Legal Lines - Wills And Trusts

TABLE OF CONTENTS AND SHORT RE\'IEW OUTLINE Page I.

A FOTJNDATION FOR ESTATEPLANNING: SOCIETY,S CONTROL OF INHERITANCE

I

A. PROLOGUE

1

B.

INHERITANCE AND ITS LIMITATIONS

I

l. 2. 3. 4. 5.

I I I I 3

T. Jefferson 2 W Blackstone, Commentaries SupremeCowt TakingPropertyWithout JustCompensation PartialRestraints on Mafiase Permissible

C. TIIE PROBATEPROCESS l.

lntroductionahdTerminology a. b.

2. 3.

ls Probale Necessary? . . .. .. A Summaryof ProbateProcedure a. b. c.

4.

Execulor, administralor ... Oth e te r rmi n o l o g......... y

Openingprobare Supervising therepresentative's actions C l o si n g th ee sta te.......

4 4

6

6 6 6

Contest of Wills a.

Gro u n dfo s rco n te st.....

D . P R O T E S S ION ARLE S P ON S IBILITY.,............. l. 2.

II.

Will Beneficiaries OwedDuty of Care Fiduciary Duly

,7 8

INTESTACY: AN ESTATE PLAN BY DEFAULT . . . . . . . . . .

10

A. INTESTATE SUCCESSORS! SPOUSEAND DESCENDANTS .. . . . . .. . . .

10

l.

Spouse

l0

a.

l0

S i mu l ta n e oduesa th.......

Wills - v

l)

Evidenceof survival

2. Descendants a.

b. c.

10 ll

Taking by representation: per stirpesdist ibution

1l

1) 2)

t2 t2

UPC rule-per capitaat eachgeneration . . . . . . . Minodty rule-strict per stirpes

Posthumous children Adoptedchildrcn

I2 12

1) I-oss of inheritancedghts from or throughnatuml parents 2) Equitableadoption

t2 ').4

t

Childrenbomout of wedlock Cryogenically-preservedsperm .. Transfersto minors

e.

Advancements

t)

d.

l3

t4 l5

B. INTESTATTSUCCFSSORS: ANCESTORSAND COLLATERAT,S . . . . . . . t6 l.

HalfBloods

2.

Escheat

C. BARSTO SUCCESSION 1.

2.

lr,

vi - Wills

l6 16 l6

Misconduct

16

a.

Killing decedent

b. c.

Adultery Deseftion

l6

t1 ).'l

Transferof Interestin Decedent'sEstate

t7

a. b. c.

Releaseofexpectancy Tnnsfer of expectancy Disclaimer

17

l)

17

Disclaimerupheld

t't t1

CAPACITYAND WILL CONTESTS

t9

A.

MENTALCAPACITY

19

l. 2. 3.

l9 I9 l9

Why RequircMentalCapacity? Testof MenralCapacity InsaneDelusion

a. b.

19 delusions aboutmen .. -lnsane facts . . . . 20 Insanedelusionresultinefrom irrationalbeliefin nonexistent

B, TJNDUEIMLUENCE l.

Subjeclive Test

2l .........

2l

2. Requirement ot erootsnowrng suusti*,ion oinpiurroi 3. 4. )_

T e sl a me n l a ryD i sp o si..... tion 2l Relationship 22 UndueInfluenceArisingout of Attomey-Client UndueInfluencea Questionof FactwhereTestatorIs EasilySwayed. . . . . . 23 No-contest Clauses

24

C. FRAUD l.

u

Definition a, b.

Fruudin the execution Fraudin the inducement

A

24

Constuctive Trust ImDosedWhercTestatorPreventedFrcm ExecutingWill

Iv.

24

EXECUTION: FORMSAND FORMALITIES

26

A. EXECUTION

26

I.

wills Attested a. b.

2.

27

Competency of Witnesses a. b.

3. 4. 5. 6. 7. 8. 9.

26

Requirements of dueexecution Requirement thatbothwitnesses be present

Re co mme n dMe e d th o do f Executing a W ill ........ Se l f-ko vi n g A ffi d a vi ...... t Sa fe g u a rd ianWi g l l ....... of a Will Mistakein Execution Co n d i ti o nWi a l l l s ......... Wi l l s Sta tu to ry Ho l o g ra p hWi ic lls. . . . . . . a. b. c.

27 27

Interested witnesses Requirement of disinterestedness

wills Self-proved Testamentaryprovisionsnot in handwritingof testator Infomal will

......... . ..... ....... ..-... ........ ....... .........30

28 28 29 29 30 30 30

Wills - vii

B.

REVOCATIONOF WILLS

33

l. 2. 3.

33 33 34

MethodsofRevocation ProbateofLost or Destroyed Wills Revocation by Writingor PhysicalAct a. b. c.

4.

5.

a. b.

Prcsumption against intestacy Doctrineapplicable wherelaterwill revokedundermistakenbelief thatdoingsoreinstates prior will

c.

Revival

38

1) Commonlaw 2) Modemlaw

38 38

viii - Wills

......

36

Revocation by Operationof Law:Changein FamilyCircumstances

39

a.

Marriage

39

l) 2)

39

Stateswithoutstatutes Stateswith statutes

Divorce

39 39

COMPONENTSOFA WILL

39

l. 2. 3.

Integrationof Wills Republication by Codicil Incorpontionby Reference

39 39 40

a. b.

40

4.

D,

34 35 35

Dependent RelativeRevocation andRevival

b.

c.

Presumption will destroyed.. .. .. Attemptedrevocationby writing on paperuponwhichwill is wdtten Partialrevocationby physicalact

Notebookincorporatedby reference Validationof inoperative will by holographic codicil

4l

ActsoflndependentSignificance

42

CONTRACTSRELATING TO wlLLS

42

I. 2. 3.

Contractsto Make a Will Conrracts Not to Revokea Will JointWills

43 43 43

a.

43

Electivesharein conflictwith will conracr

V,

WILL SUBSTITUTES

4S

A. CONTRACTSWITHPAYABLE.ON-DEATH PROVISIONS

15

l.

Life Insurance

2.

NonleslamenlaryTransfersat Deatt

3. 4. 5.

Successor Beneficiarynot Pemittedin Life Insurance Contact Investment ClubProceeds ChangeofBeneficiaryof Life Insurance Policyby Will

45

46

B. JOINT TENANCYAND MULTIPLE-PARTYBANK ACCOT'NTS l. 2. 3.

c.

48

TypesofAccounts. . . . . . . . JointBankAccount:LackofDonativelntent ... StockCertificates Heldin JointTenancy. . . . . . .

48 48 49

JOINT TENANCIES IN LAND

5t,

D. R EV O C A B L E T R U S T ............S . 1. 2.

Intoduction Retentionof Controlby Settlor a. b. c.

3.

5.

..........

UniformTestamentary Additions to TrustsAct . . . ...... Effectof divorceon validityof dispositions to formerspouse m a d eb y re vo ca bilnete rvi vostr ust .........

UseofRevocable Trustsin Estate Planning a. b.

50 50

Creationof validintervivostrustnotwithstanding control retainedby settlorfuustee. . . Intervivostrustrevoked.... Creditorsmayrcachtrustassets overwhichthe settlorhadcontrol at thetime of his death . . . . .

"Pour-Over" Testamentary intoanInterVivosTrust a. b.

4.

50

Co n se q u e n d ce u sri n gl i feof settlor Co n se q u e n a ce tdse a tho f settlor

50 52 53 54 54 54

.......

56

......... ...........

)o 56

D w a b l eP o w eor f A tto me y....

...............

57

a.

...............

5' l

............... ............. ..............

58 58 58

A g e n t's a cti o nu p h e l d. . . .

6. H e a l th -C aDrei re cti ve ........ s '1. T e r mi n a ti o nf Me d i caTl re a tment 8 . D i s po si ti oonf D e ce d e n B t'so d y .

Wills - ix

vr.

WILLS: CONSTRUCTIONPROBLEMS A.

59

ADMISSION OF EXTRTNSTCEVIDENCE: AMBIGUTTI

MJSTAKE, AN'DOMtssroN.. l.

59

LatenlAmbigur!ies

59 59 59

2. 3.

PatentAmbiguities No ExtrinsicEvidenceto Corect Drafter,sMistake Failurero ComplywjrhSlalutory RequiremenLs 5. E_xtrinsic EvidenceAdrnissibleto Ascertarn Circumstances U n d e rWh i ch WiWasMade ll ........ 6. Correcting MistaLes a.

60 60 62

Extrinsicevidenceofscrivener'serroraclmlssible to ascertalntestator'strue intent

7.

Liability for DraftingAmbiguousWill

B. DEATH OF BENEFICIARYBEFORE DEATH

TESTATOR:LAPSE

OF 64

1 . LIPCSection2-601 2. ttP CS e cti o2n-6 0 5.. .. .. .. .. .. .. .. 3 . An li- lAh ca s' "h ,,- . a.

Anti-lapsestatutedoesnot apply

64

4.

RuleofConstructionthat..And,,BeReadas.,Or,,to Effectuate

5

RuleofConsrucrionHeldInapplicable

7.

cift ro ClassandNamedIndividualWhopreaeceases thetestaior

C. CIIAiIGES IN PROPERTYAFTEREXECUTION

SPECIFICVS. GENERALDE\'ISES r.

Aoempuon

a. 2.

3.

Ademption by extinction.. , .. ..

Abatement a.

IJP Cse cl i o 2 n -6 0 8 ............

Exoneration ofLiens a.

x - Wills

64 64 64

IJPCsection2-609:nonexoneration

65 66

OF WILL: 68 68 69 69 69 69 69

4.

a. 5. VII.

70

Satisfaction

10

IIPC section2-607:ademptionby satisfaction

10

StockSplits

RESTRICTIONS ON THE POWEROF DISPOSITION: PROTECTIONOF TIIE T'AMILY

7l

A. RIGHTS OF THE SURVIVINGSPOUSE

7l '71

L. Introductionto MaritalPropertySystems a.

propertysystem Separate l)

b.

Prctection aeainst disinheritance

11. ......

'11

Communitypropenysystem

'tl

to suppon 2. Rightsof SunivingSpouse a. b. c. d. e. f.

3.

7l

Socialsecurity p e n si opnl a n s ..... P ri va te Homestead propenyset-aside. Personal F a mi l ya l l o w a n ce....... Do w e ra n dcu rte sy......

'11 7l '11 '72

I) Propenysubjeclto dower . . . 2) T e sra me n ta e ffe ry ct....... 3) Presentstatusof dower andcurtesy

'12 12 72

12 '12

Rightsof SurvivingSpouseto a ShareofDecedent'sPropelty

'12

a. b. c. d.

72 73 14

f.

a.

Electiveshareandits rationale Election requiredfor public assistance No forced sharein homosexualrelationship . . . . . . Survivingspouse's statutoryshareof assets of intervivos trustcreatedby deceased spouse . share.... .. UPCrighttoelective Sourceof elecliveshare Otherstatures l)

h.

16 '76 '76

Inter vivos transferincludedin computationof electiveshare . . . . . 17

Waiver. . . l)

Wa i ve ru p h e l d

18 ..........

78 Wills - xi

4.

Rightsof SuryivingSpousein Communityproperry a. b. c.

5.

MigratingCouplesandMultistatepropertyHoldings b. c.

6.

Introduction Classification of assets ascommunityor separate property Pullinglhe sur\ivor lo anelection

Stateswithoutstatutes Statutorysolurions Spouseomitted from premaritalwill

80 80 80

ChildBom After Will but Befo.eCodicil

2. No MalpracriceSuitWithourprioriry . . 3. Greatgrandchildren Not p."r"r-itt"dt"j;;

. .. . .. . .

VUI. TRUSTS:CREATION,TypES,AND CHARACTERISTTCS A. INTRODUCTION l.

2. 3. 5. 6.

Background The Settlor The Trustee TheBeneficiaries Use of Trustsin Estateplanning . . A TrustComparcdwith a LegalLife Estare

81 8l 82 82

u 84 84 84 84 84 84 84

B. CREATIONOFA TRUST

84

1. Intentto Create a Trust

84

a. b.

c. d. e.

2.

Neednot expressly directthatsubjectmatterbe heldin trust CustodianshipUnderUniform Tmnsfelsto Minom Act

Precatorylanguageand equitablecharges No intentJonto imposerrusreeduries L .

Constnrctive delivery

Necessityof Tnistproperty a.

xii - Wills

. . . . . . . . . .7g

80

B. RIGHTS OF ISSUEOMITTED FROM THE WILL l.

79 79 79

Migntion ftom separatepropety stateto cornmunitypropefiy state . . . .lg Migration from communityprcpertystateto separatepropertystate . . . g0 Uniform Dispositionof Co.nmunitypropefy Rights at Oeathlct . . . . . S0

SpouseOmiuedfrom premariralWill a. b. c.

. . . . . . . . . .tg

Promisero makegrftsin thefuture

84 85 86 86 87 8'I

87

b.

Resultingandconstructivetrusts

88

Resultingtust fust ... Constructive

88 88

l) 2) c,

3.

4.

89

1) Trustbasedon intercstnot in existence 2) Gift madeof propertynot in existenceat time of gift

89 90 9L

a.

Identificationofbeneficiaries

b.

Honorarytusts . . . . .

9l 92

Oral Inter Vivos Trustsof Land

93

Oral promiseto rcconveyland held sufficient to imposea constructivetrust

94 94

Trustsnot sufficiently defined

95

D I SC R D T I ON A R Y T R U S T.,....,.. S 1 . T r u s t e €D'su ty

D.

93

Oral Tmsts for Disposition at Death a.

c,

Trust distinguishedfrom debt

Necessityof Trust Beneficiaries

a. 5.

...

S P E N D T H RIF T R U S T S.......,..... l. 2.

lmmunityfromAlimonyandChildSupport. . . . . . Creditorc'Rights in SupportTrustsandDiscretionaryTrusts a. b.

3.

M e d i c aiTdru sts a.

97 99

........

........

.

99 99

"

99

.....

100 100

trusts. . ... .... Discretionary 1 ) E xce p ti o n s

b. c.

E.

97

.......' ........

Supporttusts Discretionaryfusts . . . . . . . . ..l .. .. .. 1 ) IR Su n su cce ssfu

95

......

T h ird -p e n ofu n sts . . . . . . . . . . C a re fudl ra fti n g

' ..100 ...... .. ........

M O D I F I C AT IONA N D T E R MIN A TIONOF TRUSTS......."........."...

.

.l0O 100 101

Wills - xiii

Modificationof Distributiveprovisions

l.

a.

Trustmodification denied.......

101

2. Terminationof Trusts a, b.

rx.

101

101

Remainingmaterialpwpose.. .. Trustsremaining indestructible beyondtheperpetuities period........

POWERSOFAPPOINTMENT:BUILDING FLEXIBILITY INTO THE ESTATEPLAN

102 103

r04 104

l.

Typesof Powers a.

2. r. 4.

r04

Generalandspecialpowers

104

propenyBelongto theDonororthe Doestie Appointjve Donee?. . . .. . .. . r04 ( reolrors Krghtlo propenySubject to a powerofAppointrnenr. . . . . . . . . . 104 powers TaxReasons for Creating 105

B. CREATIONOFAPOWER OFAPPOINTMENT ......... l. 2.

Intentto Createa power . . . . . . . P o w e rsto co n su ."............... a. b.

c.

Inconsistent clausesin will . T a xa ti oonf p o w " t,t;.";;;;

:...... :...... :.. :...........

Conftactto Exercisea powerof Appornrmenr. . . . .

D. EXERCISE OFA POWER OF APPOINTMENT . . . .. . . . . . l.

Exerciseby Residuary Clausein Donee,sWill ... a.

Partialreleaseof generalpowerof appointment. .

2. Limitationson Exerciseof a Specialpower . . . . . a. b.

3. 4.

xiv - Wills

t05 : 105

105

.. .. .. . .. :. .. ... ... .. .. ... :.. .. : 106

RELEASE OFA POWER OFAPPOINTMENT . . . .. . . . .. l.

105

106 106 IM to1

r08 109

Creationof limited interest . . . 109 E xcl u si ve a n d n o n " *"lur i;"po;; . .. .. . :. .. ... .. . .. .. .. .... .. . 109 Fra u d o na sp e ci a l p o w e........... r ' 109 IneffectiveEierciseofthe power _ . 11 0

a. b.

........ A l l o ca ti oonf a sse ts C a p tu re

...,.,..

...110 .... . 110 110

E. FAILURETO EXERCISEA POWEROFAPPOINTMENT .............. l.

x.

Dispositionof PropertyWhen SpecialPowerofAppointment . . . . . . . . , . . . . . . . 110 Is Not Exercised

FUTURE INTERESTS! DISPOSITM PROVISIONS OF TIIE TRUST INSTRUMENT . . . . . . . . , . , . , . A. T N T R O DU C T ION,.........,.. B.

CLASSITICATION OF FT]TTJREINTER.DSTS l.

i n th eT ra n sfer or F u t ueIn te re sts a. b. c.

2.

3.

R e ve rsi o n r P o ssi b i l iotyf re ve rte ...... R i g h to fe n try

. . . . . . . . . . . . ll2 .. . ll2

...............

. . . . . . . II2 ll2

...............

,,.... 112 .......,ll2 ...............ll2 .ll2

i n T ra n sfe re es F u t ure In te re sts

..............

a. b.

................ ......,.,,...

ll2 ll2

...........

il3

R e ma i n d e rs ....... E xe cu to ry i n te rcsts

Remainders ....... of Contingent Destructibility

C. CONSTRUCTIONAND DRAFTING PROBLEMS . . . . . . .. . . . . . .. .. . . . . I13 1

d te re s ts Pr e fe re nfo cer V e steIn a. b.

n dta xa tion... T mn sfe ra b i lai ty A cce l e ra ti o i nntop o sse ssion l)

c.

....... R e q u i d nsu g rvi vato l ti meofpossession 1) 2) 3) 4)

2.

R e n u n ci a tiva o nl i d .......

Gi ftso fi n co me

113

............113 ........... 113 .....' .....113 ..,,,,.,

.......... P re se nve t steidn te rest.... asof thedateof deathof thetestator.......... Heirsdetermined Cornmonlaw rule whercbequestis to be paid at certainage . . . . . . Controve$ialchangein UPCsection2-101 . , . . . . . . . . . . . . . . . . .

G i f tsto C l a sse s a.

...............

114 ll4 ll5 116 I 16

.....,117 ............

ll' 7

Wills - xv

l) b.

Constuingclassgift to testator'sgrandchildren_.

Gifts to childrenor issue. . .

118

1) Meaningof'thildren,' and..issue" 2) UPCSection 2-705... .. ..

118 118

a) 3) c.

d.

xr.

Adoptedadult not consideredan ,.heir'

Giftsoveron deathwithoutissue

119 119

Giftsto heirs. .. .. .. .

ll9

l) 2) 3)

119

Determiningidentiry of heirs The docrrineof worthier tirle The rlulein SheUeybCase . , .

r20 121

Theruleofconvenience

121

1) Classcloses whenall existing members rcachstated age ........

t2l

DURATION OF TRUSTS: TIIE RULE AGAINST PERPETUITTES . . . . . . . . . . 123 A. T N T R OD U C T ION.,........... l. 2. 3. 4. B.

Development of theRule . . . . PoliciesUnderlyingtheRule WhentheLivesin BeingAre Ascertained. . . . . . . T h eV a l i d a ri nLgi fe .......

t2l

123 123

r23 123

THE REQUREMENT OF NO POSSIBILITY OF REMOTE VESTING: TIIE WHAT-MIGHT.HAPPEN RULE . . . . . . , . .

123

1. 2.

The "Fertile Octogenarian" T h e " U n b o mWi d o w..... "

123 124

a. b. c.

Example Barcpossibilityis sufficient S p l i tco n ti n g e n ci es ......

124 t24 125

C. APPLICATION OF TIIE RULE TO CLASS GIFTS

t26

1.

2. xvi - Wills

117

The BasicRule:All or Norhing

126

a. b.

126 t27

Classgifts Consequences of violating therule

Gifts to Subclasses

t2"t

3. 4. D.

not invalidated. . to othersubclasses a. Remainders

127

SpecificSumto EachClassMember DoesVest= Vest= Vest?....

129 r29

APPLICATION OF TIIE RULE TO POWERS OF APPOINTMENT L

Exercisable GeneralPowersPresently a. b.

2.

2. 3.

129 130 130

"

131

.,... ' ...........

l3l

....

I32

.....

Doctrine" The "Wait-and-See a.

129 ' 129

" '

.""""

FI, PERPETTJITIESREFORM 1.

129

...."" .......""

powerofrcvocation Ruleappliedto unconditional

AttomeyLiabilityfor violatingRule

129

"'

"""""

V a l i d i ty o f p o w e r . ... . va l i d i tyo f e xe rci se.....

E . SA V T N GC L A U S E......'....... 1.

129

.. Validityofpower .... . . " general power of a by exercise created Validity of interests presently exercisable """

taxtrap" . . l) The"Delaware docrine .... 2) Thesecond-look c.

129

""

PowersandSpecialPowers GeneralTestamentary a. b.

. . . . . . 129

132

""

Statutoryperiod apPliesto nonvestedinterestcrcatedpursuant to power of apPointment. . . . . . .

" 132

(1986,asamended The UniformStatutoryRuleAgainstPerpetuities 133 . . in 1990).. ...... . . .134 Reformation Cy Prcsor Equitable

G. TIIE RULE AGAINST SUSPENSIONOF THE POWER OF AL I EN A T ION N : E W Y OR K L A W ' ...."""""" l. 2. xII .

Rule .. . ofthe Suspension A Brief Explanation Trusts . . . . . . Ruleto StatutorySpendthrift Applicationof theSuspension

C H AR T T A B L T E R U S T S......... A. I N T R O D U C T ION......,......

134 134 134

. . . . . . . . . . . . . . . . . . . . . 135 ,.................

135

Wills - xvii

l

Creationof a ChadtableTrust

B. MODIFICATIONOF CHARITABLETRUSTS:CY PRES ...'.........' l. 2.

GenemlCharitablePurpose . . GreatIncreasein AvailableFunds

C. STJPER\'ISION OF CIIARITABLE TRUSTS . . ' . . . . . . . ' l XIII.

Donor HasNo Standing . . . . . . . . .

136 136 t3'1 138 138

TRUSTADMINISTRATION: TIIE FIDUCIARY OBLIGATION . .. .. . ... .. .. . l4l A.

GENERAL FIDUCIARY DIIIIES AND LIABILITIES l.

Duty of Loyalty: Hereinof Self-Dealing . . . . . . . a. b. c. d.

2.

Trustee'swife actsaspurchasel Conflictof interest...... Co-tustees Insidertrading

Fiduciary DutiesRelatingto Careof the Trust Property a. b. c, d.

Duty to collect andprotecttlust property Duty to earmarktrust prop9rty . . . . Duty not to mingle trust furds with trustee'sown . . . . . . Duty not to delegate l)

e. 3.

4. 5. 6. B.

Delegationof investmentPower

Liability for contractsandtorts

Duty of Impafiiality: Allocation to IncomeandPdncipal a.

Trustee'sduty of impartiality

Full DisclosureRequired . . . Constuctive Fraud Changing Trustees......

POWERS OF TIIE TRUSTEE 1 2.

GeneralManagerialPowers . . . of Investment.... Powers a, b.

r\iii - Wills

135

Duty to diveGify gainsandlosses ..... Balancing

t4l 141 l4l 141

143 143 143 143

r43 t43 t43 t43 t44 t44 r44 146 147 148 148 148 148 148 149

C.

ERISA

149

XIV. WEALTH TRANSFERTAXATION: TAX PLANNING

150

A . IN TR ODU C TIO N .............

150

1 . A B r i e fH i sto ryo f th eF e d e raEstate l Tax ....... 2 . Es t ate a n dIn h e d ta n ce T a xeD s i stinguished ...... a. b. 3. 4.

.......... ..........

E sta te ta xco mp u ta ti o..... n In h e ri ta n ta cexco mp u ta tion

T h eUn i fi e dF e d e raElsta te a n dGiftTax ....... L i a b il i tyfo r P a yme notfT a xe s a. b.

P a yme notf g i ftta x P a yme notf e sta te ta x .....

B. T I I E I ' E D E R A LGIF T T A X ....,.,... 1 . N a t ure o f a T a xa b lGi e ft .... a. b. 2.

3.

150 150

......... ............

150 150

...,........

151

.. . .. ... .. ......

GiftsBetween Spouses andfromOneSpouse to a ThirdPerson.......... ...........,.....,.

Introduction The GrossEstate:PropedyPassingby Will or Intestacy a. b.

3.

........... ................

...,.,,

Transfer for thebenefitof minor Giftsof a present intercst in property

C. T I M F E D E R A L E S T A T E TAX 1. 2.

150 150

...,....... ............

T h eA n n u aEl xcl u si o n.... a. b,

............. .............

...............

D i scre ti o n apry o w eirn tru stee I n co meta xb a si s

Section2033:Propertyownedat death Section2034:Doweror curtesy

150 150

.. .. .. . .....

151 l5l 152 152 152 152 153 154 154 154 154 154

The GrossEstate:NonprobateProperty

154

a.

154

Section2040:Jointtenancy 1) 2)

Joint tenancybetweenpersonsotherthan h u sb a n d a n d w i fe ..... Joint tenancyandtenancyby the entirety

154

between husband and wife

154

Wills - xix

b. c. 4.

TheGrossEstate:LifetimeTransfe6with RishtsRetained

b. c. 5. 6.

7.

Section2039:Employe€deathbenefits Section2042:Life insurance

155 155 155

Section2036:Transfeftwith life estateor powerof contol retained

155

1)

No bona fide sale

2)

Requirement of anascertainable standard

155 156

Section2038:Revocable transfers Section2037:Transfe6with rcvercionary interestretained

t5'7 157

The GrcssEstate:Tmnsferu WithinThreeyearsofDeath TheGrossEstate:PowersofAppointmentGivenDecedentby Another

157 157

a. b.

157 158

Cohfort limitedby ascertainable standard S€quentialtusts

TheMaritalDeduction .... Inlroduclion b.

159

Interests thatqualifyfor thededuction

159 159

l) 2)

160 161

Failureto qualifyfor thededucrion Refomationallowed

t62 8 . T h eC h a .i ta bD l ee d u ction ....... 9. Executor'sElections:post-Death Taxplanning . . . a. b.

Valuationof estateassets Sections2053and2054deductions

162 162 162 162

D.

THE GENERATION.SKIPPING TAX

163

E.

STATE WEALTH TRANSFER TAXES

163

TABLE OF CASES

xx - Wills

165

I. A FOLINDATIONI'OR ESTATEPLANMNG: SOCIETY'S CONTROLOF INHERITANCE A. PROLOGUE Thematerialin thisoutlinecoverswills, ffusts,futureinterests, andestateand tust administration. Eachof these topicsrclates tothesocialprocessby which privatewealthis aansmittedandallocated, andis criticalto a comprehensive understanding of theestateplanningprocess. B, INIIERITANCE AND ITS LIMITATIONS l.

T. Jefferson. "The earthbelongsin usuftuctto the living; the deadhave neitherpowersnor rightsoverit."

,

2 W. Blackstone, Commentaries. "The permanentdght of property, vestedin the ancestorhimself, was b]ot a'l natuful, but merely a ciyi, dght." "Wills . . . testaments, dghtsof inheritancel,] andsuccessions are all . . . creatwesof the civil or municipallaws."

a

Suprcme Court. In lrying Trust Co. u Day, 314 U.S. 556 (\942), the person'sprcpSuFemeCowt heldthatsuccession dghtsto a deceased erty arecreatedby statute.The Constitutiondoesnot forbid statelegislatwes from limiting or abolishingtestamentarydispositionover property.

4.

Thking Property Without Just Compensation-Hodel v. Irving,481 U.S.7M (1987). a,

Hodel v kving

Facts.Pursuant to an 1889actof Congess,tractsof landreserved for theSiouxIndianNationwereallottedto individual Sioux,though heldin trustby theUnitedStates,andwereallowedto passto the generations allottees'heiN. Succeeding of Siouxdividedthei predecesso$'tmctsinto increasinglytiny undividedfractionalinterests,which oftenyieldedpenniesin annualrent.Congressresponded by enactingsection207 of the IndianLand Consolidation Act of 1983,which providedthat any undividedftactional interestreprcsentinglessthan2% ofa fact's acrcage, andwhichhadeamedless than $100 in the precedingyear,would escheatto the tribe rather than descendby intestacyor devise.ThreeSioux who would have inheritedsuchinterestsbut for the operationof section207 filed an action for injunctive anddeclaratoryrelief in federalcourt, claiming that section207violatedtheFifth Amendmentby taking private propenywithoutjust compensation. The Distdct Court foundthat the heirs (Ps)did not haveany vested propertyinterestwhichwouldbeentitledto constitutional protec-

W ills- l

tlon,andaccordingly deniedreliel TheEighthCircuitrevened,holdingthat: (i) Pshadstandingto assedthedecedents' right to contrclthedispositionof theirpropefty,and(ii) therakingof thatright withoutcompensation violated theFifth Amendment. b.

Issue.Doesa federalstatutebardnginheritance oflndianlandallotments and providing for escheatto the tribe effect a taking of the decedents'property withoutjustcompensation in violationofthe Fifti Amendment? Held. Yes.Judgmentaffirmed.

2 - Wills

I)

The fact that section207 hasdeprivedthosetribal membersof fractional intercststhattheywouldotherwisehaveinheritedis sufficientiniury in fact to satrsfythecaseor conlrovers)requiremenl of Arlicle lll of rhe UnitedStatesConstitution.

2)

Theoriginalversionofsection207oftheIndianLandConsolidation Act of 1983effectsa takingof picpertywirhoutjustcompensation in violation of theFifth Amendment. It entirclyabolishes bothtle descentand deviseof thesepropertyintercstsevenwhenthe passingof the prcperty to an heir might result in the consolidationof property.

3)

Thegovemment hasconsiderable latitude,undertheJustComDensation Clauseo[ lhe FifthAmendment. in regularing propenyrighrsrn ways that may adve$ely affect the owne$.

4)

Thereis no setformulafor determiningwhenjustice andfaimessrequire thateconomicinjuriescausedby publicactionbe compensated by rhe govemment,ratherthanremainingdispropofiionatelyconcentratedon a few persons. Instead,thequestionwhethersuchactionrcsults in atakins of propenyunderlheFifth Amendment is examinedby engagingrn esl sentially ad hoc, factualinquiries in which sevemlfactors-such asthe economicimpactof theregulation,its interference with reasonable in_ vestrnent-backed expectations, and the characterof the govemmental action-havepanicularsignificance.

5)

Although the stateandfederalgovemmentshavebroadauthorityto adJusttherulesgovemingthedescentanddeviseof prcpertywithoutimplicatingthe guarantees of the JustCompensation Clauseof the Fifth Amendment, thecompleteabolitionof boththedescentanddeviseof a particularclassof propertymay constitutea takingwithin the meaning of thatclause.Underthesefacts,bothdescentanddeviseareabolished evenwherethegovemmental puposesoughtto beadvanced, consolida_ tion of ownershipof Indianlands,doesnot conflictwith thefurtherde_ scentof th€ property.

5.

Partial Restraintson Marriage Permissible-Shapirav, Union National Bank, 39 ohio Misc.28,315N.E.2d825(1974).

Shapira v. Union NationalBank

DavidShapira, M.D., bequeathed a Facts.Thewill of thedecedent, portionof theresidueofhis estateto his son,DanielJacobShapira (P), plovided that he is mardedto a Jewishgirl, both of whoseparents arc Jewish,at the time of the testator'sdeath.If after seven yearsfrom the testatot'sdeath,P is unmardedor maried to a nonJewishgirl, thenhis sharcshouldgo to the Stateof Israel.P,who is 2l yea$ old andunmarried,brings a petition in the Court of Common Pleasfor a declaratoryjudgment, arguingthat the condition is unconstitutional, contraryto publicpolicy, uponhis inheritance because of its unrcasonableness. andunenforceable b.

Issues, 1) Is a partialrestrainton marriagein a will a violationof the right to marry protectedby the Fouteenth Amendment? 2)

c.

Is a partial restnint on marriagethat imposesonly reasonable validandnot conharyto publicpolicy? restrictions

Held. l) No. 2) Yes.Petitiondenied. l)

P is cofiect that the right to malry is constitutionallyprotected from Estrictive statelegislativeaction.Here,however,thecourt is not askedto enforceany rcstdctionon P's constitutional dght to marry;rather,thecout is askedto enforcethetestator's Theright to receiveproprestrictionon his son'sinheritance. erly is a creaturcof the law and is not a constitutionally guaranteed right. Hence,upholdingthepartialrcstraintimposed by thetestatorwill not violatetheConstitution.

2)

Nor doesa partialestraint on marriageviolatepublic policy.If the condition werc that the b€neficiarynot marry anyone,the restraintwouldbegeneralor total andwouldbeheldconmry to public policy.A partial restnint on mardagethat imposesoflly reasonable restrictionsis valid,andnot contraryto publicpolicy. Th€ weightof authodtyin the UnitedStatesis that gifts conditionedon thebeneficiary'smarying within apadicularreligious It is the conclusionof this court classor faith are reasonable. contained in thetestator'swill arereasonable thattheconditions restnctionson mardaeeandarevalid.

C, TIIE PROBATE PROCESS L.

Intmduction and Tbrminology. The generalstepsin the prcbateprocessare(i) openingtheestateby offeringthe will for probate,(ii) colWills - 3

l e c li n g l h e d e ce d e n r'sa ssets.{ iii) payingan} fam ilyallowanceandsetti ngas i de andlaxblll(' propefly. personat tiv I pa)ingcreditors'clajms andexempt homes'tead a oe€ree and(v) distributingthe assetsof theestateuponthe probatecourt enteflng ofdistribution. a.

b.

4 - Wills

namedin Executor'administrator.Theexecutorisa personalrepresentative a will. The administratoris a perconalrcprcsentativeappointedby the coul't' Therearevarioustypesof administratorc. 1)

when is a personoriginallyappointed Administrator.An administrator diesintestate. thedecedent

2)

Administrator with the will annexed(administratorc't'a')' An administratorwith the will annexed(administratolc t a ) ls a personapdiestestatebut no executoris namedin the pointedwhenthedecedent will.

3)

Administrator of goodsnot administered(administertdd'b'n')' An administratorof goodsnot administered(administeredd b n ) is a person appointedto succeedan original administrator'

4)

An administatorc t a d-bn is a pelsonapAdministratorc.t.a.d.b.n.. anexecutoror anadministatorc t a pointedto succeed

5)

Specialadministrator. A specialadministator is a personappointedto pieservethe assetspendingqualification of the regularadministrator'

estatesandtrusts Oth€r terminology,The teminologyusedin decedents' originatedprimarilyin England,wherecommonlaw courtshadjurisdiction couts hadj urisdictionoverpersonalp'opovJr realpropertyandecclesiastical a distinctterminologythathascarriedoverto this erty.Eachgroupdeveloped day.Somekeytermsaredefinedbelow' l)

is theprocessof becomingbeneficiallyentitled Succession Succession. lo thepropenyof a decedent

2)

occu6 when the decedent Intestatesuccession Intestatesuccession. leavesno valid will, sothathis propertypassesto thoseof his relatives namedin a statestatute(calledtheintestatelaw)'

3)

Statuteof descent.A statuteof descentis an intestatelaw thatapplies only to real property.Intestatereal propeftyis saidto Passby descent

4)

Statuteof distribution.A statuteof distdbutionis anintestatelaw that appliesonly to personalproperty.Intestatepersonalpropeftyis saidto passby distribution.

5)

Statute of descentand distribution. A statuteof descentanddistribulaw thatappliesto bothrealandpersonalproperty' tion is an intestate

6)

Heir.Apersonentitledby statuteto thelandofthe intestateis calledtheheir or heirat law. a)

Expectantheir.An expectant heiris onewhoexpectsto takeby inheri!ance,

b)

Prospectiveheir.A prospective heiris onewho mayinheritbut maybe €xcluded. This categoryincludesheirspresumptive andheirsapparent. (1) Heir prcsumptive.An heir presumptive is a personwho will ir. herit if the potentialintestatediesimmediately,but who will be excludedifrelativescloserin relationship arebom. (2) Heir apparenl An heir apparentis one who is certainto inhenr unless excluded by a validwill.

7)

Nextofkin (or distributee).Thenextof kin, or distributee, is rharperson(or persons)who is, or may be,entitledto the personalpropertyof an intestate. This perconis saidto ir,rreritthepersonalproperty.

8)

Ascendantor ancestor.An ascendant or ancestoris a penon relatedto an intestate or to a claimantto an intestate sharein theascending linealline.

9)

Descendant. A descendant is a personrelatedto an intestateor to a claimanr to an intestatesharein thedescending linealline.

10) Collateral.A collateralis a relativewho tracesrelationshipto an intestate tlrough a commonancestor but who is not in his linealline of ascentor descenl, a)

Collateralsof the half blood.A collateralof the half bloodis a person relatedto an intestate throughonly onecommonancestor.

1r) Alnnity. Relationshipby marriageis calledaffinity. 12) Consanguinity,Relationship by bloodis calledconsanguinity. 13) Escheat.Propefiyescheats to thestateif no relativesofthe intestare areentitledto inheritance. 14) Will. A wiJl is an expression, eitherwritteno. oral, of a person'sintention concerning the dispositionof propefiyat death.A personwho diesleavinga validwill is saidto diet€stare.

1s)Devise.Adeviseis a clausedirectingthedispositionofrealpropertyin a will, andthepersonwho is namedto taketherealpropenyis calledthedevisee.

r6)

Legacy.Alegacyis a clausein a will directingthedispositionof money.

Wills- 5

17) Bequest.A bequest is a clausein a will dircctingthedispositionof personalpropertyotherthanmoney. 18) Attested, holographic, aDdnuncupativ€ wills. An attestedwill is a will signedby a witness.A holographicwill is a will entirelyin the handwritingof the testator.A nuncupativewill is an oral will. 19) Codicil. A codicil is a testamentaryinstrumentancillary to a will. 20) Probate, Probateis theprocedue by which a transactionallegedto judicially as a valid testamentary be a will is established disposition, andalso appliesto the act of approvingthe will after probate hastakenplace.

2, Is Probate Necessary?Oneof theprimaryfunctionsof the probateprccessis to provide evidenceof transf€r of title to the decedent'sheirs or devisees. Howevet in view of the costsand delaysof probate,one may wish to avoid probateby tansfedng title to propertyduring life. Three commonways of avoidingFobat€ are(i) taking title in joint tenancy,(ii) creatinga trustdudng life, and (iii) designatinga payable-on-death beneficiaryin a life insurance contractor other contract.Statutesin all statespermit heirs to avoid probate wherethe amountof propertyinvolved is small.

3. A Summary of Probat€ Pmcedur€.

4,

a.

Opening probate. Primary or domiciliary judsdiction is found in the jurisdictionwhercthedecedent wasdomiciledat thetime of death.Ancillary adminishationis requiredif the property is located in another jurisdiction. Eachstatehasa detailedstatutoryprocedue for issuanceof letters testarnentaryor letten of administration.The majodty of states rcquirepdor noticeto inleresiedpaniesbeforethe appointmentof a personal rcprcsentativeor Fobate of a will. Under the Unifom Prcbate Code("LIPC"), thercprcsentativealsohasa duty to publish a newspaper noticefor creditoNonceeachweekfor thre€we€ks.

b.

Supervisingthc representative'sactions.The probatecowt supervises the representative'sactionsand approvesthe inventory and appraisal, paymentof debts,family allowance,grantingof optionson real estate, borowing of funds,personalrepresentative's commissions, attomeys' fees,preliminary and final distributions,and discharyeof the personal representatrve.

c.

Closing the estat€.The representativeis under a fiduciary duty to the estateuntil the cout grantsdischarge.

Contest of Wills, a.

6 - Wills

Groundsforcont€st.A will contestposestheissueofwhetherthedocumentofferedfor probateis a valid will. While mostwill contestsinvolve

I

theissuesof testamentary capacityor undueinfluence,a will contestmay alsobe basedon defectiveexecution,revocationof thewill by the testator,lack of testamentaryintent, ftaud, andmistake. D, PROFFSSIONAL RFSPONSIBILITY No lawyer shouldpreparea will unlesshe considershimself competentto do so. 1.

Will BeneficiariesOwed Duty of Care--Simpsonv. Calivas, 139 N.H.l, 650A.2d318(1994). a.

Facts.RobertSimpson,Sr, (T), executed a will &aftedby ChdstopherCalivas@). All realestatewasleftto RobertSimpson,Jr.,(P), exceptfor a life estatein "our homestead locatedat Piscataqua Road," which wasleft to P's stepmother. UponT's death,P andhis stepmotherfiled a petition to determinewhether"homestead"referred to the houseand surounding (limited) acreageor if it referredto the house,over 100 acres,buildings,andthe family businesson Piscataqua Road.The cout admittedextrinsicevidenceshowing the closerelationshipbetweenT and his wife, but did not admit notestakenbyD duringconsultation withT, whichread,"Houseto wife asa life estateremainderto soll . . . remainingland . . . to son. . . ." The courtconstrued the will to providethe stepmother with a life estatein all of thercal property.Two yearslater,P bought out his stepmother's life estatefor $400,000.P broughtthis malpracticeactionin contract,basedon a third-partybeneficiarytheory andnegligence. The trial courtdirecteda verdict,grantedD sumjudgment, mary anddismissed.P appeals.

b.

Issues.

c.

l)

Doesan attomeywho draftsa will owe a duty to the intended beneficiary?

2)

Did thetrial cout elr in rulingthatthefindingsof theprobate cout on thetestator'sintentcollaterallyestoppedP from bringing a malpractice action?

Simpson v.Calivas

H€ld. 1) Yes.2) Yes.Judgmentrcvened andremanded. 1)

A d$fting attomeyowesa duty of careto an intendedbeneficiary,notwithstandinglack of privity, dueto the foreseeability of injury to theintendedbeneficiaryAfter the testator'sdeath, the failure of his testamentaryschemeworks only to deprive his intendedbeneficiades of theintendedbequests.

2)

If a testatorcontractswith an attomeyto draft a will andhas Wills - 7

identified thoseto whom he wisheshis estateto pass,the identified beneficiariesmay enforcethe contact asthird-partybeneficiaries' 3)

Hotz v. Minyard

,

Wherethe termsof the will are ambiguous'extrinsic evidenceof the testator'sintent may be admittedto probateproceedingsto the extentthatit doesnot contradictth€expresstermsof the will While both the probatecourt andthe superiorcowt arecompetentto consider the sameevidenceon the issueof T's intent, that is not dispositiveof an identity of issues.The probatecourt's role is to of thewill in thelanguage intentexpressed ;eterminethetestator's of the testator'sintent are generallyinadmisDirect declarations A findingof actualintgntis notnecessiblein probateproceedings. sary(orissential)to thatj udgment.Evenanexplicit finding of actual intent by a probatecoufi cannotbe the basisof collateralestoppel' Collateralestoppelis only applicableif the finding in the fi$t proceedingwas essentialto the judgment of that cout. [Restatement (Second) Judgments, $271

Fiduciary Duty-Hotz v. Minyard, 304S.C. 225' 4O3S.E.2d634(1991) a.

