Trusts and Estates Law Favors Testacy Over Intestacy (In re Teuberts Estate) Restatement of Property: Wills and

Other Donative Transfers Section 10.1 - Donors intention determines the meaning of a donative document and is given effect to the maximum extent allowed by law. - The controlling consideration in determining the meaning of a donative document is the donors intention. Arguments about Testamentary Intent - Constitutional Argument o Wills are private action, not state - Policy Argument o Restriction that interferes with marriage o Father could have given inter vivos to the kid if he approved of wife o There is a point at which restrictions begin to violate public policy Ill only leave you the money if you divorce your wife If you ever marry a non-Jewish girl you are cut off Ongoing restrictions are too much dead hand control o Needs to exist for some period of time otherwise it wouldnt matter in the first place - Zero-Sum Game o Cannot increase the freedom of the testator without impeding on the rights of the beneficiary to receive the property o Cannot increase rights of beneficiary to receive property without restrictions without impeding on freedom of testator to decide what happens with the property Purposes of Probate 1) Evidence of transfer of tile: As a surviving spouse I go to the bank and tell them my wife is dead and I want the money in her account the bank will say no because I am not the one signed on the account. - That is what the probate process is for. - The purpose of probate is to settle the estate. - The Probate Court will issue testamentary letters to the beneficiaries of the estate. - Armed with that letter you will be able to go to a bank and effectuate the transfer of title for that account. - This is called Evidence of Transfer of Title. 2) Protect Creditors of the Estate: - When a person dies you must let the creditors know that the person is dead. - There is a short statute of limitations when going through the probate process.

- If no probate, statute of limitations is MUCH longer gives the estate some certainty - If the creditors dont come forward within the statute of limitations then the debt is wiped out. Executor: the person who is designated to disperse the estate. Administrator: if the executor cannot do it the court appoints this person to handle the estate. Responsibilities of Executor and Administrator 1) Inventory and collection of assets 2) Manage assets during probate (businesses, stocks, etc.) 3) Receive and Pay Creditors and Taxes - Identify creditors and calculate taxes due 4) Clear title - Find out if there even IS title - If there is, are there clouds on the title? 5) Distribute Remaining Assets - identify beneficiaries. Bottom Line: the executor collects all of the assets and makes sure everyone gets paid. Reasons to Avoid Probate 1) Expensive: - executor/administrator fees - people often named as executor are family members so they generally disclaim fee - professionals charge a % of the estate - attorneys fees - accounting fees 2) Time consuming: - requires court approval - requires formal notice to creditors, heirs and beneficiaries - even simple estates can take years - money isnt paid out until the end of the probate process How to Avoid Probate (non-probate property, all of these you have to pay taxes) 1) Joint tenancies w/ a right of survivorship (includes tenants of the entirety) 2) Life Insurance 3) Contracts or bank accounts with Payable on Death Provisions. 4) Trusts: these let you avoid probate but you have to pay taxes on them. Devise applies to real property Bequeath applies to personal property Dispose NY language and incorporates both 2

Duty to Intended Beneficiaries (Simpson v. Calivas p58) - Man leaves homestead to the wife, unclear whether this is just house or land too - Attorney notes show intent to just leave house to wife and land to son - Son sues the attorney, who he has never met (not in privity) - Son is 3rd Party beneficiary of the will - Only person in privity is the personal representative of the estate o Cant have the estate sue because the estate isnt harmed - Most states have statutes stating atty has duty to all beneficiaries and all beneficiaries have standing to sue (like NH in this case) o NOT RULE IN NY! Doesnt allow 3rd party suits for malpractice Schneider v. Finman Personal representative has standing to sue an atty for bad estate planning ending up creating more tax liability NOT extended to 3rd parties Functions of the courts for purposes of collateral estoppel - Probate court: Determine the intention of the testator as shown by the language of the whole will - Ct. of general j/d: Determine if there is negligence Pro Res: - Trust and Estates is a legal malpractice minefield. - Issues about who to tell what can get hairy. Ex: A v. B - Husband and wife go to law firm to draft their wills. - Husband has had an affair with mistress secretly. - The mistress goes to the same firm in a paternity suit against the husband. So the firm is repping her too. - In the husband and wifes wills they are joint reciprocal wills the mirror image of each other. If the wife dies before the husband then her estate goes to him and his issue and vice versa. - The mistress has an illegitimate child with the husband. - That means the illegitimate child would eventually get the wifes estate. The law firm thinks that they must tell the wife since a part of her estate may be going somewhere that she does not realize it is going. - The lawyers have a duty of confidentiality and disclosure rules. - Husband gets a letter from the firm that tells him to tell his wife or the firm will. - The court says that this is fraud against the wife and the law firm is allowed to tell the wife of the illegitimate child.

o This isnt a mandatory disclosure regime, it is permissive o Firm has permission to disclose info to the wife INTESTATE to die without a will. - is governed by statute - A decedent can change intestate succession rule in his will. Ex: I dont want my money going to my son. This is called a negative inheritance. Intestate Succession who gets your property if you die without a will? 1) these are default rules 2) these rules apply to people who die partially intestate. When a person gets rid of some but not all property in the will (no residuary clause) 3) These rules may kick in if a will has been invalidated. Why do we care about this? 1. Important to know default rules for people who die intestate 2. Doesnt cover clients who have wills unless they die partially intestate 3. If a will is struck down for some reason, these rules govern 4. Substantive judgments in this area of law 5. Statutory interpretation SPOUSES SHARE (Complicated) UPC 2-102 Share of the Spouse The intestate share of a decedents surviving spouse is: (1) the entire estate if: (A) no descendant or parent of the decedent survives the decedent; OR (B) all of the decedents surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent. (2) the first $300,000, plus three fourths of any balance of the intestate estate, even if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent. (3) The first $225,000, plus one half of any balance of the intestate estate, if all of the decedents surviving descendants are also descendents of the surviving spouse and the surviving spouse has one or more surviving descendants who are not descendants of the decedent. (4) the first $150,000, plus one half of any balance of the intestate estate, if one or more of the decedents surviving descendants are not descendants of the surviving spouse. Example: Decedent dies with a $1 million estate. Who takes and how much?

1) If there is no parent of the decedent alive then the surviving spouse gets everything. 2) if a parent is alive: the spouse gets the first $300,000 plus three fourths of the balance. The rest to the parent. 3) if the parents are dead but the surviving spouse has a child from a previous marriage. Then the spouse will get $225,000 plus one half of the balance. Child will get the rests is actual kin and should be adequately compensated ** Under UPC, spouses get more money automatically just for having a pre-marital kid (UPC almost anticipates divorce) ** Under EPTL, spouse only takes everything if there are no kids ** Under EPTL, parents take NOTHING unless no spouse and no kids (Doesnt really consider young couples, late in life marriages, etc.) EPTL (New York Law) 4-1.1 (a) If a decedent is survived by: 1) a spouse and issue, fifty thousand dollars and one half of the residue to the spouse and the balance thereof to the issue by REPRESENTATION. 2) A spouse and no issue, the whole to the spouse. 3) Issue and no spouse, the whole to the issue by REPRESENTATION. 4) One or both parents, and no spouse and no issue, the whole to the surviving parent or parents. 5) Issue of parents, and no spouse, issue or parents, the whole to the issue of the parents by REPRESENTATION. 6) One or more grandparent or issue of grandparent 7) One or more grandchildren of the grandparents (b)For all purposes of this section, decedents relatives of the half blood shall be treated as if they were relatives of the whole blood. (c) distributes of the decedent, conceived before his or her death but born alive thereafter, take as if they were born in his or her lifetime. (d) the right of an adopted child to take a distributive share and the right to succession to the estate of an adopted child continue as provided in the domestic relations law. Within UPC/EPTL there are judgments about who deserving beneficiaries are: 1. Defined as spouse same sex partners do NOT take under intestacy - goal of intestacy: provide default rules to approximate what we think the decedent (or at least most people) would have wanted if decedent had a will 2. Why exclude same sex partners? - Administrability - Fraud - Dont know if couple would get married even if it was allowed Issue generally means children of a decedent. 5

Descendants not only issue but children of issue. The line of succession. Heir someone who takes through intestacy. Only dead people have heirs. Before you die you only have heirs apparent. Representation. Descendents take the share of the dead people in line. Three different systems: 1) Per Stirpes. 2) Modern Per Stirpes 3) Per Capita at Each Generation 1) PER STIRPES - A per stirpes distribution literally means one that determines takers by the roots or stocks. - The younger generation descendants divide the share the older generation descendant would have received had the older generation descendant survived the intestate. Example: - Intestate had three children. Son 1, Son 2, and Daughter. - Son 1 predeceased Intestate but was survived by two children: Arthur and Brenda who both survive Intestate. - Son 2 also predeceased Intestate and had no surviving descendents. - How would the property be divided? Answer: Daughter receives one half, Arthur receives one quarter, and Brenda receives on quarter. - If Son one had survived he would have received half of the estate. Instead his kids take it and it evenly divided among them. - There is no share for son 2 because since he has no descendents there is no one to represent him. Example 2: -Same facts as the above example except Daughter also predeceased Intestate and was survived by her only child Charles. How is the property divided? Answer: - Charles gets , Arthur gets , and Brenda gets . - Charles gets the share that is left to him by the Daughter. Had the Daughter survived she would have received . This share goes to Charles. Son 1 got share and Daughter gets share that is then divided by their kids. 2) MODERN PER STIRPES Instead of using the intestates children as the root of distribution, the nearest generation with descendant who survive the intestate is used.

thus if all takers are of the same generation, they take per capita (equal shares) Only if takers are of different generations is the share of the younger generation descendants based on the share that the older generation descendant would have received had the older generation descendant survived the intestate.

Example: Intestate has two children Son and Daughter. - son predeceased intestate survived by two children of his own: Arthur and Brenda. - How would Intestate property be distributed applying a modern per stirpes approach? Answer: - Daughter receives , Arthur receives and Brenda . - Shares are divided at the children level because it is the first level with a member who outlived intestate. Example 2: Same facts as the above example but Daughter also predeceased intestate and is survived by her only son Charles. - how would intestates property be distribute applying a modern per stirpes approach? Answer: Arthur receives 1/3, Brenda receives 1/3, and Charles receives 1/3. Because the level of grandchildren is the nearest generation to intestate with survivors it is the root generation. All members of this generation are alive and thus they take equal shares. - this approach is regarded as being fairer to both the intestate and the heirs than per stirpes. - A modern per stirpes approach is more likely to be in harmony with the intestate presumed intent than a per stirpes one because of the equal treatment accorded to each heir when all heirs are relate to the intestate in the same manner. Example 3: Intestate had 4 children: Arthur, Brenda, Charles, and Doris. - Arthur and Brenda died before intestate. - Arthur was survived by one child: Edward. - Brenda was survived by two children: Fran and George. - How would Intestates property be distributed using a modern per stirpes approach? Answer: - Charles receives , Doris receives , Edward receives , Fran receives 1/8, and George receives 1/8. - Intestates property is divided into shares at the first generation with survivors, that is, children. 7

The initial division is into quarters one share for each of the surviving children and one share for each of the deceased children who left surviving descendants. Charles and Doris as surviving children will each received one of the quarters. Edward takes all of Aruthurs share because he is Arthurs only child. Fran and George divide Brendas quarter equally.

3) PER CAPITA AT EACH GENERATION - is the representation used by the UPC and EPTL - is governed by the principle of equally near, equally dear. - The goal is to treat everyone in same generation equally. - make the same division of the estate as you do under the modern per stripes approach and pay out that share to the living class members of that generation. - When the money drops to the next generation, instead of taking from the parents directly you rebundle the money and then distribute again equally. Example: - Intestate had four children: Arthur, Brenda, Charles, Doris. Both Arthur and Brenda die before Intestate. - Arthur is survived by one child: Edward and Brenda was survived by two children: Fran and George. - How would intestate property be distributed using a per capita at each generation approach? Answer: - Charles receives , Doris receives , Edward receives 1/6, Fran receives 1/6, and George receives 1/6. - Intestates property is divided into shares at the first generation with survivors, that is, children. - The initial division is into quarters one share for each of the surviving children and one share for each of the deceased children who left surviving descendents. - Charles and Doris as surviving children will each receive one of the quarters. - The shares created on behalf of the predeceased children, Arthur and Brenda are pooled and then divided evenly among their children, who are the intestates grandchildren. The two shares created from the descendents of Arthur and Brenda total one half the estate. - There are three descendants, each of whom is equally related to Intestate. - Thus each grandchild takes one-third of one half of the estate, or one sixth. - Under this form of distribution, all equally related heirs receive the same portion of the intestates estate. Ancestors and Collaterals - If none of the intestates descendants survive, the intestates ancestors and collaterals will inherit the balance of the intestates probate property that does not pass to the intestates surviving spouse. 8

1) Both Parents survive intestate - under all modern intestacy statutes, an intestates parents divide the intestates probate estate that does not pass to the surviving spouse if the intestate died without surviving descendants. 2) One parent and at least one sibling. Example: Intestate dies survived by mother, brother, and sister. How Is intestates estate distributed? Answer: Under UPC 2-103 the mother would inherit the entire estate as the surviving parent. - in other states it provides that the deceased parents share passes to Intestates sibling. Under this statute mother would take one half of the estate with brother and sister each taking a quarter. 3) No parent and at least one sibling (or descendant of sibling) Survive Intestate. - if the intestate dies without a surviving descendent or parent, the balance of the probate estate not passing to the surviving spouse passes to the siblings or their descendants. If one or more of their siblings die before the intestate, the distribution among their descendants the intestates nieces and nephews, will depends on whether that jurisdiction uses per stirpes, modern per stirpes, or per capita at each generation. EVEN MORE DISTANT - If the intestate dies without a surviving descendent, a parent, or a firstline collateral relative, the intestates property not passing to the surviving spouse passes to grandparent, second-line collaterals, and perhaps to more distant relatives. - Jurisdiction adopt two main methods for determining the intestates heirs in this situation: 1) A parentelic system 2) degree of relationship approach Parentelic System: NYs EPTL has adopted this approach: - looks for the nearest common ancestor with a living descendent. - UPC the limit is great grandchildren of grandparents (1st cousins once removed). They are the last to take. If nothing that near, escheats to state - Under UPC, as last resort step-children would take Degree of relationship Systems - determine heirs by counting the degrees of kinship between the intestate and the heir and then awarding the probate estate to the nearest next of kin. Whoever has the lowest number wins. UPC 2-105 When property escheats to the state. 9

Property escheats to the state it is located in: thus I have realty in state A and State B. The realty in each of those states will escheat back to those particular states. SIMULTANEOUS DEATH Uniform Simultaneous Death Act (USDA) - Absent clear and convincing evidence people are presumed to die simultaneously (Janus v. Tarasewicz p80) Draft around this by including temporal provisions for survivorship like UPC/EPTL UPC 2-104 and 2-702 provide that an heir or devisee or life insurance beneficiary who fails to survive by 120 hour (5 days) is deemed to have predeceased the decedent. (the 120 hour rule) - UPC 5 days and a requirement of clear and convincing evidence that they did not die within 5 days. EPTL 2-1.6 Simultaneous Death (a) Where the title to property or the devolution thereof depends upon priority of death and there is no sufficient evidence that the persons have died other than simultaneously: The property if each person shall be disposed of as if he had survived, except as otherwise provided by this section. (b) Where a testamentary disposition of property depends upon the time of death of two or more beneficiaries designated to take alternatively by reason of survivorship and there is no sufficient evidence that such beneficiaries have died other than simultaneously: The property disposed of shall be divided into as many equal portions as there are alternative beneficiaries and such portions shall be distributed respectively to those who would have taken the whole property in the event that the designated beneficiary through whom they take had survived. (c) Where there is no sufficient evidence that two joint tenants or tenants by the entirety have died otherwise than simultaneously the property shall be distributed one-half as if one had survived and one half as if the other had survived. If there are more than two joint tenants and all of them have so died the property thus distributed shall be in the proportion that one bears to the whole number of joint tenants. (d) Where the insured and the beneficiary in a policy of life or accident insurance have died and there is no sufficient evidence that they have died otherwise than simultaneously the proceeds of the policy shall be distributed as if the insure had survived the beneficiary. (e) This section does not apply in the case of wills, lifetime trusts, deeds or contract of insurance wherein a provision other than that prescribed by this section has been made for the disposition of property.

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NOTE! - Survivorship is a fact that must be proven by a preponderance of the evidence by the party whose claim depends on survivorship - Well-drafted wills typically require beneficiary to survive the donor by a stated period of time (often 30 or 60 days) WHAT COUNTS AS A CHILD? WHAT COUNTS AS A DESCENDANT Adoption : - adoption is treated as creating a new parent child relationship and severing the parent child relationship from the biological parent. - The adopted child will always take from the adopting parents. Hall v. Vallandingham (MD 1988) p97 - Earl marries Elizabeth and they have 4 kids - Earl dies and Elizabeth remarries Jim. Jim adopts the 4 kids. - Earls brother William dies 25 years later - Earls kids are remote collaterals to William - Can they take through Earl from William? - Since they were adopted, there is total transplant of the kids - They are Jims kids and cant get a share of Williams estate - This is likely not what William would have wanted - Doesnt seem right to cut off kids inheritance rights from his uncle on his fathers side just because the adoptive father adopted the kid **** UNDER UPC THIS COMES OUT THE OTHER WAY **** UPC focuses on parent-child relationship rather than categories of parenthood - You are parent/child in terms of intestacy if you are in a parent-child relationship with them UPC 2-116 The parent is a parent of the child and the child is a child of the parent for the purpose of intestate succession by, from, or through the parent of the child. UPC 2-118 A parent child relationship exists between an adopted child and the adoptive parent, UPC 2-119 (a) But not between an adopted child and the childs genetic parents. (b) Stepchild adopted by Stepparent. A parent child relationship exists between an individual who is adopted by the spouse of either genetic parent and: (1) the genetic parent whose spouse adopted the individual; and

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(2) the other genetic parent, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit from or through the other genetic parent. ** works with divorce, too. Can take (in intestacy) from BOTH fathers and THROUGH both fathers. Excludes right of parent to take from child, tho (c) Individual Adopted by Relative of a genetic parent. A parent child relationship exists between both genetic parents and an individual who is adopted by a relative of a genetic parent, or by the spouse of surviving spouse of a relative of a genetic parent, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit from or through either genetic parent. (d) Individual Adopted after Death of Both Genetic Parents. A parent child relationship exists between both genetic parents and an individual who is adopted after the death of both genetic parent, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit through either genetic parent. ADOPTION OF ADULTS Minary v. Citizens Fidelity Bank & Trust Co. (KY 1967) p103 - Minary leaves money in trust to her husband for his life and then to 3 sons (T,J,A) for their lives, remainder to my then surviving heirs according to the laws of descent and distribution then in force in KY - T has 2 kids, J has no kids, A has no kids, but has a wife, M - A adopts his wife M as his child (she now stands to inherit 1/3 of the trust) - Under KY law, technically adoption of an adult person DOES make her an heir - An adult person may be adopted in the same manner as provided by law for the adoption of a child and with the same legal effect - BUT, Minary could have included wives in her trust initially or appointed someone to figure out who gets it - Court looks to policy instead - Paramount importance that a man be permitted to pass on his property at his death to those who represent the natural objects of his bounty - Adoption of an adult for the purpose of bringing that person under the provisions of a preexisting testamentary instrument when he clearly was not intended to be so covered should not be permitted Benefits of Adult Adoption - Prevents will challenges by family members o Same-sex couples have good reason to worry about challenges by family members o To challenge a will you must be someone that would benefit from the will being struck down Only someone who would take in intestacy can challenge (95) - NY DOES NOT ALLOW THIS o A sexual relationship is incompatible with a parent-child relationship o Doesnt allow same-sex to adopt, either - If you remarry, might want to adopt new spouses kids. One might be over 18 12

3 Regimes of Adult Adoption - Can adopt an adult for whatever reason and they will be child no matter what - Yes, can adopt an adult for whatever reason, but not if you have a sexual relationship with them - No, cannot adopt an adult ever POSTHUMOUS & NONMARITAL CHILDREN Posthumous children: - Child is BORN AFTER death of father - No problem recognizing a person could father a child if they were born after the father is dead (10-11 months is general time frame) Posthumous conception: - Child is CONVEIVED AFTER the death of the father - Because death ends the marriage, posthumously conceived children are always nonmarital children - Sperm bank / cryogenesis Woodward v. Commissioner of Social Security (Mass 2002) p118 - Husband has cancer, puts sperm in bank, wife impregnates 15mo after his death - Wife inherits social security benefits - 3 State interests (1) Best interests of the child - 99% of the time, interest of the child to be recognized as a child for inheritance purposes - The SIBLINGS will be disadvantaged (2) State interest in orderly administration of estates - Limitation periods - Certainty to heirs/creditors (3) Reproductive rights of the genetic parent - Right of father to control his own reproductive freedom - 2 Part Test - Fathers consent to both: (1) POSTHUMOUS reproduction (2) Support of the resulting child - Donating to a sperm bank isnt dispositive In re Martin B (NY 2008) p126 - Similar to Woodward, but with a trust, not social security benefits (Inheritance is different) - Question is whether posthumously conceived children fall within category of recipients: issue and descendents - Rights of posthumous children under EPTL - EPTL 4-1.1[c] Intestacy 13

- EPTL 5-3.2 Under a will - Post-conceived child is excluded from sharing in parents estate as an after-born - Ensures certainty in identifying persons interested in an estate and finality in its distribution - EPTL 6-5.7 Future interests - Where future estate is limited to children, distributes, heirs or issue, posthumous children are entitled to take in the same manner as if living at the death of their ancestors - EPTL 2-1.3(2) Members of classes - Posthumous child may share as a member of a class if such child was conceived before the disposition became effective - Restatement 3rd section 14.8 - If an individual considers a child to be his or her own, society through its laws should do so as well - Where governing instruments are silent, children born of new technology with consent of their parent are entitled to same rights for all purposes as those of a natural child - Grantors intent is important UPC 2-120 Posthumously conceived child inherits from the deceased parent if (1) during life the parent consented to posthumous conception in a signed writing or consent is otherwise proved by clear and convincing evidence, AND (2) the child is in utero not later than 36 months or is born not later than 45 months after the parents death Concerns with Posthumously Conceived Children: - What if a trustee paid out some, most, or all of the money from the trust? - Might have to clawback $ to give to the posthumously revealed child - Posthumous heirs CAN clawback $ - Cant really contract around the orderly administration of estates - You CAN, however, contract around reproductive rights (dont consent) SURROGATE MOTHERHOOD Who is the parent of a child born by surrogate motherhood? Johnson v. Calvert (Cal 1993) p130 - Doesnt really matter who gives birth to the child or whose sperm it is - Only thing that matters is the partys intent within the surrogacy contract Michigan Surrogacy for compensation is illegal - Surrogate is the mother

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UPC 2-121 In absence of a court order to the contrary, the surrogate does NOT have a parentchild relationship with the child unless the surrogate is the childs genetic mother and no one else has a parent-child relationship with the child. An intended parent of the child, meaning someone who entered into an agreement with the surrogate stating that the person would be the parent of the child, has a parent-child relationship with the child if the person functioned as a parent of the child within two years of the childs birth. GUARDIAN OF A PERSON a guardian of a person has the responsibility for the minor childs custody and care. As long as one parent of the child is living and competent that parent is the natural guardian of that person. A guardian of a person has no authority to deal with the childs property.

