relating to the Trust Property

I. Duty to Collect and Protect Trust Property

a. UTC § 809 : trustee has the duty of obtaining possession of the trust assets without

unnecessary delay.

b. UTC § 812 : A trustee shall take reasonable steps to compel a former trustee or other

person to deliver trust property to the trustee, and to redress a breach of trust known to

the trustee to have been committed by a former trustee.

c. Trustee must look at the acts of the executor and require the executor to redress any

breach of duty that diminished the assets intended for the trust.

II. Duty to Earmark Trust Property

a. A trustee has a duty to earmark trust property

b. This means to designate it as trust property rather than the trustee’s own property.

c. Cases are split over whether causation is necessary for earmarking

i. Some cases say that there is absolute liability.

ii. Other cases say that a trustee is liable for such loss as results from the failure to

earmark and is not liable for such loss as results from general economic

conditions.

d. Damages:

i. Money plus interest that would have been earned.

III. Duty Not to Mingle Funds with the Trustee’s Own

a. A trustee is guilty of a breach of trust if the trustee commingles the trust funds with his

own, even if the trustee does not use the trust funds for his own purposes.

i. Codified in UTC § 810(b)

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1. Exception: permits a corporate fiduciary to hold and invest trust assets in

a common trust fund.

b. CL: when there is commingling of funds, there is strict liability

c. Modern law: commingling is only a problem when there is a loss of funds.

i. Also allows trustee to make a joint investment from separate trusts, provided

that the trustee maintains records clearly indicating the respective interests.

Duty to Inform and Account to the Beneficiaries

I. The trustee has a duty to furnish information about the trust instrument and about other

documents relating to the trust.

II. One provision in the UTC § 105 that can be waived by the settlor is that a copy of the trust has

to be distributed to the beneficiaries.

a. One thing that CANNOT be waived: trustee must act in the best interest of the

beneficiaries.

III. The trustee is under a duty to the beneficiary to give him upon his request at reasonable times

complete and accurate information as to the nature and amount of the trust property, and to

permit him or a person duly authorized by him to inspect the subject matter for the trust and the

accounts and vouchers and other documents relating to the trust. (Restatement)

IV. UTC § 813: there is a duty to inform and report.

a. A trustee shall keep the qualified beneficiaries of the trust reasonably informed about

the administration of the trust.

b. A trustee, upon request of a beneficiary, shall promptly furnish to the beneficiary a

copy of the trust instrument.

c. Requires that the trustee provide an annual report/accounting. The settlor may release

the trustee from the requirement to report by the terms of the trust instrument.

i. But the trustee still has to act in good faith according to the trust document.

V. Trustee has to make reasonable efforts to inquiry into the income of the beneficiary. (National

Academy of Science v. Cambridge)

a. Need to inquire into the status of the beneficiary to determine if she is still entitled to

receive the trust income.

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