Facts.JudyMinyard Hotz (P) andToomy Minyard (Dl ) arebrotherand sister.D1 hasbee! in chargeof theftfather'sGreenvillecar dealeNhip since1983, since197?;P workedat theirfather'sAnde$ondealership andwasalso vice-prcsidentandminority shareholderIn 1985,their father signeda contractwith GeneralMoto$ designatingP successorof the Andersondealership. In october of 1984,their father had Dobson (D2), a lawyer and nonpracticingCPA,draft a will, which their father executedone momandD1 Dl wasleft the of his wife, his secretary, ing in the presence Greenvilledealership;otherfamily memberswerc left bequeststotaling $250,000andtheremainderof the estatewasdivided betwe€nDl anda trust for P after the wife's death.Later the sameaftemoon,their father signeda secondwill with all of the sameprovisionsexceptit gavethe real estateon which the Gretnville dealershipwas locatedto Dl outright. He told D2 not to disclosethe existenceof the secondwill and specifically said P should not be told about it. Thrce months later, P D2 showedherthe askedto seethewill andwith herfather'spermission, D2 gaveher the P claims her in detail it with first will anddiscussed impressionshewouldreceivetheAndersondealershiPandsaidshewould shareequally with D1 in their father's estate.D2 claims he explained that their father intendedto provide for P ashe had for Dl when and if shebecamecapableof handlinga dealership.D2 notedthis on the will andP claimedshethoughtthesenoteswere part of the will. About 16 monthslater, the father had a stroke and he is now mentally incompetent.P andD1 agreedthatwhile their fatherwasill, P would

8 - Wills

carc for him andDl would temporarilyrun the Ande$on dealership.Under D 1's direction,theAndersondeale$hipboughtanotherdealership,which was operatingat a loss;Dl alsoformeda holding company,which assumedownershipof thefather's real estateleasedto theAndersondealershipandgreatly incrcased the rent.WhenP tried to retum.Dl refusedto relincuishcontrol andeventuallyfiredher After P consultedanotherattomey,the father executeda codicil rcmoving P andher childrenasbeneficiariesunderhis will andadvisedP of this by letter Later,at a meetingwith theirmother,Dl, andD2, P wastold shewouldbe restoredunderthe will andcould work at the Greenvilledealershipif she droppedher plansfor a lawsuit.P discharged her lawyersand movedto Greenville.Eventually,D I terminat€dher. P suedDl, D2, D2's lawfi.m, andanaccounting firm of whichD2 is a shareholder and director but from which he receivesno remunemtionas an employee.The causesof actionagainstD I for totious interferencewith contact, a sharcholderderivativesuit for wrongful diversionof corporateprofits, and fraud survivedsummaryjudgmentandarenot at issuehere.P appealsvarious causesof actionthat did not survivesummaryjudgment,but the only issue addressedherc is the fial judge's order grantingsummaryjudgment on the causeof action againstD2 for breachof fiduciary duty. b.

Issue.Do material issuesof fact, precludingsummaryjudgment,exist as to whetherD2 oweda fiduciary duty towardB who consultedhim regardingthe termsof herfather'swill? Held. Yes.Judgmentrevelsedin part, affirmedin part. l)

D2's law film had preparedP's tax retumsfor approximately20 yea$ until 1985andhadprepared a will forherwhichshehadsignedonly one weekbeforc sheinquircd aboutthe effect of her father's will. P testified shehadconsulted D2 in 1984or 1985abouta suspected misappropdation of funds at one of the dealershipsand as late as 1986 about her problemswith D 1. A fiduciary relationshipexistswhenonehasa special confidencein anothersothat the latter,in equity andgoodconscience,is boundto act in goodfaith.

2)

An attomey-client relationship is a fiduciaryone.D2 did not owe P a duty to disclosethe existence of the secondwill, but he did owe her a duty to dealwith her in goodfaith andnot activelymisrepresentthe first will.

3)

SinceD2wasactingasanattomeywhenhemetwith B thereis evidence to prcsentajury issuewhetherD2's law firm shouldbeheldvicariously liablefor D2's conduct.

Wills - 9

II. INTESTACY: AN ESTATE PLAN BY DEMULT A.

INTESTATESUCCESSORS: SPOUSEAND DESCENDANTS All stateshavestatutes ofdescentanddistribution thatgovemthedistribution of thepropertyof a personwho diesintestate, or who doesnot makea completedistributionof theestate. l.

Spous€,Undercommonla% a spousewasnot an heil andthe decedents propeftypassedby intestacyto descendants. Today,the survivingspouse takesan intestateshareof the decedent'sestatein all jurisdictions.If the decedentis survivedby a spouseandby descendants (childrcn,gandchii, dren, etc.), in most statesthe spousetakesone-thirdor one-halfof the decedent's estate.If thedecedent is survivedby a spousebut not by descendants or parcnts,in manystatesthe spouseinheritsthe entireestate. a.

Janusv. Tarasewicz

Simultaneousdeath.A pe6on cannottakeasan heir or will beneficiary unlesshe survivesthe decedentfor at leastan instantof time Howevet it is often difficult to determinewhetherthe pe6on sur, vived the decedent(e.g.,whenthe p€rsonandthe decedentarebotn fatally injuredin anaccident).The Unifom SimultaneousDeathAcr (or its Uniform ProbateCodeequivalent,the 120-hoursurvivalrule) providesfor this situation.UndertheAct, wherethe title to properti or the devoluion thereofdependsuponpriority of deathandthereis no sufficientevidencethat the partieshave died otherwisethan si_ multaneously,the propety of eachpersonshallbe disposedof asif hehadsurvived.Ifthere is sufficientevidencethatonepartysuffived the other,evenfor a brief periodof time, theAct doesnot apply. l)

Evidenceofsurvival.-Janusv. Tarasewicz,135lll. App.3d 936,482N.E.2d418(1985). a)

l0 - Wills

judgmentactionaroseout of the Facts.This declaratory deathsof a husbandand wife who died afteringesting Tylenolcapsules lacedwith cyanide.StanleyJanuswas pronounceddeadshortlyafterhe wasadmittedto thehos_ pital.However,TheresaJanus wasplacedon life support systemsfor almosttwo daysbeforebeing pronounced dead.Claimingthattherewasno sufficientevidencethat Theresa Jalussurvivedherhusband, Stanley,s mother(p) broughtthis actionfor theproceeds of Stanley,s $ 100,000 life insuancepolicy,which namedTheresaas the primarybeneficiaryandP asthecontingentbeneficiary.Mef ropolitanLife Insurance Company(D) paidtheproceeds to Tarasewicz (D), who is Theresa'sfatherand the administratorof herestate.The t.ial courtfoundsufficient evidence thatTheresa survivedStanley.p andtheadmin-

contendingthat thereis istratorof Stanley'sestateappealed, not sufficientevidenceto DrovethatbothYictimsdid not suffer brain deathprior to their affival at the hospital. b)

Issue.In a factuallydisputedcaseof whetheronespousesurvivedtheother,is theappellatecourt'sreviewlimited to whether the trial court's finding wasagainstthe manifestweight of the evidence?

c)

Held. Yes.Judgmentaffirmed (l) A civil caseis govemedby the law as it existswhena judgmentis rendered, not whenthe factsunderlyingthe caseoccur. (2) EventhoughIn re lialmer, which setforth standardsfor determiningwhenlegaldeathoccurs,wasdecidedafter the deathsin issue,the trial court properly applied the Fudhermore,applicationof thosestanFialmer standards. dardswasnot unfairsincethetreatingphysicianshadmade pertinentdiagnosesat the time of the deathsandthe parties presentedevidencerelevantunderthe standards. (3) Survivorship is a fact thatmustbe provenby a preponderanceofthe evidenceby thepartywhoseclaim depends on survivorshiP. (4) In caseswhere survivorshipis detemined by the testimony of lay witnesses,the burdenof sufficient evidence maybe metby evidenceof a positivesignof life in one body andthe absenceof any suchsign in the other. (5) In caseswherethedeathptocessis monitoredby medical asto theusualandcustomprofessionals, theirtestimony of medicalpracticearehighly rclevantwhen ary standards a positivesign of life and consideringwhatconstitutes what constitutesa criterion for determiningdeath (6) The appellatecourt'staskon rcview of a factuallydisputedcaseis to determinewhetherthetrial court'sfindThe ing wasagainstthemanifestweightof theevidence. findingherethatthe wife survivedher husbandwasnot againstthemanifestweightofthe evidence.

)

Descendants. a.

Taking by rtpresentation: per stirpes distribution' After the spouse's childrenof the shareis setaside,thechildrenandtheissueof deceased Wills - I I

the decedentwill takethe remainderof a decedent,spmperty.If the decedent is survivedby childrenandgmndchildrcn,the grandchildrenwill takea share of the estateonly if they are childrenof a deceased child of the decedent. Grandchildrentakeonly by reprcsentation.

b.

l)

LIPC rule-per capita at each generation. UpC section 2-106 providesthateachdescen dant thefirst generdtianalkvel u whichliere ate living takers takesone^t share,andthe shareof eachdeceasedperson atthalgenerattonal levelis dividedequallyamongthedescendanti at the nextgenemtional level.

2)

Minority rule---6trict per stirpes.A few statesapplya,,strictperstirpes" rule. Under this rule, the stirpital sharcsarc always determinedai the fi$t generational level,evenif thereareno living takersat thatlevel.

Posthumouschildren. Today,in many states,a child conceiveddurins the faLher's lifetimebuLbomafrerhrsdeathis considered hischild for inheriince pu4)oses. Adopted children. In all statesthat haveenactedstatutesgovemingin}lerit_ ance.ights of adoptedchildren, an adoptedchild has the sameinheritance rights asa naturalchild.

Hall r Vallandingham

l)

Loss of inheritance rights from or through natural parents_Hall v. Vallandingham,75 Md. App. 187,540A.2d 1162(1988). a)

Facts. Earl Vallandinghamdied in 1956,survived bv his widow. Elizaberh. andtheirfour chitdren.Two yearsIateqEiizaberhmarried Jim Killgorc,who adoptedthe childrcn.Earl,sbrother,Will_ iam, died childless,unmaried,andintestate.His soleheils were his surviving brothersand sistersand the children of the brothers and sisteNwho predeceased him. Earl,s four natuml childrcn (ps) allegedthat they, ereentilled tothedistributive shareofrheirnalu_ ral uncleWilliam'sestatethat thef naturalfatherwouldhavere_ ceivedhad he survived.The circuit cowt found that ps were not entided to inherit from the decedentbecauseof their adoDtionbv theirstepfather aflerthedeathof lheir naturalfatherandrheremar_ riageof theirnatumlmother.ps appeal.

b)

Issue.Do children adoptedafter the deathof a natural parentlose all righlsofinheritancefrom or throughLhatnatulalparent?

c)

Held.Yes.Judgment affirmed. (l)

12- Wills

Everystatepossesses thepowerto regulatethemannerby which propertywithin its dominionmay be transmittedby will or

inheritanceandto prescdbewho canreceivethatproperty.The state or mayimposewhateverresticmaydenytheprivilegealtogether tions upon the grantit deemsappropriate. (2) An adoptedchildis entitledto all therightsandprivilegesof a biologicalchild insofarastheadoptiveparcntsareconcemed,but adoption doesnotconferupontheadoptedchildmorerightsandprivileges by a natumlchild.To allow dualinhedtance thanthosepossessed upon an adoptedchild a superiorstatus. would bestow (3) Adoptedchildrenmay not inherit from or throughtheir naturalpartherightsof boththenaturalparents ents.Oncea childis adopted, andtheir relativesareterminated. (4) Becausean adoptedchild hasno right to inheritfrom theestateof a naturalparcntwho diesintestate,it followsthat the samechild may not inheritthroughthe naturalparentby way of representation. 2)

Equitableadoption.Thedoctrineof"equitableadoption,"basedon estoppel or fosterparentjustas pdnciples,allowsa child to inheritftom a stepparent the estoppel is thestepparent's adopted. The basis of thoughthechild hadbeen or foster parent'sconductin failing to perfom the agreementto adopt.The docrine only works againstthe stepparentor fosterparent.Thus,if thereis an unperformedagreementto adoptandthechild diesintestate,the stepparentor fosterparcntdoesnot inherit from the child. a)

No valid adoption-O'Neal v. Wilkes, 263 Ga. 850,439 S.E.2d490 ,1994't.

O'Nealv Wilkes

of (1) Facts.O'Neal(P)filed a petitionin equityseekinga declaration virtualadoption.P wasgivento the Cooksby her auntin 1961-P lived with theCooksandaftertheyweredivorced,continuedto live by with Mr. Cookuntil 1975whenP wasmarried.P waseducated grandchildren. When Mr. CookandheidentifiedP'schildrenashis Wilkes(D), refusedto rccognize Mr. Cookdied,his administrator, interestin Mr. Cook'sestate.A jury foundP hadbeen P's asserted Thecoult grantedajudgmentn.o.v.,findingthat virtuallyadopted. P's auntwaswithoutauthorityto confact for P's adoption.P appeals. (2) Issue,Doesanaunthaveauthorityto contractfor herniece'sadoption if sheis not thelegalguardian? (3) Held. No. Judgmentaffirmed. P andhis con(a) AlthoughP's fatherhadneveracknowledged

Wills- 13

P's auntwasnot sentto the adoptionwasnot necessary, P s "legalguatdian." (b) EventhoughP's aunthadphysicalpossession of P at the P'sauntwasnotgivenlegalcustody timeof theadoption, by courtorder;evenif shehadbeen"legal custodian," underGeorgialaw,a custodian doesnot havetherightto consentto a child'sadoption. (4) Dissent.Equityconsiders thatdonewhichoughtto havebeen to adopta child,so done.Thiscourthasheldthatanagreement as to make the child an heir on the adoptingperson'sdeath, performedon the part of the child, is enforceableupon the deathof the adoptingpersonasto propety undisposedof by the will. P hasfully performedthe allegedcontractover a lifetime.

Hechtv. SuperiorCourt

d.

Children born out of wedlock. In all statestoday,a child bom out of wedlock(i.e.,a nonmarital child)inheritsfromhisnaturalmotherandthemother's kin, andtheycaninheritfrom andthroughthechild.While therulesrespecting inheritancefrom the father vary, most stateshaveadoptedthe provisions in UPC section2-109,whichpermitpatemityto be established by evidence of the parents'subsequent marriage,by the father'sacknowledgment by an adjudicationduringthe father'slifetime,or by clear andconvincingproof after his death.

e.

sperm-.Hechtv. Superior Court, l6 Cal.App. Cryogenically.preserved 4th 836,20 Cal.Rptr.2d275(1993). 1)

Facts. Kane left frozen spermspecimensfor his girlfriend Hecht (P), with whom Kanehad lived for five yearsbeforehis death.He indicated in a letterthathe hopedP wouldhavehis child.He bequeathed only a pieceof landto his two adultchildren,whomhe considered financially secure. Aftet Kane'ssuicide,his childrenfiled sepamte will contests alleging lack of mental capacityand undueinfluence by P The children rcquestedKane'sspecialadministratorto file a petition to orderKane's spermdestroyed.The adminishatoralsofiled petitionsto havethe sperm distributedandfor thecourtto determinewhetheranychildrcnconceived from Kane's spermwould be entitled to disaibution under instructions accompanying Kane'Ewill. P contended that the spelmwaseitheran inter vivos gift or a gift causamortis.The coult ordercdthe spelmdestroyed.P petitionedand the trial court'sorderwas stayedp€ndinga heanng.

2)

Issues. a)

14- Wills

Did Kanehavesufficientright of possession or ownershipof the spermso asto bdng it within thejurisdictionof theprobatecourt?

b)

3)

Doesthe public policy of Califomia prohibit the artificial inseminationof P becausesheis anunmarriedwomanor becauseKaneis deceased?

rcversed. Held. a) Yes.b) No. Judgment a)

Other authoritieshave, in consideringthe legal statusof pre-embryos,determinedthat spermis "gameticmaterial"thatcanbe used At thetime of Kane'sdeath,hehadaninterestin for reproduction. the natureof ownershipto the extentthat he had decisionmaking authority asto the useof his spermfor reproduction.Suchinterest is sufficientto constitutepropertywithin the meaningof the relevantprobatestatute.

b)

This court hasinterprctedstatecivil law to afford both manied and unmarriedwomena vehiclefor obtainingsemenfor artificialinsemination withoutfearthata donormay claimpatemity.The donor wasdeterminedto havea statutoryvehiclefor donatingsemen withoutfearof liability for child support.Thus,we arenot opemtpoliciesrelativeto an ingin a legalvacuumandarefreeto establish Thercis no unmaried woman'saccessto atificial insemination. thatCalifomiapublicpolicyprohibitsP's supportfor theargument artificialinsemination because of herstatus.

c)

with theirargumentthatposthuKane'schildrendo not establish, wouldcreateorphaned child.enwith stateauthomousconception justify interferencewith P's rization, a stateinterestsufficient to andKane'sdesireto conceivea child.Thereis no Califomiastatute thatrevealsan interestthat thatcontainsa publicpolicy statement decisionalauthority. couldjustify infringingon gamete-providen'

Transfersto minors.Minorsdo not havethelegalcapacityto manageproperty.Therc arethreeoptionsavailableto parentsof minomfor propertymancustodianship, and trusteeship. Custodianships and agement:guardianship, will. created only during the lifetime of the creator orby trusteeships maybe A guardianor conservatorwill be appointedby the court if Foperty is left to a minorchild andtheparcntdiesintestate. g.

At commonlaw andin a numberof statestoday,anylifetime Advancements. gift to a childis Fesumedto beanadvancement ofthatchild'sintestateshare to be takeninto accountin distributingthe intestate'spropertyat death.Many govemingadvancements. provide Most of thesestatutes stateshavestafutes canbe madeto any heir andnot just a child or other that an advancement descendant. The mostimportanteffect of thesestatutesis to rcversethe common law presumption:in manystates,a lifetime gift to an heir canbe treated declared assuchin a writingsignedby onlyif (i) expressly asanadvancement assuchin a writing signedby thedonee. thedonor,or (ii) acknowledged

Wills- l5

B, INTESTATESUCCESSORS: AND COLLATERALS ANCESTORS If the intestateis suNivedby descendants, parentsandcollateralsdo not take in anyjurisdiction. If thereareno descendants, propeftyis usutheintestate's ally distributedto theparentsafterdeductingthe spouse's share.In nearlyall ifthe intestate states, is not survivedby a spouse, descendants, or parents, the estatepassesto thedescendants of theintestate'sparents,i.e.,to thedecedent's brothersandsisters(andthedescendants of deceased brcthercandsiste6, per surpes). 1.

Half Bloods.In moststates,a relativeof the half blood (e.8.,a halfbrother)is treatedthe sameasa relativeof the whole blood.

2.

Escheat,If thereare no heifs, the property of the decedentescheatsto the statein all juri sdictions.

C. BARS TO SUCCESSION 1. In re Estate ofMahoney

Misconducl a.

Killing decedent--Inrc Est^tEofMahoney,126Vt.3\,220 A.2d, 4',75(1966\. 1)

Facts.The decedent, HowardMahoney,died intestateafter beingshotto deathby his wife, CharlotteMahoney(P),who wasconvictedof manslaughter andsentenced to prison.The decedentwassuflived only by P andhis parents.Thet ial cowt enteredajudgmentdecreeing theresidueofthe decedent's estateto his parentsin equalshares. P appeals.

2)

Issue.Cana widowconvictedof manslaughter for thedeathof herhusband inheritfrom his estate?

3)

Held.Yes.Judgmentrcvened. a) Thereareth.eeseparate linesof casesdealingwith this issue:(i) somestateshold that legal title passesto the slayerandmayberetainedinspiteof thecdme;(ii) some statesholdthatlegaltitle doesnot passto the slayerbecauseof thepdnciplethatno oneshouldbe permittedto profit by his own wrong;and (iii) somestateshold that legaldtlepasses to theslayerbutequity holdshim to bea constructive trusteefor theheirsor nextof kin of thedecedent. b)

16- Wills

We adoptthe third line of cases.However,in this case, thetrial courtdid not decreetheestateto thewidowand then makeher a constructivetrusteeof the estatefor the benefitof the parents;rather,thecourt below decreedthe

estatedirectly to the parents.We reve$e. The trial court was bound to follow the statutesof descentand distribution and decreethe estateto the widow. c)

2.

Further,juisdiction to imposea constructive tust restswith the chancerycowt, not the probatecourt.Accordingly, we remandthis caseso thatapplicationmay be madeto the chan cery cowt for purposes of imposinga constructive trustand for determinationof whether the death of the husbandwas voluntarymanslaughter or involuntarymanslaughter. Ifno such applicationis made,thentheprobatecout shallassignto the widow theinterestin theestateof herdeceased husband.

b.

Adult€ry. In a few states,a spouseis disqualifiedfrom dowel inhedtance, or anelectiveshareif the spouseabandoned the decedentandcommitted adultery

c.

Desertion. Statesmay disqualify a parent as an heir if the parenthas failed or refusedto supportthe child or hasabandonedthe child during his minority.

T[ansfer of Interest in Decedent'sEstate. A personmay be barredfrom succeeding to a decedent's estateb€cause he hasreleased, transferred, or disclaimedhis interest. Relcas€ofexpectancy. A child'srelease to hisparcntdudngtheparent's lifetimeis bindingif givenfor fair consideration. b.

Tfansfer of expectancy.An expectancyis merely the possibility of inheriting prcperty and, as such,it cannotbe transferred,though a purportedtransferof anexpectancyfor considerationmay be enforceablein equity. Disclaimer.It hasalwaysbeenheldthata beneficiarycandisclaimany gift. If a beneficiarymakesa valid disclaimer,thedisclaimed testamentary interestpassesas though the disclaimantpredeceased the testator.If a persondisclaims,andthe disclaimeris not "qualified,"ie., thepe$on hasnot madeaniflevocableandunqualifiedrefusalof aninterestin prcperty underIntemalRevenueCodesection2518procedures, gift tax liability results.The disclaimermustbe madewithin nine monthsafter the interestis createdor afterthe doneereachesase21. whicheveris later. l)

Disclaimerupheld-Troyv. Hart, 116Md.App.468,697A.zd Troyv. ll3, cert.denied,341Md.255,700A.2d 1215(1997). Hart a)

Facts.PaulLettich,a residentof StellaMarisHospice("Stella Maris"),wasreceivingMedicareandMedicaidbenefitswhen Wills - 17

his sisterdiedintestate. Oneof l_ettich'stwo survivingsisters,Hart (D), was appointed penonalrepresentative of herdeceased sister'sestate. andalthoush D wasawareLeltichwasrepresenled byTroy(p). D visiledLeuichandhelD;d hime\eculea disclaimer to hisSt 00.000share of rhedeceased sister.s est;te. D did not adviseLettichof theeffectof thedisclaimeron his Medicaidstatus andshedividedthe $100,000with their orhersisrer.p was notifiedof the renunciation thefollowingmonth.Counselfor I_ettichfiled a Detitionto re_ scindthedisclaimerandremoveD aspersonal representative oi thedeceased sister'sestate.One day beforethe deadlineto.espondto the petition,D,s attomeyvisitedLettichandaskedhim to executea motionto striketheDeti_ tion.A socialworkerintervened p beconsulted. andsuggesred t ertichdied shortlythereafterThe courtdeniedp's petition.p appealed. D,s motionfor Judgmentwith rcspectto p,s requestto haveher tEmovedwasglanted:p,s pelitionro rescind p appeals. wasdjsmissed. b)

Issue.May a Medicaidrecipientdisclaimaninheritance?

c)

Held.Yes.Judgment affirmed. ( 1) Marylandlaw requiresthatonceanindividualis elisiblefor and receiv_ ingMedicaid benefits. hemustnorifytheDepartmeit ofSocialServices ("DSS")within l0 workingdaysof changesaffectingeligibility. (2) Lettichfailedto notify DSSof his inheritance andtherebyviolatedap_ plicableMedicaidlaw anddeprivedboththe stateandfederal eovem_ menlsof anopponunity to ree\alualehiseligibility. (3) A New Yorkcourthasfoundin similarcircumstances thatrcnunciation of an intestateshareis irreconcilable with theconceptthatpublicaidis limited andshoutdbereservedfor thosewho havea legitimateneed,that a renunciation is essentially equalto a transfer,andshouldbe penalized in lhesamemanner. Weadoptthereasontng of theNew york coufl here. (4) If a rcnunciation wouldcausea benefitsrecipientto be disqualified. the renuncjalion shouldbe lreatedasa translerandincur thesamepenalty that.aftansferprior ro eligibilitywould incur The recipientshouldbe liablefor anypaymentsincorrectlypaidby the statein consequence of therenunciation. (5) WhileLettich'sdisclaimeris valid,hissurvivingsistersshould rakesubject to any claimsthe statemay haveagainstl_ettich,sestate for anv paymenrs improperly madeasa resulrof Lenichs failurero notifyDSS of his acquisition of property. (6) A consructive rust is applied wherecircumsrances renderrl inequitable for thepartyholdingrirleto rctainit, ashere

l8 - Wills

III. CAPACITYAND WILL CONTESTS A. MENTALCAPACITY l

Why Require Mental Capacity? Mental capacityis required for the protectionof societyandfor the protectionof the decedent'sfamily and the decedentherself.

',

Test of Mental Capacity. The decedentmust know: (i) the natue and extentof her propedy;(ii) thepersonswho arethe naturalobjectsof her bounty;(iii) thedispositionsheis making;and(iv) how theseelements relatein planningfor the dispositionof her propefiy.

1

InsaneDelusiol. An insanedelusionis an exteme misconception of reality to which the testatoradheresagainstall proof to the contrary. a.

Insanedelusionsaboutmen-L re Strittmater,140N.J.Eq. 94, 53 4.2d205 (1947).

r)

In re Strittmater

Facts. Strittmater(T) never married.Shelived with her parentsuntil their deathandwasdevotedto them andthey to her. Four yearsafter their death,shewrote that her father was "a conupt,vicious,andunintelligentsavage,"typicalof themajority of his sex,andon a photograph of her mother,sheinscribed,"moronicshe-devil."T's dealingswith her attomey, over a period of years,were nomal. T becamea memberof the NationalWomen'sParty andvolunteeredone day a week for at leasttwo years.In her will, sheleft her estateto the party, ashad beenher expressedintention.T died one month after her will wasexecuted.The will wasadmittedto probate. Two cousinschallenged the will, allegingit wasa productof T's insanity.

2) Issue.May a will that was executedby a personwith insane delusions aboutmenbe admittedto prcbate? J)

Held. No. Decreeaffirmed. a)

T's femalephysicianopinedT sufferedfrom a splitpersonality.

b)

T hadbeena memberofthe partyfor 11yearswhenshe wrcte: "It remainsfor feministorganizations like [the party] to make exposureof women's'protectors'and 'lovers'for whattheir viciousandcontemptibleselves arc."

Wills - 19

c)

Inrc Honigman

20 - Wills

b.

condition,especiallyher insanedeluI think it washer paranoiac sionsaboutthe male,that led her to leaveher estateto the pady' Probateshouldbe setaside.

Insanedelusionresulting from irrational belief in nonexistentfacts'h re Honigman, 8 N.Y2d 244, 168 N E.2d 676, 203 N.YS 2d 859 (1e60). 1)

Facts. Prior to his death,the decedent,Frank Honigman,told friends alikethathe believedhis wife wasunfaithful.This suspiandstrangers althoughhe wasnormalandrationalin other cionbecameanobsession, respects.The decedent,a man of 70 who had undergonea numberof that he was sick in the headand that he oncecommented operations, bis attorinstructed him Thedecedent wrong with was knewsomething neyto preparea will cuttingoff his wife from anyof his estate,leaving her life useof her minimum statutoryshare,with dircctionsto pay the principal upon her deathto his surviving brothersor sistersand to the brotheror sister,per stirpes.At the trial, of anypredeceased descendants which,theyargued,showed of thewill adducedevidence theproponents This includedanannive$ary belief. a reasonable basisfor thedecedent's card sentby a Mr. Krauseto the decedent'swife; a letter; evidencethat wife wouldanswerit; andevlwheneverthephonerangthedecedent's houseonenightwhile dencethatMr. Krausecameoverto thedecedent's for probate,the will was offered the decedentwas out. When the A trial wasconductedon theisdecedenfswidow (P)filed objections. mind andmemoryat the time of sound was sueof whetherthe deceased court Theappellate in thenegative. hesignedthewill.Thejury answered Thisappealfollowed. revers€d.

2)

Issue. If a p€rsonbelievesfacts that arc againstall evidenceand probof himself,howeverlogically,upontheassumption abilityandconducts in makinghiswill, doeshesufferfrom aninsanedelusion theirexistence capacity? soasto defeattestamentary

3)

Held. Yes.Judgmentrevetsedand a new trial ordered. a)

believessupposed The generalrule is thatif a personpersistently in hispervefiedimagination factsthathavenorealexistenceexcept himself,howandprobability,andconducts andagainstallevidence he is, sofar of theirexistence, everlogically,uponthe assumption delusion Such a personis undera morbid asthey areconcemed, mador insaneon thosesubjects essentially

b)

sanitywasan issuefor thejury to Here,theissueofthe decedent's resolve.Therewassufficientevidenceto justify placingthis issue ofP's unfaithrepeatedsuspicions beforethejury: thedecedent's

fulness;his belief of P's misbehavingby hiding male callersunderherbedandby haulingmenfrom thestreet up to her bedroomby the useof sheets;andso forth.

4)

B.

c)

Theproponentsarguethatevenifthe decedentwaslaboring undera delusion,otherreasonssupportthe validity of A will is invalidif its dispository the will. We disagree. provisions mighthavebeencausedor affectedby thedelusion.

d)

Finally, we hold that the DeadMan's Statute-which excludesthe testimonyof a witnessconceminga perbetweenthe witnessandthe desonalcommunication to permitthetestimonyofP ceased-wasmisconstrued had beenproperly to her testimony when an objection raised.

utterlyfailedto prcvethatthe Dissent.Theevidenceadduced testatorwassufferingfrom an insanedelusionor lackedtestamentarycapacity.Much of the evidencewas improperly admitted,asthecoufi itselfnotes,by reasonof theDeadMan's Statute.

LNDUE INFLUENCE A will or a gift in a will may be setasideif it wastheresultof undueinfluence-mental coercionthat destroyedthe testator'sfree will and forcedhim else'sintentionin his will in placeof his own to embodysomeone l.

Subjective Test. The test of whethera testatorhas been subjectedto atthetimeofexecutionof one,measurcd undueinfluenceis a subjective (i) the will. The evidencemustestablish: that undueinfluencewasexertedon thetestator;(ii) thattheeffect of theinfluencemusthavebeento overpowerthe mind andwill of the testator;and (iii) that the influence the intent musthaveproduceda wili or a gift in the will thatexpresses the influence, and that would not of thetestatorbut of the oneexerting not havebeenmadebul for the influence Requir€ment of Proof Showing Substitution of a Plan of T€stamen- Lipper v weslow tary Disposition-Lipperv. Weslow,369S.W.2d698 (Tex.1963). a.

Facts.M.s. SophieBlock (T) executeda will writtenby her son, FrankLipper, a lawyer,22 daysbeforeshedied.Lipper bore malice half-brother, whowasexcludedfrom thewill. againsthisdeceased receiving a larger shareunderthe will than in Lipper This resulted LiDperlivednextdoorto T and he otherwisewouldhavereceived.

Wills - 2l

hadakey to herhome.After signingthewill, T toldonewitnessthatshe wasleavingher estateto her sonanddaughterandthather otherson, theynever JulianA.Weslow,andhischildrenwouldbeexcludedbecause as showedanyattentionto her.Thewill provideda lengthyexplanation to why Julianwasexcludedfrom thewill largelydueto the"unfriendly and distant attitude" T felt had been accordedto her. The children of JulianWeslow(Ps)contestthe will, chargingFrankLipper andIrene LipperDover(Ds) with undueinfluence.At tial, ajury foundthatT's thatthere will wasprocuredby undueinfluence.Ds appeal,contending is no evidenceto suppofithisfinding.

h rc Will of Moses

22 - Wills

b.

Issue.Must a personcontestinga will on the basisof undueinfluence disposition supplyproof of the substitution of theplan of testamentary as the will of the testaaix? by another

c.

Held. Yes.Judgmentrevercedandrenderedfor Ds. l)

a confidential relationship, theopThecontestants haveestablished portunity,andperhaps a motivefor undueinfluence.However,they prove go in somefashionthat the will aswdtten must forward and resultedfrom D's substitutinghis mind andwill for that of T. Prcof of vital factsof undueinfluencemustbe provided:thesubstitution of a planof testamentary disposition by anotherasthe will ofT.

2)

Here,theevidenceshowsthatT wasof soundmind,of strongwill, andin excellentphysicalcondition.Apersonof soundmindhasthe legaldght to disposeof her propertyasshewishes,with the burden onthoseattackingthedisposition to provethatit wastheprcductof undueinfluence.T hada legalrightto do whatshedid whetherwe think shewasjustifiedor not.Weconcludethatthercwasno evi denceof probativeforce to supportthe verdict of thejury.

Undue Influence Arising out ofAttorney.Client Relationship.-In rc Will of Moses,227So.2d 829(Miss.1969). a.

Facts. FannieTaylor Moses (T), during her secondmarriage,became friends with ClarenceHolland, an attomey.Prior to her death,shesuffered from hearttrouble, had a breastremovedbecauseof cancet and becamean alcoholic.Threeyealspdor to her death,shemadea will devisingvirtuallyall of herpropertyto Holland.This will wasdraftedby a lawyerwhohadnoconnection with Clarence Holland,nordid Holland knowaboutthewill. T's eldestsister(P)attackedthewill on theground of undueinfluence.Thetrial courtfoundfor P Hollandappeals.

b.

Issue.Doesa presumption of undueinfluenceexistwherca sexualrclationshipbetweenattomeyandclientcoexists with theattomey-client relationship?

c.

Held, Yes.Judgmentaffirmed. 1) It is arguedthatevenifHolland,T's attomey,occupieda fiduciary of onthedateofexecutionof thewill, thepresumption relationship advice undueinfluenceis overcomesinceT had the independent andcounselof an attomey.Wedisagee.The evidencehercshows thatthe attomeywho draftedthe will waslittle morethana scrivener,andthattherewasno meaningfulindependentadviceor counsel touchingupon the areain question. 2)

d.

Herc,the intimatenatureof this relationshipis relevantto thequeswarantedan tion of undueinfluenceto theextentthatits existence inferenceof undueinfluence,extendingandaugmentingthat which flowed from theattomey-clientrelationship.This is particularlytue benefitfrom the whenit is considered thatHollandwill Dersonallv will asdrafted.

Dissent.Thercis not one iota of evidencein the recordthat Holland evenknew of the will, much lessthat he padicipatedin the preparation herwill on is to thecontary T prepared or executionof it. Theevidence purpose whose sole was to adviseher counsel theadviceof independent andpreparethewill exactlyasshewantedit.

4.

Undue Inlluence a Question of Fact Where Testator Is Easily Swayed. Will,20 A.D.2d464,U7 N.YS.2d664 Underthefactsin 1nre Kaufrnann's (1964),aff'd, l5 N.Y2d 825,257N.YS.2d941,205N.E.2d864(1965),the lived with Walter RobertKaufmann,a millionaireby inheritance, decedent, years, which time Robeft, in successive wills, during Weissfor someeight increased Walter'sshareof his estate.UponRobert'sdeath,his brotherJoel suedto havethefinal will, draftedin 1958,setasideon the groundof undue relationship influence.In his deposition,Walterdeniedthat a homosexual jury finding undue influtdals,both existedbetwe€nthetwo men.After two ence,the court of appealsaffirmed, statingthat "where, as here, the record of, that there indicatesthat testatorwaspliableandeasilytakenadvantage betweenthem, wasa long anddetailedhistoryof dominanceandsubservience knowledge. . . andpropothattestatorreliedexclusivelyuponproponent's nentis willed virtuallythe entireestate,we considerthat a questionof fact waspresented concemingwhether[therehadbeenundueinfluence]."

5.

clausein a will providesthatanype$on No-ContestClauses.A no-contest who conteststhe will shallforfeit all interestshe otherwisewould haverethe will is successful, the ceivedunderthatwill. If a beneficiarycontesting no-contestclausefails with the will. In most statesandunderthe UPC, a thewill doesnot forfeitthelegacyif contests beneficiarywhounsuccessfully the court finds that the beneficiarychallengedthe will tn goo.lfaith alld on thebasrsof prcbablecaase.A minorityview givesfull effectto no-contest hadprobablecausefor challengingthe clausesevenif the losingcontestant Wills - 23

will. A challengebasedon an actionbroughtto construethe will, on jurisdictional gounds, or on the appointmentof an executor,or to the a contestto the will accounting madeby thatperson,is not considercd that would result in a forfeifure undera no-contestclause.

c.

FRATJD 1.

Latharn v. FatherDivine

24 - Wills

2.

of materialfacts,(ii) Definition. Fraudconsistsof (i) falsestatements (iii) madewith knownto be falseby the partymakingthe statements, (iv) actually de€eivethe teswhich the intentionof deceivingthetestator tator,and(v) which causethe testatorto actin relianceon the falsestatements. a.

Fraud in the ex€cution.This tlpe of fraud (alsoknown asfraud in the factum)includescaseswherethe testatorwastricked into signing a documentnot knowingit to be a will, andcaseswhereone for another. will is substituted

b.

Fraud in the irducement. This type of fraud includesthosecases wherethe testatoris fraudulentlyinducedinto makingthe will (e.8., in rctum for a falsepromiseof care).

Constructive Tfust Imposed Wherc Testator Prevent€d From EtecutingWill..Latham v. FatherDivine,299N.Y 22,85N.E.2d168,ll A.L.R.2d 802(l949). a.

Facts.Thecomplaintbroughtby Ps(first cousinsof thedecedent) allegedthe following facts: The will of Mary SheldonLyon (T) gavealmosther wholeestateto FatherDivine, leaderof a religious cult (D), two corporatedefendants(Ds), andto PatienceBudd @), one of FatherDivine'sactivefollowers.After makingthe will, T expresseda desireto revokethe will and to execut€a new will by which Pswouldreceivea substantialportionof theestate,T, shortly beforeher death,had attomeysdmft a new will for her with Psrethiswill, Ds ceivinga substantial sum,butbeforcshecouldexecute by undueinfluenceandphysicalforce,preventedT ftom executing to thewill. Thecomplaintbroughtby Ps allegedthatDs conspired kill, anddid kill, T by meansof a surgicaloperationperfomedby a doctorengagedby Ds withoutthe consentor knowledgeof any relativesofT. The will thatT did signwasprcbatedundera compromiseagreement in a proceeding in which Ps werenot parties. The tdal cowt upheldthe complaintbut the appellatecourt disPsappeal. missedit on groundsof insufficiency.

b.

Issue.When an heir or deviseein a will preventsthe testatorfrom providing for one for whom she would have provided but for the interferenceof theheir or devisee.will thatheir or deviseebedeemed a trusteeofthe propertyreceivedby him to the extentthatthede-

beeninterfered fraudedparty would have receivedhad not the deceased with? Held. Yes.Judgnent of the appellatecowt reversed

d.

l)

The generalrule is that wherc an heir or deviseein a will preventsthe testatorfrom providing for onefor whom shewould haveprovidedbut for the interferenceof the heir or devisee,that heir or deviseewill be deemeda trustee,by operationof law, of the property,real or personal, receivedby him from the lestator'sestate.to lhe amountor extentthat the defraudedparty would have receivedhad not the intention of the deceasedbeeninterferedwith.

2)

This is not a prcceedingto probatethe will nor is it an attemptto accomDlisha revocationof the earlierwill. The complaintallegesthat by force ind fraud Ds keptT from makinga will in favor of Ps.We cannotsayas a matterof law that no constuctive trust canarisetherefrom

3)

A constructivetrust will be erectedwhenevernecessaryto satisfy the will hasfull effectbut equity,in oder endsofjustice.Here,theprobated to defeatthe fraud, raisesa trust in favor of thoseintendedto be benefitted by the testatorandcompelsthe legateeto tum over the gift to them'

Comment. Tortious interferencewith an expectancyis anothertheory that can be used to rectify fraud or undueinfluence. (Restatement(Second)of involvedconTorts$?74B(1979))The plaintiffmustprcvetheinterfercnce ducttortiousin andofitself, e.g.,fraud,duress,undueinfluence.

Wills- 25

IV. EXECUTION: FORMS AND FORMALITIF^S A.

EXECUTION 1.

In re Groffman

AttestedWills. The standard form of a will is onethatis signedby the testatorandwimessedby two witnessespursuantto a formal attestation DrcCedure. a.

R€quirementsofdue execution.For a will to be valid andadmissible to probate,the testatormust meetthe formal requircmentsof dueexecutionimposedby statutesof the appropdate state.These requircmentsvary from stateto state,andgenerallyinclude requiring thetestatorto signat theendof thewill andin thepresence of all attestingwitnesses.The testatormight also be requiredto publish thewill, ie., declareto thewitnesses thattheinstumentis her will.

b.

Requirement that botb witnessesbe present-I2 re Groffman, I w.L.R.733(l969). 1)

Facts. CharlesGroffman (T), oneeveningwhile sitting in his lounge,askedDavidBlock, thesolicitorwhoprcparcdhiswill, andJuliusL€igh,a friend,to witnesshis will. Block ledT out of the loungeinto the dining room whercT took out his will, whichhadalreadybeensignedby him. T askedBlock to sign thewill andBlockdidso.Mr.Irigh, however,wasleft behind andwasnotprcsentwhenBlock signed.Block retumedto the lounge,leavingT in the diningroom.Mr. IJigh wentto the diningroomandsignedhisnamebeneath Block's.In themeantime,Blockhadremained in thelounge.T's son@) andBlock (P),bothexecutors underthewill, propoundthewill to beprobated.T's widowcontests thewill, contending thatit wasnot validly acknowledged in thepresenceof two or morcwitnesses presentat thesametime.

2)

Issue.Fora willtobe valid,mustitbe signedby thetestatorin theprcsenceof two or moaewitnessespresentat the sametime with thewitnesses signingthewill in thepresence of thetestator?

3)

Held.Yes.Probatedenied. a)

26 Wills

TheWlls Act statesthatno will shallbe validunlessir is in writing andexecutedin themannerhercaftermentioned: It mustbe signedat the end by the testatoror someother personin his presence andby his direction;andthesignaturcmustbemadeor acknowledged by thetestatorin

theprcsenceof two or morewimessesprcsentat the sametim€, and thosewitnessesmust attestand subscribethe will in the presenceof thetestator,but no form of attestationis necessary b)

7

Here, therewasno acknowledgmentor signatureby T in the presenceof two or morewitnessesat the sametime The argu_ ments put forth-that there was suflicient acknowledgment sincethe attestingwitnesseshadanoppofiunity to seethe will if they hadwishedto andthat therewasno breakin the continuity of theftansaction-are without merit l amboundto prcnounceagainstthiswill.

Competency of Witnesses.Witnessesmust be competent This genenlly meansthat at the time the will is executedthe witnessmustbe matureenough and of sufficient mental capacityto understandand appreciatethe natureof the acthe is witnessingandto be ableto testify in coud shouldthis be neces-

sary. a.

At commonlaw.if an altestingwitnesswasalsoa Interestedwitness€s. wltwasnot a competent beneficiaryof a will, the witness-beneficiary Today'however,mostjurisdictions nessaldthe will wasdeniedprobate have interestedwitnessstatutes,which provide that if an attestingwitnessis alsoa beneficiary,the gift to the witnessis void but the witnessis a competentwitnessandthe will may be probated

b,

Requirement of disinter€stedness-Estrte ofParsons, 103Cal App 3d:84, 163cal. Rptr.?0 (1980). 1)

Facts. Threepersonssignedthe will of the decedent'GeneveParsons(T):EvelynNielson,MarieGower@), andBobwarda,a notary public. Two of them,Nielson and Gower, werc namedin the wiil asbeneficiaries.After T's death,her will was admittedto probate.Nielsonthenfiled a disclaimerof herbequestin thewill Thereof T's first cousinoncercmovedandotherfirst after,the assignees cousinsoncercmoved(Ps)claimed an interestin the estateon the groundthatthedeviseto Gowerwasinvalid. The rial courtrejected that argument.Ps appeal.