ADVANCEMENTS An advancement is a special type of inter vivos gift. - When the advancer dies intestate, the advanced property is treated as if it were still the advancers probate estate when computing the size of the inheritance shares. - Thus the advancee receives a smaller share in the estate because the advancee already has received part of the advances estate, that is the advancement. - This equalization process is called going into the hotchpot. - It used to be that any gifts during life were presumed to be advancements on a gift of their inheritance. - All states have reversed this. - NOW IN ORDER TO BE AN ADVANCEMENT IT HAS TO BE ACCOMPANIED BY CONTEMPORANEOUS WRITING. How are advancements valued? UPC 2-109(b) for purposes of an advancement, property advanced is valued as of the time the heir came into possession or enjoyment of the property or as of the time of the decedents death, WHICHEVER COMES FIRST. UPC 2-109 Advancements applies only to spouses and collaterals (not friends) (a) If an individual dies intestate as to all or a portion of his estate, property the decedent gave during the decedents lifetime to an individual who, at the decedents death, is an heir is treated as an advancement against the heirs intestate share only if: (i) the decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift is an advancement or, 15

(ii) the decedents contemporaneous writing or the heirs written acknowledgement otherwise indicates that the gift is to be taken into account in computing the division and distribution of the decedents intestate estate. (b) Property advanced is valued at the time the heir came into possession or enjoyment of the property or as of the time of the decedents death, WHICHEVER COMES FIRST. (c) If the recipient of the property fails to survive the decedent, the property is not taken into account in computing the division and distribution of the decedents intestate estate, unless the decedents contemporaneous writing provides otherwise. (this means that if A was advanced $10 and died and later intestate dies with $75, and A was survived by kids B and E and intestate had two kids C and D then each would get a third of the estate B and E get $12.50 each and C and D get $25 each) EPTL 2-1.5 Advancements and their Adjustment (a) An advancement is an irrevocable gift intended by the donor as an anticipatory distribution in complete or partial satisfaction of the interest of the donee in the donors estate, either as distributee in intestacy or as beneficiary under an existing will of the donor. (b) no advancement shall affect the distribution of the estate unless proved by a writing contemporaneous therewith signed by the donor evidencing his intention that the gift be treated as an advancement, OR by the donee acknowledging that such was the intention. (c) When so proved, the advancement is part of the estate of the donor for the purpose of the distribution. If such advancement is equal to or greater than the interest of the donee, whether in intestacy or under the will, such donee or his successor interest may not share in the distribution of the estate, but if less than such intestate share or testamentary interest, the donee or his successor in interest may take his intestate share or testamentary interest reduced by the amount of the advancement. Advancement and their adjustments is a far different approach to valuation. Example: Advancements Decedent dies with $600,000 and four kids. Kid 1 was given a $100,000 advancement Kid 2 was given a $ 300,000 advancement Kid 3: 0 Kid 4: 0 - collect all of the money in advancement and total that with what the decedent dies with which is $1,000,000. - Each kid gets $250,000. 16

Problem: Kid 2 already has $300,000. In this case Kid 2 will be treated as predeceased. Now the total pot will be $700,000 and each Kid gets $233,333. Kid 1 will get $133,333. Kids 3 and 4 will get $233,333. If one kid predeceased the decedent but received an advancement then it will be passed to his kids.

* By declaring the advancement contemporaneous in writing as well as a will the writing is basically a safety net for will that get struck down.* What If Child 2s $300k advancement wasnt cash gift, but an apartment that is now worth $1mm? - UPC 2-109(b) - Property advanced is valued as of the time heir came into possession or the decedents death, WHICHEVER IS FIRST - When decedent dies is important/relevant - EPTL 2-1.5 - Opposite view - Advancement shall have the value at which it is appraised for estate tax purposes - Valued at death Transfers to Minors Alternatives in Property Management (1) Guardianship of the Property - the guardian has the duty of preserving the specific property left to the minor and delivering it to the ward at age 18, unless the court approves a sale, lease, or mortgage. - the guardian may use the money to support the minor, but he needs the courts permission for everything. - should be avoided because it is so costly and it could deplete the beneficiaries assets before they become an adult. (2) Conservatorship - the conservator is given title as trustee to the protected persons property as well as investment powers similar to those of trustees. - still needs appointment and permission of court but conservator has far more flexible powers than a guardian. - terminates when the minor reaches the age of maturity OR minor dies. (3) Custodianship - a custodian is a person who is given property to hold for the benefit of a minor under the Uniform Transfers to Minors Act. - the donor will choose a custodian usually himself. - this is good for modest gifts. 17

- the custodian has the right to manage property or reinvest it and is not under the court supervision. - the powers of the custodian has all of the rights, powers, and authority over property that young unmarried adults have over their property. - a custodian is a fiduciary and owes a duty of care to the minor . (4) Trusts - the most flexible - the donor can tailor the will specifically to the needs of his specific family. - the trust does not have to be handed over at the age of 18 or 21 but as the donor sees fit. BARS TO SUCCESSION If I stand to inherit money there are two ways I may be barred: 1) If I kill the person 2) If I disclaim my interest INTENTIONAL KILLING - two policies behind this: 1) the heir should not be rewarded for causing the intestates death 2) an heir should not be deprived of inheritance without just cause. - many states have slayer statutes - people who intentionally kill the person they are inheriting from is a bar from succession. - Even if found not guilty in a criminal trial you still may not be able to take. - Even if found guilty of manslaughter you may be able to take because the statute prevents someone from taking if there is an intentional kill. - If there is an intentional kill then the murderer is treated as predeceased. UPC 2-803 An individual who feloniously and intentionally kills the decedent may not claim inheritance rights. The intestates estate passes as if the murderer disclaimed the inheritance, that is, as if the murderer predeceased the intestate. - If under the preponderance of evidence standard, the individual would be found criminally accountable for the felonious and intentional killing of the decedent then they will be prevented from taking. - If I euthanized my father I would be prevented from taking. In re Estate of Mahoney (VT 1966) p145 - Husband dies intestate after wife is convicted for manslaughter (tried for murder) - Should a widow convicted of manslaughter be able to inherit from his estate? - Question is whether it was voluntary or involuntary? - 3 Options (1) Killer is allowed to take - Already punished criminally, shouldnt double penalize the slayer - There is no slayer statute in VT (2) Equity should prevent the killer from taking the property 18

- Shouldnt profit from ones own fraud (3) Impose a constructive trust on the killer for the benefit of the next of kid of the deceased - Court doesnt want to effectuate #2 by passing the inheritance to decedents parents - Only court that can adopt a constructive trust is a general trial court - Cant be done in probate court - Probate court just follows the statute (there isnt a slayer statute!) - Parents would have to sue to impose the constructive trust Easy for pre-meditated killings person doesnt take What about other killings? - Drunk Driving - Heat of Passion - Absurd Recklessness - Mercy Killing DISCLAIMER -Someone who disclaims is treated as predeceased. Disclaiming is constructively predeceasing and my heirs will take the money. Reasons to Disclaim 1) Property may be undesirable or accompanied by an onerous burden. 2) An heir who is in debt may disclaim the property to prevent the property from being taken by the heirs creditors. UPC 2-801(d) says this is not perpetrating a fraud. 3) I may owe a ton of money to my creditors. 4) By letting money skip a generation I can skip paying an estate tax twice, I only pay once. Common Requirements for disclaimer 1) Disclaimer must be memorialized in a writing that is signed by the disclaiming heir. 2) the disclaimer document must be filed with the proper authorities. Some have a 90 day rule. Not the UPC 2-801(b) it expands the time frame. 3) A copy of the disclaimer must be delivered to the administrator so the administrator knows not to deliver estate property to the heir. 4) Disclaimers are irrevocable. Once an heir disclaims it cannot regain the property disclaimed. 5) Partial disclaimers are allowed. 6) if the heir has accepted the property or any of it benefits, it is too late for the heir to disclaim even if any applicable time period has not yet elapsed. 7) The disclaimer must be unconditional. The heir cannot receive something in exchange for making the disclaimer. 19

Example: O has two kids A and B. B dies leaving child C. A has four children. O dies. O leaves estate to A and B. Both get half. But if A disclaimed his heirs will get 4/5s of the estate will get 1/5 based on modern per stirpes at the first division and then per capita at each general at the grandkid level, right? NO! UPC 2-1106(b)(3)(C) Disclaimed interest is the only thing that passes to Disclaimants descendants - Disclaimant can only control what he stands to inherit MENTAL CAPACITY In order to make a will you have to be the age of majority and need sufficient mental capacity. - Testator must have testamentary capacity at the time the testator executes the will. The fact that a testator lacked capacity moments before or moments after will execution does not prevent a court from finding the existence of testamentary capacity. - the capacity to make a will is lower than a capacity to make a contract but higher than the capacity to get married. - We require capacity in order to protect people from being exploited, in order for their true intentions to come out. - IN ORDER TO HAVE STANDING TO BRING A WILL CHALLENGE YOU MUST HAVE A STAKE IN THE MATTER. THIS MEANS YOU WOULD HAVE TAKEN IN INTESTANCY OR A PRIOR WILL THAT HAS BEEN STRUCK DOWN. THE CUNNINGHAM TEST Need to be Capable of Knowing and Understanding (not require actual knowledge): 1) the nature and extent of your property. 2) the natural objects of your bounty. 3) the disposition being made. 4) relating the first three elements all together. Presumption of Capacity - Challenger has to prove lack of capacity (Wilson v. Lane p161) o In re Estate of Washburn is a minority rule (p 159) Placed the burden on the estate to prove capacity - If the challenger successfully rebuts then the burden of proof is on the proponent of the will. If will is found to have been executed while the decedent did not have capacity then the entire will is INVALID. ** Other mental state challenges can involve only parts of the will **

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INSANE DELUSION - a mistaken belief about the world and the person resists change even when presented with evidence to the contrary. 1) You have to have a mistaken belief about the world AND 2) it has to be shown to have effected the will. - Mental Capacity and Insane Delusion can be tried separately. Majority Rule: - A rational person in Testators position could NOT have reached the same conclusion Other Rule: - If SOME factual basis for the belief, then it is NOT and insane delusion Person may have sufficient mental capacity to execute a will but be suffering from insane delusion to cause the will to fail for lack of testamentary capacity nonetheless. - if delusion shown, but it doesnt affect the dispositions, the will will STAND Examples: In re Strittmater (NJ 1947) p169 - Woman hates men and decides to leave everything to NWP - Even if suffering an insane delusion, is that enough to invalidate? o Has to show causation - If NWP didnt take, some distant cousin would o NWP is fairly natural recipient given her life, etc. - Court ends up striking the will down because of insane delusion - No woman could hate men this much o Cousin takes Honigman - Man cuts his wife out of will b/c he thinks she is having an affair - Court invalidates the disposition b/c it is an insane delusion o Lets the wife take Breeden v. Stone (CO 2000) p171 - Man on alcohol/cocaine decides to alter a previous will and cut out his family and leave all to his drug dealer o Does so via holographic will - Shoots his dog and kills himself b/c he thought people were trying to kill him and listening devices in his home, etc. - Yes, he is suffering an insane delusion o But, the insane delusion DOESNT MATERIALLY AFFECT the contested dispositions (Hanks standard) - Will stands as is, drug dealer takes

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What can a lawyer do in re: capacity/insane delusion? - Provide explanations in your will (might give fodder for challenge, though) - Have a medical examiner attend the will execution and sign affidavit discussing the competence of Testator - Videotape the conversations with Testator - Dont take them on as a client UNDUE INFLUENCE Defined: A testator who is unduly influenced has testamentary capacity but that capacity is subject to and controlled by an evil individual. - the finding of coercion. - Undue influence overcomes the donors free will. Elements: 1) The person must actually exert an influence over the testator that is undue. Merely pleading with the testator / badgering the testator to make a will in a certain way is not enough. 2) the influence must turn the testator into a marionette, that is the influence needs to be so strong that it subverts and overpowers the testators mind at the time the testator executes the will. 3) the influence must cause the testator to execute a will that the testator would not have signed but for the undue influence. 4) Result: the will reflects the wishes of the influencer, not the testator. In Undue Influence you need to show: a confidential relationship AND suspicious circumstances. If you dont have direct evidence to shift the burden, you can use Circumstantial Evidence that Can Show Undue Influence: 1. Motive. 2. Untraditional Disposition. 3. Opportunity and Access. 4. Relationship Between Testator and Alleged Undue Influencer. The existence of a confidential relationship may even trigger a presumption of undue influence requiring the alleged influencer to prove otherwise. 5. Susceptibility and the Ability to Resist. 6. Connection Between Will and Alleged Undue Influencer. NOTE: Undue Influence ISNT the same as Duress or Fraud! No Contest Clause - this clause basically says that if you challenge this will then you will not get the share that has been bequeathed to you.

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A no contest clause is valid UNLESS the challenger to the will has probable cause that there was undue influence, fraud, etc. NY: you are allowed to challenge a will execution formality, allowed to question witnesses, in a no contest clause.

Burden Shifting - If proponent of a will proves the formalities of execution are followed, a contestant who claims there has been undue influence has burden of proof - Burden is shifted so as to require proponent to disprove undue influence - Contestant must prove by clear and convincing evidence: (1) there was a confidential relationship - fiduciary, reliant, dominant-subservient (2) the person enjoying such relationship received the bulk of the estate (3) decedents intellect was weakened Restatement (Third) Burden Shifting (1) Existence of confidential relationship between alleged influencer and testator - fiduciary, reliant, dominant-subservient (2) One or more additional suspicious circumstances - Extent donor was in weakened condition, physically, mentally, or both, and therefore susceptible to undue influence - Extent to which alleged wrongdoer participated in the preparation or procurement of the will or will substitute - Whether the donor received independent advice from an attorney or from other competent and disinterested advisors in preparing the will or will substitute - Whether the will or will substitute was prepared in secrecy or in haste - Whether the donors attitude toward others had changed by reason of his/her relationship with the alleged wrongdoer - Whether there is a discrepancy between a new and previous wills or will substitutes of the donor - Whether there was a continuity of purpose running through former wills or will substitutes indicating a settled intent in the disposition of his/her property - Whether the disposition of the property is such that a reasonable person would regard it as unnatural, unjust, or unfair EX: whether the disposition abruptly and without apparent reason disinherited a faithful and deserving family member Estate of Lakatosh (PA 1994) p182 - Roger befriends and old woman (Lakatosh) and convinces her to give him PoA - He takes her money and allows her to live in squalor - Shift burden and he cannot meet his burden, so will struck down In re Will of Moses (Miss 1969) p186 - Woman becomes friendly with a man who became her lover/attorney - She goes to independent outside counsel and has will made leaving him everything - Disinherits her sister in the process - Court strikes it down, finds undue influence (probably wrong result) 23

- Court emphasizes how ugly she is and how he couldnt be in love with her - Court is very gender bias might be different if gender roles reversed - She did everything right (3rd party counsel, didnt tell the lover about the will, tells 3rd party the will reflects her true interests) In re Kaufmans Will (NY App Div 1964) p193 - Founder of Kay Jewelers leaves all his money to a secret gay lover he had for decades - Kaufman includes written note explaining why he wants the will this way - Court finds undue influence -- likely just expressing disapproval for gay relationship - Evidence sufficient to find will was result of unnatural, insidious influence to a weak-willed, trusting, inexperienced person Lipper v. Weslow (TX 1963) p193 - Sophie has 2 marriages (1st marriage has 3 grandkids; 2nd marriage husband and 2 kids) - Disinherits the 3 grandkids and the daughter in law - They didnt retain relationship with her so she wants to disinherit them - 3 grandkids bring the challenge (daughter in law cant b/c she isnt intestate taker) - She anticipates a will challenge - Lengthy message in will listing reasons for disinheriting them - Drafted with lots of legal jargon by her son (a lawyer) - Son is in a confidential relationship with her - Intuition is that this is unnatural disposition, but after you hear the story makes sense Warning Signs for Will Challenges (1) Testators new testamentary scheme makes radical departure from previous plans (2) Testator has multiple or blended families arising from multiple marriages (3) Testator imposes various conditions on a bequest (4) Testator makes a disposition to a mistress or other person or group unpopular with Testators family (5) Unnatural disposition omission of close family member or unexplainable distinction among family members of equal relation Strategies to Deal With Potential Challenges (1) Letter to lawyer explaining in detail the dispositions Testator wants to make (2) Video discussion between Testator and Lawyer to explain reasons (3) Family meeting for Testator to explain reasons (4) Professional examination of clients level of capacity (5) Use disinterested witnesses at will execution (6) No Contest Clauses (7) Inter vivos trusts/gifts

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(8) Write a check to the person on the same day donor executes will/trust. Cashing invites tough cross-examination about why it was cashed if the challenger thought Testator lacked capacity or was being unduly influenced No Compete Clause - Clause that states if you challenge this will, you cannot take - Ineffective if you dont leave the person anything to begin with - Maybe then need to leave some amount they wont want to challenge If you bring Lack of Capacity challenge to a will, and win, it is as if will never existed If you bring Undue Influence challenge you can render the no-compete clause void - Doesnt count as a disinheritance then UPC 2-517 So long as the contestant to a will has probable cause to challenge the will, the nocompete clause has no effect - If you have probable cause, even if you lose the will challenge, the no-contest clause wont be given effect as to you - Policy: only want to deter frivolous will challenges EPTL 3-3.5 No-contest clauses are enforceable, but they are narrowly defined - These do NOT trigger no-contest clause: - Forgery claims, challenges by minors/incompetents, objections to courts jurisdiction, disclosure about validity of the will NOTE: Many j/d hold presumption of undue influence when attorney-drafter receives a legacy, except when the attorney is related to Testator. Rebutted by clear and convincing evidence - In NY, attorney-drafter who is named in the will must submit affidavit explaining facts/circumstances of the gift (if not satisfied, may have a hearing on it) FRAUD - Fraud occurs when the testator is deceived by a deliberate misrepresentation and does that which he would not have done had the misrepresentation not been made. - Misrepresentation must be made with both INTENT to deceive the testator and the PURPOSE of influencing the testamentary disposition. - A provision in a 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. The 4 Basic Elements of Fraud: 1) False Representation. Someone must have made a false representation to the testator. 25

2) Knowledge of Falsity. The individual making the false representation must have known the statement was false. In other words, the liar must have intended to deceive the testator. 3) Reasonably Believed. The testator must have reasonably believed the false statement. Thus is a reasonable person would not have believe the misrepresentation, fraud could not be established. 4) Causation. The false representation must cause the testator to execute a will the testator would not have signed but for the misrepresentation. Two Kinds: 1) Fraud in the Inducement a misrepresentation of facts intending to and successfully causing the testator to favor a person in the will. A person contesting the will has to show that the testator would not have made the will if they knew the truth. - Changing your mind doesnt mean fraud in the inducement - Have to have intent AT THE TIME 2) Fraud in the Execution misrepresentation to the testator the nature/content of the document that testator is signing - having someone sign something they dont know is their will. Fraud involves lying while undue influence does not have to. The remedy for undue influence or fraud is to invalidate those portions of the will that are influenced by them.