2)

Issues.

3)

a)

witnessto a will whois namedin thewill asa Is a subscdbing witnessasrequiredby subscribing beneficiarya disinterested statute?

b)

disclaimereffectiveto tansfolm an interested Is a subsequent witnessinto a "disinterested"one?

Estateof Parsons

Held. a) No. b) No. Judgmentreversed Wills - 27

1

a)

ProbateCodesection5l providesthata gift to a subscribing witnessis void unlessthereare two otherdisinterested witnesses to the will. Ps contendthata subsequent disclaimeris ineffective to transforman intercstedwitnessinto a disinterestedone.Theyassertthatbecause therewasonly onedisinte.estedwitnessat the time of attestation, the deviseto D is void by operatiorof law.D, however,pointsto language in PrcbateCodesection190.6thatstates"in everycase,thedisclaimershallrelatebackfor all purposes to thedateofcreation ofthe intercst."

o)

At commonlaw a partyto an action,or onewho hada dircct interestin its outcome,wasnot competent to testifyin court becauseit was thoughtthat an interestedwitnesswould be temptedto perjurehimselfin favorofhis interest.If anyoneof therequisitenumberof attestingwitnesses wasalsoa beneficiary thentheentircwill wouldfail. Parliament, in 1752,enacteda statutethatsavedthewill by providingthattheinterest of an attestingwitnesswasvoid; undersuchlegislation,the competence of a witnessto testifyis restoredby invalidating hisgift.Themajorityofjurisdictions havesimilarstatutes; section 51 fallsinto thiscategory.

c)

The essential functionof a subscribing witnessis performed whenthe will is executed. We believesection5l looksin its operationsolelyto thattime.It opemtesto insue thatat least two ofthe subscribing witnesses aredisinterested.

d)

Becausewe hold that section5l lookssolelyto the time of executionandattestation of the will, it followsthat a subsequentdisclaimerwill be ineffectiveto transforman intercsted witnessintoa disinterested onewithinthemeaningof thatsection.D's rclianceon section190.6is misplaced-thatsection servesto equalizethe tax consequences of disclaimers asbetweenheirsat law andtestamentary beneficiaries.

Recommended Method of Executinga Will. A decedenr might not die in j the urisdictionwherethewill wasexecuted, thusgivingriseto potentialconflict of lawsissues. The validityof rhewill in disposingpe$onalpropefiyis deteminedaccordingto the laws of the decedent's domicileat death.The validityof the will in disposingrealpropertyis determined accordingto the laws of the statewherethat propertyis located.Hence,the will shouldbe executed sothatit will be admittedto probatein all j urisdictions involved. Self-ProvingAffidavit. The greatmajority of stateshaveadopteda self-p.ovingalfidavitprocedure in whichthereslaror andrheq irnesses, aftere^ecuring

28 - Wills

the will, executein ftont of a notarypublic an affidavit reciting that all of the havebeencompliedwith.This allowsthewillto for dueexecutron requisites be probatedif the witnessesare dead,cannotbe located,or have movedfa! away. Safeguardinga Will. An attomey'sretentionof a client's will may have whichis an ulethicalpractice.Many ofsoliciting business, theappearance stateshave statutespermittingdepositof wills with the clerk of the probatecourt. 6.

Mistake in Execution of a Will--h re Pavlinko's Estate' 394 Pa 564' 148 A,.2d 528(1959\. a.

VasilPavlinko(T), by mistakesigfledthewill of Facts.The decedent, his wife, Hellen,andHellenbymistakesignedthewill ofher husband' T. The &afting attomeyandhis secretarysignedaswitnesses.A brother ofHellen,who wastheresiduarylegateeof bothwills, offeredfor probateasT's will thewill thatpurportedto bethewill of HellenPavlinko' but which was signedby her husband.The trial court refusedto profollowec. batethewill. Thisappeal

b.

Issue.Will a courtrefom a will to allow prcbatewhenthereis a mistake in executionof the will in that one pafy mistakenly signs the will of another?

In re Pavlinko's Estate

Held. No. Judgmentaffirmed.

d.

1)

The wills Act providesin clear languagethat every will shall be in writing and shall be signedby the testatorat the end thereof.The court below correctlyheld that the paperthat rccited that it wasthe will of Hellen Pavlinkocould not b€ Fobated asthe will of T and wasa nullity.

2)

To decidein favor of the residuarylegatee,almost the entire will would haveto be rewritten.Here,thepapersignedwasnot T's will He hadexecutedno will andtherewasnothing to be reformed.He thereforedied intestateand his property descendsas at law. Were we to rewrite wills or makeexceptionsto theclearprovisionsof the andwouldencourWills Act, theAct wouldbecomemeaningless agefraudulentclaims.

Dissent. The majority doesnot make a seriouseffort to effectuatethe intent of the testator.The fact that someof the prcvisions in the will cannotbe executeddoesnot strike down the residuaryclause'which is meaningfuland standsindependently.Someof the provisions are not effective,but their ineffectualityin no way baIsthe legality andvalidity of theresiduaryclause,whichis completein itsell Wills - 29

In rcWlll ofRanney

7.

Conditional Wills. A conditionalwill is onethatbecomesoDerativeif a stated eventocculs.

8.

Statutory Wills. Severalstateshaveauthorized"statutory wills," which are shortwills, with the terminologyprovidedby statute.Spacesareprovidedfor the namesof beneficiaries.Formalities for execution,such as signing and attestation,must be followed.

9.

Holographic Wills. A holographicwill is handwrittenand signedby the testator; attestingwitnessesarenot required.About half of the statesp€rmit holographicwills. Under the UPC, a holographicwill is valid if the signatue and the materialprovisionsarc in the handwriting of the testatorevenif not witnessed. a.

Self-provedwills--fr, re Will of Ranney,124N.J. 1,589A2d1339 (l991).

r)

Facts, RussellRanney(T) executeda four-pagewill before a notaryandtwo witnesses. T acknowledged thattheinstumentwashis will andhe wantedthewitnesses to actaswitnesses. T sicnedthe will on theunnumbered fourthpage,andrhewitnesses iimulraneouslysigneda self-provingaffidavit on the fifth page.All parties believed they were complying with statutory attestationrcquircments.All signatureswerenotadzedandthe fifth pagewasstapled to the foudh. The attestationclausercferc to the executionof the will in thepasttenseandstatesthateachwitness"signedtheWill as witnesses." UponT's death,the will wasadmittedto prcbate;T's wife contested, claimingthatthewill failedto complylitelallywith the statutoryformalities.The supedorcourt ruled that the will did not containthesignatures of two witnesses. The appellate division reversedandfoundtheaffidavitto be a partof thewill, and,therefore,thewitnesses hadsigned. Thesupreme courtgmntedT's wife's petitionfor certification.

2) Issue,Shouldan insffumentpurportingto be a last will andtestamentthat includesthe signatureof two witnesses on an attached self-provingaffidavit, but not on the will itself, be admittedto probate?

3) Held, Yes.Judgmentaffirmed. a)

30 - Wills

Wedo not agreewith the appellatedivision thata will containing witnesses'signaturesonly on a self-provingaffidavit literally complieswith attestationrequirements.The court,s rationalewasthatan affidavit andanattestationclausearcsufficiently similar to justify the conclusionthat signatrreson an affidavit,like signatures on theattestation clause,satisfythe

be on the will. This conclusionfails to conthat the signatures requircment self-provingafsiderthe basicdifferencesbetweena subsequently-executed, fidavit andan attestationclause. o)

Attestationclauses(i) provide"prima facieevidence"thatthe will wassigned (ii) pemit probatewhena witness of witnesses; by thetestatorin thepresence forgetsthe circumstancesof executionor dies before the testator;and (iii) to actaswitness. express thepresentintentof the attestant Self-provingaffidavits arc swom statementsthat the will hasbeenexecuted andhasalrcadybeenwimessed.The affidavit performsall thefunctionsof the clauseandpermitsprobatewithoutrequiringeitherwitnessto apattestation pear.

o)

signedtheaffidavitimmediately Here,affiants,intendingto actaswitnesses, aflerwitnessing T s e\eculionof thewil,.

e)

contemthatthelegislaturc or historysuggests Nothingin statutorylanguage plateda subsequently-executed affidavitasa substitutefor theattestationclause self-provThe legislaturedid indicateits intentionthat subsequently-executed, ing affidavitsbe usedsolelyin conjunctionwith duly executedwills. In the instantcase,the affidavit doesnot comply with statutoryrequirements.

f)

complies"with however,a will that"substantially In limitedcircumstances, statutoryrequirementsmay beadmittedto probate.Otherstates,scholars,and compliance betterservesthegoals that"substantial teatiseshavedetermined wills that of statutoryformalitiesby permittingprobateof formally-defective theintentof thetestator" nevertheless represent Formalitiesin executionof wills (i) arc meantto insurethat the instument rcflects the testator'suncoercedintent; (ii) p€rformthe function of providing language, andcontentof a will; and(iii) prouniformityin theorganization, Thesepuposes the sedousness ofthe occasion. videa ritualthatundeNcores are often ftustratedwhen rigid insistenceon literal complianceinvalidatesa will that is the deliberateandvoluntaryact of the testator.

n,

The variationof the UPC adoptedby the statelegislatwein 1977minimizes arenot requiredto signin theprestheformalitiesofexecution:(i) witnesses enceof thetestatorandeachother;(ii) a beneficiarywho actsasa witnessis wills may holographic fromtaking:and(iii) unwitnessed no longerprevented did not intendthata be admittedto probate.Thus,we believethelegislature in thewrongplace. probate because the witnesses signed will shouldbedenied

1)

Becausean affidavit servesa uniquefunction, we arereluctantto permit the signatureson an affidavit to both validate the signatureson the will and to with theintentto atHowever,if thewitnesses, renderthewill self-proving. the will or an attestation but do not sign test,sign a self-prcvingaffidavit, Wills- 31

clause,clearandconvincingevidenceof thef intentshouldbe adducedto establish substantial compliancewith thestatute. 14 /e Estate of Johnson

Kir[nel's Estate

b.

Testamentaryprovisionsnot in handwriting of testator-h /€ Estateof Johnson,129Ariz. 307,630P2d 1039(1981). 1)

Facts.Thewill ofthe decedent, Amold H. Johnson(T), wason a printed will form availablein variousofficesupplystores.It containedcertain printedprovisionsfollowedby blankswhereT couldinsefianyprovisionshe might desire.BartonI-ee Mcl-ain andMarie Ganssle(Ps),two beneficiariesunderthe will, petitionedfor fo.mal probateof the instument.The personalrcpresentativeof the estateobjectedto the petition andfiled a motion for summaryjudgmenton the groundsthat theinstrumentwasinvalidasa will, in thatit wasnot attestedby anywitnesses, andthat it did not qualify asa hologaphic will sincethe marerialprcvisionsthereofwerenot in T's handwriting.Ps filed a cross-motion for summaryjudgment,urgingthatthedocument constituted a holographic ps will. Thetrialcowt grantedthemotionof theperconalrepresentative. appeal.

2)

Issue.May aninsh]lmentbeprobated asa holographic will ifit contains wordsnot in the handwdtingof thetestatorif suchwordsarc essentialto the testamentarydisposition?

3)

Held. No. Judgmentaffirmed. A will that doesnot comply with the statutoryrequirementsfor a will may still be valid as a hologaphicwill, whetheror not wirnessed,if the signatureandthe materialprovisionsarein the handwriting of the testator An instrumentmay not be probatedas a holographicwill if it containswordsnot in thehandwritingof the testatorif suchwordsare essentialto the testamentarvdisDosition. However.lhe merefacl lhat a teslatoruseda blanktlrm doesnoL invalidatewhatwouldotherwisebea validwill ifthe printedwords maybeentirelyrejectedassurplusage.

b)

Herc,theonly wordsthatestablish T's requisitetestanentary intent are found in the printed portion of the form. Though T used the word "estate,"this word aloneis insufficient to indlcatean animus testandi.

Informaf will..Kimmel,sEstate,278Pa.435, 123A.4OS0924). 1)

32 - Wills

a)

Facts.A lettermailedby the decedent, Kimmel (T), to two of his children,who werenarnedasbeneficiariesthercin.wasadmittedto Drobate. T djedthealtemoonof thedayhe wrotetheletter.Oneof T s heirsobandnow appeals. Jectedto theadmission

2)

3)

B.

Issues. a)

May an informal letter be testamentaryin character?

b)

Is the signature"Father" sufficient to comply with the Wills Act?

Held. a) Yes.b) Yes.Decreeaffirmedandappealdismissed. a)

Wherea testator'spurposewasto makea posthumous gift, we havehelddeeds,letters,powe$ of attomey,and an informal letter of requestsaswills.

b)

T's contingencyhere,"if ennything hapens,"was still andthequestionof tesexistingwhenhe diedsuddenly, tamentaryintent is oneof law for the cowts.

c)

T's words make it difficult to determinethat he meant gift, andhis actof sendan)4hingotherthanatestamentary persons whom the gift was into the for ing the letter tendedgivesfwther supportto that determination.

d)

The signatue "Father"wasintendedasa completesignatule.It wasthemethodemployedbyTin signingall such lettersandwasmailedby T asa finisheddocument.

REVOCATION OF WILLS 1.

Methods of Revocation.A will may be revokedby one of three metlods: By operationof law If a t€statorgetsmarriedor divorcedafter executing a will, this changein statusmay revoke,by operationof law, all or part of the will. language thatexprcssly By a laterwill or codicil.In theseinstances, revokestheprior will shouldbeincluded.Altematively,a laterwill provisionsin the may revokea prior will if thereareinconsistent laterwill thatimpliedlyrevoketheearlierwill. c.

2.

By a physicalactof destruction.Generally,buming,tearing,or obliteratinga mat€rialpart of the will revokesit. Anotherpersoncando the teadngor buming if in the testator'spresenceand at his direction.

Probate of Irst or DestmyedWills. In theabsenceof a statute,the fact Wills- 33

thata will is lost,or is destroyed withouttheconsentof thetestator,doesnot preventits prcbate,providedits contents areproved.Moststatesrequireproof of contents by testimonyof persons whohadknowledgeof thecontents of the will, asby havingreadthe will or havingheardit read.Statesthathavestatutesrestrictingtheprobateof lostor destoyedwills havenarrowlyconstrued themin orderto permit probate. 3,

Harrison v. Bird

Revocationby Writing or PhysicalAct. Underthe UPC,a will or anypart thereofisrevoked(i) by a subsequent will thatrevokestheprior will or partof it expressly orby inconsistency; or (ii) by beingbumed,tom,canceled, obli!erated,or destroyed,with the intent andfor the purposeof revoking it by the testatoror by anotherpenonin his presence andby hjs direction. a.

Presumptionwill destroyed-Harrisonv. Bird, 621So.2d,972(Ala. 19931.

r)

Facts. The decedent,Daisy Speer(T), executeda will naming Harison (P) as the main beneficiaryT latercalledher attomey, who hadtheoriginalwill, to rcvokethewill. The attomeyandhis secretary toreupthewill andwrotea lettertoT confirmingthisand enclosingthe tom pieces.He informedT shewaswithouta will. UponT'sdeath,theletterwasfound,butnotthetom pieces.I-etters of administration weregrantedto Bird (D). P filed thecopyof the rcvokedwill for probate. Thecircuitcourtruled(i) thewill wasnot revoked;(ii) therecouldbe no ratificationof thedesaucdonof the will asithadnotbeendonepuNuantto saictstatutory requirements; and(iii) basedon thelact thatthepieceswercnot found,therewas a presumption thatT revokedthewill herself.The courtfoundthis presumption hadnot beenrebuttedby P andthe duplicatewasnot T's will. ThecourtheldthatT'sestateshouldbeadministered asan intestate estate.P appeals. Issue.Wastheevidencepresented sufficientto rebutthepresumption thatT destroyed herwill with theintentto revokeit?

J'

34 - Wills

Held.No, Judgment affirmed. a)

Eventhougha duplicateexiststhatwasnot in T's possession, if T hadpossession ofher will beforeherdeath,andthewill is notfoundafterherdeath,a presumption arisesthatT revoked herwill andall duplicates.

b)

P arguedthatthefactsthatT's attomeydestroyed thewill outsideof T's presence, T hadpossession ofthe pieces,andsuch pieceswere not found, are not sufficient to invoke the presumptionof revocation. This argumentis withoutmerit.

b,

Thompson Attempted revocationby writing on paper upon which will is written" { Royall Thompsonv. Royall 163V^. 492,175S.E.748(1934). ' Mrs. Knoll (T), sigfleda 4, 1932,the decedent, 1) Facts.On September paper 19, 1932,at On September will consistingof five sheetsof legal T's request,her attomeyandher executortook thewill andcodicil to her home,where shetold the attomey,in the presenceof her executorand another,to deshoyboth.But insteadof destroyingthem' shedecidedto retatnthem asmemoranda.On the back of the manuscriptcover,in the handwritingof her attomey,signedby T, therewaswdtten:"This will null andvoid andto be heldonly by (theexecutor)insteadofbeing destroyedasa memorandumfor anotherwill if I desireto makesame." The samenotationwasmadeon thebackof thecodicil,exceptthatthename of the attomeywas substitutedfor that of the executor.The jury found that the instrumentswerethe last will andtestamentof T. From an order this verdictandprcbatingthewill, this appealwastaken. sustaining 2)

Issue.Must wdtten words usedfor revocationby cancellationof a will be soplacedastophysicallyaffectthewrittenportionofthe will andnot merelytheblankpartsof thepaPeron whichthewill is written?

3)

Held. Yes.Judgmentaffirmed. a)

by statute,eitherby (i) some A will mustbe revokedasprcscribed writing declaringan intention to rcvoke and executedin the same manneras a will or by (ii) cutting,teadng,buming,obliterating, canceling,or destroyingthe will with the intent to revoke.

b)

Here, the notationsmadeon the back of the will are not wholly in witby subscdbing nor areher signatuesattested T's handwriting, Hence,underthestatutetheyareineffectualas"somewrit_ nesses. ing declaringanintentionto rcvoke."

c)

Nor are the words sufficient to revokethe will by cancellationby physical act. The statutecontemplatesmarks or lines acrossthe written parts of the inshumentor a physicaldefacementor some mutilation of the writing itself with the intent to rcvoke. If written theymustbeplacedasto physically wordsareusedfor thepurpose, pofion of the will, not merely the blank partsof affect the written revocationis the will on whichthe will is written.The attempted thereforeineffectual.

Partial rtvocation by physical act. Most statutesauthorizepartial aswell as totalrevocationof a will by physicalact.Extrinsicevidenceis generallyadmissibleto show whetherthe testatorintendedonly a partial rcvocation.In the absenceof a statuteexpresslyallowing partial revocation,severalstates partialrevocation by a physicalact.In thesejurisdictions, lefuseto recognize Wills- 35

wherethetestatorattemptsto revokea portion of the will, theactis given no effect. Thus, if the testatorcrossesout a bequestto Tom, Tom takes the bequestdespitetheattempted podon cancellation. If the destroyed cannotbe recreated by extinsic evidence,only the destroyedportion fails; the remainderof the will is given effect. 4.

Dependent Relative Revocation and Revival. The doctdne of dependenr rclative Gvocationis anequitabledoctrineunderwhich a court may disrcgard a rcvocationif the coufi finds that the act of rcvocationwas premisedon a mistakeof law or fact andwould not haveoccured but for the testator'smistakenbelief that anotherdispositionof propertywasvalid. The requirements of thisdoctrineareasfollows: (i) It mustbe shownthatthe testatorat the time of revocationintendedto makea new testamentarydispositionthat for somereasonwas ineffective. (ii) It mustbe shownthattherewasan otherwisevalidrcvocation. (iii) It must be shownthat the testator'sintent was premisedon a mistaken beliefasto the validityof thenewdisposition. (iv) It mustbeshownthatinvalidationof thercvocationwouldbeconsistent with thetestator's probableintent.

Carterv. FirstUnited Methodist Church ofAlbany

a.

Presumptionagainstintestacy-Carter v. First United Methodist Churchof Albany,246 Ga.352,27| S.E.2d493 (1980). 1)

Facts.Thedecedent's, Mldred Tipton's(T's), 1963will wasfound at T's deathamongher personalpape$ togetherwith a handwritten instrumentdatedMay 22, 1978,captionedas a will but unsigned andunwitnessed.Pencilmarkshadb€€nmadethroughthe Foperty dispositions of the 1963will. The supedorcout foundT hadindicatedto herattomeythatshewishedto changeherwill but thatshe did notintendto rcvokethe 1963will by scratchings. The 1963will wasadmittedto probate.The caveator,Carter,appeals.

2)

Issue.Wassufficientevidenceprcsentedto rebut the statutorypresumptionof revocationandto give dse to a presumptionin favor of theprcpounderunderthedoctrineof dependentrelativercvocation?

3)

Held. Yes.Judgmentaffirmed. a)

36 - Wills

We agreewith First Methodist's contentionthat the Ceolgia statuteprovidingthatintentionto rcvokewill bepresumedfrom theobliterationor cancelingof a materialportion of the will is inappropdately appliedin thiscase.

b.

b)

The doctrineof dependentrelativerevocation,oneof presumedintention,hasasits purposeto effectthe testator'sintent.The mere fact that a testatorintendedto makea new will, or madeonethat failed,will not alone,in everycase,preventa cancellation or obliterationof a will from operatingasa revocation. If it is clearthatthe cancellationand the makingof the new will were partsof one scheme,andthe revocationof the old will was so relatedto the makingof thenewwill asto bedependent on it, thenif thenewwill is not made,or is invalid,the old will, thoughcanceled, shouldbe siveneffect.

c)

Thestipulation thatthe1963willandthe1978document werefound togethershifted the burdento Carter to prove that T would have prefered intestacy.The presumptiol againstintestacystands unrebutted.

Doctrine applicable wherc later will revoked und€r mistaken belief that doing so reinstatesprior will.-EstateofAlburn, 18Wis.2d 340,ll8 N.W. 2d919 .L963)'. 1)

Estateof Album

Facts.The decedent, OttilieL. Album (T), executeda will in Milwaukee,Wisconsin, in 1955andleft it with her attomey,ceorgeR. Affeldt. ThereaftetTmovedtoKankakee, Illinois,andin 1959executedanother will whilercsidingtherc.Shethenmovedto FortAtkinson,Wisconsin, wheresheinstucted her brother,Edwin Lehmann,to disposeof the Kankakeewill, which shehadtom up. He did so.OlgaI-ehmann,the wife of Edwin,testifiedthatT told her that shewantedthe Milwaukee will to stand.T's sister,AdeleRuedisili,broughta petitionfor appointmentof a specialadministrator,allegingthatthe deceaseddiedintestate. Thereafter,T's grandniece,Viola Henkey,filed a petition for the prcbate of theMilwaukeewill, andLulu Album andDorisAlbum filed a petition for probateof the Kankakeewill. The county court heardall threepetitions and held that T destroyedthe Kankakeewill under the mistaken beliefthatby sodoingshewouldrevivetheMilwaukeewill. The coult appliedthe doctrineof dependent relativercvocationandheldthatthe Kankakeewill wasadmittedto probate.Ruedisiliappeals. Issue.Whena testatorrevokesa later will underthe mistakenbelief that by doing sosheis reinstatinga prior will, may the doctrineof dependent relativercvocationbeinvokedto renderthercvocationineffective?

3)

Held. Yes.Judgmentaffirmed. a)

We arccommittedto the doctrineof dependentrclative rcvocation. The usualsituationfor applicationof this doctrineariseswhena testatorexecutesonewill andthereafterattemDts to revokeit bv

Wills - 37

makinga latertestamentarydispositionthatfor somereasonptoves ineffective.

4)

c.

38 - Wills

b)

However,the doctrinehasbeenappliedto the unusualsituationin which a testatorrcvokesa later will underthe mistakenbelief that a priorwill ln this situalion,thedocby doingsosheis reinstating rclativerevocationis invokedto ender therevocatline of dependent tion ineffective.The doctrineis baseduporl the testator'sinfered intention.It is held that the destructionof the later documentis inintent by theexpress whenit is accompanied tendedto beconditional evidence' no explanatory of reinstatinga former will andthereis

c)

Here,we find thatthetdal courtwascorrectin findingthatT had revokedthe Kankakeewill underthe mistakenbelief that shewas to Olga thepriorMilwaukeewill. T's statement therebyreinstating Lehmannthat shewishedher Milwaukee will to stand,the inferencethat shedid not wish to die intestate,andthe fact that shetook of the Kankakeewill to makea no stepsfollowingthe destruction new will are sufficient evidencethat shedestoyed the Kankakee will underthe mistakenbelief that the Milwauke-ewill would control the dispositionof her estateApplyingthe doctrineof dependent relative revocatlon,therefore,the trial court was corect ln holding that the attemptedrevocationof the Kankakeewill wasineffective andadmittingthe will to probate.

Comment.Wisconsinlaw on revivalof wills precludedtheMilwaukee will from beingrevived.

Revival. 1)

is to in severalstates, Commonlaw.Thecommonlawrule,still adhered Thereibre, testator. that no part of a will is effectiveuntil the deathof the revokesWill #l) is itselfrevokedbeforethe if Will #2 (whichexpressly uponthe death,Will#1aloneremainsin effectandisoperative testator's testator'sdeath.Destructionof Will #2 opentes to "revive" Will #l '

2)

Modern law. In mostjudsdictions,a will, oncerevoked,is not revived unlessrepublishedby (i) reexecutionor (ii) a latercodicil underthe docby codicil.Thus,rcvocationof a later will that trine of republication containedlanguagerevokinganearlierwill doesnot, by itself, revivethe UndertheUPC andin a substantial earlierwill or anyof its provisions. minority of states,destructionof Will #2 andits ldlguage of revocation on thetestator'sintent.Such may operateto teviveWill #1, depending intentis establishedby thetestator'sstatementsandby referenceto all of of thecase. thecircumstances

5.

Revocationby Operationoflaw: Changein Family Circumstances. mayrevokeawill by operation Achangein familycircumstances oflaw presumes Thelawin theseinstances anintentto revokeon thepartof the testator a.

b.

Marriage,At conmonlaw,a mardagefollowingtheexecutionof a will hadno effecton the will, but a marriagefollowedby a birth washeldto revokethewill. Most statesno lonserfollow thecommon law rule. 1)

Stateswithout statut€s.About half of the stateshaveno statutedealingwith theeffectof marriageon a previouslyexecuted will.In mostofthesestatesmariage,by itself,doesnot affect thewill. In a minorityof states, however,thecourtsapplythe commonlaw rule notedabove.

2)

Stateswith statutes.In mostof the stateshavingstatutesdealing with the effectof marriageon a will, the will is only partially revoked.Themarriagerevokesthe will only to theextent ofprovidingthenewspouse with anintestate share.After distributionof the spouse'sintestateshare,the will operatesto distribute the remainingassets.In a minority of states,marriageafterthe executionof a will revokesthe will in its entirety.Notethatin eithercase, thewill is notpafiiallyor totally revokedif (i) the will makesprovision for the new spouse,(ii) the will providesthatthe spouse's omissionwasintentional, or (iii) it appeanthat the will wasmadein contemplationof mamase.

Divorce.A majorityof stateshaveenactedstatutes thathold a divorce partially revokesa will in that it automaticallyrevokesthe provisionsof a will in favor of theformer spouse.The will is readas thoughthe former spouseprcdeceased the testator.

C. COMPONENTS OFA WILL 1. Integration of Wills. Integrationof a will concernsthe problemof whatpagesshouldconstitutethewill. Thepape$thatarepresentwhen the will is signedandareintendedto be includedin the will areintegrated.rypically, theproblemadseswherethepagesof a will havenot beenfastenedtogether. Republicationby Codicil.Republication by codicilmeansan implied restatement of a validwill asofthe time of or rewritingof thelanguage by codicilhassometimes republication. Republication beenusedto validatea prior invalidwill.

Wills- 39

Incorporation by Refercnce.Pagesthat cannotbe integratedbecausethey werc not presentat the will's executionneverthelessmay be given effect under the doctrineof incorporationby reference.This doctdnerecognizesthat a duly executedwill may by appropriatereferenceincorporateinto itself any extrinsicdocumentor writing eventhoughthe otherdocumentwasnot propmustbe met: erly executed. Thefollowingrcquirements (i) The documentmusthavebeenin existence at thetime thewill wasexecuted: (ii) The will mustexpressly referto thedocumentin thepresenttense; (iii) The will mustdescribethe documentto be incorporated so clearlythat therc can be no mistakeas to the identitv of the documentreferredto; and (iv) The testatormusthaveintendedto incorporatethe extrinsicdocumentas part of the overall testamentaryplan. Clarkv. Greenhalge

40 - Wills

a.

Notebookincorporated by r€ference- Clark v. Greenhalge,4l I Mass. 4lo, 582N.E.2d949(1991). 1)

Facts.Testatrix,HelenNesmith(T), executeda will in l9?7 nam(D) executorandpdncipalbeneficiaryof anypering Greenhalge sonalpropertyexceptthat designatedby a memorandumknown to duringT's life. D had D or in accordwith T's wishesasexpressed helpedTdraft a documententided"Memorandum"in 1972;T modifrom time to time.T wishedher fied this list of specificbequests friend Clark (P) to havea painting and so listed it in a notebookT kept. T's nursesknew of her wish for P to have the painting and knew of the notebookand had observedT write in it. T executed two codicilsin 1980;T amendedsomebequestsandratifiedher UponT's death,D wasgivenT's notewill in all otherrespects. book.D distdbutedT's propertyin accordwith thewill asamended, the 1972memorandum, andcefiainof the provisionsin thenoteto him in the not€book,includingall of thepropertybequeathed an book.Howevetherefusedto giveP thepainting.P commenced actionto compelDto deliverthepainting.Theprobatecowt found: (i) T wishedP to havethepainting,(ii) thenotebookwasa memorandumwithin the meaningof T's will, (iii) the notebookwasin existence at thetimeof thecodicils,whichntified thelanguage of the will in its entirety,and(iv) the notebookwasincorporated by rcferenceinto the tems of the will. D appeals.

2)

Issue.WasT's notebookincorpomtedby referenceinto the terms of T's will?

3)

b.

Ileld. Yes.Judgmentaffirmed a)

A will may incorporateby referenceanydocumentnot soexecuted and whenthewill wasexecuted ifit wasin existence andwitnessed is identified by clear andsatisfactoryproof asthe paperrefenedto in thewill.

b)

Thecardinalrule in theintelpretationof wills is thatthe intentionof surthe testatorshallprcvail.T's languageandthe circumstances used to detercodicils are rcundingthe executionof T's will and mineT's intent.

c)

T intendedto retain the right to alter and amendher bequestsof tangiblepersonalpropertyin her will withouthavingto formally and T chosewasa memorandum, amendthewill. The mechanism pulhasas its the notebook,althoughnot titled "Memorandum," poseandis in the spidt of T's intent.T is not limited to only one memomndum.

d)

at thetime T executedher codicils,that Havingbeenin existence rcpublishingof T's intent incorponted the notebookby reference.

Validationof inoperativewill by holographiccodicil--Johnsonv. Johnson,279P2dc28(Okla.1954). 1)

of a DexterG Johnson(T), consisted Facts.The will of the decedent, paragraphs. The typewritten paper three typewritten with singlesheetof At thebotby two witnesses. portionwasnot dated,signed,or attested a bequest portion, T wrote in his handwriting $10 tomofthe t)?ewritten to his brother James.The prcpofientsof the will introducedevidence showirigthatT wasa practicingattomeywho hadpreparedmanywills; that he had told his inswancecounselorthat he hada will but it wasout of dat€;that he hadtold his rentalagentthat the typewdtteninsffument was his will and that he wantedhis rental agentto witnessit; that his rentalagentdid not do so but laterT told him thathe hadchangedhis will by codicilanddid notneedhim to signit asa witness.Thetdalcourt refusedto admit the instrumentto probate.The appellatecourt affirmed The proponentsappeal.

2)

codicilrepublishandvalidatea will that Issue.May a validholographic wastheretoforeinopentive becauseit wasnot signed,dated,or attested accordingto law?

3)

with directionsto reversed andthecaseremanded Held.Yes.Judgment probate. will for enterthe a)

Johnsonv. Johnson

wasnot signed, Thereis noquestionthatthetypew tteninstrument here, that it is not so defective, as A will may be or aftested. dat€d, Wills - 4l

entitledto probate,but if testamentaryin characterit is a will nonetheless.

4,

b)

to anexistingwill By definitiona codicilis a supplement madeby the testatorto alter,enlarge,or restrict its proviin chamcterA codicil sionsandit mustbe testamentary neednot be calleda codicil;rather,it is the intentionto add a codicilthat is controllilg. Here,the handwritten words arc testamentaryin characterand they make an ofthe will alrcadyin existence' additionto theprovisions of a valid Further,thecodicilmeetsall therequirements signed by T. hologaphiccodicil.It is wdtten,dated,and The fact that it waswritten on the samepieceof paperas thetypewdttenwill doesnot invalidatethecodicil.

c)

The generalrule is that a codicilvalidly executedoperatesasa republicationof the will no matterwhat detbcts mayhaveexistedin theexecutionof theeadierdocument, that the instrumentsare incorporatedas one, and that a propetexecutionof the codicilextendsalsoto the will. We thereforehold thatthe valid holographiccodicilincorporatedtheprior will by referenceandrepublishedand validatedtheprior will asof thedateof thecodicil.

4)

Concurrence. All rules of constuction are designedfor the purposeof effectuatingthe intent of the testatorTo hold otherwisewouldpermita contrarydispositionof thetestator'spropeny againstthepurposefor which the statutoryprcvisionswere aimed.

5)

Dissenl Thetypewdttenpartis not a will andthehandwritten partis not a codicil.T intendedthe typewrittenportionio be partof his will, not thecompletedwill. I canneversubscribe to the propositionthat a holographiccodicil will validateasa will an instumentthat is typewritten,unfinished,undated, unsigned,andunattested.Propertymay descendby will when the will is executedin confomity with the statutes

Acts of Independent Signiffcance.Under the (JPc, a will may dispose of propertyby referenceto actsandeventsthat have significanceapart madein the will (e.9.,"I devise from their effecton the dispositions in my sister'swill.") Blackacreto thepersonsnamedasbeneficiaries

D. CONTRACTS RELATING TO WILLS Conhactsto makea will, contractsnot to revokea will, andcontactsnot to the pertainingto wills. In theseinstances, makea will arekindsof contracts

42 - WiUs

law of contractsapplies.A will in violationof a validcontractmadeby thetestawill be subjectto contactualremedies(e.9.,impotor,whileit maybe probated, trust). sitionof constructive l.

Contracts to Make a Will. Many stateshaveenactedstatutesrcquiring that a contractto makea gift by will be in writing lf the promisorfails to makethe gift, the promiseehasa causeof actionagainstthe promisedtestamentary promisor's estatefor damagesfor breachof contract The measureof damagesis the valueof the propertypromisedto be devisedor bequeathed.However,if the caseinvolvesa promiseto makea deviseor bequestof specific prope.ty,the usualrcmedyis to grant a consfuctive tlust for the promisee's benefit.

,,

typicallyarisewhena husContractsNot to Revokea Will. Thesecontracts joint or mutualwills A numberof stateshave bandandwife haveexecuted relatingto a will, includinga rcquiringthatany agreement enactedstatutes with certainformalities in a writing executed contractnottorevokeawill, be The mereexecutionol reciprocalwills containingidenticalprcvisionsdoes not constituteevidencethatthewills werecontractual. Joint Wills. A joint will is the will of two or morc pefionsexecutedas a singletestamentaiyinstrument.In contrastto j oint wills, reciprocalwills, somecontaining wills of two or morcpersons timescalledmirrorwills, areseparate reciprocalprovisions. a.

Elective share in conflict with will contract-'Via v. Putnam' 626 So. 2d 460Gla. 1995). 1)

\4a v. Putnam

mutualwills contracting Facts.EdgarandJoannPutnamexecuted thatthesurvivornotdo anythingto defeatthedistributionschedule entircestateto the setforth therein.The wills devisedthespouse's survivor andthe residuaryestateto thechildrenuponthe su ivor's death.After Joanndied,Edgarrcmafiied anddid not executea subwill providingfor his newwife,RachelPutnam(P).Upon sequent the shareof a preterEdgar'sdeath,P filed a petitionto determine mittedspouseandanelectionto takeherelectivesharc.The childrenof thefirst marriage(Ds)filed claimsagainsttheestatealleging thatby marryingagain,Edgarhadviolatedhis contractnot to desetforth in his mutualwill. The rial featthe distributionschedule judgefoundthatthemutualwill constituted a bindingcontractand Summaryjudgto that contract. Ds werethird-partybenehciaries mentwasentercdfor Ds,who werefoundto be class7 obligations under Florida Law (third-party beneficiaries/crcditorstatus),and thejudgeconclldedthatP's pretemittedor electiveshareis subTheseconddisrict cowt of theestate. iectto theclass7 obligations thatits decisionconflictswith acknowledging of appealreversed,

Wills - 43

thethirddistrict'stuli ngin Johnsottu Girtman,542So2d 1033(Fla 3dDCA 1989).Ds appeal. childrenasthird-partybeneficiaIssue.Shouldtheclaimsof the decedent's givencreditorstatusunderFlodda parents be of their riesunderthemutualwills theintercstsof the survivingspouseunlaw whentheirinterestscontravene der the pretermittedspousestatute? Held. No. Judgmentaffirmed.

44 - Wills

a)

in S,nnp u We agreewith thedistrictcourt'srelianceon the reasoning Huff,315Md . 624,556A.2d252(1989),a caseidenticalto thisone.The Si/imp court found the public policy underlyingthe mariage relationshipandtheelectivesharcstatuterequiredit to rule in favor of prctecting thesurr'ivingspouse'sright to receiveanelectiveshare.The district cout found that Florida's statutesalso suggestthe samestrongpublic policy. The third districtin "/ortrsortook the view thatthe survivingspouse's statutorysharecanbe subordinatedto claimsof third-partybeneficiaries of previouslyexecutedmutualwills. ./o/irsonandothersimilarrulings have advancedfour rationalesfor giving priority to contractbeneficiarightsattachonly to propertylegallyand ries:(i) thesurvivingspouse's spouse,andthe will contractplaces equitablyownedby the deceased (ii) whenthesurvivingtestator equitabletitlein theconftactbeneficiary; acceptsbenefitsunderthecontractualwill, anequitableftust on dle Fopthe testatoris enerty is createdin lavor of theconttactbeneficiaries: titled only to a life estateandthe beneficiariestakethe rcmainderupon the testator'sdeath;(iii) whenthe suryivingtestatorbenefitsunderthe contractualwill, the testatorbecomesestoppedfrom making a different dispositionof the property,despitea latermaniage:and(iv) whenthe areenthe will conftact,the beneficiades survivingtestatorbreaches duation of judgment theories, the Under these creditor status. titled to the mariage makesno difference.

b)

principle We, like the covl in Shrimp,recognizethe well-established that contractsthat discourageor restrainthe right to marry are void as againstpublicpolicy.

c)

whenapresetforththreespecificcircumstances TheFloddalegislature estate: decedent's a share of the termittedspousewould not be entidedto (i) whenthe spousehasbeenprovidedfor or waivedprovisionby prerluptial or postnuptialagre€ment;(ii) whenthe spouseis providedfor in thewill; and(iii) whenthewill statesanintentionnot to providefor the appliedForusto Thetrial courtfoundnoneof th€seexceptions spouse. hold otherwisewould amendthe statutoryexceptionsand add a fourth. Wehaveno authorityto do so.

V. WIL A.

ST]BSTITUTES

CONTRACTSWITHPAYABLE-ON-DEATHPROVISIONS L.

Life Insurance.Theissuein thesecasesincludeswhethera beneficiarr policy canbe changedby will. A majorityof courts of a life insurance hold thatif the policy requireswrittennoticeof changeof beneficiary filed with theinsuancecompany,th€beneficiaryof a life insurancepolicy maynot be changedby will.

t

NontestamentaryTransfers at Death. Under the UPC, wdtten agreementsto pay,after the deathof the decedent,moneyor otherbenefitsto a persondesignated by thedecedent in eithertheinstrument or a separate writing aredeemedto be nontestamentary. Successor BeneficiaryNot Permittedin Life Insurance Contract-Wilhoit v. PeoplesLife InsuranceCo.,218F.2d887(7thCir 1955). a.

Facts.RoleyWilhoit was the insuredof a $5,000life insurance policyissuedbyCenturyLife andreinsuredby PeoplesLife (Dl). After Roley'sdeathin 1930,SarahWilhoit,his widow andbeneficiary,arrangedto leavetheamountdueheron depositwith Dl on specifiedterms,includingthatuponherdeathanyremainingfunds plusaccruedinterestwouldbe paidto herbrothet RobertOwens. RobertOwensdied in 1932leavingall his propertyby will to ThomasOwens(D2). Sarahwilhoit died in 1951.Her will purportedto leavethe fundson depositwith Dl to RobertWilhoit (P). Both P andD2 claimthe funds;D1 refusedto recognizeP's claim.The district court grantedP's motion for summaryjudgment,andD2 appeals.

b.

policy areto be disIssue.Wherethe proceeds of a life insurance posedofin accordance with its provisions, maya beneficiary of the policy designatea successorbeneficialy to take uponthe deathof theprimarybeneficiary?

c.

Held. No. Judgmentaffirmed. l)

Wilhoit v. Peoples Life Insurance Co.

ofa life insurDs relyoncasesthathaveheldthattheproceeds of in accordance with its proviancepolicyareto bedisposed if authorized by thepolicy,may sions,andthata beneficiary, designatea successorbeneficiaryto take on the deathof the primary beneficiary.This contenilonis without merit if we do not acceptthe premisethat the agreementbetweenSarah Wilhoit andthecompanywasaninsurancecontractor anagrce' mentthereto.Werejectthis premiseandhold that the arrange-

Wills- 45

mentbetweenthepartieswastheresultof a sepanteandindependentagrcement, unrelated to thetermsofthe policy.

Estateof Hillowitz

4.

2)

SarahWilhoitdid nottakeadvantage ofthe investment provisionin theinsurance policyby whichshecouldhave left theproceeds with the companyon the termsandconditionsstatedtherein.Instead, she acceptedthe proceedsand surenderedthe policy. Only later did sheby lettermakeherownproposal, whichwasaccepted by the companyon conditionsthatdifferedmateriallyfrom thosecontained in thepolicy.We agreewith B the.eforc,thatthe provisionin the agreement by which RobertOwenswasto take the fundsin the eventofher deathwasaninvalidtestamentary disposition.

3)

Finally,it is not immaterialto takeinto consideration the intentions of the parties.Here,SarahWilhoit in her will specifically devisedthefundsin controversy to P Itthus appea$plainthatshe did not intendthefundsto go to the successors of RobertOwens but thar,afterhis death,shethoughtshehada right to disposeof the fundsasshesawfit. While we recognizethatthe intentionof the partiesis not controlling,we think that it is entitledto some considemtion.

InvestmentClub Proceeds-Estate of Hillowitz,22N.y2d 107.238N.E.2d 723,291N.y.S.2d325( 1968\. a.

Facts,AbrahamHillowitz's (T's) executors(Ps)brcughta discoveryproceedingin surrogate courtagainstT's widow (D) to havedetermined whetherT'sinvestment clubcontractto havehis sharepaidto his widow uponhisdeathwasaninvalidattemptto makea testamentary disposition of property.The surrogatecout ruled for D; the appellatedivision for Ps.D appeals.

b.