NOTE: Fraud cases generally involve caregivers! Puckett v. Kirda (Tenn 1994) p209 - Caregivers misrepresent that the woman in cares family were wasting her money and wanted to put her in a nursing home (not true) - Nurses also had power of attorney - Confidential relationship + misrepresentation + encouragement of false beliefs = fraud and undue influence DURESS - very similar to undue influence but instead of mental actions there is a threat or doing of physical harm. - when undue influence becomes overtly coercive it is called DURESS. - The law invalidates transfers compelled by duress. - 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. Latham v. Father Divine (NY 1949) p210 26

- Woman has a will leaving all her money to Father Divine but changes her mind and wants to leave Latham the majority of her estate - Claims Father Divine through undue influences and misrepresentation caused her not to make the will changes - When she tried to change will again, she claims she was killed by Father Divine - If allegation is correct, this is duress and the will should be invalid - But, the will has already been probated - Relatives that would have taken under the new will are challenging - Wouldnt take under intestacy (1st cousins) - Seeking Constructive Trust (wouldnt take under intestacy, so no point in asking to strike will down) - Idea is to not have unjust enrichment for the person to retain the property - Can create a constructive trust for a 3rd party who wouldnt take in intestacy - Court doesnt say who the beneficiary of the constructive trust would be, but will consider it NOTE: Her new will was in DRAFT form (not signed, no witnesses) - Generally, any slightest deviation from the formalities results in will being struck down - Court is willing to consider distributing the estate pursuant to draft will TORTIOUS INTERFERENCE WITH EXPECTANCY Tortious interference with expectancy is a tort action in which the plaintiff seeks to recover damages from a third party. Tort actions require Duty, Breach, Causation, Harm Typically the plaintiff must prove five things 1) the existence of an expectancy. (e.g. to be an heir, a beneficiary of a will, or a recipient of a nonprobate trust) 2) A reasonable certainty that the expectancy would have been realized BUT for the interference of the defendant. 3) the defendant intentionally interfered with the expectancy. 4) the defendants intentional interference was fraudulent or otherwise tortuous. 5) Damages. Tortious interference is not a will contest because it is based on the tortuous conduct of a third party rather than a challenge to the will Therefore, any no contest clause in the will would not apply o This is outside of the probate process Punitive damages would be recovered against the wrongdoer Theory cannot be used when challenge is based off of Testators mental capacity Purpose is to protect the testator, not the beneficiary (derivative duty) Statute of Limitations is the TORT statute of limitations, not probate one 27

o starts running at time P discovered or should have discovered fraud or undue influence Schilling v. Herrera (FL 2007) p215 - Decedents brother (sole beneficiary) sues caretaker - Brother had PoA in general and for health care but when caretaker gets close to the woman she persuades her to switch to give the caretaker PoAs and make her sole beneficiary of new will - Woman dies Aug 6 and caretaker submits will to probate without telling the brother of the sisters death until AFTER probate - Once you have final probate, challenges end - With torts, you need to show duty - With tortious interference, TESTATOR is being defrauded/unduly influenced, not beneficiary - Beneficiary has DERIVATIVE DUTY from testator ** You MUST exhaust remedies in probate before you bring a tortious interference claim ** PROBATE EXCEPTION Requires federal courts to abstain from entertaining suits that encroach on traditional j/d of state probate courts Will Formalities and Forms Will Execution Why do we have the applicable standards that we have? 1) Evidentiary function 2) Ritual function 3) Encourage seeking legal advice 4) Constraints discretion of use of the probate process. 5) Channeling function 6) Protective function. Execution UPC 2-502- Execution, Witnessed, of Notarized Wills, Holographic Wills (a) Witnessed or notarized will. Except as otherwise provided in subsection (b) and in sections 2-503, 2-506, and 2-513, A WILL MUST BE: (1) in writing; (2) signed by the testator or in the testators name by some other individual in the testators conscious presence and by the testators direction; AND (3) EITHER (A) signed by at least two individuals, each of whom signed within a reasonable time after the individual witnessed either the signing or the will as described in paragraph (2) or the testators acknowledgement of that signature or acknowledgement of the will OR 28

(B) acknowledged by the testator before a notary public or other individual authorized by law to take acknowledgements. (b) Holographic Wills. A will that does not comply with subsection (a) is valid as a holographic will, whether or not witnessed, if the signature and material portions of the document are in the testators handwriting. (c) Extrinsic Evidence. Intent that a document constitute the testators will can be established by extrinsic evidence, including, for holographic wills, portions of the document are in the testators handwriting. IN NEW YORK: EPTL 3-2.1 Execution and Attestation of Wills; Formal Requirements (a) Except for nuncupative and holographic wills authorized by 3-2.2, every will must be in writing, and executed and attested in the following manner: (1) It shall be signed at the end thereof by the testator or, in the name of the testator, by another person in his presence and by his direction, subject to the following: (A) The presence of any matter following the testator's signature, appearing on the will at the time of its execution, shall not invalidate such matter preceding the signature as appeared on the will at the time of its execution, except that such matter preceding the signature shall not be given effect, in the discretion of the surrogate, if it is so incomplete as not to be readily comprehensible without the aid of matter which follows the signature, or if to give effect to such matter preceding the signature would subvert the testator's general plan for the disposition and administration of his estate. (B) No effect shall be given to any matter, other than the attestation clause, which follows the signature of the testator, or to any matter preceding such signature which was added subsequently to the execution of the will. (C) Any person who signs the testator's name to the will, as provided in subparagraph (1), shall sign his own name and affix his residence address to the will but shall not be counted as one of the necessary attesting witnesses to the will. A will lacking the signature of the person signing the testator's name shall not be given effect; provided, however, the failure of the person signing the testator's name to affix his address shall not affect the validity of the will. (2) The signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses, or shall be acknowledged by the testator to each of them to have been affixed by him or by his direction. The testator may either sign in the presence of, or acknowledge his signature to each attesting witness separately. (3) The testator shall, at some time during the ceremony or ceremonies of execution and attestation, declare to each of the attesting witnesses 29

that the instrument to which his signature has been affixed is his will. (4) There shall be at least two attesting witnesses, who shall, within one thirty day period, both attest the testator's signature, as affixed or acknowledged in their presence, and at the request of the testator, sign their names and affix their residence addresses at the end of the will. There shall be a rebuttable presumption that the thirty day requirement of the preceding sentence has been fulfilled. The failure of a witness to affix his address shall not affect the validity of the will. (b) The procedure for the execution and attestation of wills need not be followed in the precise order set forth in paragraph (a) so long as all the requisite formalities are observed during a period of time in which, satisfactorily to the surrogate, the ceremony or ceremonies of execution and attestation continue. - Under traditional law, for a will to be admitted to probate it must be in strict compliance with the formal requirements of the WILLS ACT. - A will must be: 1) In writing 2) Signed by the testator 3) Attested to by at least two witnesses. In re Groffman (England 1969) p228 - Testator asks 2 people to witness his will (already signed not in their presence) - Each witness signs in Testators presence but not in other witnesses presence - Would be OK if he acknowledged his signature in front of both of them and then both signed separately - No indication the will doesnt reflect Testators actual intent, but refuse to probate it because it doesnt strictly follow the formalities Stevens v. Casdorph (WV 1998) p229 - Testator goes to bank so he can execute his will (everyone knows why he is there) - Signs the will at the tellers window, teller takes the will separately to 2 employees who sign as witnesses - Statute requires witness is in each others presence while watching him sign and be in each others presence while signing - If witness signs away from the other but then acknowledge his signature in front of the other this is OK (Wade Exception) - Doesnt meet the exception or the statutory standards - DISSENT: We should care more about intent than formality Groffmans will is OK under both UPC and EPTL Casdorph will is OK under UPC and maybe under EPTL THE MEANING OF PRESENCE AT WILL EXECUTION - There are two different tests in different states: 30

1) the line of sight test: testator does not have to see the witness sign but must be able to see them were the testator to look. - Capable of seeing each other (closed eyes/blind is OK if you could see them if you had power of sight) - Next room / obstructed view doesnt count 2) the 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. - Can include people in the next room THE MEANING OF SIGNATURE IN WILL EXECUTION - the purpose of the signature requirement is to provide evidence of finality, distinguishing a will from draft or notes AND to provide evidence of genuineness. - A signature by the testator with her full name at the end of the will satisfies this requirement. - Signature by mark, with assistance, or by another. A mark, a cross, abbreviation, or nickname can be sufficient. o Computerized signatures are OK so long as there is some distinguishing that the signature is different from the will 3-2.1a1a Material following the signature is invalid (rest of will is valid) Order of Signing. The testator must sign or acknowledge the will before the witnesses can attest, but if they all sign as part of a single or continuous transaction, the order signing is not critical. Subscription and Addition after Signature. When a testator signs the will at the foot or end this is called the subscription. - If there is a signature and underneath the signature it says I give Karen a diamond ring it depends upon whether the line was on the will when it was signed by the testator. - If it was added after he signed the will be may be admitted to probate but the line would be ineffective as a subsequent unexecuted codicil. Delayed Attestation. A witness observes the testator write his signature but does not sign it till later. - How long may the witness delay attestation? - NY EPTL witness must attest within 30 days. - UPC: the witness must sign within a reasonable time. Will Execution Purposes of Will Formalities Four Basic Purposes: 1) Ritual or Cautionary Function 31

- to make sure the testator intended to make an at death distribution of property. 2) Evidentiary Function - to created reliable evidence of the testators intent. 3) Protective Function - the formalities make it harder for an evil person to exert undue influence over the testator. - A will execution ceremony takes place in the presence of several individuals who may be able too detect if any untoward influence is being brought to bear on the testator. 4) Channeling function - to increase the confidence of the testator that the testators desires will actually be carried out upon death. Witnesses Competent Witnesses to a will. Competent means some who is disinterested in the probate of the will. - a beneficiary under the will is not a competent witness. EPTL 3-3.2 Competence of attesting witness who is beneficiary; (a) An attesting witness to a will to whom a BENEFICIAL disposition or appointment of property is made is a competent witness and compellable to testify respecting the execution of such will as if no such disposition or appointment had been made subject to the following: (1) Any such disposition or appointment made to an attesting witness is VOID UNLESS there are, at the time of execution or attestation, at least two other attesting witnesses to the will who receive no beneficial disposition or appointment thereunder. (2) Any such disposition or appointment to an attesting witness is effective unless the will cannot be proved without the testimony of such witness, in which case the disposition or appointment is VOID (3) Any attesting witness whose disposition is VOID who would be a distributee if the will was not established, is entitled to received so much of his intestate share as does not exceed the value of the disposition made to him in the will. UPC 2-505. Who May Witness. (a) An individual generally competent to be a witness may act as a witness to a will. (b) The signing of a will by an interested witness does not invalidate the will or any provision of it.

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Here are some ramifications of having an interested person serve as a witness to the will. 1) the entire will is void. Under the old school rule it was the case that if there were only two witnesses and one of them was a beneficiary then the will is VOID. 2) the gift to the witness is VOID. Through a PURGING STATUTE the witness forfeits any benefit under the will and is thus made disinterested and capable of giving testimony about the will. 3) the gift to the witness is VOID unless the witness is also an heir in which case the witness can receive the gift provided it does not exceed the share of the testators estate the witness would take under intestate succession. Thus the witness has no motive to lie. Purging Statues - allows the will attested by an interested witness to be admitted to probate, but voided (purged) any bequest to the interested witness. After the purging statute, a will attested by an interested witness would be valid but at the cost of purging the interested witness of his bequest. - purges a witness from their status as beneficiaries under the statute so that they may become competent witnesses again. Illustration of Purging Statue: In re Estate of Morea (NY 1996) p239 - Morea writes his will and has 3 witnesses come to sign it - Need 2 witnesses to attest to the will to make the will valid - Witness 1 is fine (isnt taking under the will) - Witnesses 2 and 3 are Testators son and friend of the testator (both beneficiaries under the will) Here is how the purging statute in NY works (EPTL 3-3.2): The son stood to make $150,000 under intestacy and $100,000 under the will. New York will then purge $50,000 to make the money even and to make him an indifferent and thus competent witness. Since the son benefit equally under intestacy and under the will he is a competent witness and so the will is satisfied under the EPTL. - Issue is whether the friend can take o He wouldnt take under intestacy But, since there are now 2 competent witnesses he can take ALL the witnesses dont need to be competent, just the requisite 2 NOTE: UPC has dispensed with the competence requirement -- 2-505(b) - Can be a taker under the will and not an intestate beneficiary and still get your full share from will while serving as a valid witness

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Curative Doctrines UPC 2-503 Harmless Error Statute Although a document or writing added upon a document was not executed in compliance with Section 2-502, the document or writing is treated as if it had been executed in compliance with that section if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute (i) the decedent's will, (ii) a partial or complete revocation of the will, (iii) an addition to or an alteration of the will, or (iv) a partial or complete revival of his [or her] formerly revoked will or of a formerly revoked portion of the will. The UPC Advocates the harmless error/ dispensing power approach. 1) Substantial Compliance: Substantial compliance holds that a will was properly executed as long as: (a) there is clear and convincing evidence that the testator intended the document to be his or her will, and (b) there is clear and convincing evidence that the testator substantially complied with the Wills Act Formalities. 2) Harmless Error/ Dispensing Power (Adopted by the UPC) - Will was properly executed as long as there is clear and convincing evidence that the testator intended the document to be his or her own will. In re Pavlinkos Estate (PA 1959) p246 - Husband and wife make wills at the same time but sign each others by accident - Wifes brother was principal beneficiary under both wills (likely not an intestacy taker under husbands will) - Will also refers to other beneficiaries by their relation to the wife - Will Act of 1947: Every will shall be in writing and shall be signed by T at end - Court doesnt want to correct the wills (would have to correct a lot of mistakes) - Could be fraudulent In re Snide (NY 1981) p250 - Similar to Pavlinko but the wills are IDENTICAL except for the mistaken signature - Court admits the wills to probate - Case of genuine mistake - Lack of testamentary intent argument is too formalistic - Should look at the testamentary SCHEME, not DOCUMENT - No danger of fraud by just switching the names In re Will of Ranney (NJ 1991) p253

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- Self-proving affidavits - Affidavit provides sworn evidence of due execution - Two Step Approach - Witness signs twice: Once on the will, once on the affidavit - Affidavit is notarized after - One Step Approach - Signature just on the will and the affidavit is folded into the attestation clause of the will - Will is notarized after - Here, instead of the one step self-proving clause, attorney puts the two step clause and the witnesses sign the affidavit - NEVER SIGNED THE WILL - Functions: - Attestation clause: - Facilitates probate by providing prima facie evidence that the testator voluntarily signed the will in the presence of the witnesses - Attestant expresses present intent to act as a witness - Self-proving affidavits: - Sworn statements by eyewitnesses that the will has been duly executed - Performs virtually all functions of attestation clause, has further effect of permitting probate w/o requiring the appearance of either witness - Affiant swears that will has already been witnessed - Literal Compliance - Substantial Compliance (near miss doctrine) - So long as the will substantially complies with the purposes that the formalities are meant to imply, that is enough - Does the document reflect the testators intent? - Were Will Act formalities substantially complied with? - Have to show by clear and convincing evidence it substantially complied with the statutory requirements In re Estate of Hall (Mont 2002) p259 - Jim has a previous will and drafts a new one with his wife - Asks that the draft be valid until the new will is complete - Lawyer says yes, they notarize it w/o any witnesses - Tells his wife to tear up the old will - Dies before the new one is complete - Substantial compliance - Consistent with Testators intent - Signed it, but have no witnesses - Dispensing Power - Court asks if the proponent of the document establishes by clear and convincing evidence whether decedent intended the document to be his will - Ct. adds this to substantial compliance 35

Substantial Compliance will should be admitted to probate if clear and convincing evidence that the purposes of the formalities were served despite a defective execution - Ranney Harmless Error should probate a document that was not properly executed if the court is satisfied that the decedent intended the document to constitute his will - Hall 4 Regimes: Strict Compliance Strict Compliance but Reason Out of It (Slouching Towards Reform) Substantial Compliance Dispensing Power HOLOGRAPHIC WILLS A holographic will must be written by the testators hand and signed by the testator. Signature: the will may be signed at the beginning, middle, or end of the document. But if it not signed at the end then it could raise some serious doubts about the testators intent. Dont need to be witnessed. - a holographic will is a will prepared in the testators own handwriting. - In half of the states a holographic will is exempted from the attestation requirement. - In other states they treat holographic wills no different from regular wills. - Holographic will statutes are far more common out west. UPC: requires that only the material portions, not the entire instrument, be in the testators handwriting. EPTL 3-2.2 Nuncupative and holographic wills - Limited only to (1) soldiers who are serving in the armed forces and who are on active duty and (2) mariners at sea. - They are the only people that can do this and these wills are only limited to a year after they return Extent of the Testators Handwriting: how much of the document must be in written in the testators own handwriting? THREE CATAGORIES HAVE EVOLVED over time: 1) Strict Compliance (1st generation): entirely written, signed, and dated. No exceptions. Anything else invalidates it. 2) Material Provisions (2nd generation): Requires only the signature and material provisions of the holograph to be in the testators handwriting.

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3) Material Portions (3rd generation): UPC. Extrinsic evidence allowed. If the signature and material portions are in the testators handwriting. Dont need witnesses. UPC 2-502 (b) A will that does not comply with subsection (a) is valid as a holographic will, whether or not witnessed, if the signature and material portions of the document are in the testator's handwriting. Holographic Will Cases Kimmels Estate (PA 1924) p269 - Father writes letter to kids saying if anything happens he wants money and papers to go to them and then dies later that day - Ct. looks at the condition, if anything should happen property to X - Testamentary character - Is signature sufficient compliance for Wills Act? - He signs all letters Father - Satisfies ritual function Estate of Gonzalez (Maine 2004) p274 - A blank will form case. - Gonzalez fills out a pre-printed will form by hand and then decides to recopy it more neatly, signs the old version but not the new one. - Has his witnesses witness the new document - Dies before he can rewrite the new document - The document he signed doesnt qualify as a will under Maine statute b/c not signed by any witnesses o To be allowed or admitted to probate, but be considered holographic - Two approaches. - 1) omit the printed parts and see if what is left is a will. - 2) use the printed parts to see if they give meaning to the handwritten part o Testator who uses preprinted form and in his own handwriting fills in the blanks by designating beneficiaries and apportioning his estate among them and signs it has created a valid holographic will In re Estate of Kuralt (MT 2000) p280 - Kuralt has secret family and provides for them directly and in a letter - Doesnt provide for them in an actual will - Ct. recognizes the letter as a valid holographic codicil to his formal will - Letter has testamentary intent REVOCATION - a will is an ambulatory instrument, that is, it walks with the testator during life but has no legal effect until the testators death. 37

As long as the testator has the mental capacity, the testator has the full authority to change or revoke the will. Only upon the testators death does the will become irrevocable.

UPC - 2-507. Revocation by Writing or by Act. (Bk. Pg 286).

(a) A will or any part thereof is revoked: (1) by executing a subsequent will that revokes the previous will or part expressly or by inconsistency; or (2) by performing a REVOCATORY ACT on the will, if the testator performed the act with the intent and for the purpose of revoking the will or part or if another individual performed the act in the testator's conscious presence and by the testator's direction. For purposes of this paragraph, "revocatory act on the will" includes burning, tearing, canceling, obliterating, or destroying the will or any part of it. A burning, tearing, or canceling is a "revocatory act on the will," whether or not the burn, tear, or cancellation touched any of the words on the will. (b) If a subsequent will does not expressly revoke a previous will, the execution of the subsequent will wholly revokes the previous will by inconsistency if the testator intended the subsequent will to replace rather than supplement the previous will. (c) The testator is presumed to have intended a subsequent will to replace rather than supplement a previous will if the subsequent will makes a complete disposition of the testator's estate. If this presumption arises and is not rebutted by clear and convincing evidence, the previous will is revoked; only the subsequent will is operative on the testator's death. (d) The testator is presumed to have intended a subsequent will to supplement rather than replace a previous will if the subsequent will does not make a complete disposition of the testator's estate. If this presumption arises and is not rebutted by clear and convincing evidence, the subsequent will revokes the previous will only to the extent the subsequent will is inconsistent with the previous will; each will is fully operative on the testator's death to the extent they are not inconsistent. 2-508. Revocation by Change of Circumstances. Except as provided in Sections 2-803 and 2-804, a change of circumstances does not revoke a will or any part of it. Failure to revoke in a manner allowed by law will make the attempted revocation ineffective regardless of the testators intent.

NY: EPTL 3-4.1 Revocation of wills; effect on codicils (a) a revocation or alteration, if intended by the testator, may be effected in the following manner only: (1) A will or any part thereof may be revoked or altered by: (A) Another will.

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(B) A writing of the testator clearly indicating an intention to effect such revocation or alteration, executed with the formalities prescribed by this article for the execution and attestation of a will. (2) A will may be revoked by: (A) an act of burning, tearing, cutting, cancellation, obliteration, or other mutilation or destruction performed by: (i) the testator. (ii) another person, in the presence and by the direction of the testator; in which case, the fact that the will was so revoked in the presence and by the direction of the testator shall be proved by at least two witnesses, neither of whom shall be the person who performed the act of revocation. (b) In addition to the methods set forth in paragraph (a), a will may be revoked or altered by a nuncupative or holographic declaration of revocation or alteration made in the circumstances prescribed by 3-2.2 by any person therein authorized to make a nuncupative or holographic will. Any such nuncuptive declaration of revocation or alteration must be clearly established by at least two witnesses; any such holographic declaration, by an instrument written entirely in the handwriting of the testator, although not executed and attested in accordance with formalities prescribed by this article for the execution and attestation of a will. (c) the revocation of a will, as provided in this section, revoke all codicils thereto. 3 ways that a will can be revoked: 1) Revocation by Operation of Law that is partial or total revocation triggered automatically by certain events. 2) Revocation by physical act: as a result of the application of some type of violence to the will. 3) Revocation by a subsequent writing such as a new will or codicil. It does not have to be a subsequent testamentary writing. Someone may write, I cancel my previous will it is signed and witnessed then it may qualify under this. RECOVATION BY SUBSEQUENT WRITING - Must comply with whatever the relevant Will Act formalities are (sign / witness) - Codicils will only revoke prior wills to the extent of their inconsistencies - ANY residuary clause in a subsequent will/codicil revokes all prior wills by inconsistency (you have disposed of all your property) - In NY, you can revoke a codicil w/o revoking the will - Normally, revoking a codicil presumptively revokes all codicils - If the document is valid, it will be a revocation of prior codicils AND serve to affirmatively distribute the property - Cant revoke and NOT affirmatively dispose property 39

REVOCATION BY OPERATION OF LAW the law assumes these occurrences would cause most testators to make corresponding changes to their wills. If one or more of these events occurs and the testator does not adjust the testators will thereafter, the law operates to revoke part or all of the will on the assumption that the testator would no longer have wanted the will to take effect as written. In most revocation by operation of law situations, extrinsic evidence may not be used to show that the testator actually would not have wanted the will or portions thereof change or revoked. 1) Marriage of testator. 2) Divorce of Testator 3) Pretermitted Heirs leaving a child out may be viewed as accidental state legislatures have responded by providing omitted children with a forced share. 4) Death of a beneficiary 5) Beneficiary Killed Testator 6) Alienation - by giving the gift away during life it is taken out of the will. By Operation of Law: revocation as a result in change in family circumstances. - Divorce will revoke whatever you leave to your spouse in the will. - How much does it revoke? UPC 2-804 Divorce will revoke bequests BOTH to the spouse and to the family of the spouse under the UPC. EPTL 5-1.4: Only revoke bequests to the spouse, but NOT to dispositions to the family of the spouse (step-sons would take) If you want to leave the property to the spouse/their family members, just republish the will AFTER marriage so that the effective date is later REVOCATION BY PHYSICAL ACT Four basic requirements for a valid revocation by physical act: 1) capacity to revoke. 2) intent to revoke 3) a satisfactory physical act performed on the will 4) the simultaneous existence of the first three prerequisites. EPTL: The writing or cancellation must be across the vital parts of the will. - When revocation takes the form of writing it has to obliterate vital portions of the will. Harrison v. Bird (Ala 1993) p287

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- Speer executes will w/ Harrison as beneficiary. - Keeps one copy for himself and duplicate original to Harrison - Speer decides she wants will destroyed. Calls lawyer and lawyer rips will into 4 pieces and mails them to her - She dies and they cant find the 4 pieces - When she received the 4 pieces, the will wasnt technically revoked - Must be destroyed within her presence (conscious / line-of-sight) - Presumption of Revocation - Pieces were in a sealed envelope and now nobody can find them - Presumption she did something to get rid of them - If there is evidence that the will was last in the testators possession, and now it cannot be found, presumption is that it was destroyed by physical act - Presumption does NOT apply if the person safeguarding the will loses it - Presumption can be rebutted by preponderance of evidence standard (not clear and convincing) - Missing wills can be probated if sufficient proof of the contents of the missing will - Clear and convincing evidence Thompson v. Royall (VA 1934) p290 - Woman executes a will Sept 4 and a Codicil Sept 15 - Sept 19 she wants to revoke the will - Lawyer writes on the back of the manuscript cover: This will null and void and to be only held by X instead of being destroyed as a memorandum for another will if I desire to make same. - Signed and dated - Did the same with the codicil - Court says not revoked as per the statute - Must come into contact with the words on the page - If writing intended to cancel does not mutilate, or erase, or deface, or otherwise physically come in contact with, any part of the written words of the will, it cannot be given any greater weight than a similar writing on a separate sheet of paper, which identifies the will referred to PARTIAL REVOCATION by PHYSICAL ACT - EPTL does NOT permit this - UPC permits partial revocation by physical act - If in j/d where you cannot have partial revocation by physical act, and will has a crossed out beneficiary, need to figure out Ts intent - Intent was to revoke part - Cant do this entire will is VALID - Intent was to revoke the whole thing - Entire will is INVALID Dependant Relative Revocation

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DRR: 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. The theory is the testator lacks true revocatory intent if the revocation was based on a mistaken belief. A typical DRR case is where a testator destroys his will under the belief that a new will is valid, but for some reason the new will is invalid. BASED ON TESTATORS INFERRED INTENTION

Courts have Held that DRR applies only: 1) where there is an alternative plan of disposition that fails, 2) where the mistake is recited in the terms of the revoking instrument or, possibly, is established by clear and convincing evidence. To treat a subsequent will that does not expressly revoke the prior will, but makes a complete disposition of the testators estate, as presumptively replacing the prior will and revoking it by inconsistency. If the subsequent will does not make a complete disposition of the testators estate, it is not presumed to revoke the prior will but is viewed as A CODICIL. The property that is not disposed of under the codicil is disposed of in accordance with the prior will CODICIL: testamentary instrument that supplements, rather than replaces, an earlier will.

LaCroix v. Senecal (CT 1953) p295 - Woman has a will then executes a codicil - Only change is that she refers to a beneficiary by his given name in the codicil - Includes a residuary beneficiary in the codicil as well as the will - Will as executed was fine - Codicil witnessed by someone different than the will (husband of a beneficiary) - Triggers states purging statute - Because relevant taker is not an intestate taker, her interest is purged - Woman was clearly mistaken as to the effect of the codicil - Giving effect to the revocation would purge beneficiarys share - Court applies DRR - Dont give effect to the codicil and instead keep the original will - Have to look at the original will and the codicil together to determine testators intent Estate of Alburn (Wisc 1963) p300 - Woman executes will in Milwaukee in 55, will in Kankakee in 59 - Revokes Kankakee will by physical act in 60 - Now dies intestate and 9/10 of the people who will take werent in either will - Court applies DRR and reinstates Kankakee will 42

- Need to figure out the relation between intestacy and the Kankakee will - Kankakee will comes closer to testators intent so reinstate that one - Milwaukee will is actually CLOSEST to her intent, but that isnt revivable in this state by statute so either Kankakee will or intestacy Here are a few examples of whether the codicil modifies the preexisting will or replaces it. Ex 1: Will 1: I leave my car to X. Will 2: I leave my car to Y - since these two wills are inconsistent will 2 revokes will 1. Ex 2: Will 1: My house to A, my ring to B, I leave my car to X. Will 2: I leave my car to Y. - here Will 2 is a codicil. It acts to amend Will 1 in terms of the car and the ring and house remain from Will 1. In General: destroying a will destroys all codicils to that will. So if Will 1 is destroyed in the above example then so is Will 2. REVIVAL UPC 2-509 Revival of Revoked Will (a) if a subsequent will that wholly revoked a previous will is thereafter revoked by a revocatory act under section 2-507(a)(2), the previous will remains revoked until it is revived. The previous will is revived if it is evident from the circumstance of the revocation of the subsequent will or from the testators contemporary or subsequent declarations that the testator intended the previous will to take effect as executed. (b) if a subsequent will partly revoked a previous will is thereafter revoked by a revocatory act under Section 2-507(a)(2), A REVOKED PART OF THE PREVIOUS WILL IS REVIVED UNLESS it is evident from the circumstances of the revocation of the subsequent will or from the testators contemporary or subsequent declaration that the testator did not intend the revoked part to take effect as executed. (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 in part, unless it is later revoked or revived. The previous will or its revoked part is revived to the extent it appears from the terms of the later will that the testator intended the previous to take effect. EPTL doesnt allow revival except by subsequently executing (re-executing) the original document Integration of Wills 43

External Integration refers to the process of establishing the testators will by piecing together all of the testators wills, codicils, and other testamentary instruments. Internal Integration - Process of making certain the testators will contains no fewer and no more pages than it did when the testator executed it. Only those pages present at the time the testator executed the will are entitled to probate. Subscription problems with integration - Wills have to be signed at the end - Where papers get placed in the stack might have serious effect - Integration is a rule of collating - Some states claim to not have a doctrine of integration - Makes no sense because then all wills would have to be on a single page Incorporation by Reference - Is a method for treating a document as testamentary in character even though that document is not physically part of the testators will. - If the testator successfully incorporates a document by reference into the will, the will is treated as if the terms of the incorporated document are contained in the will. UPC 2-510 recognizes the doctrine of incorporation by reference. (Not used in NY) Three Requirements Needed for Incorporation by Reference 1) INTENT. The testator must intend to incorporate the writing into the will. 2) IN EXISTENCE. The writing the testator wishes to incorporate must have been in existence when the testator executed the will. 3) IDENTIFICATION. The testator must identify the writing to be incorporated in the will with sufficient specificity so that no other document could reasonably be referred to by that description. The terms of any incorporated documents are frozen at the time the testator executes the will. Thus extrinsic evidence would be needed to ascertain the contents of the list as of the date of the will execution. In order to be valid incorporated writing does NOT NEED TO BE: signed, witnessed, or notarized.

REPUBLICATION Republication by Codicil - Under this doctrine, a will is treated as re-executed (republished) as of the date of the codicil. o This is a presumption that can be rebutted if there are adverse effects

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THIS HAS CONSEQUENSES: I revoke my first will by a second will and then I executed a codicil to the first will. The first will is republished and the second will is revoked by implication. This doctrine of republication should not be applied automatically, but only where updating the will carries out the testators intent. New York does not in general permit incorporation of unattested documents into a will. A codicil can republish and thereby give testamentary effect to a will that was invalid because of mental capacity, undue influence, etc. Where there is a will with a lack of mental capacity that is invalid a codicil that is made to that will in times of lucidity will save that will. YOU CAN ONLY REPUBLISH A VALIDLY EXECUTED WILL. If it wasnt witnessed or signed or something like that, republication will not save that will.

Ex: If I make a will in 1999 and then I make a codicil of that will in 2007 then the date of that will becomes 2007 and any documents that I may incorporate into it that werent in existence in 1999 but are in existence in 2007 may be incorporated by reference. Clark v. Greenhalge (Mass 1991) p310 - Nesmith has a will in 1977 that leaves everything to Greenhalge - Provision that leaves certain other property in a 1972 memorandum to other people - Starts book (not labeled memorandum) in 1979 and 1980 leaves picture to Clark - 1980 Codicil - 1986 Nesmith dies - Greenhalge doesnt want to give the painting to Clark claims no obligation to abide by provisions of the will/memorandum - Formality requirements for the book incorporated into the will and the will is executed properly - Book doesnt need to be called memorandum so long as it is sufficiently identified - Intent of testator is very important TANGIBLE PERSONAL PROPERTY DOCUMENT - A limited number of states and UPC 2-513 authorize a testator to use a separate writing to dispose of tangible personal property even though that writing: (a) does not meet the requirements of a will and thus could not be probated as a testamentary instrument. (b) was not in existence at the date of will execution and could not be incorporated by reference. (c) exists for no reason other than to dispose of property at death and thus could not be a fact of independent significance.

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Requirements: 1) the will must expressly refer to the list 2) the testator must sign the list, and 3)the list must describe the items and the recipients with reasonable certainty. The type of property is limited to personal property. Not cash advances or securities.

UPC 2-513 Separate Writing Identifying Devise of Certain Types of Tangible Personal Property - Whether or not the provisions relating to holographic will apply, a will may refer to a written statement or list to dispose of items of tangible personal property not otherwise specifically disposed of by the will, other than money. - To be admissible under this section as evidence of the intended disposition, the writing must be signed by the testator and must describe the items and the devisee with reasonable certainty. The writing mat be referred to as one to be in existence at the time of the testators death, it may be prepared before or after the execution of the will, it may be altered by the testator after its preparation and it may be a writing that has no significance apart from its effect in the dispositions made by the will. Johnson v. Johnson (OK 1954) p317 - Attorney types up a will for himself and prints it out - At the bottom, hand writes a disposition to his brother - Handwritten part is a holographic codicil that is properly executed and thus incorporated into the typed portion (WASNT properly executed) - Republication by codicil should only allow you to republish something that was already a valid will - Here, you are just publishing a will - Isnt this more incorporation by reference? - Integration cant work since the original document wasnt executed properly - General principle of law that codicil validly executed operates as a republication of the will no matter what defects may have existed in the execution of the earlier document - NY: properly executed codicil validates a will originally invalid for want of testamentary capacity, undue influence, or revocation but does not validate a will defectively executed because of improper attestation - Under certain circumstances, NY might abandon this ACTS OF INDEPENDENT SIGNIFICANCE If an act has some significance other than what I am giving away at death then the court is going to allow it. - The court will allow it as long as there is a purpose outside of a testamentary disposition.

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It does not matter whether the event occurs before or after the execution of the will.

Testamentary intent is cared about at time of execution of will, not at time of death Independent significant looks at time of death what is the situation UPC 2-512 Events of Independent Significance - 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, whether they occur before or after the execution of the will or before or after the testators death. The execution or revocation of another individuals will is such an event. Example: Ts will provides, I leave my car to my Son and I leave the rest of my estate to my Daughter. - At the time of will execution, T owned a Toyota. Shortly before his death Testator traded In the Toyota for a Jaguar and paid the difference in cash. - The Son gets the car which is the Jaguar and the Daughter will get a diminished estate because of the cash the testator used on the car. Example 2: I execute a will that says I leave my entire estate to my children. At the time of the execution I have two kids. By the time of my death I have 7 kids. - All 7 kids get the estate not just the two who were alive at the time of execution. Example 3: Content of safe deposit box to friend Fred. - Retains ability to substantially alter the disposition after execution of the will - Safe deposit boxes are special exceptions o Reasons you put things in there are to keep them safe, not to alter testamentary dispositions Example 4: Contents of top-right drawer of desk to friend Fred. - Is the drawer locked? (probably independent significance) - Not locked drawer is probably not OK Example 5: Contents of closet to friend Fred. - Clothes have independent significance - Presumably putting things in your closet not because of testamentary significance, but because you want to wear them o Would be wary about rings/stocks in the closet MISTAKES AND AMBIGUITIES Ambiguity - One of the most common will interpretation issues. - If the court finds as a matter of law that it is not ambiguous, the court simply resolves the issue. 47

If the court find as a matter of law that the provision is ambiguous, the facts necessary to resolve that ambiguity are determined by the appropriate fact finder. The way in which ambiguities are resolved depends on the type of ambiguity involved. o Patent (Obvious) NEVER extrinsic evidence o Latent (Hidden) can ALWAYS admit extrinsic evidence

Background Rule: We will admit no evidence of testators intent nor will there be reformation of wills. The will is a self-contained document and a court will only give effect to what is on the four corners of the document. If the ambiguity were patently obvious on the face of the will, the court would not admit extrinsic evidence. - Extrinsic evidence is only allowed to correct latent ambiguities. Patent (Obvious) Ambiguities - A will provision that is ambiguous on the face of the will and does not convey a sensible meaning to the reader is considered patently ambiguous. - Disposition will likely fail if patent ambiguity Example Patent Ambiguity: - I leave $%&^* to my brother John. - This is obviously ambiguous and the court will usually not let in extrinsic evidence and this bequest will fail. Latent (Hidden) Ambiguity - A will provision is latently ambiguous if it conveys a sensible meaning on its face but cannot be carried out without further clarification (becomes ambiguous later) - In other words a proofreader would say that its fine but when the executor tries to do what it says, the executor discovers it is impossible to comply. - Usually a judge will let in extrinsic evidence to explain the mishap so that the testators wishes may be fulfilled. Two Types of Latent Ambiguity 1) Equivocation: Occurs when a will clearly describes a person or thing, and two or more persons or things exactly fit that description. 2) Exists when no person or thing exactly fits the description, but two or more persons or things partially fit. Mahoney v. Grainger (Mass 1933) p336 - Woman has will with residuary to heirs at law living at time of my decease to be divided among them equally, share and share alike - Only heir at law was her maternal aunt - Heir/heirs is the same thing (plural doesnt matter) - She really wanted her 21 cousins to take and told this to her lawyer

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- This isnt even ambiguous there is no doubt as to the meaning of the words heirs at law living at the time of my decease - Wont allow extrinsic evidence - Since no doubt, will must stand as written PERRY MANOR INC, Pickneyville, Illinois - p338 - Gave to the corporation that owned Perry Mannor in Pickneyville - Since the town name wasnt capitalized it simply signaled where the holding was Audubon Society of New York State - There was both National Audubon Society (operated in NY) and Audubon Society Of New York State, Inc (operated under name Audubon International) - Gave to the 2nd one, despite testator intent to go to the 1st - Failure to add Inc does not make it ambiguous - Give to the one that is expressly named therein Hypos: - To my 21 cousins and you have 25, that is latent and you can admit extrinsic evidence - To my closest relatives is ambiguous but is this sufficient? Unclear. Arnheiter v. Arnheiter (NJ 1956) p343 - Will directs to sell interest in 304 Harrison Avenue, Harrison, NJ and set up trusts for decedents 2 nieces - Testator doesnt own interest in 304 Harrison, owns interest in 317 Harrison - This is NOT ambiguous (no power to reform it, disposition should fail) - Falsa Demonstratio Non Nocet (mere erroneous description does not vitiate) - Strike 304 from the will, THEN there is a LATENT ambiguity - Interest in house known as Harrison Avenue, Harrison, NJ - Allow extrinsic evidence now because Latent ambiguity - Only house that decedent had interest in on Harrison Avenue was 317 - Will is OK NOTE: if the person DID own the house, and then sold it to buy a new one, this isnt a mistake issue anymore, but one of ademption - Should we substitute? YES, act of independent significance Falsa demonstratio non nocet: - If will says 304 Harrison Ave, Harrison, NJ and you own 317 Hamilton Ave, Hamilton, NJ court will strike everything out except house in NJ and allow extrinsic evidence Latent Ambiguity Hypo: - I give all of my estate to my three nieces and nephews: Nora, Danielle, and Alma. - My three nieces and nephews names are Nora, Danielle, and Elmer. 49

Elmer will take after extrinsic evidence is shown.