Issue.Is a partnershipagreementproviding that, upon the deathof one partnethisjntercstshallpassto thesurvivingpartneror partneff,resting in contract,valid?

c.

Held.Yes.Orderreversed. 1) Thereis no differencebetweena contractprovi.lingfor surviving paftne(s)andoneprovidingfor a survivingwidow.

46 ' Wills

2)

Thisis a third-partybeneficiary contract,performable at death,and it neednot confom to therequirements of thestatuteof wills.

3)

Othersuchcontractsinclude(i) a contractto makea will. (ii) an intervivosftustin whichthe settlorrcservesa life estate.and(iii) aninsurance policy.

5.

Changeof B€neffciary of Life Insurance Policy by Will--Cook v. Equita. ble Life AssuranceSociety,428N.E.2d110(Ind.App. 1981). a,

Cookv. EquitableLife Assurance

a wholelife inDouglasCook(T), hadpurchased Facts.The decedent, asthebenefi policy naming his wife at that time, Doris, in 1953 surance ciary In 1965,T andDorisweiedivorced.The divorcedecrcemadeno policy.AfterthedivorceT ceased payprcvisionregarding theinsurance policy,andthe inswancecoming the premiumson his life insurance panynotifiedhim in 1965thathis wholelife policy wasautomatically convenedto a paid-upterm policy.The policy containeda provision by writtennoticeprovided allowingtheownerto changethebeneficiary company.ln thatthe changeis endoNedon thepolicyby theinsurance Daniel, was bom to them. In 1976, T married Maryarct, and a son, 1965, policy his insurance T madea holographicwill in whichhebequeathed to his wife andson. T's insurerbroughtaninterpleaderactionto determinewhetherT's former wife, Doris,the namedbeneficiaryon the life insurancepolicy,or T's the widow andchild,MargarctandDaniel,to whomT hadbequeathed policy in a holographicwill, wereentitledto the proceeds of insurance T's policy.The circuitcourtentercdsummaryjudgmentin favorof T's formerwife, andwidowandchildappeal.

b.

Issue.Can a beneficiaryof a life insurancepolicy be changedby the in his will? testator's intentasexpressed Held. No. Judgmentaffirmed. 1) An insured'sattemptto changethebeneficiaryof a life insurance policyby will, withoutmore,is ineffectual. 2)

to requircandto follow It is in theinterestof inswancecompanies in thechangeof beneficiaries sothattheymay specifiedprocedures paybenefitsto persons properlyentitledto themwithoutsubjecting to claimsby othe6 of whose.ightsthey hadno notice themselves arealsoin theinterestof benefior knowledge.Theseprocedules will not feel obliciadesthemselves, sinceinsumncecompanies gatedto withholdpayment in fearof until a will hasbeenprobated, litigationthatmightresultfrom havingpaidthewrongpafy.

3)

Substantialcompliancewith therequirementsof aninsurancepolicy will be sufficientto changea beneficiaryaslong astheinsuredhas doneeverythingin his powerto effectsucha change.Underthese facts,thercis no indicationthatT took any actionin the 14 years betweenhis divorcefrom Dorisandhis death,otherthanthe makpolicy of hislife insurance ing of thewill, to changethebeneficiary Wills - 47

from Doris to MargaretandDaniel.If T hadwantedto change the beneficiary he hadampletime andoppofiunity to comply with thepolicyrequirements. 4)

Publicpolicy requiresthattheinsurer,insured,andbeneficiary shouldbe ableto rely on the certaintythatpolicy provisions pertainingto the namingand changingof beneficiaries will control exceptin extremesituations.

B. JOINT TENANCY AND MULTIPLE-PARTY BANK ACCOUNTS

Franklin v. AnnaNational BankofAnna

1.

Tlpes ofAccounts.Multiple-paftybankaccounts includejointandsurpayable-on-death vivor accounts, accounts, agencynccounts,andsavlngsaccounttrusts.

2.

Joint BankAccount:Lack ofDonativeIntent-Franklin v.Anna NationalBankofAnna, l40Ill. App.3d 533,488N.E.2dlllT (1986). a.

Facts.Theexecutorofthedecedent's estatebroughtanactionagainst the bank allegingthat fundsin a joint savingsaccountwerc the propertyof the estate.The bank interpleadedthe decedent'ssisterinlaw, Cora Goddard,who assertedher dght to the money as a survivingjointowner. The decedenthadhadeyesurgeryand,accordingto Goddard,was losinghiseyesight. Coddardsubsequently movedin with thedecedentto helphim. Goddardclaimsthat sheandthe decedentwentto thebankto havehismoneyputin boththeirnamessoshecouldget moneywhentheyneededit.Sheallegesthat"hewantedmeto have this moneyif I outlivedhim." Goddardtestifiedthat shedid not depositanymoneyin thesavingsaccountto which sheandthedecedenthadsigneda signaturecard.Shemadeno withdrawals,though sheonce took the decedentto the bank so he could make a withdrawal.Later in the year Enola Fmnklin (P) beganto carefor the decedent.The decedentsentP to the bank to deliver a handwdtten letter signedby the decedentin which he attemptedto changethe nameof thejoint ienantto P The bank,however,would not remove a signaturefrom a signaturecard basedon a letter.Thus, the most recentsignatuecardthebankhadfor thesavingsaccountwassigned by the decedentandcoddard. The trial coult found that Goddardwasthe soleownerof the funds in the savingsaccountby dght of survivo$hipas survivingjoint tenant,andthat no part of the funds becarnepart of the decedent,s estate.P arguesthatthe decedentdid not intendto makea gift of the savingsaccountto Goddard.After remandby the appellatecourt, the circuit court enteredjudgmentfor Goddard.P appeals.

48 - Wills

b.

Issue,Doesevidenceof lackofdonativeintentat thetime of creationol severlhejoinl tenancy? ajointlenancy

c.

ofthe circuitcoul reversecl Held.Yes.Judgment speaks 1) Theinstumentcreatingajoint tenancyaccountpresumably the whole truth. In orderto go behindth€ tems of ajoint tenancy agreement,oneclaiming adverselytheretohasthe burdenof estab' thata gift wasnotintended evidence liihing by clearandconvincing

3.

2)

is not conclusiveregarding The form of ajoint tenancyagreement the intentionof the depositofi betweenthemselves'

3)

Evidenceof lack of donativeinteflt mustrelateback to the time of crcationof thejoint tenancy.The decisionof the donor' madesubsequentto the creationof thejoint tenancy,that he did not want the pr;ceedsto passto the survivorwould not, in itself, be sufficientto severthejoint tenancy.

4)

It is properto considerev€ntsoccurringaftercreationof thejoint accountin determiningwhetherthedonoractuallyintendedto hansfer his interestin theaccountat hisdeathto thesurvivingjointtenant.

5)

nameto Evidencethat,ninemonthsafteraddinghis sister-in-law's his savingsaccount,thedecedenthadattemptedto rcmoveher name and substituteanotherand that the decedenthad written lettersto the bank indicatingthathe might losehis sightandbe unableto that the deceden! established transacthis own bankingbusiness, joint accountfor his a signatoryof the hadmadehis sister-in-law in casehecouldnot gethis money,andnot with ownconvenience, the intent to effect a presentgift lt doesnot appearthat Goddard everexercisedanyauthorityor control over thejoint account Such death,moneyin that,uponthedecedent's thusestablished evidence estate' the decedent's propefiy of thejoint accountwasthe

v Blanchette,362 StockCertilicatesHeld in Joint Ten^ncy.lt\Blanchette for AI&T and worked (1972), Blanchette Robert Mass.518,287N.E.2d459 he Whenhe acquiredtheshares, ofstockin thecompany. beganto buy shares joint The tenants as their names toldhis wife,Marie,thatheputthemin both certificateswereissuedat his request:"RobertL. Blanchette& Mrs Marie A to himselfandMarie"as assignments Heexecuted JointTenants." Blanchette, JointTenantswith rightsof survivorshipandnot asTenantsin Common-" Robertnevertold Made that sheownedhalf the stock.The certificateswere kept in the wardrobeof thei bedroomup to the time they separated:atlhat but did not askfor anyof the oneofthe two bankbooks timeMariedemanded stock.No evidenceexistedthatshemadeanyclaim to the stockbeforethe Wills - 49

parties'divorce.Marie broughta petition in connectionwith the divorce to detemine her interestin the stock.The petition wasrcfered to a master,who heldthatRobertneverat anytime indicatedthathe intendedto transferanyprcsentinterestin the stockto his wife. The masterfound that the words"joint tenants"werc usedbecausethis wasthe only form of issuanceauthorizedby thecompanythat would approximateRobert's desireto makehis wife his beneficiaryif he died. On appeal,the court deteminedthatcertificates ofstockheldinjoint tenancybetweena husband and wife may be paid to the wife upon the deathof the husband without the arrangementbeingdeclaredtestamentaryandvoid. Thecourtfoundthattheintentionwasclearthatthehusband wasto have solecontrol during his life andthat whatevershouldremainat his death, ifthe wife survived,shouldripenintofull ownershipby her Thefinding that no presentgift wasintendedwould havethe effect of frustratingthe intentionof the ptutiesby renderingtheir arrangementtestamentaryand void. The court avoidedthis result by finding a presentgift of a futule interest,subjectto a reservedlife estatein the husbandandsubjectto his powerto revokehis wife'sinterest.

c.

JOINT TENANCIES IN LAND Onecommonmethodof avoidingthe cost and delayof probateis to hold propertyin joint tenancyor tenancyby the entirety.Whenonejoint tenantor tenantby the entiretydies,the survivorownsthe propertyoutright.The share of ajoint tenantcannotbe devisedby will. If ajoint tenantdoesnot wantthe co-tenantto takehis shareat death,hemust severthejoint tenancyduring his lifetime,thuscrcatinga tenancyin common.Credito$of ajoint tenantcan Ieachthejoint tenant'sinterestonly dudnghis life.

D. REVOCABLE TRUSTS

Farkasv. Williams

1.

Intmduction. In a revocabletrustthe settlorhasthe powerto revoke, alter, or amendthe aust and has the right to trust income during her lifetime.Revocable tnrstsarcvalidin all jurisdictions.

2.

Retention of Control by Settlor. If the settlorretainsnumercuspowers andlacksthetrueffust "intent," thetrustmay beruled illusory.However, aslong asthe trust createssomeinterestsin somecategoryof beneficiaries, couts will rerognizea valid nontestamentary tust eventhoughthe settlorrctainsextensive powers. a.

Creationof valid inter vivostrust notwithstandingcontrol re. tained by settlor/trustee-Farkas v. Willi ams,5 lll. 2d 4l'7 , 125 N.E.2d600(l955). l)

50 - Wills

Facts.Albeit B. Farkas,whodiedintestate, on four Durchased

occasions duringhis life thestockoflnvestorsMutual,Inc.,insftuctingit, by meansof a wdttenapplication, to issuethe stockin his name.,astnisteefor RichardJ. Williams." Farkasalso signedseparatedeclarationsof trust, all of which wereidenticalexceptasto dates.In eachof thesedeclarations,Farkas reservedto himselfas settlorthe followingpowels:(i) the dght to receive during his lifetime all cashdividends;(ii) the right at any time to changethe beneficiaryor revokethe trust; and (iii) upon saleor redemptionof any portion of the trustproperty,theright to retainthe proceedstherefromfor his own use.The co-administratorsof the estate(Ps)bring this actionto havedeclared theirlegalrightsin thefour stockcertificates. Thecircuitcourtfoundthatthc declarationswerc testamentaryin characterand, not having beenexecuted with the formalities of a will, were invalid, and directed that the stock be awardedto Ps as assetsof the estaleof Albert Farkas.The aDDellatecoun affirmed.WilliamsandlnvestorsMutualI Dsl appeal. 2)

3)

Issues. a)

Doesthe fact that the interestof a beneficiaryis contingentupon a certain stateof factsexistingat thetime of the settlor'sdeathindicatethat no prcsentinterestis acquiredin the subjectmatterof a tust, andhence rcndera tust insfument testamentaryin character?

b)

Doesthe rctentionof power by a settlorto sell or redeemstockandkeep theproceedsfor his own use,to changethebeneficiary,andto rcvokethe trust indicatethat the settlor hasretainedsuchcontuolover the subiect matterofa trustsoaslo rendera trustinsfumenlteslamenlarv in chara(_ ter?

Held. a) No. b) No. Judgmentreversedandremanded. a)

Williams acquircda presentinterestin the subjectmatterof the intended tusts. Farkas,irDmediately afterexecutionof theseinstruments, could not dealwith thestockthesameasifhe ownedthepropertyabsolutely. As trustee,Farkasis heldto haveintendedto takeon thoseoblisations that areexpresslysetout in the instrument, as well as thosefiJuciarv obligationsimpliedby law. (l)

The fact that the trust instrumentprovidesthat .,thedeceaseof the beneficiarybefore my deathshall operateas a revocationof thrs trust" doesnot changethe result. The dispositionis not testamettary and the intendedtrust is valid eventhoughthe interestof the beneficiafyis contingentuponthe existenceof a certainstateof facts at the time of the settlor,sdeath.

(2) Admittedly,absentthis prcvision,Williams,sinterestwouldhave beengreater.But to saythathisinterestwouldhavebeengreateris not to saythathe did not havea beneficialinterestdurinsthelife_ timeof Farkas.

W ills- :

b)

Farkasdid not retain such contol over the subjectmattgr of the trust as to rcnderthe trustinsfumentstestamentary in character. The retentionby the s€ttlorof the powe. to revoke,evenwhen coupledwith a rcservationof a life interestin the trust property, doesnotrenderthetrustinoperative for wantofexecutionof a will. (l)

A moredifficult problemis posedby the fact rhatFarkasis alsoftusteeandassuchis empowercd to vote,sell,andotherwisedealin andwith thesubjectmatterof thetrusts.Here,the controlreservedis not as greatas in thosecaseswherethe powerisrcservedtotheownerassettlor,for astrusteehemust conducthimselfin accordance with standards applicableto trusteesgenerally.Williamswould havehad an enforceable claimagainstFarkas'sestatewereFarkasto haveimproperly dissipated thestock.

(2) Anotherfactorin determining whetheranintervivostust existsis tle fomality of thetnnsaction.Here,the stockceitificatesin questionwereissuedin Farkas,snameastrusteefor Williams.He thus manifested his intentionin a solemnand fonnal manner In re Estate andTrust of Pilafas

b.

Inter vivos trust revoked-/r, /e Estate and Trust of pilafas. 172Ariz. 207. 836P.2d420 (1992). 1)

52 - Wills

Facts.Thedecedent, StevenPilafas(T),executeda trustappoinring himselftrustee. Theagreement directedthatuponT's death,a poitionofthe ftustestatewouldbe distributedto eightnonprofitorganizations (ps). Theremainingportionwasto be heldin vtuioustrusts.Two of T's chil_ drenwereexplicitlyomitted.Thetrustincludeda revocation/amendment provisionthatT exercised twice.On theoccasionof thesecondamend_ mentin 1987,afterT's divorce,T simultaneously executeda will that gavetheresidueofhis estateto thetrust.Subsequently, T,s relationships wrlh his childrenfDst rmproved. Duringthe lastmonthof hls life,T indicatedto his attomeyhis intentionto revisehis estateplanto include all hischildren. T s arrome)hadgivenf theoriginals;fthelrust.the amendments, andthe will immediatelyaftertheywereexecuted. Upon T s dealh. T s sonunsuccesslully searched T s houselor rhedocumenrs. Ds testifiedthatT fastidiouslysavedimportantdocumentsandthatT wasa manofdirectactionwhohadbeenknownto tearor discardDaDers thirroffended him.T s sonfrleda petitionfor appoinrmenr of a ipecial administatoranda specialtrustee,a petitionfor adjudication of intes_ tacyanddetermination ofrevocationof fust, andaskedthecoultto au_ ps objected,seeknga thorizehim to transferall trustassets to T's estate. determination thatT hadrevokedneitherhis will nor thetrust.Thetdal coufi grantedDs' motion for summaryjudgment.ps appeal.

2)

3)

Issues. a)

Did D presentsufficientevidencethatT revokedhis will?

b)

Did the trial court en in determiningthat T effectively revokedhis inter vivos trust?

Held. a) Yes.Ruling affirmed.b) Yes Ruling reversed. a)

Ds' argumentrelieson the commonlaw principlethatif a will is last seenin a testator'spossessionand cannotbe found after his death,thereis a prcsumptionthat the testatordestroyedthe will'

b)

Ds submittedaffidavitstendingto provethat(i) T took possession kept importantpapers,and (iii) a of his will, (ii) he meticulously diligentsearchdid not uncoverthewill Ps offeredno evidenceto rebut.

c)

A ttust, unlike a will, involves the presenttransfer of a property interestto beneficiaries.Theseinterestscanonly be takenfrom the (i) in accordwith a trustprcvision'(ii) by their own beneficiaries acts,or (lii) bYa courldecree

d)

T's trust providedfor revocationonly by written insfument'

e)

(Second)of Torts,section330, ard ln accordwith ihe Restatement we holdthatT couldonly revokehis trust coinrnentary' accompanying in thernannerprovidedfor in thetrustinstrumentlf a settlorrese es a powerto levokethe tlust by a transacdoninter vivos, for example' bt a noticeto thetustee, he cannotrevokehis tust by his will'

Cr€ditors may rcach trust assetsover which the settlor had control at the time of his death--State Strtet Bank & Trust Co. v. Reiser' 7 Mass App ct. 633.389N.E.2d768(1979). 1)

WilfredA. Dunnebier(T), createdan inter vivos Facts.The decedent, trust with the power to amendor rcvoke the trust, and conveyedto the trustthe capital stockof five closelyheld corpomtions lrnmediatelyfollowing the executionof the trust,T executeda will underwhich he left his rcsiduaryestateto the tust he hadestablishedThereafter,T applied to theStateStreetB ank& TrustCo.(P)for a loan,whichwaslatergranted' Approximatelyfour monthsafterheborowed the money,T died andhis duethebank' esiite hadinsufficient assetsto pay theentireindebtedness P seeksto reachthe assetsof the inter vivos trust'

2)

Issue.Whena settlorplacesPropertyin trust,may the settlor'screditors reachthoseassetsownedby the trust over which the settlorhad control at the time of his death?

StateStreet Bank & Trust Co. v. Reiser

Wills- 53

3)

4)

Held,Yes.Soordered. a)

We hold that wherca personplacespropertyin trustandrcservestheright to amendandrevoke,or to directdisposition of principalandincome,the settlor'screditorsmay reach,in satisfaction of thesettlor'sdebtsto them.thoseassets owned by thetrustoverwhichthesettlorhadsuchcontrolat thetime ofhis deathaswouldhaveenabledthe settlorto usethetrust asselsfor his own benefil.

b)

Assetsthatpouroverinto sucha trustasa consequence ofthe settlor'sdeathoverwhichthesenlordid not havecontrolduring his life arenot subjectto thereachofcredito$.

Comment.If probateassetsare insufficient,UPC section6-215 allowscreditorsto reacha decedent's Davable-on-death accounts andhisjoint bankaccounts.

3. Testamentaryr?our-Over" into an Inter Vivos Tiust. Pour-overwills are usefulto establish anintervivostrust,whichlatermergesinto theestateafter the deathof the settlor.The settlorcreatesa revocableinter vivos trustby narninga tustee andthentransferingprobateassets to thattrustee.Theseftlor thenexecutes a will devisingtheresidueofhis estateto thetrustee,to hold askusteeunderthe termsof the trust.

Clymer v Mayo

a.

Uniform TestamentaryAdditions to Tfusts Act. This Act validatesa testamentary gift to a trustprovidedthetrustis sufficiendydescribedin the testator'swill. The hustinshurnentmaybe executedafterthe will. This is so whetherthe trust wascreatedby the testatoror by a third p€rsonand whetherit wasmodifiableor in fact modified.The sizeandextentof the tlust corpusduringthe testator'slifetime is likewiseirnmaterial.The Act specificallyvalidatesgifts to eitherfundedor unfundedlife insurancetrusts, evenif thetestatorhasreserved all rightsof ownershipin thepolicies.

b.

Effect of divorceon yalidity ofdispositionsto former spousemade by revocableint€r vivostrust-.Clymerv. Mayo, 393Mass.754,473 N.E.2d1084(1985). 1)

54 - Wills

Facts.The decedent, ClaraMayo (T), diedin 1981.Shehadbeen marriedto JamesMayo (D) from 1953to 1978.The couplehadno children,andT's soleheirsat law areherparents(Pls).As a consequenceof a $300,000gift to thecouplefrom T's parentsin 1971, sheandDexecuted newwills andindentuesof trustin 1973wherein eachspousewasmadetheother'sprincipalbeneficiary. Underthe termsof T's will, D wasto rcceiveherpe$onalproperty.Thercsidueof herestatewasto "pour over"into the inter vivos trustshe createdthat samedav.

T's tust insffumentnamedherselfandJohnHill asaustees.As thedonor,'l retainedthe right to amendor revokethe tust at any time by written instrumentdelivercdto the tustees. In the eventthat D survivedT, the tust estate wasto be divided into two parts.TrustA wasthe madtal deductiontrust' The balanceof T's estate,or theentireestateif D did not surviveher,composed Trust B. Trust B provided for five specific bequests.After those gifts were satisfied,the remainingtmst assetswere to be held for the benefit of D for in TrustB wercto beheldfor thebenefitof T's life. UponD's death,theassets living at thetimeof herdeath.Whenall of thesenephews andnieces nephews andniecesreach€dthe ageof 30, the trust wasto terminateandits remaining assetswercto be dividedequallybetweenClarkUniversityandBostonUniversity. into the deTheMayosdivorcedon January3, 1978.The courtincorporated creea stipulationof the parties' propetty settlementUnder the termsof that savingsacD waivedanyright,tide, or interestin T's secudties, settlement, countsandcertificates,retirementfund, fumiture, andart. ofT'sestate(P2)petitionedfor instuctionson theeffectof Theadministrator T's parentsbroughtactionsfor deT's divorceon theestate'sadministration. claratory and equitablerelief to precludeD ftom participatingin the estate P1s'action,and andto removeP2.The probateandfamily courtdismissed appealwastaken. 2)

3)

Issues. a)

Did T createa valid trust despitethe fact that it wasnot fundeduntil her death?

b)

Doesa statutethat revokesany dispositionto a former spousemadeby will apply to revoke dispositionsto the former spousemadeby a revocableinter vivos trust that hasno funding or practical significanceuntil death? thedecedent's

Ileld. a)Yes.b) Yes.Judgmentaffirmedin part,reversedin paft,andremanded' a)

statutegoveming'?our-over" deYises,T's In light of the Massachusetts with her will was valid inter vivos trustexecutedcontemporaneously until her death. not receive funding trust did despitethe fact that the

b)

Probatecourtsareempoweredto terminateor reform a tust in whole or in part when its puposes have becomeimpossibleto achieveand the settlor did not contemplatecontinuationof the fiust undernew circumstances.

c)

by T' inasmuchassuchtransfer D couldnot takeunderthetrustestablished qualify for a marital deductionfor federal to was intendedby its terms

Wills- 55

estatetax purposes,andsuchobjectivebecameimpossibleafter the parties'divorce.Thereforethe trust waseffectively terminated. d)

Refercnceto an existingtrustin a will's pour-overclauseis not of itself sufficient to incorporatethat trust by reference withoutevidencethatthetestatorintendedthatresult. The Massachusetts statutethatopemtedto rcvokeanydisposition to a former spouse"madeby the will" wasalsoapplicable to revokedispositionsto a decedent'sdivorcedhusbandmade in a revocableinter vivos tnrst executedcontemporaneously with her will, inasmuchasthe trusthadno funding or practical sisnificance until thedecedent's death.

4.

56 - Wills

0

InasmuchasT hadno siblings,andthushadno nephewsor nieceswho wereblood relations,T's bequestin the indentue of trustto "nephewsandniecesof thedonor"createda latent ambiguity.The trial cowt thereforeproperly consideredextrinsic evidenceto determinethat T intendedthe bequeststo go to thenephewsandniecesof D.

g)

The statutethat operatedto revoke any testamentarydisposrtion to a former spousedid not apply to rcvokeT's bequestin indentureof tust to D's niecesandnephews.

Useof RevocableTfusts in Estate Planning. a.

Consequencesduring life of settlor. Durisg the life of the settlor, a rcvocabletrust may be usedto relievethe settlorof the burdensof financial management, to dealwith thecontingency ofthe settlor'sincompetency,and to cladfy title andownershipof assets.Therc are no fedeml taxadvantages in creatinga revocable trust,sincetrustincomeis taxable to thesettlorregardless of to whomit is paid.

b.

Consequencesat death of settlor. Upon the deathof the settlor,a revocabletrustcanbeusedto avoidprobate.Undera revocabletust continuing afterthesettlor'sdeath,incomeandpincipal canbedisbursed to the beneficiarieswithout significantdelay.In contrastto probale,thercis no short-termstatuteof limitations applicableto revocabletruststo cut off therightsof creditors.A rcvocablerust avoidspublicitysinceit is not rccordedin a public place.To avoid ancillary probateover rcal propefiy locatedoutsidethe domiciliary state,land in anotherstatecanbe transfenedto a revocable intervivostrust.In somestates, thelaw mightpermit a fundedrevocabletrust to defeata spouse'selectivesharein certain circumstances. An inter vivos tlust of penonalpropertymay be govemedby thestatelaw ofthe settlor'schoice.In practice,it is mor€diffi-

cult to setasidea revocabletrustthana will on groundsof lack of mental capacityandundueinfluence.Finally,a revocabletrust that becomes cantherebycontrolthesurvivirrevocable uponthedeathoione spouse of ptopen). disposilion ingspouse's

5. Durable Power of Attorney. A duable power of attomey may be usedto plan for incapacity. Agent's action upheld--Franz€nv. Norwest Bank Colorado, 955P2d 1018(Colo.1998).

r)

Franzenv. NorwestBank Colorado

Facts. Janes Franzencreateda tust for the benefit of himself and his wife. FrancesFranzen.anddiedfour monthslater.Mrs. Franzen, who wasliving in a nursinghome,wasadvisedbya NorwestBank trust officer that pursuantto the trust instrument,threemonthsatter death,shecoulddirectthatthetrustcontinueor that herhusband's residuary trust estatebe transfered to her. Mrs. Fmnzenindithe catedshewishedthe trustto continuefor her lifetime.Concemed because thetrustdid not includeMrs. Franzen'svacanthomeand Mrs. other assets,the bank contactedthe trust remaindermen, intervene. James They were reluctant to two nephews. F@nzen's brother,wasnot,howeverHe movedMrs. O'Brien,Mrs.Franzen's providedthe bank with a power of attorand Franzento Kentucky behalf,and neypurportingto authorizehimtoactin Mrs.Franzen's asfilstee. the trust and rcmove the bank a letterattemptingto revoke Thebankfiled a petitionfor adviceandlatera petitionfor appointaskingthe probatecourl to protectMrs. ment of a conservator, Franzen'sassets.The courtfoundthepowerof attomeyhadcrcThe ateda valid agency,but thatthe trustcontinuedin existence. bankwasappointedspecialfiduciarywith responsibilityfor both tust and non-trustassetsand directedto usethe assetsto make The paymentsfor Mrs. Franzen'sbenefit.Mrs. Franzenappealed. Thebankappeals. reversed. courtof appeals Issue. Under the commonlaw, must a power of attomeythat appowersto dispose pearsto givetheagentsweeping of theprincipal's surpropertybe narrowlyconsfuedin light of the circumstances andif so,maythe roundingtheexecutionof theagencyinstrument, principalconferon an agentauthorityto amendor revokefusts withoutreferdngto thetrustsby namein thepowerof attomey?

1I

affirmed. Held.Yes.Judgment a)

death, The trustinstrumentprovidedthatafterher husband's Mrs. Franzencouldremoveanytrusteewithoutcause.It furtherprovidedMr. Franzencould amendor revokethettustin wholeor in partby a writingdeliveredto thetrusteeandafter Wills - 57

Mr. Franzen's death,Mrs. Franzencouldexercisethesepowrespect to theentirctrustestate. erswith b)

While underColorado'spowerof attomeystatuteanagentmay notrevokeor amendaaustwithoutspecificauthorityandspecific referenceto the trustin the powerof attomey,that statute went into effect almosttwo yearsafter Mls. Fmnzenexecuted a power of attomey. Pinciples of statutoryconsruction and legislativehistoryleadusto concludethe statutewasnot rctroachve. Thereis no commonlawrulethatrequiresa powerof attomey to referto a trustby name.The casesrcquircthat a broadpower and be constuedin light of the surroundingcircumstances, wherethe broadly wordedpower authorizesactsthat may be with theprincipal'sintercsts,the actsshouldnot inconsistent of specificauthority. be pemittedin theabsence

o)

4)

58 - Wills

TheinstantpowerauthodzesO'Brien to revoketrusts,andwhile authorizes O'Bdento not specific,we concludethatlanguage Franzen fust. revokethe

the powerto Comment. This holdinggivesthe attomey-in-fact p.incipal incompetent. An aftorbecomes changethewill oncethe neywho draftssuchabroadpowermay unleasha dangerousweapon individual. in thehandsof anunscrupulous

6.

Health.Care Directives.ln Cruzanv. DirectotaMissouri Departmentof Courtheldthata pe6onmaymake Health,49']U.S.26l (1990),theSuprcme known her desiresregardingterminationof medical fteatment,or may approvidingstatelaw requirements point a surogateto makethosedecisions, aremet.

7.

Terminationof MedicalTreatmenl A living will providesthatthelife of a terminally ill personshall not be prolongedby extraordinarymeasrres.A durablepowerof attomeyfor healthcareis an altemativeto a living will. It putsdecisions in thehandsof a third person;theagentis rcgardingtreatment whenthepatient'swishes empowered to respondto changingcircumstances arenot known.

8.

DispositionofDecedent'sBody.All stateshaveenactedUniformAnatomical GiftActs,whichallowa pe$onto donatehis bodyto anyhospital,physior hansplantation. cian,or medicalschoolfor research

VI. W[LS: CONSTRUCTIONPROBLEMS A.

ADMISSION OF EXTRINSIC EVIDENCE: AMBIGLTITI MISTAKE' AND OMISSION to changetheplainmeaning In general,exffinsicevidenceis not admissible do notapplythisrulerigjdlybutinvokea preof i will. Somejurisdictions sumptionlhatcanbeovercomewith srong evidenceol a conttarymeanlng' in a will' to resolveambiguities Parolevidencemaybe admissible 1.

Latent Ambiguities. A latentambiguityexistswhenthe languageof the to morethanonemeanlng will, thoughclearon its face,is susceptible whenappiiedto theextrinsicfacts ln thesecases,parclevidenceis aomissibleto rcsolvethe ambiguity'

2.

Patent Ambiguities. Apatent ambiguityexistswhentheuncertarntyappearson thefaceof th€will. The traditionalview is that parolevidencels ;ot admissibleto clarify a patentambiguity The modemffend is to adaswell' mit parolevidencein theseinstances

3.

No Extrinsic Evidenceto Correct Drafter's Mistake-Mahoney v' Grainger'283Mass.189,186N E 86 (1933) a.

Facts,Upon Sullivan's(T's) death,her only heir at law washer aunt.However,shortlybeforeT's death,Texecutedawill,insfucting her attomeyto leavethe rcsidueof her estateto her 25 cousins an-d"let them shareequally." The languageof the residueclause read:"I give, deviseandbequeathto my hei6 at law living at the to be dividedamongthemequally' absolutely; time ofmy decease, shareand sharealike." The prcbatecowt denieda petition for distributionto thefirst cousins.Certaincousinsappeal'

b.

Issue. Are T's statementsregardingT's understandingof "heirs at law" admissible?

c.

Held. No. Decreeaffirmed. l)

are admissibleonly to give evidence A testator'sstatements is not clearin its applicationto language wheretestamentary will notbeallowedifthe property thefacts.Extrinsicevidence or theidentityofthe beneficiaryis clearlyandabbequeathed solutelyidentified

2)

Theteis no doubtasto themeaningof "hei$ at law " A draftert mistakedoesnot authorizea court to reform or alter a duly €xecutedandallowedwill

Mahoneyv. Grainger

wills - 59

d. Flemingv. Morrison

Estateof Russell

4,

Failureto Complywith Statutory R€quirements--Fleming v. Morrison, 187Mass.120,72 N.E.499(1904). a.

Facts.FrancisButterfield(T) executeda shamwill leavingall of his propertyto Flemingin an effort to get her to sleepwith him. The will wasdraftedby Goodridge, T's attomey,who alsoattestedthe will asa witness.Pdor to havingtwo otherwitnesses attestto T's signature, T informedGoodridgethat the will wasfake and wasmadefor a specific purpose. Thewill wasadmittedto prcbate.Contestants appeal.

b,

Issue. Has the proponentof the will proved the necessatyanimus testantli?

c.

Held.No. Decreereversed; instrument disallowed. l)

T indicatedto his attomeythatthe will wasa sham.

2)

It is competent to contradictby parolethe solemnstatements containedin aninstrument thatis a will, thatit hasbeensignedassuch by thepersonnamedastestator,andattestedandsubscribedby personssigningaswitnesses.

3)

If theanimustesldndidoesnot existwhena will is signedor acknowledged before,or attested andsubscribed by,eachofthe necessarythreewitnesses, the statutoryrequirements havenot been compliedwith.

4)

Herc,if acknowledgmentof a.nimusteslandiof a signatulenot originallymadewith thatanimrr is enough,ifT hadacknowledged the instrument subsequently beforetlree witnesses, thewill wouldhave beenduly executed. But T did not;two witnesses areinsufficient.

Extrinsic EvidenceAdmissible to Ascertain CircumstancesUnder Which Will Was Made-Estateof Russell,69 Cal. 2d.2OO, 4M P.2d353,7OCal. Rptr 561(1968). a.

60 - Wills

Comment.This holdingwasreaffirmedin 19'17in Gustafsonv.Svenson, 373Mass.273,366N.E.2d,'l6l(197'7).

Facts.The decedent, ThelmaRussell,died leavinga validly executed holographic will wdttenon a smallcardthatbequeathed everythingshe ownedto ChesterQuinn,a closeftiend, andto Roxy Russell,her pet dog,whichwasaliveon thedatethewill wasexecutedbut predeceased thetestator. ThercveNesideof thecardbequeathed a $10goldpieceand diamondsto GeorgiaNanRussellHembree(P),thenieceandonly heir at law of the testato..P broughta petition for determinationof heirship, allegingtharRo\y wasa dog.thallheProbale Codeenumerates thoie

gift of halfof entitledto takeby will andthatdogsarenot included,thatthe ,o Roiy is void, and that P, as the testator'ssoleheir at law' is ,t" "*u,"to half oi the re$idue.At the headng,P infoduced without objecentitled his tion extrinsicevidencethatRoxy wasthetestator'sdog Quinn'through anddocuw'lh thelestator' of hrsrelalionship evidence a omey.inlroduced mentaryeuidenceconsistingof the testator'saddressbook and a cefiain quiLclaim deed.all of whichwasadmilledoverobjectionThe lrial coun q tieldLharit wastheintentionof theleslalorlhal Quinn as to receiveher P andthat entireestateexceptingthe goldcoin anddiamondsbequeathedto testator'sdeathThe coult Quinnwasto carefoithe dogin theeventof the in the will indicatedthatQuinnwasto usewhatever h-eldthatthe lang,rage to carefot andmaintainthe dog' portionofthe esiateasmightbe necessary P appeals. b.

c.

underwhicha will is made of thecircumstances Issue.May extrinsicevidence whatthetestatormeantby thewordsusedin a in ascefiaining be considered will? Held. Yes.Judgmentreversed l)

resonmaybe or uncerlain' of a will is ambiguous Whenlhe language had to extrinsic evidencein orderto ascertainthe intention of the testator A latent ambiguityis onethat is not apparenton the face of the will by somefactcollateralto it, whereasa patentamblgulty butis disclosed is an uncertaintythat appearson the faceof the will We think it is selfof a will' a courtcannotdetermlne evidentthal in lhe Interpretation whetherthe termsof the will arecleat anddefinite in thefirst placeuntil underwhichthewill wasmadeExtnnsic thecircumstances it considers underwhicha will is mademay beconevidenceof thecircumstances sideredby thecoul'tin ascertainingwhatthe testatormeantby the words usedin thewill

2)

Here,extrinsic evidenceoffeied by P to ruiseandresolvethe latentambiguity as to Roxy and to establishthat Roxy was a dog was properly, co;sideredin orderto ascertainwhat the testatormeantby the wordsof thewill. However,viewingthe will in Iight of thesuroundingcircumstances,the trial coult ered in holding that thetestatorintendedto make anabsolutegift of herentireestateto Quinn A dispositionin equalshares with a dispositionof thewholeto cannotbeequated to two beneiiciaries oneof them,who may usewhateverportionon behalfof the other'We concludethat the tes;atorintendedto make a disposition of all of the residueof the estateto Quinn and the dog in equal shares As a dog gift to Roxyis void underawill, theattempted cannotbethebeneficiary of by thewill and Hence,thatpofiionof theestatercmainsundisposed oassesto the heirs at law We concludethat the residue of the estate ;houldbe distributedin equalsharesto QuinnandP Wills - 61

6.

Ericksonv. Edckson

CorrectingMistakes.Iftheallegedmistake involvesthereasons thatledthe testatorto makethewill (or thereasons for makingornot makng a particular gift), andthemistakewasnotftaudulentlyinduced,noreliefis granted. Some courtshaverecognized anexceptionifthe mistakeappears on thefaceof the will, andthedisposition thetestatorwouldhavemadebut for themistakecan at leastbeinfelredftom theinsfument.Casesin whichsuchreliefis granted arerarcbecause it is unlikelyfor themistakeandthe altematedispositionto appearon the faceof the inshument.If a provisionwasmistakenlvomitted from rheq ill. or a provision conrained in thewill is nor whatrherestator intended, paroltestimonyis generallynotadmissible to showtheexistence of the mistakeandwhatthetestatorintendedto providehadthe mistakenot been made.Thus,mistakesof omissiongenerallycannotbe corected,nor cana mistakein describing a beneficiary or item of property. a.

Extrinsicevidenceofscrivener'serror admissibleto ascertaintestator's true intent-.Erickson% Erickson.246 Conn.359-716A.2d,92 (l998).

r)

Facts.The decedent, RonaldErickson,executeda will two days beforehe marriedDorothy Erickson(D). The will left everything to D. If shepredeceased him, half of Ronald'sestatewasto go to his childrenandhalf to D s children.D wasappoinred guardiinof Ronald'schildren(whosemotherhaddied)andexecutorofhis estate.Ronald'saftomeyinnocentlymisrepresented thatthewill would be valid afterthe mariageto D, but the will did not containany language providingfor thecontingency of thesubsequent marriage. (Connecticutlaw providesthat if a testatormaries subsequentto the malingof a \^,illandrhewill makesno provisionfoisucha contingency, themardageopemtesasarcvocationof thewill.) Eleven yearslater,uponRonald'sdeath,the will wasadmittedfor Drobate. priorro rrial.p Ronalds daughrer AliciaErickson {P).appealed. filed a motionin limineto excludeextrinsicevidenceof Ronald,s intent.D madea detailedoffer of proofto showRonald'scontrary p,sappeal, intent.Thetrial courtgrantedP'smotion,butdismissed p andfoundthatthewill providedfor thecontingency of marriage. appeals. D crossappeals. Issue. Shouldthe trial court have admittedextrinsic evidenceregardingthe decedent's intentthat his will would not be revoked automatically by his subsequent mariage?

J)

Held.Yes.Judgment reversed andremanded. a)

62 - Wills

The natureof the will's provisionsandthe couple'sexfeme closeness atthetimeof mariageprovideclearandconvincing evidenceof theprovisionfor thecontingencyof marriageeven

case though the will itself did not do so and' under existlng mamage law' would havebeenrcvokedby a subsequent heldthatexlrinsice\idenceis not adb) We havepreviously missible,;ut concludenow thatthe reasoningof the dissent Conn' ii Connicti,utJuniorRepublicv' SharonHosPital'188 and we overrulethat i, q$ A'.21190(1982),is persuasive case. c)

d) '

e)'

f)

g)

n

a intoexecuting enorhasmisledthelestator [f a scrivener's the will on the belief that it wiU be valid notwithstanding error of lhat evidence marriage'exLrinsic lestalor'ssubsequent lhathrswlll teslator the of intent the lo eslablish is admissible marriage thesubsequent be validnotwithslanding and Ifthe error andthetestator'sintent areestablishedbyclear that convincing evidence,they will be sufncient to establish the will hasprovidedfor suchcontingency to provefraud'duress'or unb(trinsicevidenceis admissible bebelweenerroneous Thereis littledifference dueinfluence. those liefs inducedby fraud, duress'or undueinfluence and the ininducedby innocenterror,ashere ln both situations' fluenceof a third party distortsthe prccess of wills exof thepolicyof the.stalute Thereis no subversion or subverslon ol oIlhensk because evidence cludingextrinsic dethe tesiator'sintent, wherethe testatorcannotpersoflally exclude not would fend his testamentarybequestThat statute extrinsicevidencewhercfraud'duress'or undueinfluence^were enlorce_ concemed Therefore,that statutedoesnot compel provisionsthatthetestatornevermtenoeo mentof testamentary to make lf fraudwereinvolved'it is arguabletht th: l"ff]:y-Til anda thefraudulentconductwouldnot be allowedto benellt Analoconstructivetust wouldbe imposedon theirinheritance to estabshouldbe admissible gously'here,extdnsicevidence lish the testator'strue intent

preparinga will pursuantto Liability for Drafting Ambiguous Will' If in that makesa gift to a tf," i"rtutor'. in.t-"ti;ns, the attomeyomits a clause is liable to the intendedbeneficiaryfor the amount i"r"n-li"ty, ,ft" "n".ey havereceived the will had the clausenot been *".ra ii" l"t"itii-v '.rnder Caselaw, however,hasheld that an attomeyis rot liable "til*a. ""grrg".iiy for draftiry at ambigt ous document' Wills - 63

B , DEATH OF BENEFICIARY BEFORE DEATH OF TESTATOR: LAPSE the testator'the beneficiary'sbequestwill Whena beneficiarypredeceases lapse(andpassthroughtheresiduaryestateor throughintestacy)in the abtakers' statute,whichspecifiessubstitute senceof an anti-lapse

Allen v Talley

1.

LrPCSection2-601.Underthissection'ifa deviseedoesnot survivethe thetestatestatorby 120hours,thenheis treatedashavingpredeceased dealingspecifically tor, unlessthewill containssomeexplicitlanguage deaths. with simultaneous

2.

UPC Section2-605.Underthis section,if a deviseewho is a grandpar(i) is deadat the time of exof a gtandparent ent or a linealdescendant ecutionofthe will, (ii) failsto suNivethetestator'or (iii) is treatedasif the testator,thenhis issuewho survivethetestator he hadpredeceased takein his place.If theissueareall of the samedegreeof by 120-hours kinshipto thedeviseetheytakeequally,but if they areof unequaldegree thenthoseof moreremotedegreetakeby representation'

3.

Anti-LapseStatutes.The states'anti-lapsestatutesvary widely as to statuteappliesonly if thepretheanti-lapse theirscope.In manystates, of the testator' beneficiarywas a child or otherdescendant deceasing Underthe UPC andin sevemlnon-LrPCstates,the anti-lapsestatute or a lineal beneficiarywas a grandparent appliesif the predeceasing theantistates, nearly all ofthe testator.In ofa grandparent deicendant beneficiaryleft descenonly if thepredeceasing lapsestatuteoperates take the gift by descendants Such d;nts who survivedthe testator. In moststates,the antilapsestatutedoesnot applyif the substitution. suNivingthetestator gift is contingenton thebeneficiary's a.

Anti-lapsesiatutedoesnot apply-Allen * Talley,949S W2d 59 (Tex.Ct. App. 1997). 1)

64 - Wills

Mary Shoults,executedher Facts'At the time the decedent, will, shehadthreebrcthersandtwo sistersalive Thewill providedthat all of her propefiywasto be sharedby her living whomshenamedAt thetimeof herdeath' brcthe6andsisters, siblings onlya brotheranda sisterwerealive,butthedeceased of oneof child a surviving Allen, Jr., Irwis all left children. probate and isbrothers,filed an applicationfor thedeceased suanceof lettersof administation,asdid thesuNivingsister, IJra Talley.The court admittedthe will but did not appointan administrator.After filing petitions for declaratoryjudgment, Lera arguedthat the languagein the will operatesaswordsof survivorshipandprecludestheapplicationof theanti-lapsestatute.Irwis arguedthata classgift wasnot createdandthatthe

statuteapplies.Both partiesfiled motionsfor summaryjudgment; thetrial courtgrantedI-era'smotion.Lewisappeals. Issue.Doesthedecedent's will containwordsof survivorship, which precludeapplicationof theantilapsestatute? Held. Yes.Judgment affirmed.

4)

4.

a)

Sincebothpartiesagreethatthe languageis not ambiguous, we construethewill basedon theexprcsslanguage used.

b)

Therewereno otherprovisionsin the will but thatthe decedent'sliving brothersandsisterstakeher wholeestate,sharc andsharealike. It is clearfrom the languagethat the decedent intendedthather siblingswho wereliving at the time of her deathtake her estate;otherwise,the phrase"share and share alike"followedby no otherprovisionswouldaddnothingto the meaningof the will. Therefore,"living brothersandsisters" arewordsof survivorship.

Comments. a)

A careful will drafter will provide for the contingencyof the intendeddeviseenot survivins the testator.

b)

The anti-lapse statutes do not operateto savea decedent's interestin propertyheldinjoint tenancy.

Rule of Construction that 'rAnd" Be Read as "Or" to Effectuate Testator's Intent-Jacksonv. Schultz,38 Del. Ch.332,l5l A.2d 284(1959). a.

Jackson v. Schultz

Facts.Thechildrenof BessieBullock(Ps)contactedto sellto thedefendant(D) a houseformerlyownedby the testator,their stepfather, Ironard Bullock (T), contendingthat title passedto themthroughT's will. The will bequeathed all propertyto BessieBullock"andof whatevernatweandkind, to her andher hein andassignsforever."Bessie Bullock,however,predeceased T. D contends thatsinceBessieBullock prcdeceased T, Ps took nothingunderT's will, alguingthatthe words "her heirs and assignsforever" were words of limitation defining the quantityof the estatedevisedandthat, assuch,the heirstook nothingby wayof substitr.rtion, sincethedeviseepredeceased T. D furthercontends that wherethe word "and" appearsbeforcthe words"heirs airdassigns," thesarneruleapplies,in conrastto wherctheword"ol' appears, which hasbeendeemedto designate thosewho will takeby way of substitution.Psmovefor summaryjudgmentrequesting thecourtto gmnta decreeof sDecificDerformanceunderthe contract.

Wills - 65

b.

Issue.will thewords"and" or "or" be substitutedfor eachotherin arriving at a properconstructionof a will for the purposeof carrying out an obvioustestamentarypupose of a testator? Held. Yes.Ps' motion for sunmaryjudgmentis granted. 1) D contendsthat whena deviseis madeto a nameddevisee"his forevet" theheirsnormallytakenothingby way heirsandassigns the testator,such of substitutionif the primary deviseepredeceases expressionbeingdeemedoneof limitation defining the quantityof andthatthisrulehasbeenappliedincaseswhere theestatedevised, Howbeforetheclause"heirsandassigns-" theword"and"appears primary devise, the ever,whenthe word "or" is usedfollowing a subsequentreferenceto "heirs" or the like hasbe€ndeemedto desin theeventthat ignatethosewho will takeby way of substitution the testatoranda lapseis thereby the pdmary deviseepredeceased avoided. 2)

It hasalsobeenheld,howevetthatthewords"or" and"and"may be substitutedfor eachotherin arriving at a properconstuuctionof a will, "and" havingbeenreadas"or" for thepuposeof carlying out an obvioustestamentarypurpose.

3)

Here,the evidenceindicatesthatT's fatherwas survivedby his son (T,IJonardBullock),a brother,andastepson, all ofwhom entered in the eventofT's death into anagreement designedtoinsurethat, duringthe settlement of his father'sestate,his sharewouldgo to T's intent clearlydemonstrates his wife, Bessie.This agreement thathis shareofhis father'sestateshouldgo to his wife.Additionally,T's will shouldbe rcadnot only to cary out his intentionbut construed, if possible,to avoidnot merclyintestacybut totalescneat.

4)

A decreefor specificperformanceshouldnormally be grantedin a landpurchase caseunlessto do sowouldrequirca buyerto accepta defectivetitle subjectto attackby an adverseinterestnot beforethe Ps' claim to a fee court.Here,thereis a solidbasisfor sustaining simpletitle in thelandhereinvolved.I adopttherde of consffuction that pemits "and" to be read as"or" whento do so will carry sustains a rulingthatthe outthetestator's intent.Here,theevidence deviseoverto Ps. will be constuedasmakinga substitutionary

365, Rule of ConstructionHeld Inapplicable.In Hofingv. Willis,3l 111.2d 201N.E.2d852(1964),thecourtheldthatwhilethereis somesupportfor the aswords propositionthatthephrase"andto theirheirs"couldbe considered of thewords"and of purchase by readingtheword"and"as"ot" thepresence The courtstatedthatit is assigns"makessucha constmctionunacceptable. hardlyreasonable to suppose thatthegrantorwouldcreatea substitutionary 66 - Wills

gift andat the sametime designatethe assignsof the namedtakersto takeby way of substitution. 6,

No ClassGift-Dawsonv. Yucus,97Ill. App.2d 101,239N E 2d 305(1968) Dawson v. rucus inone-fifth her will devised a. Facts.NelleStewart's(T's)duly executed Wilson and Burtle' each two nephews, lands to farm tercstin cettain takingone-half.Butle diedpior to T's deathWilsonfiled suit to construethewill, allegingthedevisewasaclassgift andthathe,assurvivor Wilsonlaterconofthe class,wasentitledto theentireone-fifthinterest. veyedtheinteresthe allegedlyreceivedassurvivorto Burtle'stwo chilas plaintiffs.The residuary dren (Ps) and they were substituted (Ds) contendthatthe gift to WilsonandBurtlewasnot a beneficiaries classgift but insteada gift to two specificindividualsThe trial court foundfor Ds. Ps appeal. b.

Issu€.Wasa classgift to thenephewscreatedin T's will?

c.

Held.No. Decreeaffirmed. l)

sumto a bodyof pe$onsuncerAclassgift is a gift of anaggregate at a future tain in numberat the time of the gift, to be ascertained time,andwho arcall to takein equalor in someotherdefiniteproportions,the sharcof eachbeingdependentfor its amountuponthe ultimatenumberof Pelsons.

2)

Here,thereweretwo namedindividuals,makingcertainthe numandtheirshare.Thesharesdo not dependupon berofbeneficiaries the numberwho surviveT.

3)

i.e.,"nephews"'"cousins,""descenT usedno classgift language, gift ofthe residue a survivorship dants,"etc.andthewill contained clausedevising gift in the was created ofherestateino survivorship the farmland.

the Testator-I' l'e Gift to Classand Named Individual lYho Predecease's (H L.) Moss,[1899]2 Ch.314,aff'd, llg}ll A C.l87 a.

In rc' Moss

Facts. Walter Moss (T) bequeathedhi s interestin the Dail! Telegraph in fust to paytheincometoElizabethMoss(hiswife) for life newspaper and,uponherdeath,in fust for ElizabethJaneFowler(hisniece)andthe chil&enof Emily Walter(hissister)who shallattaintheageof 21,to be dividedequallyamongthemastenantsin common.T left theresidueof hisestateto hiswife.ElizabethJaneFowlerdiedin 1891IT diedin 1893 estateto ElizabethMoss(T'swidow)diedin 1897,leavingherr€siduary of five children by the WilliamGeorgeKingsbury(P).Shewassurvived Emily Walter(Ds),all olderthan21.P claimsthattheshareof T's estate to ElizabethJaneFowlerlapseduponherdeathduringT's bequeathed Wills 67

lifetimeandbecamepartof T's andElizabethMoss'sresiduaryesto ElizabethJaneFowlerandthem tates.Ds claimthatthebequest wasa gift to a class,ofwhich theyarethesurvivingmembe$.The trial courtheldfor P Ds appeal. b.

Issue.Wherea gift by will is to a classand a naned individuai equally,sothat the testatorcontemplatesthe namedindividual taking thesamesharethateachmemberofthe classwill take,doesthe testatorintendthatthewholeshallpassby his gift to the surviving membersof the classif any memberof the classsurvives,even thoughthenamedindividualdoesnot?

c.

Held.Yes.Judsment reversed. l)

(Lindley,M.R.) The questionwe haveto decideis: Who are the personsentitled to T's sharein theDail) Telegraphnewspaper?Oneview,adoptedby the trial court,is thatthe share thatElizabethJaneFowlerwouldhavetakenif shewerealiveone-sixth-has lapsedand fallen into the residuaryestate.I declineto follow thisview.Whetheryoufollow thedefinition thata gift to A andthechildrenof B mayin effectbe a gift to a classifthe testatortreatsthelegatees asaclassor whetheryou call thema numberof peNonswho .!Ie to be treatedasa class is quiteimmaterial. Here,theintentionof thetestatorwasthat the shareshouldgo to suchof the childrenasshallbe living. Thealtemativeview takesthesharcawavwhercit wasnever intendedto go.

2) (Romer,L.J.)Whena testatorgivespropertyto A anda class of persons-say the childrenof B-in equalshares,heintends that the whole propertyshall passby his gift if any oneof the childrenof B survivehim eventhoughA doesnot.Generally, when the testatorgives property to be sharcdat a pafiicular periodequallybetweena classproperlysocalledandanindividual, thenwhatthe testatormustbe takento meanis thatyou areto seewhich part of that aggregatedbody is to sharein that propertyat the time it comesfor distdbution.Hence,a gift by willto aclassanda namedindividualequally,sothatthetestator contemplates theindividual takingthe samesharethateach memberof theclasswill take,is primafacieevidenceof a gift to a class.Here,ElizabethJaneFowlerwasonly intendedto shareasoneof a class,and,inasmuchasshedid not survive, the rest of the classtakesthe whole of the property. C. CHANGES IN PROPERTY AFTER EXECUTION OF WILL: SPECIFIC VS. GENERAL DEVISES 1. 68 - wills

Ademption.If specifically devisedpropenyis notin thetestator's estate

the gift is at thetime of death(e.8.,it wassoldby the testatoror desffoyed)' doctrile only apadeerned.This is tnown as ademptionby extinction The not affected piies to specificdevisesandbequests;generallegaciesare v' Cohen'414Mass lT2' 606 Ademptionby extinction-'Wasserman N.E.2d90l (1993).

a.

1)

Wasserman v. Cohen

Facts, FriedaDrapkin crcatedan inter vivos trust fundedat execution, and retaifledthe dght to add propertyby inter vivoslransfer tust' andwill andamend,revoke,andwithdraw propertyfrcm the a A trustprovisionorderedDavid Cohen(D)' trustee'to convey the h'rl sold buildinj to Elaine Wasserman(P) However'Drapkin buildini prior to her deathandhad neverconveyedher interest-in jt]d.Cthe proierty to the mrst. P brought an action for dTlarato:y of thesale.ofth€ thetrusleepayherlhe ptoceeds ment.requesting lor cutheactionP applreo dismissed Theprobatejudge building. rect appellatereview

2)

lssue.Doesthe docttineof ademptionby extinctionaqpl) to tl: inter\ ivoslrusll conlainedin a revocable specificgift of reatestal.e

3)

Ileld. Yes Judgmentaffirmed' a) b)

Whena testatordisposesduringher lifetime of th€ subjectof a specificlegacyin herwill' thatdeviseis heldto be adeemed' A trust, particularly when executedas pa of an estateplan' shouldbi consmredaccordingto the samerules traditionally apPliedto wills.

glfls in cases 2. Abal€ment.Abatementis theprocessof reducinglestamentary

eslate u..atsarenoi sufficienrto payall claimsagainst-lhe ,h. personal "r,uta "hf.. and devisesAl commonlaw all grlts ol and satisfyall bequests of realpropenyToday'in mostslateslhe oro*nt utur" U"fot"disPositions stal li,iin.tion b"r*""n t"al ind personalpropenyhasbeenabolishedand utesprovide a gefleralorderin which the typesof gifts are abated' a.

iight UPC section2'608.Underthis section,a specificdeviseehasthe to a generalpecuniarydeviseequalto thenetsalepriceofdevisedpropertysoldbYa conse atol

Exoneration of Liens, Most jurisdictionsfollow the doctrineof exoneration to mortoflropenysubjecl dispositions lhatspecific of liens.whichpresumes areto be paidout of the teslalor-sreslduary gagesor otherencumbrances to thecontraryin thetestator'swill' Jsite, absentlanguage a.

propertypasses flPC section2'607i nonexoneration'Underthis section' pass su'ject to a withouttherightof exoneration-aspecificdevisewill

of secudtyinterestexistingon the dateof the testator'sdeath'regardless will to paythe debt' anyprovisionsin thetestator's transthe making fer to a beneficiaryafter executinga will' with the int€ntion of testator testamentarygift inoperative At commonlaw a gift to a child of the of anygiftsmadeto thechildin i. p."*rnp,*irvrn pi*al or totalsatisfaction will. a previouslyexecuted

vlvos 4, Satisfaction. Satisfactionapplieswherea testatotmakesaninter

a.

5.

70 - Wills

propflPC section2-607:ademptionby satisfactiorl Uflderthis sectlon' withouttherightof exoneration-aspecificdevisewill pass ertypasses suijict to asecttity interestexisting on the dateof the testatot'sdeath' of anyprovisionsin thetestator'swill to paythedebt reg"ardless

adStock Splits. Underthe majodty rule' a specificbeneficiaryis entitledto ditionalsharesof stockproducedby a stocksplit' but is not entitledto additionalsharesof stockproducedby a stockdividend UndertheUPC'thespecific beneficiaryof corpoiatesecuritiesis entitledto additionalor other securities of thesameentity-i.e., bothstocksplitsandstockdividends

VII. RESTRICTIONS ON TIIE POWER OF DISPOSITION: PROTECTION OF THE FAMILY A.

RIGIITS OF TIIE SURVIVING SPOUSE l.

manIntroductionto Mariial PropertySystems'Thereatetwo basic systemoi tal propertysystemsin the United States:(i) the cornmonlaw separatepioperty and(ii) the systemof communityproperty a.

is Separate property system' Under this approach'each spouse entitledto whateverpropefiy he eams-there is no sharingof earnjoindy-ownedproperty ings.This excludes 1)

b.

2.

Prctection againstdisinheritance' Nearly all ofthe common designed electivesharestatutes haveenacted lawjurisdictions disin-heriproleclion.against some to givethesurvivingspouse anelectionto takeastatugive spouse the statutes tanceThese t's estate tory share(usuallyone-thirdor one-hal0of thedeceden will' in lieu of takingunderthedecedent's

Communitypropertysystem'Underthisapproachanyeamings' ln andpropertyacquiredfrom eamlngs'aftermarriagels owneo propeqoA,onAiulaea.nat"sIn general'noneof the community power erty siateshasan electivesharcstatute Eachspousehasthe comone-half of iestamentarydispositionover only that spouse's ownsone-half munityinteresiThi survivingspouseautomatically of the communityestateuponthe other spouse'sdeath'

Rights of Surviving Spouseto Suppo ' a.

b.

c.

Socialsecurity.The survivingspouseis enlitledto thedecedent's benefits maynot transferthe socialsecuritybenefits-thedecedent to to anyoneelse.However'the surviving spousemay be requircd sharethe benefitswith the decedent'sdependents' paid under PriYate pension plans' ERISA requiresthat pensions survivor coveredprivatepensionplansmustbe paidasajoint and nonworker the unless annuityto theworkerandtheworker'sspouse' spouseconsentsto someotherform of distributionof theretirement benefit. in Hom€stead.Most stateshave statutesthat secwesomeintercst free children' the family homefor the surviving spouseand minor prcbate the claims of creditors Thesehomesteadsarc known as homesteads.

Wills- 7l

d.

Personalproperty set-aside.Somestatutesexemptcertainitemsof tangiblepersonatpropertyftom executionor levy ifl satisfactionof creditors'claims. Family allowance.The survivingspouseor minor childrcn arc entitled io Detitionfor a family allowanceto providefor their maintenance d;ring the period in which the decedent'sestate1s ln administratlon. Dower and curtesy.Dower was the provision the law madefor a widow out of the husband'sproperty.Upon the husband'sdeath'the widow was entitledto a life estatein an undividedone-thirdof the husband'slands A husbandhad a comparableinterestin his wife's landsknownascurtesy.Upon the wife's death,her husband'scurtesy right gavehim a life estatein all (notjust an undividedon€{hird) of th; Ia;ds of which the wife was seisedduring marriageHowever,a ! curtes)estaleI unliLedower)aroseonly if issue\rerebom husband to the marriage.

3.

Property subiectto dower' Dowerattachesto anylandthehusacbandownsat the time of the mardageand all subsequently ouiredland.The husbandcannotdefeatthewife's dowerinterest by attemptinga tnnsfer of land without herjoinder

2)

Testamentaryeffect.Dowerandcurtesyrightscouldbe asserted regardlessof the decedent'swill. Thus, a wife's dowerinterest in her husband'sland wasnot affectedby the fact that the huss To thisextenteachspouse lhelandto another' bandhaddevised by dispositionoverpropertywaslimited powerof testamentary the other'sdoweror curtesyilght

3)

Present status of dower and curtesy.Most stateshave abolisheddowerandcurtesyin favor of electiveshalestatutes'

Rights ofsurviving Spouseto a ShareofDecedent's Property' a.

72 - Wills

1)

Electiveshareand its rationale.The majorityof statesgive the surspouse'srealandperviving spousean electiveshareof thedeceased sonalasiets.The spousecanelect to eithertake underthe deceased spouse'swill or renouncethe will and take a statutolyshareof the estate(,.rsuallyone-thirdor one-half) Section2-202(a)of theUPC deterDrovidesa scheduleto determinethe electivesharepercentage minedby the lengthof the malliage The survivingspouseis entitled to 50% of the decedent'sestateafter 15 yearcof marriage ln addition, if the survivingspouse'sassetsarelessthan$50,000,sheis enelectivesharein the amountof $50'000' titledto a supplemental

b.

75 Ohio st' Election rtquired for public assistance-It /e Estateof Cross' 3d 530.664N.E.2d905(1996). 1) -'

2)

3)

In re Estate of Cross

leavinghisestateto his sonSay Crcss Facts.CarrollCrossdiedtestate, spouse'Beulah Beulah'80' Cpl,*fto *u. not thechild of his surviving andwasin a nuning home;her care sifered from Alzheimer'sdisease waspaidfor by Medicaid Pursuantto statute'theprobatecourtappointed thecourt a commissionirwho investigatedthe matterandconcludedthat would shouldelect on Beulah'sbehalf to takeagainstthe estate Beulah thenrcceivea spousalallowanceof $25'000andhalf of apprcximately aftera hearing,soelect€dP appealedBeulah is,mo. rh" ptoiur" "out, courtreversed'hnding waspendingThe appeals diedwhile the appeal to thatthe electionwasnot in Beulah'sbestinterestandnot necessary hercalewaspaidbyMdicaid Beulahs providefor hersupportbecause ud.ini.t uto, (D) uppealsa'Id is joined by the board of commissioners that rcpresentedBeulahbeforethe probatecourt' for Issue.Did the probatecourtjudge abusehis discretionjnelecting to support' her Beulah, who dependedsolely on Medicaid benefitsfor will? husband's takeagainstherdeceased reinstaled' counjudgment Probate reversed Held.No Judgment a)

b)

c)'

a The prcbatecoult has statutoryauthority to elect on behalf of disabledspouseafter ascertainingthe spouse'sadequatesupp9l shareunderthewill thevalueof thespouse's n""Jt una "o-p-lng The with her rights under the statuteof descentand distribution expectlife age' court must-first considerother rcsourcesand the needs ancy,physical and mentalcondition, and anticipatedfuture provide to necessary of tit" spous"unaa"termineif the electionis for her adequatesupport. The appealscourtignoredBeulah'sMedicaideligibility requircments.imong the rcsourcesthat areconsideredin determiningeli gibility for M;dicaid is propertydevisedto a recipientfrom a parcnt ir spouse,including"thosercsourcesin which anapplicant/recipient " has^alegal interesiandthe legal ability to useor dispoqeof Medicai-drules statethat an applicantor recipientwho fails to use availableincomeis ineligiblefor benefits' to eligibilityandto conlinue Medicaid Beulah's Here.to maintain providedby Medicaid,thejudgewasreqliredto haveherexpenses elect for Biulah to take againstthe will and receiveher intestate sharc.

Wills - 73

1r?re Estate of Cooper

c.

No forced sharc in homosexualrelationship-I, /e Estate of Cooper,592 N.YS.2d797,187A.D.2d128(1993). 1) Facts.UponWilliamCooper's(T's)death,thebulk ofhis estatewaslef! to his formerlover,EmestChin(P).B who hada homosexual relation, shipwithT, petitionedthe courttoallowhimto electagainstthe will. T's executrix(E)opposed andappliedto dismissP'saction.Thecourtfound for E. P aDDeals. Issue.Is a homosexual relationship a "spousalrelationship"suchthata suryivoris entitledto a rightof electionagainstthedecedent's will pursuantto therelevantstatute? t)

4)

74 - Wills

Held. No. Decreeaffirmed. a)

The statutepermitsa suNivingspousetheright of election.

b)

A "survivingspouse"is definedasa husbandor wife,but evenif it werenot,thelanguage ofa statuteis generallyconstrued according to its naturalandmostobvioussensein accordwithits ordinaryand accepted meaning.

c)

Thetraditionaldefinitioncontemplates thesurvivorof a unionbelweenmembers of theopposite sex.andwe \eeno reason to reject that.

d)

Any equalprotectionanalysisin theinstantcaseis to be measured by therationalbasisstandard, i.e.,thelegislationis validifthe classificationdrawnis rationallyrelatedto a legitimatestateinterest.

e)

TheSupreme Courtof Minnesota rcjectedsamesexpetitioners'argumentthataprchibitionon samesexmariagesdeniedthemequal protection,holdingt"the institutionof marriageasa unionof man andwoman,uniquelyinvolvingtheprocreation andrearingofchildrenwithina family. . . [is] 'fundamental to theveryexistence and survivalof the race.'This historicinstitutionmanifestlyis more deeplyfoundedthanthe asseftedcontemporaryconceptof marriage and societalintercstsfor which petitionerscontend."lBaker v. Nelson,191N.W.2d185(I4inn. 1980)lThe SupremeCourt dismissedpetitioners'appealfor want of a substantial f€deralquestion."Suchadismissalisaholdingthattheconstitutional challenge was consideredand rejected."Elicks v. Miranda,422 U.S.332 (1e60)l

Comment.On appeal,the New York Court ofAppealsdismissedon the groundthat no substantialconstitutionalquestionwas directly involved.[14rc Cooper, 82N.Y2d801,624N.E.2d696,604N.YS.2d (1 993) t 558

d.

Surviving spouse'sstatutory shareof assetsof inter vivos trust created by deceasedspouse.-Sullivanv. Burkin, 390Mass.864,460 N.E.2d571 (1984).

Sullivan v Burkin

her statutoryright to 1) Facts.Mary Sullivan(P),a widowwho exercised (Emest's) estate,broughtanactionseekng take a shareof her husband's detemination that the assetsheld in inter vivos hust createdby Emest duringmariage shouldbe consideredaspart of theestatein determining that share.Emest had executeda deedof trust under which he transfered rcal estateto himself as sole trustee.The net incomeof the trust waspayableto him during his life andthe husteewasinstucted to pai to him all or suchpart of the principal of the trust estateas he might requestin writing periodically.He retainedtheright to revokethe trust at tlusteewas directedto pay the any time. On his death,the successor principal and any undistributedincomeequally to Georgeand Harold Cronin(Ds)if theyshouldsurvivehim,whichtheydid.Emestdiedwhile still tustee of the inter vivos tust. He left a will in which he statedthat he intentionallyneglectedto makeanyprovisionfor his wife andgmndson. He directedthat, after paymentof debts,expenses,and all estate taxeslevied by rcasonof his death,the residueof his estateshouldbe paid over to the trusteeof the inter vivos trust. The ProbateCourt rejectedP'sclaimandenteredjudgment dismissing thecomplaint.Appeal wastaken.

2) Issue.Are the assetsof aninter vivos trust to be considercdin determining theportion of theestateof thedeceased to which a widow may claim her statutoryshare?

3) Held, No. Judgmentaffirmed. a)

Atust with rcmainderintercstsgivento otherson the settlor'sdeath is not invalidasa testamentary dispositionsimplybecause thesettlor retaineda broadpowerto modify or rcvokethefust, the dght to rcceiveincome,andthe right to invadeprincipal during his life.

b)

The fact that the settlorof a trust with rcmainderintercstsgiven to otherson the settlor'sdeathis the soletrusteedoesnot makethe t1!st testamentary.

c)

Whetheror not thedecedentestablishedaninter vivos tmst in order to defeatP's ight to takeher statutorysharcof the assetsplacedin trust,andeventhoughthedecedenthada generalpower of appointmentover the trust assets,P obtainedno dght to sharein the assets of thattrustwhenshemadeherstatutoryelection.

d)

In thefuture, asto anyinter vivos trustcreatedor amendedafterthe dateof this opinion,theestateof thedecedent, for purposes ofthe

Wills - 75

survlvtngspouse's statutorysharc,shallincludethevalueof assets held in an inter vivos trustcreatedby the deceased spouseas to wiich he aloneretainedpowerduringhis life to directdisposition of thosetrustassets for his benefit,as,for example,by theexercise ot a powerof appointment or by revocationofthe trust. UPC right to etectiveshare.UnderrheUpC,thesurvivingspouse hasa right a p:rc:ntag::lthe decedcnfs"augmented estate" based on the length-of :: the mariage.LIPCsection2_203combinesthe propertiesto be inclu;d in the augmented estate.Nonprobateassets_suchaJ life insumncepolicies, pensionplans,bonds,andbankaccounts_frequently pas. to t"n"ii"lJ". outsideof the will. As a result,instances arisewheri the survivingspouse mayrcceivetoo greata shareof thedecedent's estate,or too tittte.tinjer ifre IIPC, thespouse's sharefrom tle augmentea in"tua", tt iolio*ing, ".tut" " l) Theprobare esrale lessfunerale\penses. claims.andvarious familyal_ lowancesi

2) The valueof propertytransfereddudngthemariagewithout the

con, sentof thespouseby a.mngements thatare,in effeci,will substitutes;

Propenyacquiredby lhe survivingspou.efmm the decedent or olher_ wrsetranslerfed lo thesurviringspouse. 4)

The_\ alue.ofthesurvi\ingspouses.s propenyandnonprobare transfers lo otherstharwoLrld havebeenin heraugmenied estat;uponherdeath; arnd

5)

Life insurance proceeds payableto anypersonotherthanthe surviving spouse.

Sourceofelectiveshare.Statutes in somestatesprovidethatvaluesincluded Lhalpassor havepassed lo the surviving,pour. :tj"le :i:1,. ligln".","d appleo lrrstto salisty theeleclivesharecndlo reduce an) conrriluijons -. '----- due --from otherrecipients of transfe$includedin tt e uug_"ni"a ertute. Neq yort provichsgenerouslyfor a suniving spouse. Irs 9,lTi "T1"i*: erecr\eshareslalutes providelhatIhesurvivrng spouse is entitlediotheen_ lireesrale if ir is in rhe$t00.000range. ln addition to rhepr"b";;;., ;; rorowrng\rr substilules aresubject to lheelective sh616.; 111g;ft5 caus.rnar_ .rs:rI|l sa vtn gsaccol/nl r ustsl{ ijjr conlr ibuttonstojointbanliac c ounts ti \ I : propenypayable on dearhro a person olherrhanrhedecedent; tut .euocable Urerrme lransters. pension plans. andpropenyoverwhjchlhedecedenl hada generar powerot appointment. Theelecrive shareis reduced by thevalueo[ anyinterest(otherthana life estate)thatpassesf.om tle aeceaenitottresuruiv_ rng spouse.lncontrast, Delawareincludesin theelectiveshareall DroD_ 76 - Wills

regardless erty includiblein the grossestatefor federalestatetax purposes, of whetherthe decedent files an estatetax retum. 1) Int€r vivos transfer included in computation of €lective share--fr,re Reynolds,87 N.Y2d 633,664N.E.2d1209,642N.YS.2d l4'7 (1996). a)

Facts,William(P)andDorothy(T) Reynoldsweremarriedfor25 years. T hadfour childrenfiom a previousmariage.Shortlybeforeherdeath in 1989,T createda trust for the purposeof qualifyingfor Medicaid b€nefitsif nursinghomecarewasne€ded.Two of herchildrenwerenamed trustees,the majority of her propertywastransferredto the trust,andher chilfuen were namedremainderbeneficiaries.T relinquishedall rights in the property tlansfelred,but retainedthe right to appointremainder beneficiariesat any time prior to the terminationof the trust. Under the termsof the retainedpower,shecould not appointto herself,her spouse (P),her estateandits creditors,or her creditors.By its terms,the hust terminatedone day prior to T's death.Upon T's death,her entire estate havingbeenleft to her children,P filed a noticeof election,whichwas given effect by the surogate's court. Later, P filed an objection to the prcposedaccounting for theestatebecause it hadexcludedthetrustassetsfrom theestatefor thepurposesof computinghis electiveshare.The surrogatecout sustainedthe objection.The appellatedivision disagreed. P appeals.

b)

Issue.Doesan inter vivos trustin whicha decedent retaineda limited powerof appointment constitute a testamentary in violationof substitute rightof election? thesurvivingspouse's

c)

Held.Yes.Appellatedivision'sordermodified. (l)

In re Reynolds

Therclevantstatutedefinesa testamentary substituteasonein which the decedent,at the dateof her death,retaineda power to rcvoke suchdispositionorto consume, invade,or disposeofthe principal.

(2) l-egislativehistoryrevealsthat the statutewasenactedto protect the right of electionof surviving spousesftom timely usesof variousintervivostlansfers. A specialshrdyinitiatedfor thepuposeof proposingtheprotectivelegislationconcluded thatamongtheinter vivostransferssubjectto theelectivedghtsof a survivingspouse shouldbe thosewherea power of appointmenthasbeenretained. (3) T retaineda limited power of appointrnentthat left her with meaningful controloverthe trustduringher lifetime.Sheretainedthe right to executewhat weretestamentarytransfersto any numberof beneficiades. Thispowerisequalto thepowerto revoke,consume, invade,or disposeascontemplatedby the statute.

Wills - 7?

(4) The fact that the power teminated one day prior to T's death effectedno realisticlimitationon its exercise. h.

I rc Estate of Garbade

Waiver.A survivingspousemayvoluntarilywaivehis rightsto election,hom€steadallowance,exemptpropefiy,or family allowanceby a written and executeoagreement. 1)

Waiver upheld-h /e Estateof Garbadg 221A.D.2d8,14,633N.YS. 2d 878(1995). a)

Facts, In 1990,Respondent(R) mardedJ. Robertcarbade,the decedent,a wealthyexecutive, aftersigningaprcnuptialagreement in which R waivedher electiveshare,anong otherprcvisions.The agre€ment alsorcquiredthedecedent to maintaina $ 100,000 policy on his life for R'sbenefit.Followingthedecedent'sunexpected death in 1992,R received assets totalingapproximarely andfiled $340,000 noticeofher electionto takehershareofthe decedent's estate. The decedent's sonsfrcm a previousmarriage,Petitioners (Ps),moved for summaryjudgment,claimingR's right had beenwaived.R claimedthe waiver hadbeenprocuredby fraud, misrepresentation, andduress.Thecoul'tenteredjudgment for Ps.R appeals.

b)

Issue.Wasthe prenuptialagrcementprocuredby fraud?

c)

Held. No. Judgment affirmed. (l) Like anyothercontract, aduly executed prenuptialagreement is given a presumptionof legality.The party attackingthe agreement's validityhastheburdenofprovingfraud. (2) R presented evidence to showthatit wasthedecedent whohad filst raisedthe issueof an agreementand askedthat it be execut€dbeforethe wedding.The decedent's lawyerhad preparedthe agreementandit wassignedonly a few hoursbefore the wedding.R did not obtainlegalcounsel,nor did sheread the agreement beforesigningit. R wasnot told of theprovisionwaivingher electivesharcandwasnot providedwith a copyof theagreement. (3) Howevel it wasuncontovertedthat R readilyagreedto the agreement becauseshedid not want the decedent's moneyi shejustwantedto behiswife. Priorto signing,R wastoldthe full scopeofthedecedent's wealth,wasadvisedto obtaincounsel, andwasgiven the opportunityto readthe agrcement. (4) Ther€is no evidence of fraudhere.R hasesrablished only that shewasderelict in not rcadingthe agreementand in not consultinscounsel.

78 - Wills

4.

Rights of Surviving Spousein Community Property. Intrcduction. In all of the communitypropertystates,if an intestateis one-halfshareof the comthe intestate's not survivedby descendants, Becausethe otherhalf of to the survivingspouse. munityestatepasses the communityestatebelongsto the survivingspouse,the surviving to theentircestate.In severalstates,thesurvivingspouse succeeds sDouse t;kes the entire communityestateevenif the de{edentwas survivedby one-halfcommunityshareis inIn others,the decedent's d€scendants. heritedby his descendants. b.

Classilication of assetsascommunity or separateproperty. This classification is important for tax reasonssince under federal tax law the entirc valueof a spouse'sseparatepropertybut only one-halfof thecomgrossestate. spouse's munitypropefiyis includedin thedeceased Putting the survivor to an election. Under the widow's election, an will purportsto disposeof spouse's estateplanningdevice,thedeceased theentirecommunitypropertyandnotjust anundividedone-halfshare, anelectton,suchthatifthe survivingspouse givingthesurvivingspouse lays claim to her communityinterest,shelosesthe testanentarygifts in only of his separate herfavor On theotherhand,if thetestatordisposes prcperty and his one-half shareof community property,the surviving spousemay claim both her sharcof communitypropertyandher devise underthe will.

5.

Migrating Couplesand Multistate Property Holdings. a.

Migration from separateproperty stat€to community prcperty state. propertystateto a community Whena couplemovesfrom a separate propertystate,potentialproblemsarisein determiningwhat the surviving spouseis entitledto uponherhusband'sdeath,padiculadyif heeamed or acquiredthe majority of thei Foperty while domiciledin the separate propertystate.This occwsbecauseownenhip of propertyis determined with the lawsof the statein whichthecouplewasdomiin accordance ciled whenit was acquiredor eamed.Two states,Califomia andldaho' throughthecongive thesurvivingspousea remedyin thesesituations property is propcept of quasicommunity property Quasi-community whiledomiciledin anotherstatethatwould ertyacquiredby onespouse havebeenclassifiedascommunityprcpertyhadit beenacquiredwhile the spousewas domiciled in the communityproperty state.Real property locatedin anotherstatedoesnot constitutequasi-cornrnunityproperty.Whenthe acquiringspousedies,one-halfof the quasi-community propertygoesto the survivingspouseandthe otherhalf is disposedof accordingto the decedent'swill. The non-acquiringspousehasno testamentarypowe$ over the quasi-communityplopelty if shedies firstthe entirepropertybelongsto the acquiringspouse. Wills - 79

"il*",**tilrg,*t*r ,*i:ii;# "

i*il';'T*fi,*{,rqf# #l{::

6.

SpouseOmitted from premarital a.

Sates without statutes.The

Will.

"Jffi:T run;":#*i.l #H;:"+ri"l$i :'i'!i .,;:n'#i;: ::,#"iiT sr::*:,l: ;:m;nffi st

"*iji,:":t"i$*,,,x#fi {f"n*qi:L,h .l$iiil. gg4,5p*n: ;.1'.t*im ;1p ;5,*** Estateof Shannon

ft Tf $:,,:'l*i'l ft il?r,liJiir,*ll,i''ri''lr,***tl#;" -'..1i:p*'ffi

" iil::: lill"r',i":T'iil:: Esrare orShan non. 2z-+ car l"l,;;i;

",1r$;;;1;qiff*j.. iffirr"l,*#l

#il,jii:;]fi t#iTtffi iHflilf:q*f

2)

Issue.Wasp a pretermitted spouse?

3)

Hetd. yes. Orderreversed andremanded.

,;T:jil?:il:H:i,."",":i::$iil,T"#: l:fi,::?i:: 80 - Wills

the executionof the testator'swill, the omittedspouse shallreceivea share.

B.

b)

Noneof the exceptionsthat would precludeP from sharing in T's estateapply T's failue to provide for P does not appearfrom the will to be intentional.No evidence showsT providedfor P outsidethe will. P did not execute an agrcementto waive her sharc.

c)

The exclusionaryclause,without more,is insufficient to avoid the statutorypresumptionof revocationof the will asto the omitted spousebasedon public policy

RIGHTS OF ISSUE OMITTED FROM TIIE WILL Pretermittedchild statutesare designedto protect children who have been accidentallyomiftedfrom the will In moststates,the statuteoperatesonly in the In otherstates, favorof childrenbomor adoptedafterthewill's execution. pretermittedchild statuteappliesto childrenalive whenthe will wasexecuted aswell asto afterbomand after-adoptedchildren. 1.

Child Born After Will But Before Codicil-'Azcunce v, Estate of Azcunce,586So.2d1216(Fla.l99l). a.

Facts.Ren6Azcunce(T) exeauteda will that establisheda tlust for the benefitof his spouseandhis then-bomchildren;therewasno executeda codicil provisionfor after-bomchildren.T subsequendy Patricia(P)' the tems of the will. T's daughter, ihat republished wasbom after this first codicil but beforc a second'which, agair-, thewill andfirst codicilandmadeno mentionof afterrepublished bom childrcn. T died of a heart attackat age38 P petitionedfor a statutory shareas a pretermittedchild The trial court denied the Petition.P apPeals

b.

Issue. May a child who is bom after the executionof her father's will, but beforetheexecutionof a codicilto thewill, takea statutory shareunderFlorida's prctermittedchild statutewhen the will and codicil fail to provide for the child and all the other statutory .equirementsfor pretemitted child statusareotherwisesatisfied?

c.

Held. No. Order affirmed. l)

Under the statute,prior to the secondcodicil, P was a pretermittedchild,a childbornafterthemakingof thewill whohad not rcceiveda portionof T's propertyby way of advancement'

2)

origritrepublishedthe statedthat codicilexpressly Thesecond nal will andfirst codicil.Thus,P'sFetermittedstatuswasdestroyed.

Azcuncev. Estateof Azcunce

Espinosav. Spalber,Shevin, Shapo,Rosen & Heilbronner

)

3)

IfT hadwishedto providefor P,presumably, he wouldhavedone soin thesecondcodicil.P was,in effect,disinherited.

4)

Thereis no ambiguityin thewill andcodicilsthatwouldauthodze thetakingof paJoleevidence.

No Malpractice Suit Without Priority-Espinosa v. Sparber,Shevirl Shapo, Rosen& Heilbronner,612So.2d 1378(Fla. 1993). a.

Facts.After Ren6Azcunce's(T's) daughter, Patricia(P), wasbom, T contactedhis attomey(D) andindicatedhis desireto includep in his will. D dmfteda will andrestructured thetrust.However,because of a disagreement betweenT andD,T neversignedthesecondwill.Instead, T executeda secondcodicil that did not provide for p p broughta malpmcticesuit againstD. Thetdal cout dismissed for lackof privity and enteredsummaryjudgmentfor D. The court of appealreversedthe dismissalwith regardto theestate,affirmedit with regardto B andcetified thequestionof whetherP hasstandingto bring a legalmalpracticeaction.

b.

Issue.May a malpracticelawsuitbe broughtagainstan attomeywho drafted a codicil if the plaintiff is not in privity with the attomeyor an intendedthird-panybeneficiary?

c.

Held. No. Judgmenraffirmed. 1) To bringa legalmalpractice action,theplaintiff musrbe in privity with the attomey,where one pafiy has a direct obligation to the othet or mustbe an intendedthird-partybeneficiary.

In re Estate of Laura

Because Tis notaliveto tesdfyregardingintendedrhid-partyben, eficiaries,the courtis obligatedto honorT's intentin confomity with thewill's contents.

3)

T's estatestandsin T's shoesandsatisfiesthepdvity requirement.

Great-Grandchildren Not Pretermitted Heirs-I2 re Estatc ofl-aura, l4l N.H.628,690A.2dl0l1 0997). a.

82 - Wills

2)

Facts. EdwardLaura(T) executed a will in 1984andsubsequently died in 1990.The will provided rharT's estare wouldpassro his daughrer, Shirley,andspecificallydisinherited his sonEdwardandhis two grandchildren,RichardandNeil, childrenof his deceased dauehter. JoAnn. Afterlhewill wasexecuted. Neilhadtwochildren, CeciliaandNeil [l (I's great-grandchildren). kior to his deathin 1990,T attempted to executea codicil to the 1984will that would havedividedhis estatein propoftionatesharesbetweenShirley andher children,Edward andhis childrcn,andRichard. However,thecodicilwasnot properlywitnessed,

anduponT's death,the 1984will wasofferedandaccepted for probate.Richard alld T's great-grandchildren(Ps) challengethe will and claim they are pretermittedheirs. The probatecoult adoptedthe master'sfindings that Ps werenot pretemitted heirs.Ps appeal. b.

Issu€.Are Pspretermittedheirs underthe rclevantstatute? Held, No. Judgmentaffirmed. l)

The relevantstatutestates: "Every child bom after the deceaseof the testator,andeverychild or issueof a child of the deceasednot namedor ref€rredto in his will, andwho is not a deviseeor legake,shallbe entitled to the sameportion of the estate,real andpersonal,ashe would be if the deceasedwereintestate."

2)

The statuteprotectsagainstthe omissionof a child unlessthat omission is shownin thewill to beintentional.

3)

WhileCeceliaandNeil III werenot narredin T's will, theirfatherwas Wherea testatorhasspecificallynamedanheir specificallydisinherited. to disinherithim, he hasrefenedto the heir's issuefor the purposeof the statute.

4)

If a testator'schild is mentionedin his will, that child's issueare not pretermittedheirs.Here,T's will specificallynameshis prcdeceased daughter,Jo Ann. Thus,her issue,Ps, arc not pretermittedheirs.

Wills - 83

VIII. TRUSTSTCREATION,TYPES'AND CHARACTERISTICS A.

INTRODUCTION Background.The tflrsteeof a tlust ownsthe legalinterestof the fust propertywhilethebeneficiaryownstheequitableinterest The Settlor.The settloris thepersonwho createsthe trust.A tlustcreatedduringthesettlor'slifetimeis anintervivostrust.Atrust crcatedm trust. thesettlor'swill is a testamentary Failureto The Trustee.Thetrusteemaybea thirdpartyor abeneficiary. namea trusteewill not defeata trustla courtwill appointa rustee. Theyhavea hold equitableinterests. 4. The Beneficiaries,Beneficiaries

claims thetrusteefor breachof trust,andequitable personal claimagainst on thetrustpropertyitselfUseof Tfusts in EstatePlanning.Trustscanbe usedto avoidtheproAlso, trustscanbe usedto securccertarntax advantages bateprocess. includingtransferingpropeftyto minors andfor propefiymanagement, or incompetents.