Correcting Mistakes Estate of Gibbs (Wis. 1961) p344 - Disposition to Robert J. Krause, now of 4708 North 46th Street, Milwaukee, Wisconsin, if he survives me, 1% - T actually knows Robert W. Krause, of a different address - There is NO ambiguity, will describes this person and nobody else - Regardless, give disposition to Robert W. Krause - Details of identification, particularly such matters as middle initials, street addresses, and the like, which are highly susceptible to mistake, particularly in metropolitan areas, should not be accorded such sanctity as to frustrate an otherwise clearly demonstrable intent. - Where details of identification are involved, courts should receive evidence tending to show mistake made and should disregard details when proof establishes to highest degree of certainty that a mistake was in fact made. Scriveners Error Erickson v. Erickson (CT 1998) p345 - Man makes a will leaving residue of estate to a woman but if she predeceases to his children and to her children - He marries her 2 days later - Where the will includes a scriveners error that misled the testator into executing a will on the belief that it would be valid notwithstanding the testators subsequent marriage, extrinsic evidence of that error is admissible to establish the intent of the testator that his or her will be valid notwithstanding the subsequent marriage - Clear and convincing evidence standard - Here, scriveners error is not including a clause contemplating the marriage - Signing a will with a scriveners error doesnt per se ratify the will - Still need to show extrinsic evidence Erosion of the no reformation rule Restatement (Third) of Property 12.1 & UPC 2-805 Reformation to Correct Mistakes - The court may reform the terms of a governing instrument, even if unambiguous, to conform the terms to the transferors intention if it is proved by clear and convincing evidence that the transferors intent and the terms of the governing instrument were affected by a mistake of fact or law, whether in expression or inducement ADEMPTION 50

Refers to the failure of a specific gift because the property is not in the testators estate when the testator dies. Need to consider voluntary/involuntary

2 THEORIES - IDENTITY THEORY: if a specifically devised item is not in the testators estate the disposition is adeemed and fails. - EXCEPTION: if item changes form instead of substance (M&A, stock splits) - Most jurisdictions - INTENT THEORY: if the specifically devised item is not in the testators estate, the beneficiary may be entitled to the replacement for, or cash value of the original item, depending on whether the beneficiary can show that this is what the testator would have wanted. - Some jurisdictions - MODIFIED INTENTION: Identity rule will not be applied to cases where specifically devised property is removed from the estate through an act that is involuntary as to the testator - Includes cases where property is sold by a guardian, or conservator, or is destroyed contemporaneously with the death of a testator - Applies based on intervening acts of a 3rd party or testator if they intend new property for old - Generally relates to foreclosures, burned down houses, totaled cars (insurance money) - Destruction of property that occurs contemporaneously (totaled car) - Property isnt seen to have left the estate Three types of bequests: 1) Specific 2) General 3) Demonstrative Specific: a bequest of a specific piece of property. If it no longer around at death then it is gone. General: when the testator intends to confer a general benefit $$ and not give a particular asset. Ex: A legacy of $10,000 to A. If there is not $10,000 in cash in the testators estate at death, the legacy is not adeemed other property must be sold to satisfy As general legacy. Demonstrative: a hybrid of the two. Ex: I give 10,000 shares Apple stock. At death I have only 5,000 then the rest will be made up in cash from the estate.

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NOTE: you satisfy the specific disposition FIRST and then make up the difference in cash Ademption By Extinction - What happens when a will includes a specific devise of an item of property, but the testator sells or give the item away before death? - Specific devises of real and personal property are subject to the doctrine of ademption by extinction. - Example: T devises Blackacre to his son in his will. The testatator sells Blackacre and uses the sale of the purchase to buy Whiteacre. Then he died without changing his will. - The gift of Blackacre is ADEEMED: to take away. Blackacre is not owned by the testator at death the devise then fails. The son has no claim to Whiteacre. UPC 2-606 Goes with the Intent Theory of Ademption (a) A specific devisee has a right to the specifically devised property in the testators estate at death and: (1) any balance of the purchase price, together w/ any security agreement, owing from a purchaser to the testator at death by reason of sale of the property; (2) any amount of a condemnation award for the taking of the property unpaid at death; (3) any proceeds unpaid at death on fire/casualty insurance or on other recovery for injury to the property; (4) property owned by the testator at death and acquired as a result of foreclosure, or obtained in lieu of foreclosure, of the security interest for a specifically devised obligation; (5) real or tangible personal property owned by the testator at death which the testator acquired as a replacement for specifically devised real or tangible personal property; and (6) if not covered by (1) through (5), a pecuniary devise equal to the value as of its date of disposition or other specifically devised property disposed of during the testators lifetime but only to the extent it is established that ademption would be inconsistent with the testators manifested plan of distribution or that at the time the will was made, the date of the disposition or otherwise, the testator did not intend that the devise adeem In general, give the beneficiary the value so long as it is consistent w/ testators intent In re Estate of Anton (Iowa 2007) p381 - Woman leaves interest in a house to Gretchen and to her Roger, remainder to her Roger and Nancy - Nancy has durable power of attorney - Woman goes in nursing home and runs out of money to pay the expenses - Nancy selling moms assets to pay and ends up with only asset left is the house 52

- Sells house, converting it into $130k - Under traditional ademption clause, Gretchen and Roger would get $0 and Nancy would get all the cash since it is in the residuary - Mother dies and there is still $100k left - Sale by Nancy isnt exactly involuntary since it was via power of attorney it is as if the mother sells it - Court applies Modified Intention theory NO ADEMPTION - Left over money goes to Roger and Gretchen - Elements (if present, ademption) - Testator had knowledge of a transaction involving a specific devise - Realizes the effect of the transaction on his/her estate plan - Has an opportunity to revise the will SATISFACTION - Applies when a testator makes a transfer to a devisee after executing the will - Will form of advancements - If testator is the parent of the beneficiary, there is a rebuttable presumption that the gift is in satisfaction of the devise made by the will - Usually applies to general pecuniary bequests, but not to specific ones - Some states require a contemporaneous writing specifying it is intended as satisfaction (doesnt have to comply with Will Act formalities) - This is because intent of testator is sometimes hard to discern EXONERATION OF LIENS - Presumption, absent contrary language in the will, that the testator wanted debt, like other debts, to be paid out of the residuary estate ABATEMENT - Arises when the estate has insufficient assets to pay debts as well as all the devises - Abate in the following order: (1) Residuary devises are reduced first (2) General devises are reduced second (3) Specific and demonstrative devises are last - Done pro rata if there are multiples at a given level - A person can direct how they want their estate to abate - The same order applies to beneficiaries (1) Specific takes first (2) Whatever is left, to demonstrative (3) Whatever is left, to general (4) Whatever is left, to residuary DEATH OF A BENEFICIARY BEFORE THE DEATH OF A TESTATOR - If a devisee (beneficiary) does not survive the testator, then the devise lapses. - Before Anti-Lapse Statutes: Here are the common law rules: 53

1) Specific or general devise if a specific or general devise lapses, the devise falls into the residue. Ex: Ts will devises her watch (a specific devise) to A, $10,000 (a general devise) to B, and the rest of her estate, (the residuary devise) to C. A and B predecease T. Under the common law lapse rule the watch and the $10,000 go to C. 2) Residuary devise If the residuary devise lapses, the heirs of the testators take by intestacy. Ex: T devises the residue of his estate to B and C. B dies before T. Bs share goes to Ts heirs by intestacy, not to C. 3) Intestacy If there is no will, and all next-of-kin predecease the decedent, the property escheats to the state 4) 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. Ex: T devises $10,000 to the children of A (Class Gift). One child of A predeceases T. At Ts death, T is survived by another child of A named C. Because it is a class gift C takes the other childs share or the entire $10,000. 5) Void Devise: Where a devisee is already dead at the time the will is executed, or the devisee is a dog or cat, the devise is void. Estate of Russell (Cali 1968) p359 - Thelma dies and leaves $10 and diamonds to Georgia (specific bequest) and everything else to Chester and Roxy (residuary beneficiaries) - Roxy is a dog - Statute saying dispositions to pets are void - Idea is that a pet IS property and thus cannot own property - If Roxys portion of the residuary disposition fails, it will pass through intestacy to Thelmas next-of-kin, Georgia - Thelma leaves a note saying she would rather have Chester spend it all in court than have Georgia take - Maybe wanted the property to be held in trust by Chester to be used for Roxys care? - No provisions in the will give this effect (no obligations on Chester) - No residue of the residuary Rule: any residuary dispositions that fail fall into intestacy rather than passing to the other residuary beneficiaries UPC 2-604 & EPTL 3-3.4 - Rejects the no-residue-of-a-residuary rule - Surviving residuary beneficiaries take - Theory is that T would probably prefer them to take the entire estate - Idea for rejecting is that T intends to avoid intestacy 54

NOTE: Well drafted wills invariably reject the rule, reallocating the share of a predeceasing residuary beneficiary to the other residuary takers ANTI-LAPSE STATUTES - Anti-lapse statutes prevent lapse by providing substitute beneficiaries for the lapsed gift. - Idea is to prevent unintended disinheritance - Presumed Intent: the goal of these statutes is to provide a distribution that the testator would have preferred over the property passing under the residuary clause or via intestacy. - UPC 2-605 saves gift made to grandparents or descendents of grandparents (aunts, uncles, cousins, siblings, nieces, nephews, etc.) Anti-lapse do not prevent a lapse, it will allow the heirs of a beneficiary to take in the beneficiaries place that has died. 2 questions that apply: 1) Who is the subject of antilapse protection? 2) When has a testator opted out of the antilapse protection? Who benefits from anti-lapse protection?: - Applies ONLY if devisee bears a particular relationship to the testator specified in the statute - Some states are narrow, and only apply to descendants of the testator - Others are broader, and apply to descendants of testators grandparents, or to all kindred of testator, and occasionally to kindred of the testators spouse as well Check out examples on pages 364, 365, and 366 (great language!) UPC 2-603 Antilapse, Deceased Devisee, Class Gifts - If a devisee who is a grandparent or lineal descendant of a grandparent of the testator is dead at the time of the execution of the will, fails to survive the testator, or is treated as if he predeceased the testator, the issue of the deceased devisee who survive the testator by 120 hours take in place of the deceased devisee and if they are all of the same degree of kinship to the devisee they take equally, but if of unequal degree then those of more remote degree take by representation. One who would have been a devisee under a class gift if he had survived the testator is treated as a devisee for purposes of this section whether his death occurred before or after the execution of the will. - Includes step-children now EPTL 3.3 - NY applies to Testators kids and siblings 55

Gifts Prior to 1992, descendents of beneficiaries take in a modern per stirpes approach. After 1992, descendents take under the per capita at each generation approach.

NOTE ABOUT SPOUSES: - Bequests to spouses are not saved by antilapse statutes under either the UPC or EPTL - A bequest to a predeceased beneficiary that has no children will fail - It will NOT go to that persons spouse - Idea is to keep the money in the family Example: I give my car to A. $10,000 to B. All else to C A is my second cousin, A dies leaving X. B is my first cousin, B dies leaving Y. C is my brother, C dies leaving Z. My next of kin is my daughter D. Under the UPC: Z get the car. Y gets the $10,000. Under the EPTL: The only thing that would be saved by the anti-lapse is the bequest to C, the brother. NOTE: Antilapse statutes are designed to implement PRESUMED INTENT - The default rule of the antilapse statute will yield to a contrary expression of the testators ACTUAL INTENT - EX: T devises her entire estate one-half to my son A and one-half to my daughter B, but if A or B or both do not survive me, then I give such predeceasing childs share to my friend F. B predeceases T, leaving child C. At Ts death, Ts estate will pass one-half to A and one-half to F. The antilapse statute DOES NOT APPLY to Bs share, because T has provided expressly for the possibility of B predeceasing T. EXAMPLES: - To my living brothers and sisters, A, B, C, D, and E, to share and share alike - Living and share and share alike means the will requires survival - Antilapse statute would NOT apply - To my brothers and sisters, A, B, C, D, and E, to share and share alike - Share and share alike without living means the will does NOT require survivial - Antilapse statutes APPLY 56

WORDS OF SURVIVORSHIP - If he survives me or to my surviving children are not, in the absence of additional evidence, sufficient indication of an intent contrary to the application of UPC 2-603 (antilapse statute) - Most j/d hold this is sufficient to require survival, but NOT under UPC Ruotolo v. Tietjen (CT 2006) p367 - Swanson leaves of residue of estate to Hazel (stepdaughter) if she survives him - Hazel dies before Swanson - Survival provisions are often boilerplate language, and testator may not realize that such language could disinherit the line of descent headed by the deceased devisee - If testator intended to avoid application of the statute: - Unequivocally express intent to disinherit, or - Provide for an alternate bequest - Presumption is that a will is designed to dispose of the entire estate and to avoid intestacy residuary language expresses this intent - Antilapse statutes are remedial in nature - Ambiguity arising absent an express indication to the contrary will be resolved in favor of operation of the statute - Want to give it widest latitude possible WORDS OF PURCHASE: - In the devise to A and her heirs and assigns, to A is read as words of purchase - Indicates to whom the property is devised here, to A WORDS OF LIMITATION: - In the devise to A and her heirs, and her heirs and assigns is read as words of limitation - Indicates what interest in the property is being devised here, a fee simple To A or her heirs this is just words of purchase, as A is the primary devisee and her heirs are substitute takers if A predeceases T Jackson v. Schultz (Del 1959) p374 - Disposition from Leonard to my wife and her heirs forever - Wife predeceases Leonard -Wifes heirs are the stepdaughters of Leonard - Antilapse rules do NOT apply to spouses - When wife predeceases, disposition fails and stepdaughters get nothing - But, court interprets and to mean or to read the disposition as my wife or her heirs forever - This creates the alternate devise to the heirs of Leonards wife NOTE: 57

OR is a substitute disposition and avoids lapse AND generally doesnt avoid lapse, but if a court reads it to mean OR, it would CLASS GIFTS Common law rule: if a devise is made to a class, then the death of a class member doesnt make the disposition fail; it is instead divided by the surviving members - Class gift if testator was group minded - Not static; group is subject to fluctuation by increase or decrease until time of distribution Restatement: - If beneficiaries are named then presumptively no class gift - If the beneficiaries are identified by some kind of group designation (nephews, neighbors, former lovers), then it is presumptively a class gift - Friends are NOT included Dawson v. Yucus (Ill 1968) p376 - Woman has a will leaving interest in a farm to Gene and interest to Stewart - Gene predeceases testator - She named (1) the beneficiaries and (2) their specific interest amounts in the will - Specifically indicating people is indication testator wasnt group-minded - This presumption CAN be rebutted if circumstances indicate T indicated the beneficiaries as a group - No survivorship, either - She made a survivorship clause in another part of the will, so she knew how to do it and could have done it here Antilapse statutes typically apply to class gifts (NY also) - EX: Property to my brothers and sisters - A and B die, leaving E and F - C and D remain - APPLY THE ANTILAPSE STATUTE FIRST - C, D, E, and F take (or if more kids, they take by representation) - If it is a situation where the EPTL will NOT apply an antilapse statute, it is a class gift WILL SUBSTITUTES AND THE WILLS ACT A Trust involves three different elements: 1) Settlor/Grantor person who creates the trust 2) Trustee person who holds legal title to the property 3) Beneficiary holds equitable title to the property Farkas v. Williams (Ill 1955) p398 - Farkas died intestate with brothers, sisters, a nephew and a niece 58

- Had issued 4 written declarations of trust for stock in his name as trustee for beneficiary Richard (not related to Farkas) - There were no Will Act formalities for these trusts - Williams has an interest, so these are NOT testamentary trusts - Contingent equitable interest in the remainder - Retention by the settlor of power to revoke, even when coupled with the reservation of a life interest in the trust property, does NOT render the trust inoperative for want of execution as a will - Farkas has a fiduciary duty to Williams - MODERN LAW: in a revocable inter vivos trust, fiduciary duty runs to the settlor, not the beneficiary - This is a valid, inter vivos trust, and is not attempted testamentary dispositions - Has a testamentary look but that isnt the same thing Pure Will Substitutes - Treated as lifetime transfers - Establishes some present interest in the transferee, acquired during the lifetime of the transferor, which makes the transferee a donee and distinguishes the will substitute from a will Pour Over Will - A clause in a will making a gift to an inter vivos trust is called a pour over provision - Settlor designates the trustee of her revocable trust as the beneficiary of all her will substitutes and names the trustee as beneficiary under the will - Reasons a testator may prefer the pour over technique include: 1) an inter vivos trust is easier to amend than a will - dont need to re-execute document every time you want to make a change 2) an inter vivos trust can serve as a receptacle for a variety of other assets, such as life insurance proceeds. Etc. 3) the testator may pour-over into a trust created by someone else. Involves a will where the beneficiary under the will IS a trust. Independent significance o Give effect to trust only if funded during life (inter vivos) Incorporation by reference o Looks like a single document but it is really two: one is the will and the other is a trust. o Incorporate the trust into the will What does the pour over get you that a will wouldnt get you. It DOES NOT ALLOW YOU TO avoid estate taxes. BUT If you are worried that one or more of your beneficiaries is a minor, incompetent, untrustworthy with money. The trust allows for a mechanism for asset management, which can dole out the money when you choose. Avoids probate / publicity 59

Maybe fewer opportunities to challenge the contents of a trust than a will

In re Estate and Trust of Pilafas (Ari 1992) p414 - Pilafas executed a will and a revocable inter vivos trust and twice updated both - Named himself trustee and funded trust with substantial assets - Lawyer gave the documents to Pilafas, but they couldnt be found after his death - Presumption that a will is revoked if it cannot be found applies to trusts also! - Case comes out the other way, but the common law has moved towards the fact that subsidiary doctrines apply to non-probate transfers - Presumption of revocation at divorce - Slayer statutes NON PROBATE PROPERTY - Thought of as will substitutes - Only operable at death - Up until death, policy holder is free to change the terms - Revocable and ambulatory JOINT TENANCIES - Forms co-ownership with a right of survivorship LIFE INSURANCE - Term life insurance: gets paid out when your die - Whole life insurance: has a saving component and pays out at a certain time OR when you die, whichever comes first (more expensive than term life insurance) - Under the life insurance policy, at death the beneficiary takes without having to go through probate just has to show a death certificate ANNUITY - Protection for you and your family against risk of you living too long - Continues to pay out a certain amount each year until you die DOES DIVORCE CHANGE THE BENEFICIARY OF THE LIFE INSURANCE POLICY? - No the insurance company wants no part of revocation by operation of law or anything like that - They want to look at the named beneficiary on the policy and then pay it out BANK ACCOUNTS - Joint accounts: o Each person owns some % (generally ) interest in entire account o Each can spend money out of it o Comes with the right of survivorship o Upon the death of one person the control goes over to the other - Payable On Death Accounts: o Does NOT provide joint ownership during life 60

o Only 1 person can spend money from it o Comes with a right of survivorship at death Agency account: o Joint use at life o No right of survivorship

PENSION PLANS - Public or private plan that gets paid out at death to a pre-determined beneficiary and does NOT go through the probate process SPOUSAL SHARE There Are TWO KINDS OF JURISDICTIONS: 1) Community Property: - Income earned by one spouse in a marriage is treated like both spouses in a marriage earned it (automatically split 50/50 as it comes into the marital unit) - Fundamental principle of a community property state is that all earnings of the spouses and property acquired from those earnings are community property unless both spouses agree to separate ownership. - Death of one spouse destroys the community, as the surviving spouse will take her stuff - Way less on estate tax - California and more Western states adopt this 2) Separate property: - Each spouse remains the sole owner of whatever money he/she earns during the marriage - Gender bias doctrine and assumes wage earner is the man and non-wage earner is the woman - Man earns all the money and has all the money - Wife has no money or property - NY is separate as well as most North Eastern states - Pay twice as much on estate tax - The property is separate and in order to remedy the surviving spouse from being disinherited by giving them by statute an elective share (or forced) share - This elective share is not limited to property acquired with earnings. It is enforceable against all of the decedent spouses property, though as we shall see, non-probate transfers pose challenges in implementing this idea. A LOT of pressure on separate property states to become communal property ones - mainly for estate tax purposes Ex:

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H works outside the home, earning $50,000 a year. W works in the home earning no wages. At the end of 20 years, H has through savings of his earnings bought a house in his name, a life insurance policy payable to his daughter, and $100,000 of stocks in his name. Under SEPARATE PROPERTY: during life W owns none of that property. At Hs death, W has an elective share, usually 1/3 of the house and the stocks but perhaps not the insurance policy because it is not in Hs probate estate. Under COMMUNITY PROPERTY: W owns half of Hs earnings during life, and thus at Hs death W owns one-half of the acquisitions from earnings (the house, the insurance proceeds, and the stocks) If W dies first, W can dispose of her half of the community property by will In a separate property state, if W dies first she has no property to convey.