6,

B.

CREATION OF A TRUST 1.

Jimenez v Lee

A Trust Comparedwith a LegalLife Estate.In mostcases,creatlnga to givingthedoneea trustwith thedoneeaslifebeneficiaryis preferable problemswith legallifeestate,sinceresolutionof variousadminiskative theestateis facilitatedby havinga trustee.

Intent to CreateaTrust. Whilethesettlormusthavetheintentto create for thegrantor atrust,no pafiicularwordsneedto be used.Itis sulTicient benefit of another' to holdfor theuseand to conveypropertyto a grantee a,

Neednot expresslydirect that subiectmatter be held in trustJimenezv. Lee,274Ot.457,541P.2d'126(1'916). of BetsyLeeJimenez 1) Facts.In1945,thepatemalgrandmother in the (P) purchased a $1,000U.S. SavingsBond registered (D), the fatherof B and/orDornameof P and/orJasonLee needs. othyLee,themotherof P,to beusedfor P'seducational In 1956,Mrs.AdolphDiercksgave$500to P andmadeidentical gifts to D's othertwo children.Mrs. Diercksdeposited the$1,500in a savingsaccountin thenamesofD andhisthree D cashedthe savingsbondandinvested children.Thereafter, the proceedsin commonstockof the CommercialBank of Custoregistered as"JasonLee, Sdem,Oregon,withtheshares dian. . . for BetsyLee [P]."At thesametime,D closedthe

84 - Wills

in Cornmerjoint savingsaccountandinvest€d$1,000of theproceeds cial Bank stock,takng this stockascustodianfor his children P contendsthatthegifts for hereducationalneedscreatedfusts in eachinstance in theComof thetrustassets andthatthetrustssurvivedD's investment The trial for an accounting mercial Bank stock. P brought an action court held for D. P appeals 2)

3)

b.

Issues. a)

to exprcsslydirectthat is it essential To createa tust relationship, the subjectmatterof a giit be held in trust?

b)

to administera tust solelyin Doesa trusteehavetheresponsibility the interestof the beneficiaryof the trust andto prove that any expendtturcsmadewere madefor trust purposes?

andfemanded. Held. a) No. b) Yes.Casereversed a)

It is undisputedthat the gifts werc madefor the educationalneeds directD to hold donorsdid notexpressly of P.Whiletherespective to createa thesubjectmatterofthe gift in tust, thisis not essential property is made trustrelationship.It is enoughif the hansferof the with the intentto vestthebeneficialownershipin a third person' This wascl€arlyshownin thepresentcase.

b)

Havingdecidedthata ttustwascreatedfor the benefitof B it folBankstockascustodian ofthe Commercial lowsthatD's purchase powers over the trust property D's expand to for P was ineffectual D's attemptto broadenhis from thatof tusteeto thatofcustodian. power violated his duty to the beneficiary to administerthe tust solelyin the interestof thebeneficiary'Here'manyof theitemsthat or clearlyoutareeitherquestionable D lists astrustexpenditures side the purposeof an educationalffust The trial court theretbre that shesought erredin findingthatP hasreceivedthe accounting andis entitledto no furtheraccounting.

c)

The casemustbercmandedfor anaccountingto be predicatedupon atustee'sdutyto accountandthefustee'sburdento provethatthe expendituresweremadefor trustpurposes.In determiningwhether D hasmet this strict burdenof proof, the trial court must adhereto therulethatall doubtsareresolvedagainsta trusteewhomaintains system accountlng aninadequate

CustodianshipUnder Uniform Transfers to Minors Act. Under this Act, a gift to a minor may be transfered to a personascustodianfor the benefit of is simplerthanthecreationof a theminor Thecreationof thiscustodianship trust.The custodianis a fiduciary.To th€ extentthat the custodialpropertyis

Wills - 85

is requiredto transferthe not expended for theminor'sbenefit,thecustodian propertyto theminoron his attainingtheageof 21 or,ifthe minordiesbeforc arlaining rheageof 2l , ro lheesrare of theminor Precatory language and equitable charges.Precatorylanguage-such as "To A with the hopethatA will carefor B"----creates a monl obligationunenforceableat law.Uncertaintycanbe avoidedby specifyingthatonly a moral obligationis desired;e.9.,"I wish,but do not legallyrequirc,thatA will carc for B." Likewise,anequitablecharge(nota tust) occwswhena testatordevisespropertyto a personprovidedthat personpaysa certain sumof money lo anomerperson, The Hebrew University Association v Nye

d.

No intention to imposetrusteeduties-The Hebrew UniversityAssociation v, Nye (HebrewUniyersity AssociationI ), 148Conn.223,169A.2d 641 ( 1 9 6 1 ). 1)

Facts.HebrewUnivelsity(P) obtainedajudgmentdeclaringit wasthe ownerof a rarcbookcollectionpurchased by Professor Yahudaandhis wife Ethelduringtheprofessor's lifetime.Ethelhadpurchased a partof thecollecdoninventoriedin theprofessor's estatewhenhe died,andat herdeath,sheownedthecomplete Professor collection. YahudaandEthel hadindicatedto friendsbeforctheDrofessor's deaththatbothwishedto createa scholarship research centerin Israel.Professor Yahudahadforwardedsomeof thebooksto New Havenfor shipmentove$eas,butno consignee wasnamedandthebooksremainedin New Havenandwere purchasedby Ethel at theprofessor'sdeath.ThereafterEthel vi sitedPin Israelandannounced hergift at a luncheon. Thenextday,Ethelsigneda prcssrcleaseprep:uedby P,indicatingEthel had madea gift to P Ethel alsoprovidedP with a memorandum listingmostof the library'scontents,andits impoitantbooksanddocuments. [SeeHebrewUniversity AssociationII, infral Late\ Ethel statedorally and in writing that she "had given" the library to P, she refusedoffers of purchase,and told othersthe librarydid not belongto her.Ethelcratedandcatalogued the books,andup to thetimeofher death,coresponded with P aboutdeliveringthelibrary,andsentsomeitemsto a warehouse for delivery.Upon j udgmentdetermining Ethel'sdeath,P soughta declaratory whetherP or (D), Nye Ethel'sestate's reprcsentative, ownedthelibrary butP's complaintcontained no theorybaseduponwhichownershipwasclaimed.D appeals.

2)

Issue.Is P theownerof thelibrary?

3)

Held. No. Caseremanded for a newtrial. a)

86 - Wills

Thejudgmentbelowprovidedno basisfor the court'sconclusion thata trustwascreatedat theluncheonwhenEthelmadepublicher intentionto createthekust.

b)

c)

The factsindicatethatEthel intended'andpossbil orqcc rrmr to give an executed,prcsent,legal inter vivos gift o P deliverY' Becausea gift fails for lack of delivery' the intent to glre catrnot be canLd into effect throughthe presumptionthat the donor intendedto havemadeheNelftrusteeto makethenecessaq delivery

propeflyand d1 One may constituteherselftrusteeof personal cleatea tust erforceablein equity'eveflwithout consideration to or delivery.However,while theterm "ttustee"doesnot have herself be used,the donormust showanintent to imposeupon enforceabledutiesof a trustee' e)

e. -'

v'Nye Constructivedelivery-The HebrewUniversityAssociation 39i u"ir"^ity AisociationII), 26 Conn' SDpp342' 223 A'2d fi"ir". (1966). l) 2) 3)

The Hebrew University Association v Nye

Facts. SeeHebrew l|niversity Associatiotll' supra' therigh' Issue.IsP thelegalandequitableownerof thelibrarywith to immediatepossessionof its contents ' Ileld, Yes Judgmententeredfor P a)

b)

2. -'

No facs areprovidedin theopinionbelowindicatingthatEthel ever imposedausteedutieson he$elf

P claimsconstructivedeliveryby meansof.Ethel'smemorandum.Consfuctivedelivery requiresdelivery as nearly perfectandcompleteasthetypeof propertyandthe-circumdeliveryhasbeenfoundin stanceswill permit Constructive deliveryofkeys,pointingout hidingplaces'andaninforrnal memorandum. alongwith Ethel'sacts Here,deliveryof the memorandum' gift andieclarationsthatclearlyshowherintentionto give a and to divestherselfof ownership'was sufficientto comPletethe gift

Any type of Necessityof Tlust Property. A trust must have trust property interestsleasehold policies' life insutance oroo"nu--ontngent remainders' '*i li.uin.. fft" ituin concemis whetherlheparticularclaimwill bedeemed propertyby a coun a.

S W 2d Pmmiseto make gifts in the tuturc-Unthank v' Rippstein' 386 134(Tex.1964).

Unthankv. Rippstein Wills - 87

r)

payh€r Facts.C.P Craftwrotea letterto Iva Rippstein(P),promisingto ln the long that $200 a monthfor the next five yearsprovidedhe lived I marginofthe letter,hewrote:"l havestdckenoutthewords'provided iiulifruifong' u.a ft"t"by andherewithbindmy estateto makethe$200 Ctaft diedthreedaysafterwriting theletter'Pbrcught monthlypay-ments." judgment of his eslale(Ds) for declaralory suiragainsitheexeculors astheymatureThe rtreirtiauililyto paylulureInstallments aal,ral"car;ng motion for summaryjudgment The tri'al court iranted th" "i""uiotr' the court of apfeds reversedandrenderedjudgment for P' holding^that bound Craft which a voluntalytrustunder *.iting inlu"ttion "ttablished his pr;pertyto theextentof thepromisedpaymentsDs appeal' a Issue.Is a writing promisingto makegifts in the futurebindingas voluntarvtrust?

3)

b.

Held' No. Thejudgmentof the coufi of appealsis reversedandthatof the trial court is affirmed. a)

While the transactionsunder review are in the form of voluntary to gifts by lherulesapplicable in general Lhe)aregovemed lflJsls. sucha fusl anda g'll llesIn rne belween difference Theprincrpat fact ihat in the caseof a gift the thing givenpassesto the donee' whileinthecaseoi a voluntaryhustonlytheequitableor beneficiaL to thebeneficiary' title Passes

b)

to ol thenotationof Craft cannotbe expanded Here,thelanguage fust property in showanintentionon thepartof Craftto placehis The mostCraft did wasto expl€ssan intentionto makemonthly by an ineffectualattemptto bind his estate gifts to P accompanied in futuro; the writing wasno morc than a promiseto mak€ similar gifts in the futwe andassuchis unenforceable'

Resulting and constructive trusts. 1)

2)

(i). Resultingtrust' Resultingrusts ariseby opelationof law when an priceforprcpertybut trustfailsor (ii) apersonpaystheputchase express tiG resultsin the nameof anotherpenon who is not relatedto the purmoneyresultingtrust) chaser(putchase Constructivehust. Constluctivetrustsare flexibleremediesimposed to preventunjust en chment The trusteemust convey the property to for a consfuctivetust are: thewrongedpartyRequirements (i)

al relationshiP; A confidenti

prcmise,expressot implied; (ii) A transferee's

88 - Wills

(iii) A transferof propertyin relianceon thepromise;and of thelranslerce (iv) Unjustenrichment A consfuctivetrustmayalsobe imposedto avoidunjustenrichmentA neednot exist' promiseor confidentialrelationship a Tfust distinguished from debt. The crucial factorto differentiatebetween is the funds t..r.t ,"lutionihip undun ordinarydebtis whetherthe recipientof to o." th". ashis own andcomminglethemwith his own monies "ntitl"d 1) Tiust bas€don interestnot in existence"Brainardv' Commissioner,9l F.2d880(7thcir 1937) a)

Brainardv. Commissioner

Facts. Brainard,a taxpayet contemplatedtradingin the stock-mara lawyerandwasadvisedthatit waspossiblefor ket.He consulted him to tradein trust for his childrenandothermembersof his family. Brainard statedto his wife andmotherthat he declarcda trust' u;on certaintermsandconditions,of his stocktrading for the benanylossesresultpersonally eiit ofhis family.He agreedto assume ing from the venture,and to distributethe profits' if any' in equal sharesto his wife, mother,andtwo children after deductinga reafor hisservicesBrainardcarriedon histradcompensation sonable ing operationsandattheendof theyeardeteminedhis compensation toie slightlylessthan$10,000,whichhe reportedin his income tax for thatyear The profitsrcmainingwerethendividedamong the memberi of the family in approximatelyequal shates'which incometa'{retums The Boardof theyrcportedin theirresp€ctive wasta'{ableaspaft TaiAppealsheldthattheincomeincontroversy of grossincome.Brainardappeals'

b)

lssue.Can a trustbe basedon an interestthat had not comeinto existenceat the time the ttust is declaredandin which no onehad a presentinterest?

c)

Held. No Orderof the boardaffirmed' or lhathasceased thathasnotcomeintoexistence { l) An interest to existcannotbe heldin trust A pe$oncanmakea contact bindinghimselfto createatrustof aninterestif he shouldthereis not bindingas a conaftera;quireit' but suchanagreement fiact unl;sstherequirementsof contractlaw arecompliedwith cannotbe thesubjectmatlerof a tnrsl andan An expeclancy altempledcrealion.beingmerelya ptomiseto translerpropbyconslderauon supponed is invalidunless enyin lhefuture. Here,the taxpayerhadno propertyinterestin the profits in Wills - 89

stocktradingbecause therewerenonein existence at thetime.His declantionamountedto nothingmorethana ptomiseto crcatea trust. We thereforcmust determinewhetherit complied with the law of contracts. (2) It is elementary thatan executorycontact,in orderto be enforceable,mustbebasedupon valuableconsidention.Here,thedeclantion wasgmtuitous.Evenif we assumethat it wasbasedon love andaffection,thiswouldnotbesufficientconsideration for a Dromise. (3) Thisdoesnotmean,however,thatthetaxpayerhadnorightto carry outhis declaration afterthesubjectmatterhadcomeintoexistence. Thequestionis, therefore, at whattimesdid therespective eamings thatconstitute thetrustfundcomeinto existence andat whattimes did thetrustattachto them? (4) Whena personputportsto declarehimselftrusteeof aninterestnot in existence, no tust adsesevenif theintercstlatercomesintoexistence,unlessthereis a manifestation of intentat that latertime Meresilenceordinarilywill notbe sucha manifestation. (5) Herc,theprofitsin questionwercnot impressed with a trustwhen theyfirst cameinto existence. The taxpayer'screditingtheprofits to thebeneficia.ies on hisbooksseemsto constitutehis firct subsequentexpression of intentto becomea trusteeof the fund.Before that,thedeclaration couldnot havebeenenforcedagainsthim, and his meresilenceshouldnot be considered an expression of his intenlionlo establish a trusl. Speeiman v. Pascal

2)

Gift madeof property not in existenc€at time of gift-Speelman v. Pa.scal, l0 N.Y2d313,178N.E.2d,723,222 N.y.S.2d 324 o96t\. a)

90 - Wills

Facts.In1952,GabrielPascalEnterprises, Ltd. madeanagreement with the estateof GeorgeBemard Shawthat grantedto the corporationthe exclusive.ightsto prepareandprcducea musicalplaybasedon Shaw,s Pygmaliottand a motionpictureversionof the musical.prior to this agreement, Pascalhadproduced a nonmusical movievenionofthe play underrightsobtainedby Pascalfrom ShawduringShaw'slife. Thenew agreement providedthat the Shawestatewould rcceive3Eaof thercceiptsof the musicalplay andmovie.It alsoprovidedthat the license wasto terminate ifthe licensee did notarrangeto havetheplayproduced within certaintime periods.At a time whenthe licensestill had two yearsto run,GabrielPascal,who diedshotly thereafter, wrote,signed, anddelivercd (P)a letterthatconfirmedthathe wouldgive to Speelman to P57oofthe profitsobtainedin Englandandthroughout theworldand 27oof theprofitsin theUnitedStates. P broughtsuitto enforcepascal,s

trial cout heldfor promiseto paytheshareof theprofits The i. ut . put"ui(o)' puscal'swidow'appeals' thatis nol gifl bemadeofproperty b) lssue'Ma) a \alid present in existenceat the time the gift is made? c)

Held' Yes Judgmentaffirmed' letterconstl(1) Thequestlonnereis: Did thedeliveryof the way of assignP by gift to presenl tutea \ alld'complete' holdlhal rt did' menlol a share;nfutureroyaltieriWe assignments Therearcmanymstancesof courtsenforcing to b€come of rights to sumsthat wereexpectedthereafter thereJlad failed' ihat dueto the asslgnor'In thoseiases ol tm dellvery andine\ocable nolbeensucha completed matterof thegift asto pul thegil'tbey:i:"tT;::subJect lelt lor rasladonby thedonorHeretherewasnothing to P of palt of cal to do to makean irevocable ffansfer productions' Pascal'snght to receiveroyaltiesfrom the

3.

must havea beneficiary'However' Necessityof Trust Benefrciaries'A trust when-thetlust is created^Jf the ben€ficiarymay be unbom or unascertained aretoo ifldefinite to be.ascertaiied thereis morethanonebeneficiaryandthey trust may fail' in which casethere itt" ,rrn" ,fl" *" u"comeseffective' the rn or othersuccessors "i t".ti,*g trrrstin favorofthe settlor'hisheirs' *iiil" " lllrcrest. r Campbell'82 N H 28l' 133 a. Identification of beneficiaries-Clark A. 166(1926). 1)

2)

Clark v. Campbell

to his trusteesanicles bequeathed Facts.The will of the decedent of personalproperty"suchasbooks'photogtqht" 1b".T:'.!t^"]:l:t asthe trusteesshall statuary letc ]" to give to the decedent'sfriends of whetherthe enuselect.The lowercoufi reseryedthe question restnctive or mercly meration of the chattelswas intendedto be propetty bequeathedOn-apindicative of the variety of personal the bequestfoi the benefitof-the testator's f"ui, i, i, u'go"a thut iriendsmustfail for uanlofcenaintyol benelrcrarles Issues. a)

b)

personalpropertyto a Doesa bequestto a ttusteeto distribute Lstator'sfiiendsconstitutea privatetiust? a classof beneficiaMust a privaterust havea beneficiaryor *rll capableof cominginto courtandclaimi".l"ati"Ji",rt" ing thebenefitof thebequest? Wills - 9l

3)

ln re Searight's Estate

b.

Held. a) Yes.b) Yes.Casedischarged. a)

At commonlaw, therecannotbe a bequestto an indefinite person. Theremustbe a beneficiary or a classof beneficiaries indicatedin thewill capable of comingintocoufiandclaimingthebenefitof the bequest.This principleappliesto privat€tusts but not to public austsandchadties.Here,thelanguageof the will, ganting thetlusteespropertyof the describedclassto give to the testator'sfriendsas they shallselect,clearlydiscloses an intentionto createa private trust.

b)

However,we hold that the will doesnot provide for definite and ascertainable beneficiaries. Thus,it cannotbesustained asa private trust.Theword"ftiends,"unlike"relations,"hasno accepted statutory or othercontrollinglimitationsandin facthasno precisesense at all. No sufficientcritedonis fumishedto govemtheselection of theindividualsfrom theclass.

c)

Whena gift is impressed witb a tust ineffectivelydeclaredandincapableoftakingeffectbecause of theindefiniteness ofthe beneficiary, the doneewill hold the property in trust for the next taker underthewill, or for thenextofkin by way of a resultingtnist.The trusteesthereforehold the propertyunderconsiderationto be disposedof aspan of theresidue.

Honorary trusts-.h /e Searight'sEstate,87OhioApp.417,95N.E.2d779 r1950). 1) Facts.The will of the decedent, ceorgeSearight,bequeathed his dog, Trixie,to FlorenceHand,anddirectedhis executorto deposit91,000to be usedby him to pay Hand the sum of 75Cper day for the careof the dogaslong asit shalllive.Handaccepted thebequestofTrixie andrhe executorpaidher75Cperdayfor thekeepandcarcof thedog.Thetrial courtheldtheprovisionin thewill valid.This appealfollowed. 2)

3)

Issues. a)

Is the creation of a trust for the benefit of a specific animal the propersubjectof an honorarytrust?

b)

Doesa bequestfor the benefitof a specificanimal"as long as it shalllive" violatetheRuleAgainstPerpetuides?

Held. a) Yes.b) No. Judgment affi.med. a)

92 - Wills

A bequestfor the careof a specific animal is an "hononry trust," thatis, onebindingtheconscience of thetrustee,sincethereis no

beneficiarycapableof enforcingthefust. The modemauthoritiesupholdthe validity of suchgifts wherctheperconto whorn thepowerisgivenis willing to carryoutthetestator'swishes Weholdthatthebequestfor thecarcof thedog'Trixie,is noL in andof itselfunlawful. b)

4.

Nor doesthebequestviolatetheRuleAgainstPerpetuitieslt is to be noted that unlessa trust establishedfor specific animals limits the durationof the trust-that is, the time dunng which thepoweris to be exercised-tohumanlives,we will havehonorarytusts establishedfor animalsof g1€atlongevity thatpossiblycouldcontinuelongerthanthemaximumperiod allowedby theRuleAgainstPerpetuitiesHerc,however,the rule is not violatedsincethe moneygivenfor the purposeof caringfor the animalis limitedto $ 1,000at 75t per day This in threeyearsand238 l/3 sumof moneywill b€ fully exhausted days.It is thus apparentthat the testatorprovided a time limit fot the exerciseof the power given to the €xecutorand that suchtime limit is lessthanthemaximumperiodallowedun dertheRuleAgainstPerpetuities.

Oral Inter Vivos Ttusts of Land. An oral inter vivos trust of personalpropbut ifthe subjectmatterof theoralaustis land,a wntten ertyis enforceable, insfumentis requiredto makethetrlrsteffective.However,somecourtswill stoodin a confiimposea conskuctivetrustuponpropertyif the transferee to thetransferor' dentialrelationship a,

Oral promis€ to reconveyland held sufficient to impose a constructive trust-Hieble v' Hieble,164Conn.56' 316A.2d71'7(19'72)' 1)

title ofher realestateby deedto Facts.Mrs.Hieble(P)transfened her son(D) andto her daughter.The motivationfor the transferwas that P feared a recurr€nceof cancer.She and the granteesorally agreedthat thetansfer would be temporary;that shewould remain andtaxes;andthat in controlof thepropenya'ld payall expenses wouldreconveythepropthegrantees oncetheillnesshadpassed, P requested Fiveyearsaftertheconveyance, ertyto P uponrequest. that D reconveyhis title to her' D refused.P broughtsuit againstD of thepropeity.The bial court heldfor P D seekinga reconveyance appeals.

2)

trustbe imposedon propertywhenthe Issue.Will a constructive doneeby deedhasreceivedrealty underanoral promiseto hold and rcconveyto the grantorbut refusesto pedorm his promise?

3)

H€ld. Yes.Judgmentaffirmed.

Hieble v' Hieble

Wills - 93

5.

Olliffe v. Wells

a)

D hasnot attackedthecowt'sfindingthattheagreement was in factmade,nor doeshecontestthereceiptof parolevidence ashavingviolatedthe Statuteof Frauds.Sincethe findingof factsis not challenged. the conclusionof the court that rhe partiesstoodin a confidential relationship muststandunless it is uffeasonably drawn.Wegrantthatthebondbetweenparent andchild is not per sea fiduciaryone;it doesgenerate, how_ evel a natulalinclinationto reposegreatconfidence andftust.

b)

Thiscasecomes squarelywithinthegeneralruletlat whenthe ownerofan intercstin landhansfersit intervivosto anotherin trustfor the transferotbut no memorandum is signedasrequiredb) theSlaruteof Frauds,andthe transfereirefusesro pedorm the trust, the ftansfereeholds the interest in a con_ structivetrust for the fansferor if the transfereeat the time of thetransferwasin aconfidentialrclationshipto thetmnsferor.

Oral Trusts for Disposition at Death. If a testatordevisesproperty to his executors in trustsnot definedin thewill buttheexistence of whichthetesta_ tor hascommunicated to theexecutors beforcthewill's execution, somecoufts hold thatthosetrustsmaybe provedby oralevidence. Othercourtsrefuseto follow this line of decisions, holdingthatthe trusthasnot beensufficientl\ definedby the will to rakeeffect,andrheequirableinreresrgoesby way of rcsultingtrustto theheirsaspropefiyofthe deceased. a.

Tiustsnot sufficientlydefined-Olliffev. Welts,l30Mass.22l(1881). l)

Facts.The will ofthe decedent, EllenDonovan.left thercsidueof her estateto Rev.Wells@) to distibute in suchmannerasin his dlscretionshallappearbestcalculated to carryout the wishesthar shehadexpressed to him or may expressto him. The heirsof th€ decedent(Ps)broughtsuitagainstD, claimingthattheresidueshould bedistributed to them.In hisanswetD stat€dthatthedecedent hac statedto him her wish that her estatebe usedfor charitablepur. poses.D furtherstatedthat hedesiredandintendedto distributethe rcsiduefor thesepurDoses Issue.Ifa will showsthedeviseeto takelegaltitle only andnot the beneficialintercst,andthetustis notsufficientlvdefinedbv will to lakeeffect.will a counimpose a resulring rrusiontheheiisof rhe decedent asto thepropertyof thedecedent not disposed ofby will?

J'

Held.Yes.Judgment for Ps. a)

94 - Wills

It hasbeenheldthatifa testatordevisespropertyto hisexecu_ torsin trustsnot definedin the will, but which,ashe statesin

thewill, he hascommunicated to thembeforethe will's execution,thetrusts,if for lawful purposes,maybeproved by theadmission of theexecutors or by oralevidenceand hasalsobeenheldthattheffusts enlorcedagainstthem.It maybeenforcedagainsttheheirsor nextof kin. b)

We rejectthis line of cases.The will on its face shows thatthedeviseetakesthelegaltitle only andnot thebeneficialinterest,andthetust is not sufficientlydefinedby the will to takeeffect.Thus,the equitableinterestgoes, by way of resultingtrust, to the heirs as property of the deceased, not disposedof by will. They cannotbe deprivedof thatequitableinterestunlesssignifiedin those forms that the law makesessentialto everytestamentary A tnist not sufficientlydeclaredon the face disposition. of the wjll cannotthereforebe set up by exrinsic evi denceto defeatthe ghtsof theheilsat law.

C. DISCRETIONARYTRUSTS ln a mandatorytrust,the tnisteemustdistributeall the income.In a discretionarytlust,the trusteehasdiscretionto distributeeithertheincomeor the principalor both. 1.

Tfustee'sDuty-Marsman v. Nasca,30Mass.App.Ct. 789,573N.E.2d Marsman v.Nasca 1025f1991). (ID, for whom wassurvivedby hersecondhusband Facts.Testator sheprovidedin a trust.Trustee(T) wasdirectedto pay quart€rly incometo H and,aiterhavingconsideredH's sources ofincome,to payprincipalfor H's comfortable supportandmaintenance. H obtainedtitle by operationof law to the Wellesleyhomeownedas tenantsby the entirety,but testatoralsoindicatedin her will her intentto conveythepropertyto H. UponTestator's death,Farr,the attorney,met with H. H was forcedto reducehis styieof living andtoapplyfor a mortgage to paybills.Fafi wasaware dramatically herepliedto aninquiryofthe mortgagebank of H's statusbecause andH hadaskedFarrfor moneyon oneoccasion. Farr askedH to suppofthis needin wdting andwrcte to H thatFarI thoughtthe trusilanguage was"broadenoughto permita distributionofprincipal."H neveraskedagainfrom thedateof Testator's deathin 1971 until H wasadmittedto a nursinghomein 1983.Farrhadgivenhim only $300beyondtheincomeofthe trust.H remariedin 1972and executeda simplewill draitedbyFarr,leavingmostofH's property andconveyed to his wife (P).By 1974,H couldnot meetexpenses his hometoTestator'sdaughterby a formermarriageandherhus-

Wills - 95

and band.Thedaughtertookoverthemortgagepayments,taxes,insurance, majorrepairs.Hretaineda life estate.FarrhadneveradvisedHhecoulduse thetrustprincipalfor theexpenses of thehome.The daughterdiedbeforeH. H's death the daughter's husband askedP to vacate.P broughtthis Upon actionin probatecourt.The court foundT in breachof his duty to H and orderedthehusbandto conveythehometo P andalsoorderedFan to reimburceTestator'sdaughter's husbandfrom theremainingportionof H's hust for the expenses he andTestator'sdaughterhadpaid for the upkeepof the property.Ifthetrustwasinsufficient,thecourtfoundFarrpersonallyliable. P appealsthe denialof attomeys'fees.Testator'sdaughter'shusbandand FarI appealfrom thedenialoftheir motionsto amendthefindingsandfor a new trial. b.

Issues. l)

powerto pay principalfor the Doesa trustee,holdinga discretionary "comfortablesupportandmaint€nance" of a beneficiary,havea duty to inquireinto thefinancialresources ofthat beneficiarysoasto recognizehis needs?

2)

If so,wasthecourt'sremedyfor suchfailurecolrect?

Held. l) Yes.2) No. Judgmentvacatedandrcmanded. l)

The requircmentthat a trustee'spowermust be exercisedwith sound judgmentfollowingfrom a dueappreciation of trustresponsibilityimposesupona trusteea duty of inquiryinto thebeneficiary'sneeds.

2) T alsofailedto meethis responsibilities ofdistributionunderthetrust. and 3) The conveyancewas supportedby sufficientconsideration, Testator'sdaughterandher husbandhadno noticeof a breachof trust guilty ofa breachoffiduciary duty;theycanandwercnot themselves not be chargedasconstructivetrusteesof the property.

4) The remedyfor T's failure to expendtrust principal in this circumstanceis to imprcssa conshuctivetrust on the amountsthat should havebeendistdbutedbut werenot becauseof T's error On remand theseamountswill be determinedandpaid to H's estate. 5) The exculpatoryclausein Testator'swill, draftedby Farr andholding Farr harrDless, wasincorrectlyinvalidatedby the pfobatecourt since therewasno evidencethatthe insertionof the clausewasan abuseof Farr'sfiduciaryrelationship withTestator at thetimethewill wasdrawn. 6)

96 - Wills

Far's actionswerenotbreaches of trustcommittedin badfaithorintentionallyor with recklessindifference. Nor weretheywillful neglect.

D. SPENDTHRIFTTRUSTS In a spendthrift cannotvolunta.ilyalienatetheirintertrust,thebeneficiaries ftom creditors. estsandtheirinterestsareprotected 1

lmmunity from Alimony and Child Support..Shelley v. Shelley,223 Shelleyv. Or. 328, 354 P.2d.282 (1960). Shelley a,

Facts.HughShelleyleft a husttheincomeof whichwasto bepaid to his wife, GertrudeShelley,as long as shelived, and afterher deathto his son,GrantShelley.The trustalsoprovidedthateach beneficiarywaspreventedfrom alienatingthat beneficiary'sinterestintheestate, nor wouldtheinterestor estatebesubjectto claims ofcreditors.GrantShelleywasfirst maniedto PatriciaShelley,and two childrenwerebomof thismalriage.Thereafter,Patriciadivorced Grant,withthedivorcedecree requiringpaymentfor suppof.Grant latermaried BeftyShelley(P),andtwo childrenwerebornof this marriage.P laterobtaineda divorcefrom Grant,with the divorce decreerequiringbothsupportandaUmony. TheU.S.NationalBank ofPortland,Oregon(D) investedthe trustassets in securities, which incomefrom the arenow heidby it togetherwith the undisbursed trust.P obtainedaninjunctionreshainingthedisbursement of any proceedof thetrustassets. PatriciaShelleybroughta gamishment ing by which shesoughtto subjectthetrust to the claim for suppofi moneyprovidedfor in her divorce decrce.D thenbroughta bill of interpleader, tendedngto thecourtall ofthe fundsheldin trustmd prayingfor an orderestablishing therightsof the paities.Thet al couitentereda decrcesubjecting theaccruedincomeofthe trustto the claimsof P andPatriciaShelJey;subjectingfutureincomeof the trust to the pe odic obligationsbroughtby P and Patricia Shelley;andholdingthatin theeventthetrustincomewasinsufficientto satisfysuchclaims,thecorpusofthe trustwassubjectto invasion.

b.

Issue.Is a spendthriftprovisionof a trusteffectiveagainsttheclaims of the beneficiary'sformer spousefor alimony and for supportof thebeneficiary's child? Held. No. Decreeaffirmedin partandreversed in part. l)

Althougha trustis a spendthdfttlust or trustfor suppoft,the interestof thebeneficiary canbe reachedin satisfaction of an enforceable claimby the spouseor child of a beneficiaryfor for alimony.Theprivilegeofdispossupport,or by thespouse propeity ing of is not absolute:jt is hedgedwith variousrewarrantingthe strictionswheretherearepolicyconsiderations limitation.

Wills- 97

2) Publicpolicyrequiresthattheinterestofthe beneficiaryofa trustshould be subjectto claimsfor child suppon.It is clearthatparentshavethe obligationto supporttheirchildren.Werewe to bar claimsfor support, we wouldhavethe spectacle of a parentenjoyingthebenefitsol a trust whilethecommunitypaysfor thesupportofthe children.With regardto alimonyfor thespouse, thesameconsiderations apply;in manycases, if thebeneficiary'sinterestcannotbereached, thestatemaybecalledupon to supportthespouse. Weholdthatthebeneficiary's intercstin theincomeof thetrustis subject to the claimsof P for alimonyandto the claimsfor supportof tle childrenasprovidedunderbothdivorcedecrees.Weadoptthe view,however,thattheclaimantsmayreachonly thatmuchofthe incomethatthe tdal courtdeemsreasonable. 4)

The questionof the claimant'sright to rcachthe corpusof thetrustinvolvesotherconsiderations. Thereis nothingin this trustthatwouldindicatethe testator'sintentto makeP eitherdirectlyor indirectlythe beneficiaryof the trust.At leastwith respectto the corpus,an Oregon statutemakestle subjectmatterof the tlust free from attachment.It foilowsthatthelowercourterredin makingthecorpusof thetrustsubject to P'sclaimfor alimony. Whetherthechildrencanreachthecorpusinvolvesstill a differentproblem.Theftuststatesthatdisbursements to GrantShelley'schildrenwere to be made"in caseof anyemergency wherebyunusualandextraordinaryexpenses arenecessary. . . ." D claimsthattheexpenses claimedin this casearenot unusualor extraordinaryWe disagree.We conshre the clauseto includethe circumstances involvedhere-where thechildren aredesertedby their father andarein needof support.

6)

d.

98 - Wills

The decrceof the lower court, permitting the corpusof the trust to be invaded,wastoo broad.Firct,it improperlyincludedP's claimfor alimony;andsecond,it permittedencrcachment uponthecor?uswithout relerenceto whetherthe ffusteehasexercisedhis discretionor whether therehasbeenanemergencyascontemplatedby the testator.The decree thereforeshouldhavepermittedaninvasionof thecorpusonly ifit was necessary first to reachthe incomeunderthe circumstances mentioned andsuchincomewastheninsufficient.Further,thedecreeshouldhave madesuchcorpusavailableonly in theeventofthe fiustee'sexerciseof discretionundertheemergency providedfor in thetust. circumstances

Comment.Ohio recognizedspendthrifttrustsin 1991.lscott v. Bank One TrustCo.,62 OhioSt.3d39,577N.E.2d1077(1991)lIn NewYorkby statute all trusts are spendthrifttrusts unlessthe settlor expresslymakesthe beneficiary's interesttmnsfemble.

Cr€ditors' Rights in Support Thustsand Discrttionary Trusts' a.

Support trusts. A suPporttrust is onein which the trusteeis directedto make distributionsas necessaryfor the educationand maintenanceof the beneficiary,and to expendthe income and pdncipal only for that purpose.In a supporttust, creditorsof the beneficiarycannotreachthe may rccover beneficiary'sinterest.However,suppliersof necessaries rightto support. throughthebeneficiary's

b,

trustis onein whichtheftusteeis Discretionarytrusts.Adiscretionary givendiscretionwhetherto applyor withholdpaymentsoi incomeor or (in somecases)to distdbpincipal to or from a particularbeneficiary, her utethesameto someotherbeneficjaryBeforethe fusteeexercises interest to thebeneficiarythebeneficiary's discretionto makepayments If, however'thetrusteedecidesto pay his creditors. cannotbereachedby overorto applysomeamountof trustincomeor principalto thebenefiandhiscreditorsmaythen ciary,therighttheretovestsin thebeneficiary reachit. 1)

517N w2d Statesv. O'Shaughnessy' IRS unsuccessful..United 574(Minn. 1994). a)

identiof two separate is a beneficiary Facts,O'shaughnessy 1951('1hel95l Trusts")by his grandcaltusts establishedin parentsfor the benefitof their grandchildren.The trusteeshave discretion to distribut€ or withhold trust assetsdu ng lifetime. Howevet,the 1951trusts give O'Shaughnessy's exercisable a limited powerof appointment O'Shaughnessy of indiclass to a cefiain testament only by his last will and prothetrustagleements viduals.If thepoweris notexercised, vide for the distributionof the principaland undistributed a tax death.TheIRS (P)assessed incomeat O'Shaughnessy's anempted and O Shaughnessy ($412.q21.27) againsl deficiency to levy the fust propertyor rightsto suchpropertyto satisfy thedeficiency.No distributionftom thetrustswaspendingwhen of the the levy wasserved.P filed suit seekingenforcement (Ds) dismiss. moved to Bank levy.ThetusteesandFirstTrust The disttictcourtdeteminedthatthe issueraisedby themofor tion to dismissraiseda questionof statelaw appropriate certificationto thiscourt.

b)

ofa discrelaw,doesthebeneficiary Issue."UnderMinnesota 'prophave herein tionarytrustwith theprovisionsdescribed hustprincipal erty'or any'rightto property'innondistributed discretiontheir haveexercised or incomebeforethetrustees arvDowersofdistdbutionunderthetrustagrcement?"

United Statesv. O'Shaughnessy

Wills- 99

c)

in thenegative Held.No. Cefiifiedquestionanswered (1) Under an expressdiscrctionarytrust, there is a legal interestvestedin thetrust€eandanequitableinterestvested in thebeneficiary.The beneficiaryis entitledonly to what discretion,seesfit to disthetrustee'in his uncontrolled tribute.The ben€ficiarycannotcompelthe tustee to d1stribule$ hal is a "mere expectancy' (2) The beneficiary'scrcditors have no remedyagainstthe trusteesuntil the trust propertyis distdbuted' (3) The trust statesthat the trustees"may" pay all or sucl' part of the trust assetsasthey seefiti aslong asthe trusteesacl in goodfaith. from propermotives and reasonably,thecourtwill not interferewith theirdecisions'

3.

Medicaid Trusts.To qualify for Medicaid,anindividual's financialrcsources dollars.Whethertusts thatprovidesuppon mustnot exceeda few thousand for Medicaid to theindividualarecountedarnongtheindividual'sresources purposesdependson the t)?e of trust. a.

Discretionary trusts. If an individual's assetsform all or part of the by the individual,a spouse,or a tust andif the trustwasestablished peNonactingon the individual'sbehalf,for purposesof Medicaid'a irust is deemedto be crcatedby the individual.All of the assetsoi a Any incomeorprinciresources available rusl areconsidered revocable pal that may bepaidto the individual underanycircumstancesunderthe tems of aninevocabletust areconsidercdrcsources' l)

100- Wills

for truslcreatedby will by onespouse A dtscretionary Exceptions. lf a resource the benefitof the sutvivor is not deemedan available tust is createdfor a disabledpersonto prcvide care for the individualoverandabovewhatMedicaidmay provide,andthercis a provisionfor thetrust to reimburseMedicaid uponthe individual's an availableresource' death,thetrustis not considered

b.

Third-person trusts. Income or pdncipal actually or legally available to a beneficiaryof a mandatoryor supporttust establishedby a thid trustgivingthe applia resowce.A discrctionary personis considered cant no legalright to theincomeis not considercda resourceavailableto the individual unlessthepurposewasto provide for the applicant'ssupport.

c,

Car€ful drafting. This areaof the law demandsgreatcaution Judicial interprctationsof trustlanguagearenot consistent.Publicpolicy considerationsareunsettled.What worksin onejurisdictionmay not work in another.

E.

MODIFICATION AND TERMINATION OF TRUSTS l.

Modification of Distributive Provisions.Somecourtswill permi! a whercan unforcdeviationof the termsof an expressgift in instances threatens theaccomplishment ofthe testator'spurpose. seenemergency Tfust modification denied..l, .e Trust of Stuchell, 104Or App. 332.801P2d 852(1990).

r)

/r re Trust of Stuchel

(P's)four childrenwereremainder benefiFacts.Petitioner's cia.iesof a trust.Oneof them,Harrell,wasmentallyretarded Harrelllived in a state andunableto live withoutassistance. facility andreceivedMedicaidandSocialSecuritybenefits, bothof whichhaveincomeandrcsoucelimitationsfor parthe courtto apprcvea modificationof ticipants.P requested the trustso asto prcventHarell's remainderftom beingdisFibutedto him if he suNivesthetrust'sincomebeneficiaries. modificationwasdesigned to preventHarell's The proposed for publicassistance. P appeals from thetrial disqualification court'sdismissalof herpetition. Issue.ShouldP'sproposedmodificationbe approved?

3) Held. No. Judgmentaffirmed.

7

a)

P relieson commonlaw autlority for allowing a court to modification. A tlustmaybetermiapprovetheproposed (i) all beneficianatedunderverylimitedcircumstances: riesagree,(ii) no beneficiaryis undera legaldisability, would not be frustratedin and (iii) the trust'spurposes doingso.

b)

(Second) To extendthe rule, P rclies on Restatement Trusts,section167(l), whichprovidestbat a courtmay pemit the trusteeto do actsnot authodzedby the tems of thetust.

c)

However,Commentbto section167(1)statesthata court will not permit a deviationfrom the termsof a trust "merelybecause suchdeviationwouldbemorcadvantageousto the beneficiaries thana compliancewith such permittingtheprodirection."This limitationprecludes posedamendment, theonly purposeof whichis to make to thebeneficiaries. thetrustmoreadvantageous

Termination of Tlusts. If the settlorandall beneficiariesconsent,a trust The weightof authorityprovides,however,that a may be terminated. trustcannotbe terminatedDriorto thetime fixed for termination,even Wills - l0l

if teminationwouldbecontraryto a material consent, thoughall thebeneficiaries purposeof the settlor. ln re E'state ofBrown

a.

R€mainingmaterialpurpose--I/,te Estateof Brorvn,148Vt.94,528 A.2d '152.L981). 1)

Facts.AndrewBrown diedin 1977,settlinghis entireestatein a trusl The relevantportionof the trustinstrumentprovidedthatthe trust would beusedfor theeducation of thechildrenofhis nephew,WoolsonBrown. theincomefrom the rust andas After this purposewasaccomplished, wouldbe usedby thetrusteeior muchof thepdncipalaswasnecessary andwelfareofWoolsonBrownandhiswife (Ps), thecare,maintenance, sothattheymightlive in thestyleandmannerto whichtheywereaccustomeddudngthe remainderof their naturallives. Upon their demise, anyremainderof the trust wasto be paid to their thenliving childrcn in equalshares. to Thetrusteecompliedwith thetermsof thetust by usingtheproceeds payfor theeducationof thechildrenof Ps.After he determinedthattheir educationwascomplete,thetruste€begandistributionof ffust incometo Ps. thelifetimebeneficiaries, In 1983,Pspetitionedtheprobatecourtfor terminationoftrust,arguing thatthesoleremainingpurposeof thetust wasto maintaintheirlifestyle to acconrandthat distdbutionof the remainingassetswasnecessary (Ps'children)filedconsents plishthispurpose. to the Therernaindermen proposedtermination.The probatecourtdeniedthe petitionto termiSuperiorCourt.The superior nate,andPs appealed to the Washington courtreversed, concludingthatcontinuation of the trustwasno longer necessary because theonly materialpurpose,theeducationof thechilAn appealby thetusteefollowed. dren,hadbeenaccomplished.