TAX - Estate tax: tax the estate - Becomes meaningless if you can transfer property by gift during life - Gift tax - Tax on inter vivos gifts - Gifts in excess of $13k/yr to a single recipient are taxed at same rate as the estate tax - Inheritance tax: taxes income received by the beneficiaries - Death tax: both together Taxed on GROSS estate - Doesnt matter what form you own the property in - The lower the tax level is for the estate tax, the more beneficial it becomes to be in a community property system o Husband owns $4mm from working In separate system, on his death estate taxed at $4mm In community system, he only has $2mm since wife has $2mm His estate taxed at $2mm SEPARATE SYSTEMS: TAX FREE TRANSFERS TO SPOUSES - Transfers to spouses effectively become the same as community system Tax Credit for life estate to spouse or fee simple - Allows husband to leave spouse no money outright, but give her a LE, remainder to the children Beneficiaries get a step-up in basis - Instead of actual basis (amount testator paid), beneficiaries inherit with a basis of the fair market value 62

- Allows them to realize increases in value - Repealing the estate tax would repeal step-up in basis also Note: none of that applies in a community system, since the non-wage earning spouse gains title to half of the property

SPOUSAL SHARE - Takes place absent a prenuptial/postnuptial agreement - It is called an elective share because statutes typically provide the surviving spouse with an election - The spouse can take under the decedents will or the spouse can renounce the will and take a fractional share of the decedents estate. - Policy justification for the elective share: is that the surviving spouse contributed to the decedents acquisition of wealth and deserves to have a portion of it. - This is a PROBATE protection Non-probate protection - Social securities benefits o Can claim either yours or spouses social security benefits, whichever is higher - Homestead exemption o Surviving spouse is entitled to a life estate in the family house o Gets this before probate - Personal property set-asides o Before probate process o Spouse can receive $X UPC 2-403: limit $15k EPTL 5-3.1 very detailed list Predeceasing Spouse UPC is no elective share for predeceased 2-212(a) - Support Theory the spouse does not need the property for her support (shes dead) then her representative should be barred from exercising the elective share o Property goes to Hs devisees - Partnership Theory the representative should be entitled to exercise the elective share because the share represents the spouses portion of the material partnership property, which ultimately should pass to the spouses heirs and devisees Incompetent Spouses - Support Theory if the spouse does not need the property for her support, the representative should be barred from taking a forced share

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Partnership Theory - the representative should be entitled to exercise the elective share because the share represents the surviving spouses portion of the material partnership property, which ultimately should pass to the surviving spouses heirs and devisees

In re Estate of Cross (Ohio 1996) p484 - Carroll died leaving everything to his son, not a son of the surviving spouse - Surviving spouse was incompetent and couldnt elect, so the court appointed a guardian to represent her interests - Surviving spouse has no use for the money since her nursing home is being paid for my Medicaid - To keep her Medicaid benefits, she had to take (or at least try to take) the election UPC 2-212 - Election by an incompetent goes into a custodial trust, the benefit to the surviving spouse for life, but the remainder into the predeceased spouses heirs or devisees ABANDONMENT - Minority of states elective share is DENIED to individuals who abandoned or refused to support deceased spouse (NY included) - EX: Wife, who excluded husband from home and lived separately did NOT abandon him (NY) - EX: Husband abandoned wife even though mutual separation b/c he showed lack of support both before and after the separation (NY) Why is there a Spousal Share and not a forced share for children? - There is traditionally more reliance from the spouse who also helped her spouse build the fortune. - In states where same sex marriage is legal they may elect to take a share. Defrauding the Surviving Spouse - If the testators purpose was to defraud the surviving spouse out of money she was entitled to, the will be invalidated. Intent becomes the touchstone. - ILLUSORY TRANSFER TEST: if the testators technique in tying up property was to put it into a trust for the purpose of not letting the wife get it, even though it is a valid trust, it will become a part of the decedents assets that is subject to the elective share. Sullivan v. Burkin (Mass 1984) p488 - T is married to a woman, but they are estranged for 20 years but never got divorce - T intentionally disinherits her and her child - Puts all of his money into a revocable inter vivos trust, himself as trustee and lifetime beneficiary as himself, but on his death payable to his sons - General rule before this was that inter vivos trusts were NOT part of the probate estate (Kerwin), but the court alters the rule and includes it

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- RULE: Treat as part of the estate of the deceased for purposes of elective share, the assets of an inter vivos trust created during marriage by the deceased spouse over which he/she alone had a general power of appointment, exercisable by deed or by will Bongaards v. Millen (Mass 2003) p492 - 3rd party created a trust over which decedent spouse had general power of appointment - Trust property is NOT subject to elective share for the simple reason that the trust was created by a 3rd party and not be decedent spouse - Sullivan only applies if decedent spouse creates the trust STATUTORY SCHEMES EPTL 5-1.1 Elective Share (p496) - Spouse receives $50,000, or 1/3, of Net Estate, whichever is larger - Net estate disregards estate taxes (so taxes are paid from other money left over) EPTL Net Estate Includes (the estate that can be part of the elective share): - Gifts Causa Mortis (in anticipation of death) - Gifts over $13,000 within 1 year of death (gift tax max) - Savings accounts in the name of someone else (Totten Trust) - Joint Property (bank accounts & other property), to the extent of decedents contribution - Pension Plans - Payable on Death Contracts, payable to someone other than testator - Any property over which testator had a general power of appointment - BUT NOT Life Insurance UPC 2-202 Elective Share (pg 499) (a) 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 the marital property portion of the augmented estate. UPC Spousal Share - Spouse receives $75,000, or - 50% of the Augmented Estate which includes a percentage of marital property based on the duration of the marriage. (between 3% and 100%) - Augmented Estate Definition: probate estate augmented with certain nonprobate transfers) UPC Augmented Estate - Net probate estate

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Non-probate transfers to others, over which the testator retained significant control. (trusts with power to revoke, etc.) o INCLUDES LIFE INSURANCE Gifts over $13,000 within 2 years of death. Non probate transfers to surviving spouse o Includes money that has been given to the surviving spouse Surviving Spouses net assets.

Relative Disinheritance - If you only have $200k in assets and you take out a $5mm life insurance policy with beneficiary of your mistress, this is relative disinheritance of your wife **UPC 2-203 Composition of the Augmented Estate, Martial Property Portion (a) The value of the augmented estate... consists of the sum of the values of all property, whether real or personal, movable or immovable, tangible or intangible, where situated, that constitute: 1) the decedents net probate estate (defined in 2-204) 2) the decedents non-probate transfers to others (defined in 2-205) 3) the decedents non-probate transfers to the surviving spouse (defined in 2-206) 4) the surviving spouses property and non-probate transfers to others (defined in 2-207) (b) the value of the marital - property portion of the augmented estate consists of the sum of the values of the four components of the augmented estate as determined under subsection (a) multiplied by the following percentage: If the decedent and the Spouse Were Married to Each Other: - Less than 1 year - 1 year but less than 2 years - 2 years but less than 3 years - 3 years but less than 4 uears - 4 years but less than 5 years - 5 years but less than 6 years - 6 years but less than 7 years - 7 years but less than 8 years - 8 years but less than 9 years - 9 years but less than 10 years - 10 years but less than 11 years - 11 years but less than 12 years - 12 years but less than 13 years - 13 YEARS BUT LESS THAN 14 YEARS - 14 years but less than 15 years - 15 years or more HYPO: Testators Estate 66 The % Is: 3% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60% 68% 76% 84% 92% 100%

Testator and his wife were married for 5 years. Each has a child from a prior marriage, testator a daughter and his wife a son. $500,000 stocks probate $50,000 savings account in trust for the daughter (totten trust in the name of) non-probate $300,000 house, In trust to T for life, then to Ts daughter. T has the right to revoke non-probate $200,000 life insurance policy, payable to daughter - non-probate $20,000 joint bank account with wife non-probate $10,500 gift to sister, six months before death. not part of estate $20,000 gift to niece, 18 month before death not part of estate Total Probate Property = $500,000 Wifes Property: $250,000 stocks and $50,000 gift to son, six months before testator died. Spouses Intestate Share: - EPTL: It a decedent is survived by a spouse and issue, fifty thousand dollars and one-half of the residue to the spouse - UPC: the first $150,000 plus one half of any balance of the intestate estate, if one or more of the decedents surviving descendants are not descendants of the surviving spouse. (2-102) EPTL $50,000 + (1/2) ($450,000) = $275,000 UPC $150,000 + (1/2) ($350,000) = 325,000 EPTL NET ESTATE INCLUDES 1) Net Probate estate (p 496) In NY the decedents net estate that is subject to the elective share includes the probate estate and the following non-probate transfers: - Gifts Causa Mortis - gifts over $13,000 within 1 year of death. - savings accounts in the name of someone else (Totten Trusts) - joint property (bank accounts & other property) - pension plans - payable on death contract, payable to someone other than testator. - any property over which testator had a general power of appointment. Applying the EPTL: $500,000 stocks included $50,000 savings account in trust for daughter (Totten trust in the name of ) included. $300,000 house, in trust for T for life, then to Ts daughter. T has the right to revoke included. $200,000 life insurance policy payable to daughter not included. $20,000 joint bank account with wife included (5.1.1 A(b)(2)) $10,5000 gift to sister, six months before death not included. 67

$20,000 gift to niece, 18 months before death not included. Net Estate = $860,000. Spousal share = $860,000 X 1/3 = 286,666. UPC Augmented Estate - Net probate estate - Non-probate transfers to other, over which the testator retained significant control. - Gifts over $13,000 within 2 years of death. - Non-probate transfers to surviving spouse. - Surviving spouses net assets. Applying the UPC: $5000,000 stocks included $50,000 savings account in trust for daughter (Totten Trust: In the name of) included $300,000 house, in trust for T for life, then to Ts daughter. T has the right to revoke. included. $200,000 life insurance policy, payable to daughter included $20,000 joint bank account with wife - included $10,500 gift to sister, six months before death not included $20,000 gift to niece, 18 months before death - $7,000 included. Wifes $250,000 in stocks, and $50,000 gift to son, - $287,000 included. Total $1,364,000 5 year marriage = 30% (UPC 2-201) Augmented estate included = $409,200; Spouse gets 50% = $204,600 Reduce this amount by the shares owned outright by wife: she gets nothing - Must be satisfied first by the money the wife has! If the marriage lasted 15 years? = 100% (UPC 2-201) Total Augmented Estate = $1,364,400 Spousal share is 50% of augmented estate = $682,000 (compared with $204,6000 for a five year marriage) Reduce this amount by property owned outright by wife. - Wifes $250,000 in stock and $37,000 gift to son. - $20,000 joint bank account with wife. - Wifes total property equals: $307,000. - Wife can claim from the estate $682,000 - $307,000 = $375,000 Comparison of Totals: Intestacy under EPTL = $275,000 Intestacy under UPC = $325,000 Spousal Share Under UPC (5 year marriage) = Zero (or the $75k) Spousal Share under UPC (15 year marriage) = $370,000

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NOTE: UPC helps women that are independently wealthy and hurts those that arent. Longer they stay together the more entitlement the spouse gets. This looks like SUPPORT THEORY. WAIVER OF ELECTION - Prenuptial / postnuptial agreement constitutes a waiver of elective share - UPAA overrides presumption of fraud that some courts attach to premarital agreements if, in the courts view, the agreement made inadequate provision for a spouse in light of the other spouses wealth - Party opposing enforcement MUST PROVE: (1) either the agreement wasnt voluntary, or (2) it was unconscionable when executed and the party opposing enforcement did not have fair and reasonable disclosure of the other partys property and finances Reece v. Elliott (Tenn 2006) p503 - Reece had an prenuptial agreement with his wife - He died intestate and his wife filed for her elective share and rescission of the document based on failure to make full disclosure regarding his assets/financial condition - Prenuptial stated each party made a full disclosure and each party waived right as to separate property - She didnt know how much money some stock was worth - But, she didnt disclose values of certain things, either - Wife wasnt misled - Fact that there was no value listed for one asset, even though it was significant, doesnt invalidate the agreement she freely entered into OMISSION SPOUSE 3 ways a spouse can take absent a will - Intestacy if there is no will at all / the will is struck down - Forced spousal share that is contrary to the expressed content of the will - Pretermitted spousal statute o Provides spouse who is omitted from a premarital will with a spousal intestate share but otherwise leaves the premarital will intact o Designed to correct probable mistake in failing to update the will In re Estate of Prestie (Nevada 2006) p516 - Couple is married, get divorced, and eventually get married again - Husband has a pour-over will and a trust with the beneficiary being his son - Amends the trust prior to the 2nd marriage to give wife a life estate in the house - Because pretermitted statutes only work by presumption, they are rebuttable (1) Spouse provided for in the will even if it predates marriage

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- If it is a pour-over will, and you provide for the spouse in the trust where the will goes, isnt this the functional equivalent? - Yes, but court doesnt agree b/c of the plain language of the statute (2) Provision in the will expressing intent NOT to provide for the spouse (3) Marriage contract providing for the spouse EPTL has the same result wife MUST be provided for in the will UPC 2-301 Entitlements of Spouse; Premarital Will (a) If a testators surviving spouse married the testator after the testator executed his will, surviving spouse is entitled to receive, as an intestate share, no less than the value of the share of the estate he would have received if the testator had died intestate as to that portion of the testators estate, if any, that is neither devised to a child of the testator who was born before the testator married the surviving spouse and who is not a child of the surviving spouse nor devised to a descendent of such a child or passes under sections 2-603 or 2-604 to such a child or to a descendant of such a child, unless: (1) it appears from the will or other evidence that the will was made in contemplation of the testators marriage to the surviving spouse; (2) the will expresses the intention that it is to be effective notwithstanding any subsequent marriage; or (3) the testator provided for the spouse by transfer outside the will and the intent that the transfer be in lieu of a testamentary provision is shown by the testators statements or is reasonably inferred from the amount of the transfer or other evidence (b) in satisfying the share provided in this section, devises made by the will to the testators surviving spouse, if any, are applied FIRST, and other devises, other than a devise to a child of the testator who was born before the testator married the surviving spouse and who is not a child of the surviving spouse or a devise or substitute gift under 2-603 or 2-604 to a descendant of such a child, abate as provided in 3-902 Essentially, spouse takes whatever isnt left to a child by prior marriage. NOTE: - A surviving spouse electing against a will is allowed to take some nonprobate property as part of the augmented estate by the UPC - Spouse omitted from a will made before marriage is not able to reach nonprobate assets ISSUE Wills that disinherit kids virtually invite a challenge - Judges/juries are frequently influenced by sympathies for children

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Gray v. Gray (Ala 2006) p528 - John has 2 kids from a prior marriage - John divorces and marries Mary - Makes a will, then has a son Jack with Mary (pretermitted child) - John and Mary divorce and set up a trust for Jack - Any property provided for John by his mother will go to Jack - John dies without changing his will - Statute provides children born or adopted after the execution of will with an intestate share UNLESS: 1) It appears from the face of the will the omission was intentional - I intentionally disinherit all after-born children 2) When the will was executed the testator had one or more children and devised substantially all of his estate to the other parent of the omitted child - Dont really want new child to take as a pretermitted heir since he will be provided for by his mother - Infer the treatment of the new kid should be the same as the others - Makes sense if kids are similarly situated - Statute doesnt require that the parent ACTUALLY take, just that the underlying purpose is there - Here, the mother wouldnt take since the will would be revoked by operation of law on divorce 3) The testator provided for the child by transfer outside the will and the intent that the transfer be in lieu of a testamentary provision be reasonably proven - Here, court says the statute applies, but it really probably shouldnt (UPC) UPC 2-302 Omitted Children 2-302(a)(1) - If T has no kids at time of executing will, then any after-born child is entitled to his/her intestate share unless will gives substantially all or all of the property to the other parent and that parent survives T and is entitled to take - Fixes the Gray problem of wife eligibility 2-302(a)(2) - If T has 1 or more kids living when he executes will, and will gives property or an interest in property to 1 or more of the then living kids, an omitted or after-born or after-adopted child is entitled to take as follows: - (i) The portion of Ts estate in which the omitted, after-born, or after-adopted kid is entitled to share is limited to devises made to Ts then living children under the will - ii) omitted, after-born, or after-adopted child takes a share that it would have received had T included all omitted, after-born and after-adopted children with the kids to whom devises were made under the will and gave them equal shares - (iv) to satisfy the shares, you take from the other children and abate ratably 2-302(b) 71

- Neither subsection (a)(1) nor subsection (a)(2) applies if: (1) It appears from the will that the omission was intentional (2) the testator provided for the omitted after-born or after-adopted child by transfer outside the will and the intent that the transfer be in lieu of a testamentary provision is shown by the testators statements or is reasonably inferred from the amount of the transfer or other evidence 2-302(c) - If at the time of execution of the will the testator fails to provide in his will for a living child solely because he believes the child to be dead, the child is entitled to share in the estate as if the child were an omitted after-born or after-adopted child EX: John leaves $50,000 to preborn children 1 and 2 each. Then Jack will take a percentage of what was left to the prior children. - So add up the $50,000 to make it $100,000 and the after born child will take 1/3 of it. - It reduces the amount given to the previous children and they all take $33,333. - If John leaves nothing to his previous kids then the after born child will also receive nothing. EX: A to receive $0, B $10,000. C is born. A still gets $0, B now gets $5,000 and C now gets $5,000. (see 2-302(A)(2)(ii)) Kidwell v. Rhew (Ark 2007) p536 - Revocable inter vivos trust - Pretermitted child statutes do NOT apply to trusts, only to wills - Wills and Trusts are DIFFERENT - Also, wouldnt apply if there was no will (like here, when person died intestate) TRUSTS The owner of property may create a trust by transferring that property in a unique fashion Settlor/grantor creates the trust Trustee holds legal title to the trust property - must have some active duty to perform - if passive duty, the trust is dry and fails - trusts can be created w/o trustees (court will appoint one) Beneficiary hold equitable title - Trustee must owe equitable duties to someone other than herself, or the equitable and legal titles would merge, leaving whoever with absolute title Purposes and Uses of Trusts Some reasons a property owner may want to convey property in trust:

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Provide for and Protect Beneficiaries: the settlors desire to provide for and protect someone is probably the most common reason for creating a trust. Minors: they lack legal capacity to manage property and usually have insufficient maturity to do so as well. Individuals who Lack Management Skills: A person may lack the skills to manage the trust property. May be physically or mentally impaired where he cannot make prudent investment decisions. Person who is susceptible to influence. Flexible Distribution of Assets: the settlor may restrict the beneficiarys control over the property in any matter the settlor desires as long as the restrictions arent illegal or in violation of public policy. Protection against Settlors Incompetence. Professional management of property Probate avoidance Tax Benefits. Trusts have little formalities and dispenses entirely of Will Act formalities A trustee owes a fiduciary duty to the beneficiary and also owes the duty of prudence There are no formalities to create a Trust

There are THREE substantive requirements, without which the trust fails: 1) Intent: the settlor must intend to have some trust relationship. 2) Trust property. 3) Trust beneficiaries. Trust Creation Inter vivos Trust: a trust that the settlor creates to take effect while the settlor is still alive. Testamentary Trust: a settlor creates a trust to take effect upon the settlors death. TRUST INTENT If the transferor does not manifest trust intent, no trust is created and the court will not intervene to create a trust. UTC 402(a)(2). - A transferor of property has trust intent if the transferor (1) divides title to the property into legal and equitable components, (2) imposes enforceable fiduciary duties on the holder of legal title to deal with the property for the benefit of the equitable holder. - Note: Precatory Language: courts normally consider precatory language such as I wish, I recommend or I suggest as merely suggestive and not binding on the beneficiary - The settlor may create a trust for any purpose as long as that purpose is not illegal. Nor may the trust require the trustee to commit an act that is criminal, tortuous, or contrary to public policy. UTC 404.