102- Wills

2)

I6sue.If any matedalpuryoseof the trust remainsto be accomplished, may thetust beteminatedif all beneficiaries consent?

3)

Held.No. Judgment reve$ed. a)

An activetrustmaynot b€teminated,evenwith theconsentof all thebeneficiades, if a materialpurposeof the settlorrcmainsto be accomplished.

b)

If eithera supporttrustor a spendthdfttrustwereinvolved,teminationcouldnotbecompelled by thebeneficiaries because a material puposeofthe settlorwouldremainunsatisfied.

c)

The tust at issuedoesnot qualify asa supporttrust.A supporttrust is createdwhenthetrusteeis directedto usehustincomeorDdnci-

palfor thebenefitofan individual,but onlyto theextentnecessary thefusteemust,attheveryleast, to supporttheindividual.Because as payall of thetrustincometo Ps,thetrustcannotbecharacterized a suppofimlst. d)

trust.Afust in which Thetrustalsodoesnotqualifyasa spendthrift by thetermsof thetrustor by statutea validrestrainton thevoluntary and involuntarytransferof the intercstof the beneficiaryis trust.Thetems of thetust instrumentdo imposedis a spendthrift trust. Brown's intentionto createa spendthrift manifest Andrcw not The merefact that an interestin a trust is not tmnsfembledoesnot makethe trust a spendthritltrust. a materialpurpose Termination cannotbe compelledherebecause The settlor'sintentionto of the settlorremainsunaccomplished. if terminationof assurea lifelongincometo Pswouldbe defeated were allowed. thefust

b.

Tfusts remainingindestructiblebeyondthe perpetuitiesperiod.A trustis period.The not void merelybecauseit canextendbeyondthe perpetuities in a trustandrequiresthatthey appliesto interests RuleAgainstPerpetuities period provided by the Rule,but it doesnot limit the the vestor fail within a trustcannotremainindesfuctibleby the durationof thetrust.Nonetheless, perpetuities period. beneficiariesbeyondthe

wills - 103

IX. POWERSOF APPOINTMENT: BIILDING FLEXIBILITY INTO TIIE ESTATE PLAN A.

INTRODUCTION 1.

is calledthe rypes of Powers,The creatorol a powerof appointment person granted power dorrl. The the is calledthedore€.Thosepersons to whomthedoneemay appointpropefiyaretheobjects. a.

Generaland specialpowers.All powersof appointment canbe djvidedintogeneralpowersandspecialpowers.A generalpoweris on€exercisable in favorof the donee.her estate.her crcdito$.or thecreditorsof herestate. A specialpoweris onenotexercisable in favorof thedonee,herestate,hercreditors,or the creditoNof her estate.

2, Doesthe AppointiveProperty Belongto the Donor or the Donee? Undertherelation-back doctrine.thedoneewasconsidered to haveauthorityto fill in blanksin thedonor'swill; propertysubjectto apowerof appointment wasviewedasownedby thedonorandthepowerwasconceivedasmerelyauthorityof thedoneeto do an actfor thedonor.Special powersarestill treatedaccordingto this doctrine. Irwin Union Bank& Trust Co. v. Long

Creditor's Right to Property Subjectto a PowerofAppointment.Irwin UnionBank & Tfust Co.v. Long, l60 Ind.App.509,312N.E.2d 908(1974). a.

Facts,In1957,VctoriaLong(D) obtained ajudgment in theamount of $15,000againstPhilipLong aspartof a divorcedecree.In this action,D seekssatisfaction of thatjudgmentby punuingfundsallegedlyowedto Philip asa rcsultof a trustsetup by Lau.al,ong, his motherD allegedthatthe Irwjn Union Bank andTrustCompanywasindebtedto Philipastheresultofits positionastrusteeof thetrustcreatedby Laura.Thetuialcoud orderedthatanyincome, propefiy,or profitsthatwereowedto Philip andnot exemptfrom executionshouldbe appliedto the divorcejudgment.Thereafter, the trial coufi orderedthat 47oof the tlust corpusthat benefited Philipwasnotexemptfrcm executionandcouldbe levieduponby D. The primaryissuemisedon appealis whetherthe trial court e.redin allowingexecutionon the4% ofthe trustcorpus.

b.

Issue.Can a creditorreachpropertycoveredby an unexercised powerof appointment?

c.

Held.No. Judgment of trial couitreversedandcasercmanded. l)

104- Wills

Wherea beneficiarywasgivena powerundera testamentary tlustto dist.ibutepropertynothisownby electingto withdraw

not more than 4% of the fust corpus under certain circum_ the powergivento the beneficiarywas a "powerol stances, formerwife wasnot enandthe beneficiary's appointment," titled as a creditor under a divorce decreeto reachproperty thatwasunexercised. coveredby a powerof appointment 2)

4.

B.

Thebeneficiaryof a trusthadno controloverthetrustcorpus andgavenoticeto hispowerofappointment until heexercised thetrusteethathewishedtoreceivehis47oofthe trustcorpus. wasmade,thetrusteehadtheabsoluteconUntil suchexercise trol andbenefitof the kust corpuswithin the termsof thetrust insfiument.

Thx Reasonsfor Creating Powers.The doneeof a generalpower of appoinftnentover incomeor principal is regardedas the owner of that property.The incomeis taxableto the donee.If the power of appointpropertyis mentis exercised duringthedonee'slifetime,thetransferred is notexercised dursubjectto gift taxation.Ifthepowerof appointment ing the donee'slifetime,the propertyis a part of the donee'sfederal grossestateandis subjectto taxation.Note that propertysubjectto a is nottreatedasownedby thedonee. specialpowerof appointment

CREATION OF A POWER OF APPOINTMENT 1.

Intent to Crcate a Porver.The creationof a power of appointmentmust be accompanied by thedonor'sexpressor impliedmanifestationof intent.

2.

Powersto Consume.Theissueof whethera powerto consumeprinciwith powersof appointment. pal hasbeencreatedarisesin connection a.

in will--Sternery, Nelson'210Neb.358,314 Inconsist€ntclau.$es (1982). N.W2d263 1)

Facts.Thewill ofthe decedent,OscarWurtele(T), bequeathed to his wife,Mary,all his property"absolutelywith full power in her to makesuchdispositionof saidpropertyas shemay desire."It alsoprovidedthatuponthedeathof his wife (or if theremainingpropertyshouldvestinT's shepredeceasedT), fosterdaughterandher children(Ps).After T's death,Mary remarried.Mary died testate,leavingpropertyto variousindibutnot to Psreferredto in T's viduals,includingherhusband, inT's will createda will. Thetrialcowt heldthatthelanguage feesimpleabsolutein Mary.Psappeal.

2)

Issue.If a will conveysabsolutetitle in fee simple,will an inconsistentclausein theinstrumentattemptingmerelyto limit thattitle or conveyto thesamepersona limitedtitle be disresarded?

Stemer v. Nelson

Wills- 105

3)

b.

affirmed. Held. Yes.Judgment a)

to onein The generalmle is thatwhenthereis a bequest genemltermsonly,expressing neitherfeenor life estate, limitationoverof whatremains andthercis a subsequent at thefirct taker'sdeath,if thereis alsogivento thefirst powerof absolute distakeranunlimitedandunrestricted posal,thebequestis constuedto passa fee.The attempted limitationoveris void.[f a will conveysanabsolutetitle clausein theinshumentatin feesimple,aninconsistent temptingto limit thattitle orconveyto thesamepersona limitedtitle will be disrcgarded.

b)

Here,the $ant to Mary Wurtelewasclearandunambiguous.Shewasto havethe Foperty "absolutelywith full powerin herto makesuchdispositionof saidpropertyas shemaydesire."Wefind no reasonwhy thecornmonlaw Accordingly, rule shouldnot be appliedto this bequest. we holdthatthebequestto Mary Wurtelewasa fe€ simple absolute.

Taxation of powers to consume.A power to consumethat allows the doneeto appointpropefiyto himselfduring his lifetimeis a generalpowerof appointrnentandis taxable.However,if thepower is limited by asceitainable standards, it falls within an exception andis not taxable.

C. RELEASE OF A POWER OF APPOINTMENT (exceptpowersin tust or imperativepowe6)maybe Powersof appointment j puGuantto caselaw or statute. released in alI urisdictions, Seidelv Wemer

1.

Contractto Exercisea PowerofAppointment-Seidelv. Werner,81 Misc.2d 220,364N.Y5.2d963(19'75). Facts.The decedent,StevenWemer,entercdinto a sepamionagrcementwith his secondwife, Harriet,wherebyhe agreedto makea powerofappointwillin whichhewouldexercise his testamentary mentover his shareof a trust, known astheAbrahamWemerTrust No. 1, by establishinga tuustfor the berefit of their children,Anna and Frank Wemer.l-€ss than four months after the divorcejudgment,of which the separationagreementwasmadea pafi, thedecedentexecuteda will, which,insteadof executinghis testamentary powerof appointment in favorofAnna andFrankWemer,left everythingto his third wife, Edith (D). The trusteesof the fust (Ps) aresuingfor a declaratoryjudgmentto determinewho is entitledto thedecedent's shareofthe trustfund.

106- Wilts

b.

Issue.May the doneeof a power of appointmentthat is not prcsently exercisablecontractto makean appointment?

c.

Held. No. Summaryjudgment$antedfor D. thatis not presentlyex1) The doneeof a powerof appointrnent ercisable,or of a postponedpower that hasnot becomeexercisable,cannotcontractto make an appointment.Such a contractcannotbe the basisof an action for specific pedorbut thepromiseecanobtainrcstitutionof manceor damages, given by him for thepromiseunlessthe doneehas value the thepowerpwsuantlo lhecontract. exercised 2)

Howevef Halaiet,Anna,andFrankWemerarguethat at a minimum the agreementshould be construedas a releaseof his andthatAnnaandFrankshouldbeperpowerof appointment, mitted to take ason default of appointment.This argumentis to thiscasesinceit is clearthatthepartiesdid not inapplicable intend a releaseof the powerof appointmentNor is the effect of thepromisedexerciseof thepowerthe sameaswouldfollow from rcleaseof the power, sincethe agrcementprovides for appointmentof a greaterprincipal to Anna andFrank than they would get in defaultof appointment.Also, underthetrust insfument, on default of exerciseof the power, the property goesto thefour childrenabsolutely,whereasunderthe separathe decedentshall createa trust payableto tion agreement Harriet astrusteefor the supportof Anna and Frank. Finally, under the separationagrcement,if Anna and Frank fail to qualify,theprincipalwouldgo to thedecedent'sestate,whercas under the trust instrument,in default of appointmentand an inability ofAnna andFrankto take,thedecedent'ssharcwould go to his otherchildren,ifliving, andif not,to his nextofkin. it is too strainedto construethe Underthesecircumstances, separationagrc€mentastheequivalentof areleaseof thepower Accordingly,D is entitledto the decedent's of appointment. pdncipal of theAbrahamWemertrust. sharein the

D. EXERCISE OF A POWER OF APPOINTMENT 1.

Exercise by Residuary Clause in Donee'sWill. Courts are split over exercis€a generalor whethera residuaryclauseshouldpresumptively Probate Code,section2The Uniform specialpowerof appointment. 610,providesthata generalresiduaryclausein a will, or a will making generaldispositionof all of the testator'sproperty,doesnot exercisea heldby the testatorunlessspecificreferenceis powerof appointment madeto the poweror thercis someotherindicationof intentionto includethe propertysubjectto the power

Wills- 107

Bealsv. State Stre€tBank & TrustCo.

108- Wills

Partia.lrcleaseof generalpow€r of appoinlment-Beals v. Stlte Str€etBank & Tfust Co.,367Mass.318,326N.E.2d896(1975). 1)

Facts.The will of thedecedent, Arthur Hunnewell(T), placedtheresidueof his propertyin a trust,theincomeof which wasto be paidto his wife during her life. The will dircctedthar ar the deathof the wife the trustwasto be dividedinto pofiions,onefor eachsurviving daughterand for thethen-surviviflg issueof anydeceased daughterThe will directed that the incomeof eachpofiion shouldbe,on a daughter'sdeath,paid anddisposed ofas shemaydirectandappointby herlastwill. Following the deathof her mother,one daughter,Isabella Hunnewell Dexter, requestedthe trusteesto makethe principal paymentsby transfer.ingvirtually all of her trust sharcto the Dexter family office in Boston. Thereafter,Isabellaexecutedan instrumentpartially rcleasingher general powerof appointment underher father'swill. Isabella,who died withoutissue,did not expressly exerciseherpowerof appointment underherfather'swill but did leavea will thatleft theresidueof heresrare to theissueof hersisterMargaretBlake,who hadpredeceased Isabella. In defaultof appointment, theBlakeissuewouldtakeone-halfof Isab€lla,s trustshare.If Isabella'swill shouldbe teated aseffectivelyexercising her power of appointment,the Blake issuewould take the entire trust sharcandthe executorsof the will of Isabella'ssisterJanewouldnot receivethat one-halfof thetrust sharethat would otherwiseeo to Janein defaultof appointmenl. The lrusrees(Ps)of T's wjll filed a peririonfor instrucdons,seekinga determinationof the distdbution to be made.The trial court reserveddecisionand reportedthe caseto the appealscourt. The casewasthentransfered to the suprcmecourt.

2)

Issue.Doesthe partial releaseof a generalpower of appointmentobviatethe applicationof therule of conskuctionthatpresumes thata generalresiduaryclauseexercises a genemlpowerof appointment?

3)

Held. No. Judgmentordered. a)

We arc unawarcof any decidedcasethat, in this context,hasdealt with a testamentarygeneralpower reducedto a sp€{ial power by action of the donee.We concludethat the residuaryclauseof Isabella'swill shouldbe prcsumed to haveexercised thepowerof appointrneflt.We believe that a presumptionof exerciseis morc appropriatein this casethan a presumptionof nonexercise.

b)

Whenthis courtfirst decidednot to extendto a sDecialDowerof appointment theruleofconsuuctionthala generalresiduary clause executesa genemltestamentarypower unlessa contrary intent is shownby thewill, we notedsignificantdistinctions betweena generalpoweranda specialpower.A generalpowerwassaidto be a

closeapproximationof a propertyinterestwhile a specialpower lackedthis quality. c)

The rationalefor thecanonof construction applicableto generalpowersshouldbe appliedin this case.The powerwasa generalpowerat its inception.Isabellahadtheuseandenjoymentof the major portionsof the propertyandthis is a factor properlyconsidered asweighingin favorof th€ exerciseof a poweroi appointment by a will. Here,thepartialrcleaseof a generalpowerdoesnot obviatetheapplicationof thatrule of construction thatpresumes thata genemlrcsiduaryclauseexgeneral power ercisesa of appointment.

Limitations on Exerciseof a SpecialPower.Doneesof genemlpowe6 of appoinhnent canusuallyappointoutrightor in fulher trust.They can also createnewpoweNof appointment. Thedonee'sauthorityis morelimitedwith a specialpowerof appointment. A specialpowermustbe exercised in accordancewith theinstrument creatingthepower,andthedonormay imposerestrictionson thewaythepowermaybeexercised. a.

Crcationoflimited interest,Unlessthedonorhasexpressed a contmry intent,thedoneeof a specialpowermayappointlimitedintereststo objectsof thepowet or appointin futher trust.In somestatesthedoneeof a specialpower maynot appointin furthertrustunlessit appears thatthe donorintendedto allow suchan appointment.The rationalefor this minodty view is that the donorpresumptively intendedthat the trustbe terminatedandthe assetsdistributedto personsselectedby the donee. Thespecialpowergivesthedoneeonly therightto selecttherccipients.

b,

Exclusiveand nonexclusivepowers.A specialpoweris eitherexcluIf thedonorintendsthatthe doneebe ableto exsiveor nonexclusive. clude one or more of the class of objects,perhapsappointing all the propedyto oneobject,thepoweris exclusive.If the donorintendsthat all membe$ofthe classbenefit,but thattheamountofeachshareshall be determined by the donee,the poweris nonexclusive. The presumptionis thatthedonorintendsthepowerto beexclusive. However,courts oftenhavefoundthat the presumption is overcomeby particularlanguagein thecreatinginstrument.

Fraud on a SpecialPower.Thedoneeof a specialpowermaynot appointto non-objects of thepower If thedoneeof a specialpowerappointsto a class composed of objectsandnon-objects, the appointment to the non-objects is void.An appointrnent to an objectwith an expressconditionthatthe object payoveran amountto a non objectis a fraudulentappointnent.The conditionis void.If thedoneeof a specialpowerappointsto anobjectin considerationof a benefitto a non-object, theappointment is void to theextentit was motivatedby thepurposeofbenefitingnon-objects. Wills - 109

4.

Ineffective Exerciseof the Power.If an attemptedexerciseof a power of appointmentis ineffective,the donee'sintent may still be effectuated by allocationandcapture. a.

Allocation of assets.Under the doctrine of allocation, when the doneeof a powerblendsher own propertywith the appointiveproperty,andexercises the powerin an invalid way,the donee'sown propertyandtheappointivepropertywill be allocated, if possible, to give maximumeffectto the donee'sintent.Thus,thedone€'sown propeftymaybeallocatedto theappointees, andtheappointiveploperty may be allocatedto legateesof the done€'sown propefiy.

b.

Capture. Ordinarily, if the doneeof a power makesan ineffective exercise,the propertygoesin defaultof appointment.If thereis no gift in default,the propefiy revefis to the donor or the donor's estate.The exceptionto this is tbe captue doctrine.If the doneeof a generalpowerof appointrnentineffectivelyexercisesthepower,but manifestsanintent to assumecontrol of the appointivepropertyfor all purposes,thepropertyis capturedin thedone€'sestate.Thequestion is whetherthe doneeintendedto captwethe propefiy; if so,the propefiy doesnot passin defaultof appointment.The intent to capture the propertycanbe foundin a generalblendingclausein a will thatexpresses thedonee'sintent to disposeof her own propertyand anypropertyoverwhich shehaspowerof appointment.An intentto capturecanalsobe foundin a residuaryclausethatdisposes of the donee'spropertyandtheappointiveassets in thesamemanner

E, FAILIJRE TO EXERCISE A POWER OF APPOINTMENT Appointivepropertypassesin defaultof appointrnentif the doneeof a general power fails to exercis€it. The propertyrevertsto the donor,sestateif thereis no gift in defaultof appointment.Appointive propertypassesto the objectsof thepowerifthey arcan ascertainable, limitedclassif the doneeof a special powerfails to exerciseit andthereis no gift in defaultof appointment. Inring v. Marshall

1.

Disposition ofProperty When SpecialPower ofAppointment Is Not Exertised-Loringv. Ma$hall, 396Mass.166,484N.E.2d1315(1985). a.

110- Wills

Facts.MarianHovey (T) died in 1898,survivedby a brother,a sister,andtwonephews. By herwill, T left theresidueof herestate in fust, theincomepayablein equalsharesto her brotherandsister du.ingtheirlives.Uponherbrother'sdeathin 1900,his shareof the incomepassed to hersister,and,uponhersister'sdeathin 1922,the incomewaspaidin equalsharesto hertwo nephews. Onenephew diedin 1928,unmarried andwithoutissue.His shareofthe income then passedto his brother who remainedthe sole income beneficiaryuntil his deathin 1946.

T's will gaveCabotJackson Morse,thesu ivingnephew,a specialpowerlo principal to his "wife andissue"with thelimitationthatorly appointthetrust to a widowwhowasliving atT's death.Cabotwas incomecouldbeappointed his wife Anna, whowasliving atT's deatb,andby his only child, suryivedby CabotJr, whodiedin 1948,two yearsafterhisfatherCabotleft a will, which providedthatthepowerof appointment hehadunderT'swill wasto beexercisedby appointingto his wife the right to the incomeduringher lifetime. Consequently, the trustincomefollowingCabot'sdeathwas paid to Anna Thetrustees until herdeathin 1983,whentheprincipalbecamedistributable. sought inskuctions as to who is entitled to the remainder of the thereupon Marian Hovey Trust now that the trr.lstis distributable.Among the claimants areseveralcharitieswho wereto rcceivethewholetrustfund ifneither nephew left appointees. b.

it andthereis no gift in Issu€.Ifthedoneeof a specialpowerfailsto exercise propertypassto theobjectsof the defaultof appointment, maytheappointive power? Held. Yes.Judgmentsoordercd. l)

is not exercisedandabsentspeWhena specialpowerof appointment the cific language indicatingan expressgift in defaultof appointment, propertynot appointed goesin equalsharesto themembersof theclass to whomthepropertycouldhavebeenappointed.

2)

Applyingthis rule of law thereis no specificlanguage in the will indiin theeventCabotshouldfail to catinga gift in defaultof appointment appointtheprincipal.

3)

T's will discloses anintentto keepherpropety in thefamily.The intergave to hersisterandbrotherwerelife interests, aswerctheinterestsT Thesharcofany nephewwhodiedunmarried estsgivento hernephews. andwithoutissue,asonedid,wasaddedto theshaleof theothernephew. Eachnephewwaslimitedto exercising his powerof appointment in favor of his issueandhis widow.The apparentintentto keepthe assets within thefamily is sufficientlystong to overcomeany claimthatT's will providesfor a gift to thecharitiesin defaultof appointment.

4)

Wherea testamentary trustprovidedthatthelastsurvivingincomebeneficiary hada powerof appointmentof trustprincipal andthelast survivonly therust income,in the ing incomebeneficiaryof a trustappointed gift in defaultof appointment ofany express thesurvivingissue absence (i.?.,theestateof CabotJr.)was thedoneeof thepowerof appointment entitledto distributionof thetust principal.

Wills- 111

X. FUTUR.EINTERESTS:DISPOSITIVEPROVISIONSOF TIIE TRUST INSTRIJMENT A.

INTRODUCTION A futureinterestis d nonpossessory intercstcapableof becomingpossessory in thefuture.The law of futureintercstsd€alswith situations wherethebeneficial enjoymentof land by a successor occursat sometime in the futue. Certaintyof beneficialenjoymentis not requiredihowevettheremustbe at leastthepossibilityof futurebeneficialenjoyment.

B.

CLASSIFICATION OF FT]TUREINTERESTS l.

2.

Future Interests in the Tlansferor:,The threetypesof future intercsts that can be retainedby the transferor are rcversion, possibility of revertcl, andight ofen /Jr'.Theseinterestswill or maybecomepossessory in thetransferor or her successors in interest. a.

Reversion,A reversionis a futureinterestleft in the grantorafter sheconveysa vestedestateof a lesserquantumthanshehas(usually a life estate).

b.

Possibility of reverter.A possibilityof rcverterariseswhena grantor carvesout of herestatea deteminableestateofthe samequantum (thedeterminable estatewill endif somefutureeventoccurs).

c.

Right of entry. A right ol entryoccurswhena gnntor createsan estatesubjectto a conditionsubsequent andretains thepowertocut shortor teminatetheestateuponthehappening of thatcondition.

Future Interestsin Transferees, The threetypesof futureinterestsin bansfereesarc y?.rt?dremainders,contingent remaintlers, andexecutory interests. Remainders.A remainder is a futureintercstcreatedin a erantee lhatis capable of becoming a presenl possessory esrate ufon rhe expirationof a pdor possessory estatecreatedin thesameconveyancein whichtheremainder is c.eated.A wfted remainder is createdinanascertained personin beingandis notsubjectto acondition precedent (i.e.,it is capableof becomingpossessory wheneverthe precedingestateterminates).Acontinge t temainder,on the other hand,is createdin anunasceftained penonor is subjectto a condi(i.e.,it is contingent tion precedent on something happening before it canbecomepossessory). b.

112- Wills

Executoryinterests.Any interestin a transferee thatcannotbe a rcmaindermustbe anexecutoryintercst.An executoryinterestis a tutureinterestthatmust,in orderto becomeDossessorv. divestor

(a shiftingexecutory cut shortsomeintercstin anothertransferce interest)or divestthetransferorfollowinga certainperiodof time (a springing duringwhich no tmnsferceis entitledto possession executoryinterest). 3.

D€structibilityof ContingentRemainders.This doctrineholdsthatif a legal contingentremainderin land doesnot vestbeforeor at the telmiIn nationof the prccedingfreeholdestate,the remainderis destroyed. of the states,the desttuctibilityrule hasbeenabolaboutthrce-fourths orjudicialdecision. ishedby stalule

C. CONSTRUCTIONAND DRAFTING PROBLEMS 1.

Prcferencefor VestedInterests.If an interestmight be classifiedas vestedor contingent,thecommonlaw preferenceis to classifyit asvested. a.

Tfansferability and t&xation. Over 40 stateshave madecontinReversions, by statute orjudicialdecision. gentinterests transfemble arc descendible and devisable andexecutoryinterests remainders, interests.The federal at deathin the samemanneras possessory gift govemmentsubjects to or estatetaxationanygratuitoustansfer of a propertyinterest.

b.

Accelerationinto possession. 1) Renunciationvalid--Itt /e Estateof Gilbert, 156Misc 2d 3',79, 592N.Y.S.2d224(1992). a)

Facts. I-esterCilbert (D) renouncedhis shareof two trustsunderhis father'swill. The wholly discretionary estatewasworth $40million dollars.D, age32, hadno childrenand was a memberof a groupof peoplewho shareda similarreligiousdoctrine.Theexecutor(P)petinull andvoid. tionsthiscoufito declarcD's renunciation

b)

Issues. (l)

1n re Estate ofGilbeft

Would permittingthe renunciationviolatethe intentto providefor D? testator's

(2) DoesD possess a cunentpropefiyinterestthat he I cantenounce c)

for D. Held. (1) No. (2)Yes.Judgment (l) Thedecedent's intentionis not contolling.Thelaw doesnot compela manto acceptan estateagainst hiswill. Wills- 113

(2) The contolling statutes providerhata beneficiaryof a dispo_ jn a rransfei sitionmayrenounce all or panof his inrerest of propertyby a personduing his lifetimeor by will. properryis "anythingrhatmaybethesubjectofown€nhip.,, (3) D's renunciation appliesto his remainderinterestin oneelec_ tlve sharetrust,contingentuponD suniving his mother,and to his cufientinterestin a trustunderwhichhe may havethe right to compelthefusteesto distributetrustpropertyto him undercertaincircumstances. (4) Thefiling of a rcnunciation hasthesameeffectwith resDect to therenounced inrereslasif D hadpredeceased hrsfather\ ith_ out issue.

Requiringsurvival to time ofpossession. Generally,a remainderman need rlot live to thetime ofpossession. If theremainderman predeceases thelife tenant,the rcmainderpassesto his estate.The testatormay.however.ex_ presslyrequiresur\,ival, andin somecasescounswill Infera requiremen ofsurvival. FirstNatioml Bankof Bar Harborv Anthony

l)

Pr€sentvest€dinterest--FirstNational Bank of Bar Harbor v. An. thony,557A.2d957(Me. 1989). a)

FactJ.JohnAnthony(T) createda revocableintervivostrustDro_ vidingfor income lo bepaidto himtor Iife.lhenhiswidow,should shesurvivehim, and uponher deaththe corpusto be dividedin equalshares to T's threechildren,John,peter,andDencie.T's wife andJohnpredeceased T. UponT's death,his will wasadmiuedto probateand left two-thirds of T's estateto peter and one{hird to Dencie;theheirsof Johnwereexpresslyomitred.Thebank(p), as trustee,filed a complaintin superiorcourtrequesting construction of thetrust.John'schildren(Ds),T,s gandchil&en,filed a motion for summaryjudgment,assefiingJohn,sinterestin the trustwas vested,not contingent,at the time of its creation.The summarv judgment morionwasgranted againslDs.Dsappeal.

b)

Issue.WasJohn'sremainderinteresta prcsent,vestedintercstat thetimeofthe creationof theintervivostuust?

c)

Held.Yes.Judgment vacated. (l) Becausea will is not operativeuntil the testator'sdeath,an lnrcrestln a testamentary trustcannotvestprior to thedeath. An intervivostrustis operativefrom thedateof creation. (2) Thetermsof T's trustincludedT's right to changebeneficia_ des,an absenceofcontrol overhow the childrenmisht dis_

114- Wilis

Doseof thet sharcs'andno conditionof survivalof anychildren ihis plan effectively eliminatedany futher idterestof T unlesshe choseto inteffene. a dispositionto a pre(3) T's failureto changethetrusttermssuggests child'sestaterathelthana reveNion deceased f4) Otherstateshaveheldthatanintervivostrustrcseryingto thesett' lor incomefor life plus power to rcvoke, with a remainderover at the settlor'sdeath,crcatesa vestedinterestin the remaindermen by exerciseof therevocationpower'Enjoysubjectto defeasance ment is postponeduntil terminationof the life estates,but upon executionof the trust instrument,thereis a presentight to the remainder. 2)

Heirs determined as of the date of death of the testator-'Security Trust Co. v.Irvine.33 Del.Ch.375,93A.2d,528(1953). a)

Facts.The will of the decedent,JamesWilson (T), devisedall real property to the SecurityTrustCompany(P)in trustfor T's two sisters,Martha andMary wilson, during their joint lives and duing the lifetime of the survivoroi them,andfurtherprcvidedthatif his sisterMargarctIrvine shouldbe left a widow,thensheshouldshareequallywith theothertwo sisters.Upon the deathof Martha andMary, the estatewould be divided equally amongT's brotheN and sistets'sharcand sharcalike, with the brotheror sistertotakehis or herparent'sshareT isiueof anydeceased wassurvivedby five brothe6 andsistersFrom these'Mary Wilson was thelastsuwiving life tenant Pbroughtanactionto determine:(i) whether the residuaryestateleft to T's brotheNandsistersvestedasof the dateof the deathof the last life tenantor as of the date of his death; and (ii) whetherMartha andMary take asmembersof the classof brothersand sistersshould it be decidedthat the estatevestedas of the date of T's death

b)

Issues.

SecurityTmst co v kvine

as of a contraryintent,will theheirsbe determined (1) In the absence of the dateof deathof the testator? (2) In theeventof thedeathof devisees leavingno issue,arctheinterdivestedby theirdeath? estsof thos€devisees c)

soordered' Held. (1) Yes.(2) No. Judgment (l) The law favorsearlyvestingof devisedestatesand will presume that wordsof survivorshiprelateto the deathof the testator'In the absenceof a clear intent to the contrary the heirs will be determinedasof the dateof the deathof the testatorand not at some Wills- ll5

futwe date.The fact that a life tenantis a memberof a classdoes not preventthelife tenantfrom participatingin theremainderof th€ testator'sestateas part of the class.Here, the life tenantsshould participatein the remainderdevisedby the testatorto his brothers andsisters. (2) The weight of authority in other sratesis to the effect that in the eventof the deathof the devisees leavingno issue,the interestof thosedeviseesi snot divestedby their death.The interestsof Martha and Mary Wilson and MargaretIrvine were not divestedby their deathswithoutissueandthattheirinterestsin T's estateshouldso to their respectiveestates. Clobberie's Case

3) Common law rule where bequestis to be paid at c€rtain age-Clobberie,s C^se,2VenL342,86Eng.Rep.476(1677). a)

Facts. A sum of moneywas be4ueathedto a woman to be paid to her with interest upon her reachingthe age of 21 or upon the day of her marriage.Shedied beforeeithercondition was satisfied.

b)

Issue.If a bequest is to bepaidon theexpress condirionthatthebeneficiary rcach a cefiain age, and that condition does not occu, doesthe bequestpassto theestateof thebeneficiary?

c)

Held.Yes. (l) Whena sumof moneyis to be paidto a womanuponherreaching theageof 2l or uponherdayof marriage,andshediesbeforeeither conditionis met,the bequestpasses to her executoraspartof her estate.However,if the moneywerebequeathedto one ..at',the age of 21,thentheb€questwouldlapse.

4)

Controversial change in UPC section 2-707, A few states(Alaska. Colorado,Hawaii,Mchigan,Montana,andNew Mexico)haveadopteda highly controvercial1990changemadeby the revisersof the UpC to sectron2_70'1. Under the new language,absentlanguageto the contrary,the following rules apply: (i)

All future interestsin trust arc contingenton the beneficiary'ssurviving to the dateof distribution.

(ii) If a remaindermandoesnot slrrviveto the distributiondate,I_lpCsection 2-707createsa substitute gift in the remainderman,s descendents who survivethedateofdistribution. (iii) If a remainderman diesbeforedistributionandleavesno descendents, the remainderfails,and,if thereis no altemativeremainderthattakes

116- Wills

effecr.lhelrustpropenypasses lo rhesettlor'sresiduarydeviseesor thesettlor'sheirs. This provision destroysthe flexibility of the commonlaw and the tansmissibleremainderrule; the beneficiarymay no longerdevise the rcmainderto whomeverhe pleases.Spousessuffermost,as only issue are substitutedfor the deceasedrcmaindermen. The changepresentsnumercusprcblemsfor estateplanners;to insulate their trustsfrom theproblemsinherentin section2-707,plannersin stateswherethesectionhasbeenadoptedcanincludein the tust instruments a generaldisclaimerthattotallydisclaimstherulesof construction embodiedin section2-707. 2 Gifts to Classes. a.

Gifts of income. 1)

Construing classgift to testator's grandchildren-.Dewire v. Haveles,404Mass.274,534N.E.2d782(1989). a)

Dewirev Haveles

Fact-s. A petitionfor a declaration ofrightswasbrcughtseeking constructionof a will creatinga classgift on behalfof ThomasDewire's(T's)gandchildren.T diedin January1941 survivedby his widow,his son(ThomasJr), andthreegrandchildren.His will placedsubstantially all ofhis estatein a reThe income payable siduarytrust. trust was to his widow for life and on her deathto ThomasJr. and ThomasJr.'s widow andchildren.AfterT's death,ThomasJr.hadthrcemorcchildrenby a secondwife. ThomasJr. diedin 1978,a widower, survivedbyall sixofhis children.ThomasIII, whohadserved astustee since1978,diedin 1987leavinga widow andone child,JenniferThequestionppsentedis whetherJennifertakes herdeceased father'sshal€in thetrustincomeor whetherthe remainingclassmembers(theotherfive grandchildren) take thatincomeshareequallyby dght of survivorship. In his will, T providedthathis grandchildren shareequallyin thenet incomeof his estate.Thereis no explicitprovisionin the will concemingthedistributionof incomeon thedeathof a grandchild,nor is thereany statementasto what the fustee shoulddo with trustincomebetweenthedeathofthe lastgrandchild andthe dateassignedfor terminationof thetrust 2I yeals after that event.

b)

grandchildentitledto Issue.Is the daughterof T's deceased succeed by right of reprEsentation to thegran&hild'sincome interestin a trust createdby a classgift?

Wills- 117

c)

Held. Yes.Judgmentsoordered. (1) Thegift ofnerincometoT's grandchildrcn, dividedequally or to be sharedequally,is a classgift. The classincludesail six grandchildren,three of whom were bom before and three of whomwercbom afterT's death. (2) In the absence of a contraryintentexpressed in the will or a controllingstatutestatingotherwise,membersof a classare Jointtenantswith rightsof survivorship. (3) T's will violatedrheRuleAgainstperperuities because ThomasJr could(anddid) havechildrenafterT's death:therrust wasthusscheduledto terminate21 yearsaftera lifenotneces_ sarilyyetin being.Nevertheless, thelanguage ofthis voidpro_ visioncanbeusedtodetermine T's intentionasto dispositions thatdo not violatetheRule. (4) T provided that the trust should terminate2l yeals after the deathof his lasrgrandchild. It is unlikelythatT inrendedthat trustincomeshouldbeaccumulated for21 yeals.He musthave expected thatsomeone wouldreceivetheincomedurinsthose years.Theonly logicalrecipientswouldbe rheissue{by right of representation) of deceased grandchildren, thesamegrcup ofpeoplewhowouldtakethetn6t assets onteminationof the trust(assuming no violationofthe RuleAgainstperpetuities). (5) Sinceeveryotherprovisionin thewill conceming thedistribu_ tion of fust incomeandprincipal(afterthedeathof T andhis wife) pointsto equaltreatment ofT's issueperstirpes,thereis a sufficientcontraryintentshownto overcometheruleofcon_ structionthattheclassgift ofincometo glandchitdren is given to themasjoint tenantswith the right of survivorship. Thus, Jenniferin her lifetimeis entitledto one-sixthof the net in_ comeofthe trustdudngtheperiodofthe classgift ofincome.

b.

118- Wills

Gifts to children or issue. 1)

Meaningof'.children" and ,.issue."The word .'children,'doesnotin_ cludegrandchilfuen. Theword"issue"includesgrandchildren andmore remotedescendants.

2)

UPC section2-705.Adoptedpe$onsandpersonsbom out of wedlock areincludedinclassgift terminologyin accordance with rulesfor deter_ miningrelationships for pulposesof intestatesuccession. However,a personbom outof wedlockis nottreatedasthechildofthe fatherunless he is openlyandnotoriouslysotreatedby thefather.

a)

Adopted adult not consideredan "heir"--Minary v. Citizens FidelityBank & Trust Co.,419S.W2d340(Ky. 1967). (1) Facts.The will ofthe decedent, Amelia S. Minary (T), devisedherresiduaryestatein trustto paythe incometo her husbandandthreesonsfor their respectivelives. The trust wasto terminateupon the deathof the last surviving beneficiary at whichtimethetrustwasto bedistributed to T's survivinghei$ andif no heirs,thento theFirstChristianChurch.Two of the threesonsleftno survivingissues, buta thirdson,Alfred,married andthereafteradoptedhis wife. Myra Minary (P),the wife ofAlfred, broughtsuitagainsttheCitizensFidelityBank(D), contendingthat the trust shouldbe awardedto her sinceshe, havingbeenadoptedby her husband, becomesan "heir" for purposes of thewill. The ftial courtheldfor P D appeals.

Minary v. Citizens FidelityBank & TrustCo.

(2) Issue.Will adoptionof an adultfor the purposeof bringing thatpersonundertheprovisionsof a preexisting testarnentary instrumentb€ permitted? (3) Held, No. Judgmentreverced. (a) Even thoughthe adoptionstatuteprovidesthat an adult personmay be adoptedin the samemannerasa child, we are constrainedto view this pnctice as an act of subterfuge that thwafis the testator'sintent. Here, were we to give strict effect to the adoptionstatute,we would thwan the efforts of the deceasedto disposeof her property as shesawfit. Adoptionof anadult for thepurposeof bdnging thatpersonundertheprovisionsof a preexisting testamentaryinstrumentwhensheclearly wasnot intended to be socovercdshouldnot be pemitted,andwe do not viewthisasdoinganygreatviolenceto orr adoptionlaws. 3)

c.

Gifts over on death without issue.In thesecases,the questionto be determined is whetherthe exprcssion means(i) deathwithoutissueat any time or (ii) deathwithoutissueduringthe testator'slifetime.The first constructionis preferredby a majodty of couts if a possessoryfee simplemay be divested.The secondconstruction is preferredif a remaindermaybe divested.

Gifts to heirs. 1)

Determining identity of heirs..Estateof Woodworth, lSCal.App. 4th 936,22 Cal. Rptt. 2d 676 (1993). a)

Estateof Woodworth

(T's) testamentary Facts.HaroldWoodworth's trustestablished by T's will providedfor apofiionof T's estateto go to T's wife (W) as Wills- I l9

life tenantand to terminateuponW's death.The rcmainingtust estate wasto go to T's daughter @) if shesurvivedandifnot, thento D's heiN at law.UponD's deathin 1980,shewassurvivedby herhusband(H), a niece,anda nephew.H died testatein 1988,leavingtheresidueof his estateto the Regentsof the University of Califomia (Rs) for the unive$ity'sBerkeleycampus.W diedin 1991.The rrusreebank(P)petitionedtheprobatecourtto detemineD's heirsat law Thecowt determinedthenieceandnephewto beD's heiG.Rs appeal. b)

Issue.Absentevidence of T's intentto thecontrary,musttheidentityof "heirs" entitled to trust assetsbe detemined at the dateof the deathof thenamedancestor who predeceased thelife tenant,andnot at thedate of thedeathof thelife tenant?

c)

Held.Yes.Judgment rcversed. (1) Thereis a commonlawprcfercnce for vestedrutherthancontingent remainders, unlessaninstumentdiscloses a differentintent.Thus. a remainderto a classbecarnevestedin the classwhenoneor more ofits members cameinto existence andcouldbe ascertained. even thoughtheclassis subjectto open. (2) Whena gift is madeto "hei$," the donoris sayihghe wantsthe propefiy distributedasif thenamedpersondied intestate.Thus,the deathof thenamedindividualis thenomal time for applyingthe statut€of descentor distribution,absenta manifested intentby T that the statut€be appliedearlieror later. (3) Noneof theexceptions to theearlyvestingrule reflectedin W?lh FargoBankv. TitleInsurunce& TrustCo,22Cal. App.3d295,99 Cal.Rptr 4g (1971),applyhere.This is not a situationwherethe "life tenantis thesoleheir,butthewill devisestheremainder to the testator's heils." (4) WehavenothingbeforcusthatrcvealsT's intentandnothingforeclosesthepossibilitythatT took into accountthatD might predeceaseandH mightoutliveW. (5) Thereis no language in thedecreethatcontainsanyexpression of futurityin thedescription of theancestor's heirs,suchas.,mythen living heirsat law" The word"then"hercmerelyindicatestimeof enjoyment.

2)

120- Wills

The doctrineof worthier title. The docrrineof worthiertitle providesthat if a settlor transfersproperty in trust but retains a life estatein himself or another, andattempts to crcatea remainder in his heirs,a presumption adses thatthesettlorintendedto retaina reversion in himselfinsteadof a remainder

in his heirs.The docrine is a rule of consfuction,not a rule of law It raisesa presumptionthat no remainderin the settlor's heirs has been created,but this presumptioncanbe rebuttedby evidenceof a contrary intent of the gFntor. The doctrinemay still exist in somestates. 3)

d,

The rule in Sl€lley's Case,T\e rule rn Shelley'sCasestatesthat if one instument createsa freeholdin land in A and puryorts to crcate a femainderin As heirs andtheestatesareboth legal or both equitable,then the rcmainderbecomesa remainderin fee simplein A. It is a legal printhe transferor'sintent.The rule has ciple that appliesnotwithstanding beenabolished in nearlyall states.

a classcloseswhen Undertheruleofconvenience, The rul€ of convenience. any memberhasthe right to demanddistributionof her share,andnot when the beneficiaryactually demandsdisaibution or whendistribution occurs.If no membersof theclasshavebeenbom beforethetestator'sdeath,theclass ancestor of theclass.If thereis doesnotcloseuntilthedeathof thedesignated an immediatebequestof a separatefixed sum to eachmemberof a class,the classclosesat thetestator'sdeath,evenif thereareno membetsof theclass possession aftera life estate,theclasswill not alive.Ifthegiftis postponedin until thetimefor takingpossession. closeundertheruleofconvenience 1)

Classcloseswhen all existing membersr€ach stated age--Lux v. Lux, 109R.I. 592,288A.2d701 (19'72). a)

PhilomenaLux (T), providedthat Facts.The will of thedecedent, AnthonyLur, prcdeceased her,the in the eventthather husband, residueof her estateshouldgo to her grandchildren,shareandshare alike. It fwther providedthat anyrcal estateincludedin the residue shall be maintainedfor the benefit of the grandchildrenand shall hasreached2l not be solduntil the youngestof thegrandchildren yea$ of age.T wassurvivedby oneson(Anthony) andfrve grandchildren.The youngestgandchildwasbom aftertheexecutionof the will but beforeT's death.The soninformed the trial court that he andhis wife plan to havemorechildren.The trial court appointed a guardianad litem to reprcsentthe interestsof thegandchildren. It therightsofindividualswho anattomeyto represent alsoappointed may have an intercst underthe will. unknown but who are

b)

ofaclasshaveattainedthestated Issue.Whenall existentmembers closed and thedistributionbe made? should the class be age,

c)

Held. Yes.Judgmentsoordercd.