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DOES NOT NEED TO SAY THE WORD TRUST, just focus on function rather than form o for the use and benefit is good language

Lux v. Lux (RI 1972) p557 - Lux devises residue of her estate to her grandchildren, share and share alike - This ISNT a trust - Any real estate included in the residue shall be maintained for the benefit of said grandkids and shall not be sold until the youngest of said grandkids has reached the age of 21 - This is a trust - While there is no trustee specified, that is OK (trusts dont fail for want of trustee) - Use of terms shall be maintained shall not be sold are strong indication of intent that property be retained and managed by some person for future benefit of her grandkids - Duty associated with a trustee Jimenez v. Lee (Oregon 1976) p558 - Daughter had a few savings bonds that were supposed to go for education - Father was Custodian - Respective donors didnt expressly direct father to hold the $ in trust, but that doesnt matter - It is enough if the transfer of the property is made with the intent to vest the beneficial ownership in a 3rd person - Father took value of the trust and invested in stock; kept the interest for himself - Trustee is obligated to the beneficiaries to use the property consistently with the terms of the trust - Terms were for education of the beneficiary - Assuming he cannot account for the $, daughter should receive ($1,500 whatever he can account for) Gifts require delivery Trusts do not require delivery Does I give you a car make a trust where Im the trustee and youre the beneficiary? - Will the law of trusts step in to save a failed gift? Hebrew University Association v. Nye (CT 1961) p563 - Husband has a large library of books and leaves it to the wife - Wife intends to give the library to P university - She announces it at a luncheon and signs a release saying she was giving it to them, she told people it was theirs, and overall really thought she had given it to them - She never intended this to be a trust - Gifts, though, require delivery and the books were sitting in a warehouse - Is her continued interaction with the books a trustee-like activity? 74

- No, no obligation or fiduciary duty - Court finds there is significant CONSTRUCTIVE delivery of the books - Went to the university and brought description of the books - Rejects formalism TRUST PROPERTY - There must be some kind of property/interest in property in the trust (res/corpus) - It cannot be built solely on future earnings that may come - It must be something of substance. Unthank v. Rippstein (TX 1964) p569 - Craft sends Rippstein a letter purporting to give him $200/mo for next 5 years provided he lives that long - Craft amends the letter to strike provided I live that long and tries to bind his estate to make the monthly payments of $200 - Probate ct. refuses to probate it as a testamentary instrument - This isnt even a trust - Looks like a promise to give a future gift, which fails for lack of delivery - Promise for a future gift cannot be a trust since there is no trust property - If it was to be a trust, would put entire estate into trust to generate the $200 a month payments - Not even a contract, since no consideration - Have to be careful you are actually setting money aside and creating a trust rather than just making future promises Brainard v. Commissioner (7th Cir 1937) p572 - In 1927 Brainard orally stated before his wife and mother that he declared a trust of his expected profits from stock trading in 1928 for his mother, two children, and wife - Probably motivated by his desire to transfer income to family members who were in a lower tax bracket - Trust did not arise until after the profits were credited on Brainards books on the grounds that there was no res at the time of the declaration of trust - Where there is no res at the time of the declaration of trust, the settlor must manifest anew his intent to create a trust when the res comes into being - You cant say my profits next year to count as trust property, it is too speculative NOTE: He could have put the trading account itself into trust, interest to his family, corpus to him *Future profits are too speculative and cant count as trust that was sufficient to create a trust Hypo: $100k in trust for Adam for life, then to Risa if she is alive 21 years after Adam dies. Here, there is actual res that can fall to Risa when Adam dies. 75

- In Brainard, there might not be anything in the future Speelman v. Pascal (NY 1961) p573 - Pascal dies intestate - He had written a letter allocating 5% of any royalties made from the development from a play into a movie or musical to his secretary - At the time, there was no movie even written - There was an underlying contract right, though - He delivered as much as he could at the time - Future profits from the movie are sufficient enough to satisfy the property requirement for a valid trust - Assignment created equitable title, which courts enforce - Assignment of future earnings - Future yield of an existing property right can be transferred even though property to be acquired in the future cannot be - As trusts are so easy to create, these doctrines of intent, res, etc. do some work to police trust creation not much, though, since could always just give $1 and orally declare trust NECESSITY OF TRUST BENEFICIARIES - A trust cannot exist without an ascertainable beneficiary. - There must be someone to whom the trustee owes fiduciary duties, someone who can call the trustee to account. - Trust beneficiaries hold equitable title to trust property and have standing to enforce a trust. - Capacity: any human alive can be a beneficiary. - The settlor may be a beneficiary of his own trust. - A trustee may be a beneficiary of his or her own trust. A trust may also be the beneficiary of a trust as long as the sole beneficiary is not the sole trustee. - There can be multiple beneficiaries. Some can have concurrent, or interests at the same time, or successive, one after the other, interests. o If the beneficiaries are too indefinite, the trust will fail for want of ascertainable beneficiaries Beneficiary Designation must be Adequate - The settlor MUST designate the beneficiaries of a private trust so that their identity is definitively stated or clearly ascertainable. - The trust WILL FAIL if the settlor fails to describe the beneficiaries with sufficient certainty. - There has to be someone who can come into court and says, Hey I have equitable title. Clark v. Campbell (NH 1926) p579 - Testator leaves his stuff in trust where the beneficiaries are his friends

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- He leave the property to his two close friends in trust and those friends will distribute it to his other friends - There has to be someone, a beneficiary, who shows up to court to be check on the trustee (here there isnt) - Friends is too broad of a term to be deemed a class of beneficiaries - Relatives, on the other hand, is OK since it will be your next of kin under the statute of distribution How can you make friends work? - Make a list - Make a trust where all your friends are both trustees AND beneficiaries Class Gifts in Trusts EX: - Settlor transferred $100,000 to Timothy in trust, to distribute to those of my children whom my trustee so desires. Is this sufficient to be a class gift? Yes. Class designation, such as settlors gift to my children are adequate beneficiary descriptions as long as the individual members of the specified class are readily ascertainable. the class has to be identified with a certain degree of specificity.

Honorary Trusts - Is a failed trust - An honorary trust is a gift that the donor intends to benefit a nonhuman, noncharitable purpose - Binds the conscience of the trustee, since there is no beneficiary capable of enforcing the trust - Examples: trusts to care for pets, maintain specified items of property, and to erect monuments, care for tombstones, etc. - Most jurisdictions do not recognize honorary trusts and an attempted honorary trust fails and the property reverts to the settlor or if he is dead the settlors successors in interest - Restatement of Trust provides in S124 that honorary trust are unenforceable but that the trustee may use the property for the designated purpose In re Searights Estate (Ohio 1950) p582 - $1,000 in trust to be paid to Florence at 75c a day to keep and care for dog as long as it shall live - If dog dies before the $1k is used, rest to be divided among a list of friends - Dog cannot go into court and enforce this - Pet is NOT a valid measuring life for RAP, no matter how well the trust is drafted - This is an honorary trust - Florence doesnt legally have to take care of the dog since that cant be enforced - So long as there is a specific purpose and no violation of the RAP, this is OK 77

- Amount would max run out in less than 5 years, regardless of how long the dog lives UTC 408 and 409 Trust for the Care of an animal 408 (a) A trust may be created to provide for the care of an animal alive during the settlors lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlors lifetime, upon the death of the last surviving animal. (b) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed. (c) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlors successors in interest. SECTION 409. NONCHARITABLE TRUST WITHOUT ASCERTAINABLE BENEFICIARY. Except as otherwise provided in Section 408 or by another statute, the following rules apply: (1) A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee. The trust may not be enforced for more than [21] years. (2) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. (3) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlors successors in interest. EPTL 7-8-1 Honorary trust for Pets (a) a trust for the care of a pet is valid. The intended use of the principal or income may be enforced by a individual designated for that purpose in the trust instrument or, if none, by an individual appointed by a court under application to it by an individual, or by a trustee. Such trust shall terminate when no living animal is covered by the trust, or at the end of 21 years, whichever occurs earlier.

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(b) Except as expressly provided otherwise in the trust instrument, no portion of the principal or income may be converted to the use of the trustee or to any use other than for the benefit of a covered animal. (c) Upon termination, the trustee shall transfer the unexpended trust property as directed in the trust instrument or, if there are no such directions in the trust instrument, the property shall pass to the estate of the grantor. (d) A court may reduce the amount of the property transferred if it determines that amount substantially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property pursuant to paragraph (c) of this section. (e) If no trustee is designated or no designated trustee is willing or able to serve, a court shall appoint a trustee and may make such other orders and determinations as are advisable to carry out the intent of the transferor and the purpose of this section. Summary: This New York statute provides that a trust for the care of a designated domestic or pet animal is valid. Such trust shall terminate when no living animal is covered by the trust, or at the end of twenty-one years, whichever occurs earlier. Upon termination, the trustee shall transfer the unexpended trust property as directed in the trust instrument or, if there are no such directions in the trust instrument, the property shall pass to the estate of the grantor. A court may reduce the amount of the property transferred if it determines that amount substantially exceeds the amount required for the intended use. RESULTING TRUSTS - When the settlor attempts to create an express trust but that attempt fails because, for example, the settlor did not indicate a trust purpose, describe the beneficiaries specifically, or comply with the Rule Against Perpetuities. - If the settlor does not say who gets the property, or if there is no property then the trust will fail. If the trust fails then it will pass through the settlors residuary or if the trust is already in the residuary or there is no will, through intestacy. THE RIGHT TO DISTRIBUTIONS OF A TRUST Two Kinds of Trusts: 1) Mandatory Trusts 2) Discretionary Trusts Mandatory Trust: When there is some kind of required payment or pre-designated distributions. Trustee has the power for asset management, has the duty of prudence but no discretion in the payment scheme.

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Discretionary Trust: When the trustee has the power to decide when to make the payments. UTC 814 - The trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trusts and the interests of the beneficiaries. - Most jurisdictions impose an objective reasonableness standard on the trustees exercise of discretion. Three Kinds of Discretionary Trusts: 1) Spray: the trustee decides whom to give money to. There will be a list of beneficiaries and he decides where the money may go in any given year 2) Sprinkle: involves adding income to the principal. the trustee decides how much to pay in a given year. Can give all of it, can give less, or can give what he decides 3) Support discretion of the trustee to make distributions as is necessary for the beneficiarys support and maintenance. Support Trusts - Settlor may restrict the use of trust income, principal, or both to the beneficiarys basic needs such as food, clothing, medical care, and educational expenses. - A trust containing this type of provision is called a support trust. - Support trust can be either mandatory or discretionary. - If mandatory, the trustee must make distribution to support the beneficiary. - If discretionary, the trustee may, but is not required to pay for the beneficiarys support and may not any under circumstances, make distributions for other reasons such as a vacation or second home. - A beneficiary of a support trust cannot convey his interest. - For the same reason, creditors may not reach the beneficiarys interest. - Support generally means the standard of living to which the beneficiary was accustomed to at the time of the trust creation. Marsman v. Nasca (Mass 1991) p598 - Sarah dies and is survived by her husband Cappy and daughter. - Sarah sets up a support trust for Cappy where trustee has the sole discretion of doling out the money to Cappy. - Cappy had a house with his wife as tenants in the entirety and since she is dead he takes it outright o Wants to leave this to his new wife - Cappy gets in financial trouble and calls the trustee to asks for money

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Trustee gives Cappy $300 and asks him to write down exactly what he needs the money for. o This discourages Cappy from asking for more $, and he never does. Ends up selling the house and keeping a life estate in it What possible claim does Cappy have against the trustee? This is a discretionary support trust w/ some objective standards built into it o The trustee violated his duty to inquire about Cappy. DUTY OF PRUDENCE o He did not ask how he was doing financially. If it is a purely discretionary trust, Cappy probably loses because disagreeing with the trustee doesnt make him win o Totally discretionary on the part of the trustee o Beneficiary wouldnt have a right to determine how much he gets

NOTE on attorneys conduct: - Possible he felt his duty ran to Sally and Sara rather than to Cappy - Isnt personally liable, although the exculpatory/exoneration clause comes close PROTECTION FROM CREDITORS - The beneficiary of a trust incurs substantial debt. Can the creditors go after the trust instead of after the beneficiary to try and collect on that debt? In Mandatory Trusts: - The creditors of the beneficiary can stand in the beneficiarys shoes and compel distribution. - If the trust proceeds are to be paid out at a certain age, if the daughter has incurred substantial debts when she reaches that age the creditors may stand in her shoes and collect on the trust. In Discretionary Trusts - Pure discretionary: creditors have no rights to the trust o Beneficiary has no entitlement to the principal of the trust - Support: some creditors can reach while others cannot reach the beneficiarys interest o Beneficiary cannot alienate the interest o Only creditors that can reach the interest are those that supply necessities, like groceries or medicine because they recover through the support o Children and spouses may enforce claims for child support and alimony against beneficiarys interest in INCOME but not principal (Shelley) Beneficiarys interest in principal is discretionary - Discretionary Support: creditors have no rights to the trust o Although treated as a variant of support trust, for creditors rights it is treated as a pure discretionary trust

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A creditor may have some remedies though: - Cutting off. The creditors can go to court and get an order against the trustee saying that even though the trustee has no obligation to pay out to the beneficiary, if he does make a payment it must go to the creditors. - This gives the creditors leverage against the beneficiary. Limits on the ability of a creditor of a beneficiary to go directly after the trust. - basically the creditor will have to go after each payment made to the beneficiary. In Support Trusts - the trustee is obligate to make payments for the necessary support of the beneficiary. - If the creditor is someone who provided necessary support service to the beneficiary then the creditor can go after the trust. Usually this would be for food or medicine. The most protection a beneficiary gets is through a PURE DISCRETIONARY TRUST. - there is no way for the creditor to go after the trust assets here. - In a discretionary trust the trustee may be skittish to make more than the obligated payment: this is because if he over pays he may be personally liable, if he underpays the court will compel the remedy of paying out the trust. - The father out into the future the trust goes the greater need for discretion. SPEND THRIFT TRUST 1) it prohibit the beneficiary from selling, giving away, or otherwise transferring the beneficiarys interest (limits alienability) 2) prevents the beneficiarys creditors for reaching the beneficiarys interest in the trust. - spendthrift restrictions protect beneficiary from their own improvidence and their personal creditors. - CANNOT USE SPENDTHRIFT TRUSTS AS COLLATERAL - beneficiary cannot assign interest - if settlor wanted the beneficiary to be able to leverage the trust as collateral, he should have opted out of the spendthrift provisions - Once the trustee distributes the income, the protection of the spendthrift provision ends. - If one of the creditors is someone who provided the beneficiary with a necessity like food they may have a good chance to get at the trust money because an exception to the spendthrift provision is based on the public policy of encouraging creditors to supply the basic necessities of life without fear of getting paid. IS THIS RIGHT? Much might depend on whether the creditor is voluntary (contract) or involuntary (child/wife/tort victim) 82

UTC 502 Spendthrift Provisions (a) A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiarys interest (b) A term of the trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, is sufficient to restrain both voluntary or involuntary transfer of the beneficiarys interest UTC 503 Exceptions (b) A spendthrift provision is unenforceable against: (1) a beneficiarys child, spouse, or former spouse who has a judgment or court order against the beneficiary for support or maintenance (2) a judgment creditor who has provided services for the protection of a beneficiarys interest in the trust; and (3) a claim of the State or the US to the extent a statute of the State or federal law applies - Note: Tort creditors are not mentioned here purposely Scheffel v. Krueger (NH 2001) p616 - Krueger has a spendthrift trust and sexually abuses a child and puts it on Internet - Mother of the child sues him and wins $500k judgment in civil court - She tries to get the money by attaching his trust - Wants an exemption for tort creditors - If not, exemption for torts with criminal defendants - If not, exemption based on public policy - If not, dissolve the trust - Trust cannot fulfill the trust purpose of support, maintenance, and educating him since he will be in jail - Court rejects these claims - Major policy decision in favor of spendthrift trusts Shelley v. Shelley (OR 1960) p618 - Beneficiary of spendthrift trust marries and divorces twice, kids in both marriages - Disappears so wives/kids are seeking alimony and child support - Court held that his interest in the trust income could be given to creditors but not the principal - His interest in the principal is discretionary, so until trustee decides to pay out principal the creditors cannot get at it - BUT, children were beneficiaries for support so they could get at the corpus as beneficiaries, not derivatively through the father Self-Settled Asset Protection Trust - Spendthrift trust for your own benefit - If you have liabilities, you cant just go put your money in a spendthrift trust o This is fraud - If you WORRY about liability, you can do this 83

But, probably just easier to transfer your money to your spouse

MODIFICATION AND TERMINATION OF TRUSTS We want to modify to give effect to the Settlors intent had the circumstances in question been anticipated All of the beneficiaries and the settlor have to agree (absent provisions in the trust) - hard if the settlor is dead - hard if there are unborn beneficiaries The traditional rule: Calfin Doctrine: the traditional rule is that a trust cannot be terminated or modified prior to the time fixed for termination by petition of all the beneficiaries if the termination or modification would be contrary to a material purpose of the settlor. In Calfin a trust was established for the testators son with principal to be paid to the son at age of 30. After the age of 21, son sued to terminate the trust. The court refused termination because it would violate the intent of the testator. (the intent was to pay it out at the age of 30). The Calfin Doctrine applies to modification or termination by consent of the beneficiaries. Should this doctrine be relaxed to allow freer modification? Equitable Deviation Doctrine (Restatement 66): - The court will permit the trustee to deviate from the administrative terms of a trust when compliance would defeat or substantially impair the accomplishment of the purposes of the trust on account of change circumstances not anticipated by the settlor. - DEVIATION MUST BE NECESSARY TO FURTHER THE PURPOSE OF THE TRUST, not simply be more advantageous for the beneficiaries - Modification to achieve the settlors PROBABLE intent in light of the changed circumstances o Compare: Reformation as equitable remedy to achieve ACTUAL intent Deviation and Changed Circumstances Uniform Trust Code 412: Modification or Termination Because of Unanticipated Circumstances or Inability to Administer Trust Effectively (a) the court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of the circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. The modification must be made in accordance with the settlors probable intention. (b) the court may modify the administrative terms of a trust if the continuation of the trust on its existing terms would be impracticable or wasteful or impair the trusts administration. 84

(c) upon termination of trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust. In re Riddell (Washington 2007) p645 Two pronged test for EQUIABLE DEVIATION: 1) Because of the circumstance not anticipated by the settlor, 2) the modification or deviation will further the purposes of the trust. - In this case a father wanted to modify the trust because if his daughter, one of the beneficiaries of the trust, got the money then her Medicare funding would be pulled. - The purpose of this trust was for the maintenance, medical care, and education, thus if it wasnt modified it would defeat the purpose of her medical care. NOTE: Courts are more liberal in permitting trustees to deviate from ADMINISTRATIVE directions in the trust rather than DISTRIBUTIVE directions based on unanticipated change of circumstances NOTE: Restatement 66 and UTC 412 adopt the modern view of Equitable Deviation - Also lower the threshold from showing of defeat or substantial impairment to furthering the purpose of the trust NOTE: Presumption is in favor of modification/termination - Not the case in NY/Mass Supplemental Needs Trust - Trust established for the disabled persons benefit and that is intended to supplement public benefits w/o increasing countable assets and resources so as to disqualify the individual from public benefits - Created in order to allow disabled people to continue receiving governmental assistance while allowing extra funds for assistance the govt didnt provide - State generally gets whatever monies remain in the trust after termination Side Note: Trust Protectors - T devises her property to X, a bank, in trust to pay income to A for life and on As death to distribute the property to As descendents. - T also names P as a trust protector. - T authorizes P as a trust protector to: 1) replace X with another corporate fiduciary. 2) to approve modifications to the trusts administrative and dispositive provisions. 3) terminate the trust. 4) to select a successor trust protector. P can fire the bank and increase As share as the trust protector. Trust protectors have unilateral power to modify terms of a trust CALFIN AND MATERIAL PURPOSE 85

What is a Material Purpose? - Material Terms are usually but not exclusive to: spendthrift provisions (not according to UTC 411), attaining age, discretionary trust, trust for the support of the beneficiary. Example Case of Material Purpose: In re Estate of Brown (VT 1987) p653 - Andrew Brown left a trust and the material provisions were as such: - 1) The trust shall be used to provide an education for the children of my nephew Woolson. - 2) When that is accomplished the trust shall be used for the welfare and maintenance of Woolson and his wife according to the life they are accustomed to living. - 3) After that, their kids share in equal shares. - Nephew and kids want the trust terminated claim the only purpose was the education and that is fulfilled. - COURT HOLDS: that termination cannot be compelled here because a material purpose of the settlor remains unaccomplished. - The trust had two purposes: 1) education accomplished; 2) to care for the maintenance and welfare of the lifetime beneficiaries since this was life long, Woolson cannot cash out of the trust because that would defeat the purpose of the trust. So long as a single material purpose of the trust remains, termination is inappropriate NOTE: Spendthrift trusts cannot be terminated this way - EXTREMELY hard to terminate a trust in NY since all are PRESUMABLY SPENDTHRIFT Restatement of Trusts 65 Termination or Modification By Consent of Beneficiaries (1) if all of the beneficiaries of an irrevocable trust consent, they can compel the termination or modification of the trust. (2) if termination or modification of the trust under Subsection (1) would be inconsistent with a material purpose of the trust, the beneficiaries CANNOT compel its termination or modification except with the consent of the settlor, or, after settlors death, with authorization of the court if it determines that the reason for termination or modification outweigh the material purpose. Uniform Trust Code 411 MODIFICATION OR TERMINATION OF NONCHARITABLE IRREVOCABLE TRUST BY CONSENT.

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(b) a noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. (c) a spendthrift provision in the terms of the trust is not presumed to constitute a material purpose of the trust. (e) if not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection (b) the modification or termination may be approved by the court if the court is satisfied that: 1. All of the beneficiaries had consented, the trust could have been modified or terminate under this section; and 2. the interest of a beneficiary who does not consent will be adequately protected - likely relates to unborn beneficiaries A trust is revocable unless it declared irrevocable

TRUSTEE REMOVAL - Traditional law permits removal only for cause. - The court may remove a trustee who is dishonest or who has engaged in a serious breach of trust / fiduciary duty - Trustees who were specifically named by the settlor are even less readily removed. - If a settlor is aware of an asserted ground for removal at the time of naming a trustee, that ground will not serve as a basis for the later removal of the trustee unless the trustee unless the trustee is entirely unfit to serve. UTC 706 Removal of a Trustee (a) the settlor, a co-trustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative. (b) the court may remove a trustee IF: (1) The trustee has committed a serious breach of trust. (2) Lack of cooperation among co-trustees that substantially impairs the administration of the trust, (3) Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines this is in the best interests of the beneficiaries. (4) Substantial change of circumstances or removal is requested by all of the qualified beneficiaries. Davis v. US Bank National Association (Missouri 2007) p660 - UTC provides for the removal of a trustee without wrongdoing is a trustee if: - Removal is requested by all of the qualified beneficiaries and in either such case the party seeking removal establishes to the court that: (a) removal of the trustee best serves the interest of the beneficiaries, (b) removal of the trustee is not inconsistent with a material purpose of the trust, AND (c) a suitable co-trustee or successor trustee is available or willing to serve. - Qualified beneficiaries all that matter 87

- Remote remainder beneficiaries are not qualified - Beneficiarys kids are remainder beneficiaries and thus their interests are substantially aligned with his - He can virtually represent them w/o conflict of interest - Normally, lifetime beneficiaries and remainder beneficiary interests conflict POWERS OF APPOINTMENT A power appointment is the right to designate the new owner of property. - The owner of the property is the donor of the power, the person with the power to appoint the property is the donee, and the people for whom the power can be exercised are the objects of the power. - When the donee actually exercises the power, the new owners are called the appointees. - If the donee fails to exercise the power, the property passes to the default takers. If the donor failed to name default takers, the property reverts to the donor or the donors estate. - The donor can create a power of appointment in an inter vivos document, such as a deed or trust, or in a separate power of appointment instrument. - 1) The power may be GENERAL: when there are no restrictions or conditions on the donees exercise of the power. Thus the donee can exercise the power on behalf of himself or his own estate. o A holder of the general power is like the actual owner of the property. - 2) SPECIAL or limited Power: the donor may specify certain individuals or groups as the objects of the power that do not include the donee, the donees creditors, the donees estate. May be limited to the whims of the donor. - A donee is not a fiduciary and has no duty to manage the property or to distribute the property. - It could be an inter vivos appointment or testamentary appointment. - Powers of appointment are usually used in trusts. Trustees often have the power to decide which beneficiaries will receive distributions and in what amount. - Can creditors get to the appointive property under power of appointment? o Technically he doesnt have the property he just directs where it goes. o BUT, if it is a presently exercisable general power of appointment, creditors can in most j/d reach the appointive property UTC 505(b)(1), Restatement 56 o If it is a testamentary general power of appointment, most j/d say yes UTC is silent o Specific power NO Relation-back Doctrine Appointee receives the appointive property from donor, not donee - Creates flexibility in the trust. This is a way for the settlor to create flexibility in the trust. This is because settlors cant see into the future. 88

Well-drafted trusts often contain power of appointment, typically in the trust beneficiaries. A power of appointment gives the person who holds the power the ability to distribute the trust property. Powers of appointment allow the settlor to leave it to others in the future to deal flexibility with changing circumstances.

Note: you can create a power of appointment not only in a beneficiary, but in someone else also (CANNOT create power of appointment in the judge) Terminology on the Powers of Appointment Donor the person who creates the power of appointment. Donee - the person who holds the power of appointment. Objects of Power people for who the power can be exercised Appointees object when a power is exercised in favor of them Taker in default person who receives property if donee fails to exercise the power Appointive property the property subject to the power The Powers Can Be: General: can be exercised on behalf of the donee, donees creditors, and estate. - Can be appointed in further trust o This is b/c donee can simply appoint himself, then grant power over his estate to someone else in trust Special: cannot be exercised on behalf of the donee, donees creditors, and estate. - Cannot be appointed in further trust o Only can if the governing instrument expressly permits it Example of a Fraud Against the Power: - Elsa has the power of appointment. She wants to appoint someone who is not an object of the appointment. Paul, an object, is going to give $100,000 back to Elsas husband after she gives Paul $250,000. The power of the donee is committing a fraud against the power and is inadmissible. - An appointment in favor of a person who is not an object of the power is invalid. - 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. UPC 2-608 Exercise of Power of Appointment A residuary clause in a will, or a will making general disposition of a testators property, expresses the intention to exercise a power of appointment held by the testator only if (i) the power is a general power and the creating instrument does not contain a gift if the power is not exercised OR (ii) the testators will manifest an intention to include the property subject to the power. 89

Specific Reference Requirement To prevent unintentional exercise of a power of appointment, the donor will sometimes provide that the power can be exercised only by an instrument, executed after the date of the creating instrument, that refers specifically to the power NOTE: Blanket-exercise clauses do NOT exercise Specific Reference powers. Beals v. State Street Bank & Trust Co (Mass 1975) p813 - Arthur leaves property to his wife in trust for life, remainder to his 3 daughters - Will gives each daughter a power of appointment over her share - Isabella wants big principal payments to go to her Husband (trustee allows this) and some amounts remain - When she dies, her residuary goes to her predeceasing sisters kids per stirpes - Husband predeceases her also - Isabella transformed her general power of appointment into a special power - Did this because of a change in the tax code - Presumption that residuary clause in a will exercises the general power of appointment - This is because it is essentially part of their estate anyway should they choose to appoint themselves - If you treat the property as if it was your own, you have exercised the power - Presumption only applies if residual beneficiary is suitable object - Specific powers are NOT presumptively exercised through residuary clauses If you have residuary with a power that HASNT been exercised: - General power: presumption applies only if meets standards of UPC - Special power: maybe (NY allows this, but minority rule) In general, antilapse statutes APPLY to the exercise of a power of appointment - UPC 2-603 RELEASE OF A POWER OF APPOINTMENT Seidel v. Werner (NY 1975) - Man has a separation contract with wife and promises to exercise power of appointment to his kids - Man exercises power of appointment on behalf of his 3rd wife - Kids claim that no, he promised to exercise it on THEIR behalf - It was a testamentary power that could only be exercised at death - This cannot be alienated - Would get around settlors intent - Kids argue that this is a release of power - Agreement not to exercise it - Seek restitution 90

- Value gotten through the power of appointment - BUT, cannot seek restitution out of the trust fund, since it wasnt his property (he only had life estate) Failure to Exercise a Power of Appointment: Failure to Exercise a General Power - If the donee of a general power of appointment fails to exercise it, the appointive property passes to the takers in default of appointment. - If there is no such provision in the document creating the power, the property reverts to the donors estate. - Restatement Rule: o If there is no gift in default clause or if the clause is ineffective, the property reverts to the donor or the donors estate only if the donee expressly refrained from exercising the power. o Under this approach, every general power of appointment in effect comes with an implied gift in default of appointment to the donee or the donees estate. Failure to Exercise a Special Power - If the donee fails to exercise a special power and there is no gift in default of appointment, the appointive property may pass to the object of the power. - Otherwise it reverts to the donor or the donors estate. Loring v. Marshall (Mass 1985) - Implied gift in default of appointment - Adopted by Restatement Options for distribution: - Cabot Jr o Only legitimate object of power of appointment o Dead, so would go to his estate o Has an adopted daughter stranger to the adoption problem o Clear settlor wanted $ to remain in family - to Cabot to his Wife o This is what original will wanted, so maybe testamentary intent - Wife o Cabot Jr. gave her power of appointment (for life) - Intestate takers o She failed to provide for the contingency that happened o Incomplete disposition of the estate o But, this would require reopening an estate probated over 100yrs ago o Adopted daughter would get it anyway - Charities o Testator would prefer these to intestacy o Probably didnt want these to be the gift in default, though o Named in the original instrument

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TRUST ADMINISTRATION: THE FIDUCIARY OBLIGATION Fiduciary Obligation: Comprises the duties of loyalty, prudence, and a host of subsidiary rules that reinforce he duties of loyalty and prudence. UTC 815 - In addition to the powers conferred by the terms of the trust, the trustee is authorized to exercise all powers over the trust property and any other power appropriate to achieve the proper investment, management, and distribution of the trust property. UTC 816 - The trustee is given more than two dozen specific transactional powers, including the power to acquire or sell property, to deposit trust money in an account in a regulated financial service institution, to pay a contest claim, to sign and deliver contracts. Concern that a trustees interest will diverge from the interests of the beneficiary Remedies on breach of duties: - Trustee removal - Maybe ability to recover from trustee personally o If professionals, probably have malpractice insurance o Is there an exculpation clause? - Maybe ability to recover from people with whom the trustee deals in the breach o If good faith bona fide purchaser, highly unlikely for beneficiary to recover o If NOT the case, beneficiary may be able to recover from the 3rd party Duty of Loyalty Duty of Prudence I. Duty of Loyalty - the most fundamental principle of the fiduciary obligation in trust law is the duty of undivided loyalty to the beneficiary. - the trustee must act solely for the benefit of the beneficiary. - the trustee is not limited to exercise complete and full control over the trust property as if it were his own. - the trustee is not limited in the powers he can use: - can buy and sell property, invest whatever he thinks is best for the beneficiary. - Breach of wither the duty of loyalty or the duty of prudence will hold the trustee personally liable. THERE IS A SERIOUS PROHIBITION AGAINST SELF DEALING> trustees cannot buy and sell the trust assets for themselves.

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Example: I cant sell myself a house that is in the trust corpus if I am the trustee even if it were a great deal. NO SELF DEALING. Undivided Loyalty - the trustee may not engage in a transaction that involves self dealing or a conflict between the trustees fiduciary capacity and personal interest. - Good faith and fairness to the beneficiary are not enough. The only defenses to self-dealing or conflicted transaction are: 1) the settlor authorized it in the trust instrument OR 2) the beneficiaries consented after full disclosure. No further inquiry rule: Applies to cases of self-dealing by a trustee. Makes all selfdealing transactions entered into by the trustee per se voidable by the beneficiaries, requiring no proof that such transactions were unreasonable or harmful. Trustee must act for the sole benefit of the beneficiaries. Trustees are often between a rock and a hard place - If you dont do anything, you could be liable for waste - If you get full disclosure and beneficiaries sign off, maybe that helps o Still need to act in good faith If there are only 2 beneficiaries, and both agree they arent going to sue, who cares if the executor/trustee alters the plan according to what the beneficiaries want?? Hartman v. Hartle (NJ 1923) p675 - Woman died testate with 5 sons, 2 of whom were the executors - Directions to sell the estate and divide proceeds among the children - Executors sell farm for $3,900 to one of the sons who gives it to his wife - Deputy is upset at the sale price of the farm and brings the action - Wife sells the property a month later and makes $1,600 (keeps for herself) - Transactions were done in GOOD FAITH - Nobody wanted the farm, so one stepped up and bought it - Doesnt matter, this is self-dealing had to account for 1/5 of the $1,600 profit In re Gleesons Will (Ill 1955) p676 - Will leaves farmland to farmer as trustee for benefit of settlors 3 kids - Farmer renews his lease for 1 year at a higher rent than normal and the year after leases to someone else - Breach of fiduciary duty because self-dealing - If he didnt lease it, the crops wouldnt have been able to be harvested that year - Had to account for his profits from that year In re Rothko (NY 1977) p679 - Rothko left his 3 friends as executors of will that had 800 paintings

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- They sold the paintings to the gallery owned by one of the trustees at a really low price and with a 50% commission (going rate was 10% - One trustee sought legal counsel - This doesnt absolve him, since he knew the other 2 were doing wrong and he did nothing to stop them - Rothkos daughter brings claim saying she wants her elective share as per the NY rule at the time - No longer a rule b/c of this case - Damages for breach of fiduciary duty are generally restitution - Here, appreciation - The property was meant to stay in the trust and appreciate until possibly the beneficiary saw how to dispose of it NOTE: Co-Trustees - Under the law or unless the trust instrument says so, the co-trustees must be in unanimity as to the decisions of the trust and should this be held liable of the actions of another co-trustee. II. Duty of Prudence - Imposes on the trustee an objective standard of care. - A trustee shall administer the trust as a prudent person would and needs to exercise reasonable care, skill, and caution. - The Prudent Man Standard has been outmoded in favor of the Prudent Investor Standard that was instituted by the Uniform Prudent Investor Act pg 694. o Based on Modern Portfolio Theory: based on diversification. Some safe stocks, some riskier stocks, hedging against risk. EX: What if a settlor leaves $200,000 of GM stock to someone in trust with the direction that the trustee never sell it and to pay out the principle thirty years from now What are the trustees obligations? - Even if the language existed in the trusts the trustee needs to worry about their duty of prudence. Maybe go to court to seek modification. IMPARTIALITY AMD THE INCOME / PRINCIPLE PROBLEM - Duty of impartiality is the most important SUBRULE in trust fiduciary law. - The duty is implicated when a trust has two or more beneficiaries. - The DUTY OF IMPARTIALITY: in investing, managing, and distributing the trust property, the trustee must strike a balance between the beneficiaries, giving due regard to their respective interests. - This rule is misnamed and does not really have to do with impartiality. - THE TRUSTEE must take into account any preferences that the settlor may have expressed in the governing instrument or in some other manner, and must also consider the various and sometimes conflicting interests of the beneficiaries. 94

After giving due regard to these interests, the trustee must act accordingly. IN SOME CIRCUMSTANCES THIS WILL REQUIRE THE TRUSTEE TO FAVOR ONE BENEFICIARY OVER ANOTHER. The rule is: The trust must carry out the provisions that are expressed in the trust by the settlor.

Income / Principle Problem - In many trusts there is a lifetime income beneficiary with the remainder, the principle to be paid out to someone else. - By investing in certain stocks you can favor the income beneficiary OR the remainder beneficiary. - Short-term investments favor the income beneficiary who gets it now and long term favors the residual . - Dividends favor income, appreciation in stock favors residual - As a trustee it is the duty not to favor either one. Howard v. Howard (Oregon 2007) p726 - Howard has 3 kids with a first wife (who dies) and remarries woman with 2 kids - They combine all their money and form 2 trusts, 60% to Howards kids, 40% to Marcenes kids (goal is 20% for each kid) - Trust amended to Howards trust, divided into 2 trusts - Family trust: max tax-free amount possible - Marital trust: residue to marital trust, for his wife - income from both payable to wife for life and so much principal to provide for support - wife gets preference over the remainders - Wife and Howards son Coy are co-trustees and clearly have v. different interests - Coy claims she can basically just take everything from his side of the familys trust - Court suggests that if Howard wanted to have the trust consider her other resources, he knew how to do that - She gets the preference and thats that Impecunious Surviving Spouse - If a surviving spouse cannot live comfortably on income created by a trust at the other spouses death, they might ask court to invade principal - NOT allowed unless all the remainder beneficiaries consent - or, if trust has express/implied power to invade principal Two things to deal with this problem: 1) UPIA: Uniform Principle and Income Act (EPTL 11-A) - Allows for the trustee to seek to make an adjustment in the amount of income that gets paid out to the income beneficiary if the trust generated a certain amount in a given year. - NO SELF-INTERESTED ELECTIONS - Essentially, turn principal into interest or vice versa 95

- Happens upon petition - Designed to make it fair to both income and residual beneficiaries - Gives flexibility over treatment of assets 2) UniTrust Statute (EPTL 11-2.4) - Allows the trustee to implement the untitrust on a trust even though it wasnt written in by the settlor. - A unitrust by statute will give the lifetime beneficiary 4% of the trust income with the excess going to the remaindermen. - The Unitrust aligns the interests of the lifetime beneficiaries and the remaindermen because their goal is to maximize the profits of the trust. - ALLOWS ELECTION BY TRUSEES WHO ARE REMAINDER BENEFICIARIES UNITRUST FORMULA: - This is a fixed formula. - An income beneficiary receives an annual income distribution for 4% of the net fair market value of the assets held in trust on the first business day of the current valuation year of the first three years of the unitrust agreement. - In the 4th year the value of trust assets is determined by calculating the average of three figures: the net fair market value on the first business day of the prior two valuation years compared with the current year. *** Even though there is legislation that says that beneficiaries may not adjust the trust an adjustment by a beneficiary making it a unitrust is allowed**** In re Matter of Heller (NY 2007) p731 - Trust where Bertha was to receive $40k or income of trust each year - Trust did REALLY well and she was being paid $190k a year - Trustees seek to have unitrust provisions apply and it be retroactive, making her takings be $70k a year - One of the trustees is also a remainder beneficiary - Trustees status as a remainder beneficiary does NOT in itself invalidate a unitrust election made by that trustee - This is NOT a conflict of interest - Although you cannot self-deal as a trusee, you have dual fiduciary duties to income AND remainder beneficiaries - Since unitrust aligns the interests of the two, this is fine ADJUSTEMNT POWER IS USUALLY DENIED TO A TRUSTEE WHO IS ALSO A BENEFICIARY BUT IT ALLOWED IN HELLER UNDER THE UNITRUST PROVISION. CHARITABLE TRUSTS Private Trusts Require: - settlor - beneficiary 96

trust property intent

Charitable Trusts Require: - settlor - a charitable purpose - trust property - intent Two Principle Difference From Private Trusts and Charitable Trusts 1) A private trust needs a legitimate, identifiable, beneficiary. A charitable trust replaces the legitimate beneficiary with a charitable purpose. - The state attorney general has the right to go into court to fight to enforce the terms of the charitable trust. - NY AG is very active, but depends on trust size/purpose 2) Rule against perpetuities does not apply to charitable trusts. Charitable trust live in perpetuity. There is some flexibility in charitable trusts because of their indefinite lifespan and comes in the form of cy pres. CHARITABLE PURPOSES a. the relief of poverty b. the advancement of education c. the advancement of religion d. the promotion of health. e. governmental or municipal purposes, and f. other purposes the accomplishment of which is beneficial to the community - These other purposes arent as broad as one might think A charity must be for the benefit of an indefinite number of people Shenandoah Valley National Bank v. Taylor (VA 1951) p752 - Charles Henry trust takes his money and puts in trust for the benefit of all 1st, 2nd, and 3rd graders at a particular school to be payable before Christmas and Easter each year. - If this trust is not valid then it will be a resulting trust and the trust would go through intestacy. - NOT a charitable trust; just BENEVOLENT Reasons why it isnt a charitable trust: - Not for any charitable purpose it is just giving the money away. - An outright gift to the needy would be fine. But this class of people is too broad in the 1st, 2nd, and 3rd graders could have rich parent. - Unless one of your charity falls under the above a through f then it is not a charitable trust. - This is just a benevolent gift not a charitable trust. 97

There is a real distinction between a charitable trust and mere benevolence.

How about a trust buying flowers for the lobby of the Met? Charitable Trust? YES it frees up money for other thing in the museum and this could count as the furthering of education. Trusts to Benefit a Political Party - It is against public policy to endow perpetually a political party, so a trust to promote the success of a particular political party is not charitable. - However a trust for the improvement of the structure and methods of government, in a manner advocated by a particular political party, IS CHARITABLE, - Hence, a trust to advance the principles of socialism and those causes related to socialism including supporting candidates for public office espousing socialistic views has been held charitable. Modification of Charitable Trusts CY PRES - Judicial modifications of the charitable trust. - Under the Cy Pres Doctrine if the settlors exact charitable purpose becomes illegal, impossible, or impracticable, the court may direct the application of the trust property to another charitable purpose that approximates the settlors intention What is the Court Looking At When Granting Cy Pres? 1) Does the settlor have a general charitable purpose? 2) If it is then cy pres is possible as long as it is consistent with that general charitable purpose. 3) If amount of money is so obscene or offensive, ct. might impose Cy Pres to expand the trust to other charitable purposes The longer the trust can last, the greater the need for judicial intervention There has been a change in the law that say there is a presumption of general charitable purpose. In re Neher (NY 1939) p761 - Sets aside money for a hospital in his name - Municipality accepts it but then decides it doesnt need a hospital since the town next door opened one - Needs administrative buildings - Widow says this is not what they want - What is the best substitute? - Gift to the municipality? 98

- Gift to fund a hospital? - Maybe give to the hospital in the town next door Barnes Foundation Case (PA) p769 - Man has lots of art in his home - Terms of the trust state the art must always hang in a certain way - Cant change how it is hung or the contents of the collection - Cant charge money for tickets - Runs out of money - Charitable trust is supposed to stay this way forever, but the paintings start falling into disrepair etc. - Cy Pres petitions - Art goes on tour to raise money worked for a bit, but ran out of $ again - Move to a new building court says OK, but it is a controversial building Who has standing to sue? - Settlor - If testamentary trust, spouse of Settlor, Estate, Next of kin, etc. - But, he has essentially given his interest away - Yes, but the interests of spouse, estate, etc. are probably aligned with that of AG - Dont want vexatious litigation Testamentary freedom v. perpetual trust in charitable form - Issues of dead hand control - As law of private trusts expands to meet that of charitable forms, many states have started repealing the RAP

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