Lux v. Lux

(1) We hold that the distributionof the trust corpusshallbe made at any time when the youngestof the then-living grandchildrcn hasattainedthe ageof 2 I . Whenall existentmembersof

Wills- 121

the classhaveattainedthe statedage,considerationsof conveniencerequire thatdistributionshallthenbe madeandtharthe propenyshallnot beiepl ftom furtherutilization to awaitthe uncertainconceptionof further members of the group. Shouldit becomene.gssarydueto a declinein rentalincomoto sell theDroD_ erty. the trusteehasthe discretionarypower to sell the real estate.The proceedsfrom the saleshall,becauseof the doctrineof the subsriruteres.reoiace thereallyastheEustcorpus.lncomewouldbe payableto thebeneficiariisas it accrues.Shouldadditionalchildren be bom, tho amountof eachshareof incomercceivedby a gandchild would be rcducedas eachnew memberof the classjoins his brothersand sistgrs.

122- Wills

XI. DURATION OF TRUSTS: THE RULE AGAINST PERPETIJ'ITIES A. INTRODUCTION

1. Developmentofthe Rule. The RuleAgainstPerpetuitiesstates:"No

interestis goodunlessitmust vest,if at all, not laterthan21 yearsafter somelife in beingat the creationof the interest."lJohnC. Gray'The RuleAgainstPerpetuities, s20l (4th Ed. 1942)lAn early formulation in theDukeof Nofolk's Casein !682' and of theRulewasannollnced theRulewasfurtherrcfinedoverthenextfew centudesascourtssought to preventlong-termrestrictionson the alienabilityof land. PoliciesUnderlyingthe Rule.TheRuleis designedtofurthermarketof wealthin the ability of propefiyandpreventanundueconcentration thesociallydesirableresult handsofthe few.TheRulealsoencourages that wealthbe controlledby the living and not by the dead.It also from bankuptcurtailstrusts,whichcanprotectwealthybeneficiades ciesandcreditors. When the Lives in BeingAre Ascertained.Thevalidity of aninterest is determinedas of the time of the purportedcreationof the intercst. "Lives in being"mustbe personsaliveat thattime.Generally'the perpetuitiesperiod(livesin beingplus 2l yea6) beginsto run whenevel anirtevocabletransfer'Ifthe interestis createdby thetransferormakes will, the periodbeginsat the testator'sdeath.If the interestis created by deed,or by an irrevocabledeedof trust,the pe.iod beginsat the time thedeedis delivercdwith intentto passtitle.Ifa trustis revocable by the settlor,the periodbeginsat the datethe rust becomesirevocable.

4.

B.

proof to be valid.the necessary Life.For an inlerest The Validaaing must be madeftom amongpersonswho can affect vesting.Altematively,theinterestmustvestat creation,or vestor fail within 21 years aftercrcation.

THE REQTJIREMENTOF NO POSSIBILITY OF REMOTE VESTING: THE WHAT-MIGHT-IIAPPEN RULE Under the commonlaw rule, any possibilityof remotevestingvoids the rule interest.Abouthalf the stateshavercfomed this what-might-happen doctrine(coveredbelow). Oneof the reformsis the wait-and-see 1.

The "Fertile Octogenarian."The law conclusivelypresumesthat a personcan havechildrenaslong asthe personis alive A few stat€s haveenactedlegislationto dealwith the conclusivepresumptionof Wills - 123

fetility, prescribingthatanypersonwho hasattainedthe ageof 65 shallbe deemed incapable of havinga chrld. 2.

The "Ijnborn Widow." The law presumes thata person'sswvivingspouse mighttum out to be a personnotnow alive. Example.O devises"to A for life, thento A's wife for life, thento As childrenwho surviveA's widow."It is possiblethatA maymarrysomeonenot in being(not yet bom) at O's death(whichis the time of the fansfer).Shecouldlive beyondlivesin being(O'slife andA s life) plus 2l yean.Thereforc,thedeviseto thechildrenis void.This is thecaseof the"unbomwidow."

Dickersonv Union National Bankof Little Rock

b.

Bare possibilityis suflicient-Dickersonv. Union NationalBank of Little Rock, 268Ark. 292,595S.W.2d677(1980). 1)

Facts.NinaDickerson(T) wassurvivedbyhertwo children.Cecil (P),50, wassingle,andMartin,45, wasmaried. At thatrimethe two sonshada total of sevenchildren,who wercT's grandchildren.T namedthebank(D) asexecutoranddirectediharat rhe closeof administration proceedings D transferto itself astrustee all the assetsof the estate.The will requiredthe trustto continue until thedeathofboth sonsandMartin'swidow,andtheyoungest child ofeithersonhasreachedtheageof 25.At thattime,thehust wasto distributeandpayovertheentirebalanceof the trustfund to thebodily heils of borhof her sons. T diedin 1967.The probatecourtentercda routineorderreciting that the will had been properly executedand approving the executor'sfiNt andfinal accountingandclosingthe administration of theestate.The ordermakesno rcferenceto the validity of thetrustor themannerin whichtheassetsof theestatewereto be distributed. In 1977,P filed a complaintagainstD and its trust officer.The complaintasserted thatthe trustwasvoid underthe RuleAsainst -violaPerpetuities. Thecomplainlcharges lhe trusroffrcerwirh tionsof his fiduciarydutiesin failing to deliverall the estateassetsto T's heirsandin failing to askthe probatecourtto construe the will with respectto violationsof the Rule Againstperpetuities.ThechancerycourtrejectedP's attackon two grounds.First, P shouldhaveraisedthequestionofthe validityofthe trustin the probatecoufi in connectionwith the probateof the will andthe administration of the estate.His failue to do so makesthe issue resjudicata.Second,on the medts,the trustdoesnot violatethe RuleAgainstPerpetuities.

124- Wills

Issue.Is a tust createdby a will void undertheRuleAgainstPerpetuities because it is possiblethatthe interestof the variousbeneficiaries vest within theperiodallowedby thatrule? mightnot

3) Held.Yes.Chancerycourtjudgmentreversedandcaseremanded. a)

Failureof a will beneficiaryto challengethe validityof a tust as in probateproceedings violativeof the RuleAgainstPerpetuities himfromraisingthatissuein a lateraction,where doesnotpreclude within theissuesbefore thevalidityofthe trustwasnot necessarily probate court made no pertinentdecisions the probatecourt andthe asto the validity of the trust.

b)

Sincethe bankwasboth executorof the estateandfustee of the in the will, thebankwasa fiduciaryandoweda trustestablished ofthe estateand dutyofgood faith andloyaltyto all beneficiades of the trust.Therefore,thebankcouldnot ignorethe possibleinvalidityof thetrustbothin probatecourtandin ex partechancery to its own pecuniary andthentake advantage, courtprcceedings similarcourseof conductby assertbenefit,of the beneficiaries' ing that the beneficiaries'failureto challengethe validity of the precludedP from raisingthatissuein trustin probateproceedings a lateraction. interestwill not vestwithin A barepossibilitythata beneficiary's is enoughto pedod the Rule Against Perpetuities the allowedby renderthatinterestvoid.

d)

The termsof this trust presentan instanceof the "unbom widow." This trust is not to terminateuntil the deathsof P, Martin, and Martin's widow,but theidentityof Maltin's widow cannotbe known untilhis death.Martinmightmarryan l8-year-oldwoman20 years afterhis mother'sdeath,haveadditionalchildrenby her,andthen die.P might alsodie.Matin's youngwidow,however,might live for another40 or 50 years,afterwhichthe interestswouldfinally vest.But sinceP andMartin wouldhavebeenthe last measuring livesin beingat T's death,the trustpropertywouldnot vestuntil manyyearspastthemaximumtime allowedby theRule.The hust thereis a possibilitythat the estatewill is thereforevoid because by a life or lives in beingat T's not vestwithin a periodmeasured death,plus2l years.

Split contingencies.If the transferormakesa gift uponeitherof two continperiod,andtheother gencies, oneofwhich mustoccurwithintheperpetuities The gift is valid arejudgedseparately. of whichmightnot,thecontingencies is void. occurs;thesecondcontingency ifthe first contingency Wills - 125

C. APPLICATION OF THE RULE TO CLASS GIFTS 1.

Wardv. Vander Loeff

The BasicRule:All or Nothing.Pursuant to theRule,a classgift mus! be validasto all membenof theclassor it is completelyvoid.It cannot be valid asto somemembersandinvalidasto others.If the gift to one memberof the classmight vesttoo rcmotelyto satisfythe Rule,the entireclassgift is void.The nrre o:fconveniencemay operateto save someclassgifts. a.

Classgifts-Ward v. Van der Loeff, u9241A,.C.653. 1) Facts.Thewill of thedecedent, WilliamBumyeat(T),left his estatein hustfor his wife with theremainderto his children. In theeventthathe hadno children,he gavehis wife a power to appointthe trust fund amongthe children of his brcthers andsisters;in defaultofappointrnent, thetrustfundwasto go in equalsharesto the childrenof his brothersand sisters.A codicilto thewill provided:(i) thatthelife interestto hiswife shall be terminableon her remaniageunlesssuchremaniage shallbe with a natural-bom Britishsubject;(ii) thatthepower of appointrnent berevoked;and(iii) that,afterthedeathof his wife, the trusteeswould hold the ftust for any or all of the childrenof his brothersandsisterswho shallbe living at th€ deathof his wife or bom at anytime afterwardbeforeanyone of thechildrenattainsa vestedintercstandattainsthe ageof 21 (if a son)or attainsthat ageor maries (if a daughter), in equalshares. T wassurvivedby his wife but no children,by his father and mother,aged67, and by two brcthersandtwo sisters,eachof whomhadchildrenliving at T's death.Phillip Bumyeat,anothernephewofT, wasbom afterT's deathand aftertheremariageof his widowto a Dutchsubject, 2)

Issue.Will a gift to a classviolarethe RuleAgainstPerpetuities if the bequestis to the childrenof b.othe6 and sisters bom at anytime afterthedeathofa life in being?

3)

Held.Yes.Judgment affirmed. a)

126- Wills

(LordHaldane)In construingrhewordsof a will, theeffectof theRuleAgainstPerpetuities mustin thefirst instancebe left out of sight,and thenhavingin this way definedtheintentionexpressed, thecourtmustapplythe Ruleto themeaningthusascertained. Here,thecodicilis void sinceit speaksof T's brothersandsistersgenerally andthereis no expression thatexcludesthe childrenof possible other brothersandsistersof the wholeor half bloodwho mightin contemplation of law be bom.

b.

b)

Howevetthecodicildoesnot operateto revokethegift to the childrenof brothersandsisterscontainedin the will. The revoto cationin thecodicilisconfinedtothepowerof appointment The time will stands undisturbed prcvision in the thewife. The whendistribr-rtionof the estateoccurs-herc, whenthe widow remaried-is whentheclassofchildrenwho will takewill be Phillip Bumyeatis excludedsincehe wasbom ascertained. after the widow rcmarried

c)

(Irrd Dunedin)Thereareonly two classes ofcaseswherethe gift ftom. First, can be departed primarymeaningof a class that anyperson whereit is impossibleunderthecircumstances under the beprima meaning can tale facie indicatedby the that quest.Here,this is not the casesincethe law presumes Secinto existence. could still come otherbrothersandsisters theprimafain thewill itselfexcludes ond,wheresomething is not the case Herc,this also cie interpretation.

ofviolating the rule. Violationofthe Rulewill resultin Consequences the violatinginterestbeing stricken,with all other valid intercstsleft standng.

Oneexceptionto theall or nothingclassgift rule is the Gifts to Subclasses. heldto be invalidas Underthisdoctrine,a remainder doctrineof subclasses. violative of the Rule Against Perpetuitiesdo€snot taint and invalidate all otherremaindenwhetethe ultimatetake$ arcnot describedasa singleclass but asa groupof subclasses. a.

Amencan Security& Trust Co. (T), bequeathed v. Cramer AbrahamHazen Facts.The will of the decedent, the residueof his estatein trust to his wife for life; after her death halfofthe corpuswasto be giventoT's sisterandbrothersandthe otherhalf wasto remainin trust for T's adopteddaughter,Hannah Duffey. Upon the deathof Hannah,the income was to go to the childrenof Hannah.if alive,andif deadthento thek issue,and uponthe deathof each,the shareof eachwasto go to thosewho are heirs accordingto the law of descentand distribution.T's heirs brought this action to have the will stricken as in violation of the Thelowercout heldthattheinterestsof RuleAgainstPerpetuities. Hannah'schildrenwerevalid. The courtof appealsaffirmed.At the time of T's death,Hannahhad two children-Mary and Hugh Duffey-and after T's death had two more-Depue and Homce Duffey. After the deathof Hugh, the trusteebrought a bill for instructionsregardingthe validity of the remainderover to Hugh's heirs;again,theremainderwasheldvalid.ThereaftelDepuedied

R€maindersto oth€r subclassesnot invalidated-American S€curity & Tfust Co, v. Cram€r' 175F' Supp.367(D.D.C.1959). 1)

Wills - 127

andagaina suit washought. While this actionwaspending,Horace bill for instuctionswasfiled.AlthoughMaryis diedanda supplemental regarding stillliving,thiscourtwill passon thevalidityof theremainder all partiesconcemed. 2)

3)

128- Wills

Issues. a)

If a classgift is to be valid, must the classclosewithin the period provided by the RuleAgainstPerpetuities?

b)

Whenoneremainderis heldto beinvalidasviolativeof theRuleAgainst Perpetuities,doesthis taint andinvalidateall otherremaindersif the ultimate takersare not describedas a single classbut as a group of subclasses?

Held. a) Yes.b) No. Counselwill submitan appropriateorder. a)

A gift will fail unlessthe membersof the class are finally determined within a life or livesin beingplus2l yealsandactualperiodsof gestation; stateddiffercntly, the classmust closewithin the period provided by theRule,if theclassis to be heldvalid.Here,the remainde$to the heirs of Hugh and Mary Duffey are valid-both Hugh and Mary were limitedto theirhei$ had livesin beingat T's death,andtheremainders to vest,if at all, withintheperiodprovidedby theRule.Thercmainders to the heirsof HoraceandDepueareinvalid-they both werebom after T died. andhencethe remaindersto their heirs could vestlater thanthe periodpfovidedby theRule.It doesnot helpto showthat the Rulemight becompliedwith,or that,thewaythingstumedout,it actuallywascompliedwith.

b)

Theinvalidityoftheseremaindem doesnottaintthevalidremainders to the heirs of Mary andHugh.If the ultimatetaken arenot describedasa singleclass-i.e.,As childrenthatreachage25-but nther asa group of subclasses-i.?., theheilsof eachof A s children-and if theshareto whicheachseparate subclassis entitledwill finallybedeteminedwithin period gifts the of the Rule, the to the differcnt subclasses are separabie for the purposeof the Rule. We read the languagehere as a deviseof rcmainders to subclasses andnot asa singleclass:"uponthe deathof 'each'theshareof the 'one' sodyingshallgo [to] . . . heror his heirsat law" Accordingly,the invalidity of onedoesnot invalidatethemall.

c)

The Rule in ShelleykCa.redoesnot savethe two invalid remainders sincethercmaindeNwerenot limitedto "hei6" but insteadwentto"her orhis hei6 at law accordingto thelawsof descent now in force."When a remainderin fee after a life estatefails, thereis a revercionin theheirs of the testatorThe two one-sixthsharesheldinvalid shallthereforepass in interestof T's heirs. to thesuccessors

D.

3.

Specilic Sum to Each ClassMember. Another exceptionto the all or nothing class gift rule is wherethere is a gift of a statedsum to every memberof the class.The policy underlyingthis exceptionis that the amountintendedby the conveyorto be given to eachclassmembercan how manypersonsarein theclass withoutestimating be deduced

4.

DoesVest= Vest= Vest?Difficulties adseregardingthe meaningof the word vest. sinceorthodoxdoctrinehasinsistedthat whetheran interest is vestedor contingentdependsuponthe form of words setforth in the limitation.

APPLICATION OF THE RULE TO POWERS OF APPOINTMENT To apply the R'lle AgainstPerpetuitiesto powe$ of appointment,the powers must be separatedinto (i) generalpowerspresentlyexercisable,which are treatedasabsoluteowne$hip for pur?osesof theRule, and(ii) generaltestamentarypowen andall specialpowers. 1.

2.

General PowersPr€sently Exercisable. a.

Validity of power.A generalintervivospoweris valid if thereis pecertaintythatthepowerwill vestor fail within theperpetuihes property is no longer riod. OncethePowerbecomesexercisable,the tied up.The factthat thedoneemayexercisethepowerafter lives in beingplus2l Yealsis irrelevant.

b.

Validity of interestscr€atedby exercis€or a generalpower presently exertisable.An interestcreatedby exerciseof a generalpower is deemedvalid accordingto the sameprinciplesas if the donee owned the propeny in fee. The perpetuitiesperiod runs ftom the exerciseof the Power'

General T€stamentaryPowersand SpecialPowers. a.

Validity of power. A testamentaryor specialpower is valid if it may not be exercisedbeyondthe perpetuitiesperiod that beginsat the thecreationofthe powerIf thepowermaybeexercisedbeyond pedod,it is void abinitio. per?etuities

b.

Validity of exercise.Generaland specialpowersate treatedalike The perpetuities the validityof an appointment. whendetermining p€riodbeginsat thedalethepower$as created. 1)

The "Delaware tax trap." Under Delawarelaw, every interest createdby the exerciseof all powersmust vest within the wouldpermit period.Thisprovisiontheotetically perpetuities throughthe to be createdin indefinitesuccession life estates specialpowersof appointment,thus exerciseof successive Wills - 129

avoidingfederaltax liability (sincepropertysubjectto a specialpower of appointment is not taxableat the donee'sdeath). Howevet section 2041(a)(3) of theIntemalRevenueCodetaxesthe assetsin thedonee's estateif he exercises his specialpowerof appointment by establishing power another thatcanbe exercised regardless of thefi$t power'sdate ofcrcation. 2)

SecondNationalBankof New Haven v. Haris Trust & SavingsBank

The secondJookdoctrine.Underthe second-look doctdne,the exerciseof a powerofappointment is readbackinto theinstrument thatcrepower, atedthe andthe factsexistingon the dateof theexerciseof the powera1€takeninto consideration. Thus,thecoul'twill detemineifthe interestsvestor fail within the time prescribed by the rule,takinginto accountthefactsexistingon thedateof theappointment.

Rule applied to unconditional power of revocation--SecondNational Bank ofNew Havenv.Ilarris Trust & SavingsBank, 29 Conn.Supp.275,283 A.2d226 (19',11\. 1)

Iacts. CarolineTrowbridge(T) createdan intervivostrustnamingthe SecondNationalBankof New Haven(P) astrustee,with theincomeof thetrustto bepaidto T's daughtetMargaretManh, who wasalsogiven a generaltestamentary powerof appointment over half of the corpus. The remaininghalf wouldbe distibutedto Margaret'ssurvivingchildren,andif nonethento T's otherdaughter,Mary BrewsterMuray, or to her survivingissueper stilpes.T reserved thepowerto revoke,modify, or alterthetermsof thetrustrespecting paymentof theincome.MargaretMarshleft a will purportingto exercise thepowerby creatinganother rust giving theincometo her daughter,Mary Washbume,for a periodof 30 years,afterwhich time the tr.rstwould be distributedto her or, if Mary died prior to this, then to her survivingchildren.At issuewas whetherthe exerciseof the testamentary power of appointmentby Margaret'swill is invalidasviolativeof theRuleAgainstPerpetuities.

2) Issue.Ifa settlorreseflesanunconditional powerof revocation, for purposesofthe RuleAgainstPerpetuities, doestheperiodofthe Rulebegin power from whena of appointmentis first created? Held.No. Judgment enteredaccordingly. a)

130- Wills

Whena powerof appointment is in fact exercised, the validityof theappointment is determined by preciselythe samerule asif the onginaltestatorwho createdthepowerhadmadein her own will the sameprovisionin favor of the s.!meappointee. The appoint, mentis readbackinto theinstrument creatingthepower.As far as perpetuities areconcemed, theperiodofthe Ruleis reckonedfrom thedateof creationof theDower,not from thedateof its exercise.

b)

However,thercis anexceptionto thisgeneralrulewherc powerofrevocation anunconditional is reserved. In those instances,theperiodof perpetuitiesis calculatedfrom the time the powerof revocationceased,usually at the death of the grantor. Here,the powerto rcvokereservedby T doesnot qualify for the exceptionapplicableto a full andunconditional power of revocation,sinceshereservedthe power to revokeonly asto thepaymentofincome.Thus,theremotenessof the futue intercstscreatedcould not be affected by anyexercise of thepower.

o)

Herc, both the gift of the incometo Mary Washbumefor 30 yearsandthegift of thercmainderafterthe 30 yearsto Mary'schildrenvestedin interestat thedeathof MargaretMarchwithintheperiodof theRule.Postponement of enjoymentbeyondthe periodof theRule wouldnot invalidatethem.Accordingly,Mary hasa valid incomeinterestin the half of the trust subjectto the power of appointment for 30 yearsandis thenentitledto theprincipal.If shediesbeforethen,theprincipalwouldbe dist.ibutedto her estatebecause herremainderhasbecome indefeasibly vested.

e)

If Marydiesbeforethe30-yearpedod expires,thepdncipal goesto her estate;it doesnot passto her surviving children underthe termsof Margaret'strust. That trust's contingentrcmainderto Mary's childrenviolatestheRule AgainstPeryetuities because it might vestmorethan21 years after Margaret'sdeath.The result in caseswherc futureinterestsare voidedby the Ruleis that the p.ior interests b€comewhattheywouldhavebeenhadthelimitation of the future interestb€€nomitted from the instument.If a divestinginterestis void, theinterestthatwould otherwisehavebeendivestedbecomes absolute.

E. SA\INGCLAUSE A savingclauserectifiesany possibleviolationof the Rule.Sucha clause shouldbe includedevenin thosejudsdictionsthathaveadopteda cy prcsor "wait-and-see" doctdne. 1.

AttorneyLiability for ViolatingRule.Courtsaredividedastowhether an attomeywho dafts a will that violatesthe Rule is liablefor negligence.

Wills- 131

F.

PERPETTIITIESREFORM Threekinds of reforrnhaveemergedto alleviatesomeof the harsheffectsof the Rule: the wait-and-seedoctrine,the equitablereformationor cy presdocapplications of the Rule with trine, andremedyingthe most objectionable remedies. specific 1.

ln re Trttsl of Wold

The "Wait-and-SeeDoctrine.r'Underthis doctrine,thevalidityof interestsisjudgedby actualeventsastheyhappen,andnot by eventsthat might happen.lsee In re Estateof Anderson,541 So. 2d 423 (Miss. 1989)l a.

Statutory period appliesto no[vested interest cr€at€dpursuant to power of appointment-Ir, ,'e Trust of Wold, 310 N,J. Super 382,708A.2d787(1998). 1)

createdtrusts Facts,SewardJohnson(ofJohnson& Johnson) in 1944to benefithischil&en;ElaineJohnsonWold(P)is the beneficiaryof the trusts.Underthe tems of thetust, thehustpayableout eeswercdirectedto collectincome,payexpenses of income.andaccumulatethe net incomeuntil P reachedthe hadabsolutediscretionto ageof 21.At thattime,thetrustees pay to P asmuch of the incomeas the trusteesdeemedto b€ for herbestintercst.Thelust alsopemits thetmsteesto hansfer and pay to "the life beneficiary" (P) "any or all of the trust property."UponP's death,thetrusteesaredirectedto payover the trust property to her spouseand issueas directedin her will or, in theabsence of a will, to her issuein equalsharcs. P wishesto createa testamentary trustappointingthe proceeds of her fiust in fwther kust for the benefit of her spouseand survivingissue.Thenewtust wouldpermitprcpertyheldby oneof P's childrento continuein trustfor that child'sissue (P'sgrandchild's) uponthechild'sdeath.Thus, theissue's interestwouldbe considered nonvestedsincethe propertywould passonly uponthehappening of a specificevent,thedeathof P's child. P plansto rely on the New Jersey"wait andsee" go-yearperpetuities pedodandhasrequested the trusteesto petitionthis courtfor directionandinterlretationregarding theapplicationofthe New Jerseystatuteto her proposedexerciseof her powerof appointmentunderthe termsof the 1944trust.

2)

Issues. a)

132- Wills

Doesthe powergrantedto P to disposeof the fiust res includethepowerto appointthetrustassets by a successivetestamentary trust?

-!

b)

3)

4)

2.

DoestheNew JerseyUniform RuleAgainstPerpetuities,* hrcfprovidesthatan actthatwouldhavebeeninvalid at common validif it vestswithin 90 yearsof its crelaw is nevertheless and in existence invalidonlyifit continues ationandbecomes period, to a nonvested apply that time doesnot vestwithin ofa powerof appointto theexercise intercstcreatedpursuant from the cremeaswed 1944 tust and ment vestedin P by a ationof the 1944trust?

fot P Held. a) Yes.b) Yes.Judgment a)

Thetrusteeshavebeengiventhe maximumflexibility anddisneeds. thebeneficiary's cretionin addrcssing

b)

(SecThelaw ofhustssuppofisP'sposition.TheRestatement provides may be created thatatmst ond)ofTrusts,section17, to anotherpe6on by "a personhavinga powerof appointment power for a third person" or astrusteefot the doneeof the

c)

thetrustwasto proThesettlor'sclearpuposein establishing tect the trust ftom tax burdensto the fullest extentof the law. trustwilleffectsignificanttaxsavtestamentary Theproposed is well within ratherthanbeingrestricted, ings.Sucha purpose, andintentof thetust instrument. thecontemplation

d)

WhiletheNewJeNeystatutegenerallymaynot applyretroactively,wheretheapplicabilityof a new statutoryperiodis bethelaw statesthatanintercstcrcatedpurcuant ing determined, is deemedcreatedupontheexercise power of appointrnent to a of thatpower.Thus,if thepowercreatedby P wereexercised after July 3, l99l (the effective dateof the statute),the Rule would apply to an interestcreatedunderthat power,

Comment.The New JerseyUniform StatutoryRuleAgainstPerpetuitieswasrepealedin 1999.It wasreplacedwith a statutethatalor i mplied lows a perpetualttustif thetrusteehaseitheranexpressed powerto sellor anunlimitedpowerto teminatethetrustin oneor moreliving persons.

The Uniform Statutory Rule Against P€rpetuities (1986, as amended in 1990),The Uniform StatutoryRuleAgainstPerpetuities("USRAP") provides thecommonlawRuleandthewait-and-see for two rulesagainstperyetuities, rule of 90 years.The original &afters of USRAPfailed to noticethe effect of transfertax (a tax thisprovisionwhenconjoinedwith thegeneration-skipping payableon the transferto a pe$on who is at leasttwo genentionsremoved from the transferor).Pursuantto treasuryregulationsin effect whenUSRAP transfertaxdoesnot applyto trustscrcthegeneration-skipping wasenacted, Wills- 133

l

atedprior to 1986unlesstheexerciseof a specialpowerof appointment delaysthe vestingof an interestbeyondthe commonlaw perpetuities period. Under USRAP,a grandfatheredtrr.rstis not exemptif a special in violationof thecornrnonlaw peris exercised powerof appointment rule.In1990, period,thusgivingrisetothe90-yearwait-and-see petuities sectionl(e) wasaddedto USRABprovidingthatif thevestingof a gift oneof whichcomplieswith is basedon two altemativecontingencies, period and the othercomplieswith the perpetuities the commonlaw peUSRAPperiod,effectis givenonly to thecommonlaw perpetuities riod. 3.

Cy Pres or Equitable Reformation. Under this doctrine,an invalid interestis reformedwithin thelimits of theRuleto approximatemostclosely theintentionof thecreatorof theinterest.

G. TIIE RTJLEAGAINST SUSPENSION OF THE POWER OF ALIENATION: NEW YORK LAW

134- Wills

l.

Rule.TheruleprohibitingsusA BriefExplanationofthe Suspension upona policy assumpdon pensionof the powerof alienationproceeds whentherearenot perpower is suspended only of alienation thatthe sonsin beingwho canconveyan absolutefee.The rule appliesonly if Subsethe takerof a contingentinterestis unbomor unasceitainable quentmodifications of the statutehavemadeit similarin scopeto the with the exceptionthat trusts commonlaw RuleAgainstPerpetuities, that might last beyondthe statutoryperiodarc morc likely to be held invalidunderthestatutethantheywouldbe undertheRule.

2.

Application ofthe SuspensionRule to Statutory Spendthrift Trusts, whena transferis madein trustif Thepowerof alienationis suspended (i) the legal fee simple to the trust propertyis nontransferableor (ii) the intercstsin absolutefee. equitableowne$cannotconveypossessory

XII. CIIARITABLE TRUSTS A.

INTRODUCTION A charitabletrust is one for the benefit of a classof pe6ons, and not for the benefitof the communityat large,andmustbe for relief of poverty or lbr the advancement of education,rcligion, health,or othercharitablepurpose.It must benefitthe generalpublic or someparticularclassof the public that is indefinite in number. 1.

Creationofa Charitlble Trust-ShenandoahValleyNational Bank 786(1951). v. Thylor,192Va.i35, 63 S.E.2d

Shenandoah ValleyNational Bank v. Taylor

Facts. The will of the decedent,CharlesHenry provided that the Valresidueofhis estatewasto beheldin trustby the Shenandoah paid to be by the trustee on the ley NationalBank of Winchester, lastschooldaysof eachcalendaryearbeforechristmasandEaster "in asmanyequalpartsastherearechildrenin the first, second,and third $ades of the JohnKen Schoolof the City of Winchester,and (thetrustee)shallpayoneofeachsuchequalpartsto eachchildin suchgrades,tobeusedbysuchchildin thefwtheranceofhis orher obtainmentof aneducation."Oneof the nextof kin of the decedent (P) filed suit againsttheexecutorandtrustee(Ds) challengingthe validityofthe will, whichundefiookto createa charitabletrust.P aryuedthat the trust did rlot constitutea charitabletrust and was The trial invalid in that it violatedthe RuleAgainstPerpetuities. courtheldthatthetrustwasnot charitablebut wasa privatetrust, andwasvoid. andthusviolatedtheRuleAgainstPerpetuities b.

Issue,Must a trustbe public in naturebeforeit will be considereda charitabletrust? Held. Yes.Decreesaffirmed. l)

A charitablehustis createdonly if the settlorproperlymanifests an intention to crcatea charitableffust. Charitablepurof posesincludethe relief of povertyand the advancement andotherpureducation, religion,health,municipalpurposes, posestheaccomplishment ofwhich arebeneficialto thecommunity. It is essentialthat the charity be for the benefit of an indefinite numberof persons,for if all the beneficiariesare pe$onally designated,the rust lacksthe essentialelementof of a legalcharity. whichis onecharacteristic indefiniteness,

2)

Herc,the time for paymentof thefundsto the childrenis when their minds would be far removedfrom studiesand indicates mind.Execuwasin thetestator's thatno educational Dumose

Wills- 135

no educational tion of the mandateof the trustaccomplishes purpose. It merelyplacestheincomeforeverbeyondtherange of the ftust. The wordsof the trust import an intent to havethe ffusteepay eachchild an allotted share.The testator'sintent wasto bestowuponeachchild gifts that wouldbring happinesson the two holidays,which purposefalls far short of an educationaltrust. 3)

B.

It is arguedthat evenif the will fails to createa charitable producesa depurposes, trustfor educational it nonetheless sirablesocialeffect.Wedisagree. A trustfrom which theinpaid is stated intervals to eachmemberof a come to be at designated segmentof thepublic,withoutregardto whether therecipients arepooror in need,is notfor thereliefof poverty,nor is it a socialbenefitto the community.Thercis no languagein this will that permitsthe trusteeto limit the recipientsto theschoolchildren who arein necessitous circumstances.Accordingly, it is mere benevolence-a private fiust-and not a charitabletrust.

MODIFICATION OF CIIARITABLE TRUSTS: CY PRTS Wherea generalcharitablebequestis impracticable,somecourtswill execute a gift cy presthrougha schemeftamedby the court for the purposeof canying out thegeneralpuq)ose.

I re Neher

1.

Gen€ralCharitabl€Purpose-.Inie Neher,279N.Y 370, 18 N.E.2d 625 0.939\. Facts.Ella Neher's(T's) will devisedcertainrealpropertyto the village(P),with a directionthatP erecta hospitalnamedasa memorial to T's deceased husband.P acceptedthe propefiy in 193l In 1937,P petitionedtheswrogate'scourtto conshueandreformthe relevantprovisionof T's will, directingthat P would receivethe propertyand erectan administrationbuilding in T's husband's memorysincea nea$y hospitaladequately servedP's needs.P's petition wasdenied.The appellatedivision affirmed.P appeals. b.

Issue.WasT's devisea generalintention to devotethe propertyto purposes charitable insteadofaspecificintentionto limit theuseof the prcpertyto the operationof a hospital? Held.Yes.Orderre\elsedandremanded. I)

136- Wills

This wasa gift to theentirecommunity.That wasthefiIst stated desienof beneficence.

parThe direction that a hospitalbe erectedshowsan absenceof or control'exceptthatP s trusttlculantyaslo type.managemenl' of par(lct antyrs eeswereto be thegovemingboardThis absence a strongshowingagainstlhe \iew thattheinstructionwasthesub stanceof the gift

2)

3)

2.

We thinkT's intentionwasa generalcharitablegift with an added ls graftasto T's desiresA graftmay beignoredwhencomplrance iltogetherimpracticable'and the gift may be executedcy pres throigh a schemedevisedby thecourtto carryout thegeneralcharitablePurPose.

L Rev' Great Incrcase in Available Funds-Itt re Estateof Buck' 21 U S'F 691(Cal.sup.ct. 1986). a.

In re Estate of Buck

Facts.In 1975,BerylBuck(T) dieda residentofMarin County'California.MarinCountyis themostaffluentcountyin the SanFranciscoBay countyof morethan50'000 Areaandis thenation'ssecond-wealthiest residents.T's will left theresidueof her estateto the SanFranciscoFourrdation,a communitytrust administeringcharitablefundsin five counties in the Bay Area. Her will directedthat the residueof het estatebe used purposes for exclusively nonprofit charitable'rcligious' or edutational nonprofit foi ttte needyin Marin County,andfor other in prouiaing "ur" in thatcounty' purposes ieligious,or educational charitable, At the time of T's death'the largestassetin her estateconsistedof a blockof stockwofih about$9 million ln 1979,ShellOil won a bidding wat andboughtthe stockin theBuckTrustfor $260million' whichincreasedto we-ilover$300million by 1984 In 1984'thefoundationbrcught suit seekingjudicial authodzationto spendsomeportion of the Buck Trustincolie in the otherfour countiesof theBay Arca The foundation's petition for cy presresteduponthe following theory:The enormouslnraising creasein the'valueof principalwasa changein circumstances substantialdoubt whetherT, had sheanticipatedsuchan event' would to MarinCountyForty-sixindividualsand havelimitedherbeneficence charitableorganizationsin theotherfour counties(called"objector-bgneficiaries") wereallowedto interveneto objectto theMarin-only limitation.

b.

Issue.Doesthe doctrineof cy presapplyif thereis a dramatlc'unexpectedincreasein tilst funds anda diffetent useof trustfunds would be to the community? more advantageous

c.

Heltl. No. Judgmentdeniedthe petition for modification' I)

Cy Dresappliesonly uherethe purposeof a rust hasberomeilleand of performance' impraclicable gut.i.po.iilt". ot p.rmanently Wills - 137

thetestatormanifested a generalcharitableintention.In practice,cy preshasmostoftenbeenappliedin Califomiain such caseswherethecharitable trustpurposeis literallyimpossible to fulfill or in caseswhercit hasbecomercasonably impossibleof performance. Ineffectivephilanthropy,inefficiency,and relativeinefficiency(i.e.,inefficiencyof trustexpenditures in onelocationgivengreaterrelativeneedsor benefitselsewhere) do not constitute impracticability.

c.

2)

If both the testator'sintent andthe charitablegift can,in fact, beeffectuated, i.e.,thespecifiedtrustpurposehasnot become impossible or impracticable of performance, thereis nojustificationfor cy pres.Cy prcsmaynot be invokeduponthebelief thatthemodifiedschemewouldb€moredesirableor would constitutea betteruseof the income.Courtshaveheld that termsof a charitabletrust may not be modified on the grounds that a differentusewouldbe morebeneficialto the community or advantageous to thecharity.Cy presdoesnot authodze the court to vary the termsof a trust merelybecausethe variationwill meetthedesireandsuittheconvenience of thetrustee.

3)

The residents of Marin Countyhavesubstantial unmetneeds that arewithin the scopeof the purposesof the Buck Trust. The entireincomeofthe BuckTrustis presentlyinsufficient, andwill remaininsufficientin thefuture,to addressall of these needsandopportunities.

SIJPERVISION OF CHARITABLE TRUSTS Most statesauthorizetheir attomey generalto enforce charitabletrusts on behalfof a community.Otherswith a particularidentifiableinterestin the trust may alsoenforcethe trust.

Carl J. Herzog Foundation, Inc. v. Udversity of Bridgepofi

138- Wills

1,

Donor HasNo Standing-CarlJ, HerzogFoundation,Inc.v. University of Bridgeport,243 Corlf'],.I,699 A.2d995 (1997). a.

Facts. In 1986,the Carl J. HerzogFoundation(P) madegrantsto theUniversityof Bddgeport(D) forneed-based meritscholaNhips for medicallyrelatededucationfor disadvantaged students.The scholarships wereprcvidedto nursingstudents until 1991whenthe nursingschoolclosed.P allegesthe fundshavebeencor[ningled with D's generalfundsandarenot beingusedin accordance with the trust instrument. P rcquesteda temporaryand permanentinjunctionrequiringD to segregate $250,000,requestinga full accountingof the fund, and requiringthe fund be reestablished in accordance with theoriginalpurposes. D movedto dismiss,claiming P did not havestanding.The trial courtdismissed,notingthe

attomeygeneralcouldbringanaction.Theappellate courtreversed, concluding the ConnecticutUniform Managementof Institutional Funds Act ("CUMIFA")providesdono6with standingeventhoughno such.ightisprovided for in the trust instrument.D appeals. b.

Issue. Does CUMIFA establishstatutory standingfor a donor to bdng an actionto enforcethetermsof a completed charitable gift whenthegift instrumentcontainedno exprcssreseflationof controloverthegift? Held.No. Judgment reversed. l)

Onewith standingis eitherclassically aggdeved orprovidedwithstanding by statute.Here,P's solebasisis CI-MIFA.

2)

At commonlaw,unlessa donorwho madea completedcharitablecontributionexpresslyreservedthe right to bring an actionto enforcethe termsof thegift, shehadno standingto do so.Generally,suchgifts are enforceable by theattomeygeneral.Theattomeygeneralhastheexclusivepoweron behalfof a donorwhoattaches conditions to seethatthose conditionsarcmet,i.e.,to corect abuses in theadministration of a public charity.

3)

Subsection 45a-533of CL\4IFAprovidesthataninstitution'sgoveming board may seekrelief from an onercusor obsoleterestriction without resortto the couts by obtainingthe donor'sconsent,if living, or from tbecourtifthe donoris dead.In thecaseof theabsence of a resriction. permitsa govemingboardto usea gift only for "educathe subsection tional,religious,charitable or othereleemosynary purposes." Thestatute is not meantto supplantbut to supplement thedoctrinesof cy presand approxlmatlon.

4)

In the absenceof exprcsslanguagein the statuteprovidinga donor's access to thecourtsto complainof achangein a resirictionwithoutconsent,we mustlook to thelegislative history.Thishistorydirectlyrefutes P'sclaim. Wehavestatedthat in the absenceof prior authorityto aid in interpretation of C['MIFA, we are guidedby the meaningof the draftersof the UniformManagement of InstitutionalFundsAct ("UMIFA"). In enacting CUMIFA, the draftersintendedto implementthe intention, meaning, andobjectivesof UMIFA.UMIFA specificallystatesthedonorhas no right to enforcerestdctions, no powerto changethe eleemos),nary beneficiary, andno interestin thefund;shemayonly lessena restriction in effect.

6) Thedonor'spowerherewasconsideredin thelight of adverse taxconsequences for donorsif fIMIFA provideddonorswith controlof theirgift after the gift wascompleted.In their commentaryto UMIFA, the &aftWills 139

ers clearly statedthey wishedto protect the donor's federalcharitable contribution deduction,andthey anticipatedno federaltax problemby allowing the donorto releasea restriction. 7)

d.

140- Wills

The appellatecout dismissed this languageasapplyingonly to tax issuesandrcasonedit did not answerthequestionwhetherthe soleright to speakto the donor's interestin the releaseof a restriction lies with the attomeygeneral.Wedisagree.Thercis no languagein either statutethat the draftersintendedthe donorto supplantthe attomeygeneral.

Dissent.This decisioncondonesa doneedoublecrossingthe donor andgetting awaywith it unlessan attomeygeneraldoessomethingaboutit.

XIII. TRUST ADMINISTRATION: THE FIDUCIARY OBLIGATION A.

GENERAL FIDUCIARY DUTIES AND LIABILITIES 1.

Duty of Loyalty: Herein of Self'Dealing. A fustee hasa duty to give undividedloyalty to thebeneficiariesThe duty of loyalty requirestrusteesto avoidanyconflictsof interestbetweenpeNonalinterestsandthe interestsof the trust or estate.Thus,dtJ transactionsbetweenthe individualandthetrustor estateshouldbe avoided.A rusteewho engages is liableevenif he actedin goodfaith and treatedthe in self-dealing is consent to self-dealing fairly.Thetustee'sonly defense beneficiaries (thetransaction muststill befar afterfull disclosure by thebeneficiaries andrcasonable). a.

b.

Tlustee's wife acts as purchaser"Hartman v. Hartle' 95 N J. Eq. r23, 122A.615 (t923). 1)

Facts.ThetestatorDorotheaGeick(T), namedhertwo sonsinlaw executorsanddirectedthemto sellher rcal estateand equallyamongher five children.The exdividetheprcceeds e.uton soldpartofthe realestateto oneof T's sons,who bought thepropefiyforhis sistetthewifeofoneofthe executorsShe soldthepropeitytwo monthslaterfor a $1,600prcfit. Oneof T's daughters(P) filed a bill charyingthe sal€ to have been improperandfraudulent

2)

Issue.Is thesaleof propertyby anexecutorto his wife, without previousauthorityfrom thecoun,illegalandvoid?

3)

Held.Yes.Decreewill be advised a)

The settledlaw tn this stateis a rusteecannotpurchase fromhimselfathisownsale,andhiswife is subjectto the samedisability.

b)

thepropertyis nowownedby innocentpurchasBecause ers,the executonandthe wife will be heldaccountable for P's one-fiithshareofthe profitson rcsale

Conflict of interest-'In re Rothko' 43 N.Y2d 305,372 N.E.2d 291,401N.YS.2d,l49(1977).

Hartman v. Hartle

In re Rothko

1) Facts. The decedent,Mark Rothko (T)' an intemationally knownpainter,diedtestate,leavingan estateconsistingprinand Stamos, cipallyof798paintingsBemardReis,Ttreodoros (Ds). three Within co-executors appointed were Mortonl€vine Ds agreedto sellto Marlborough weeksoftheir appoifltment, 100paintingsto be paid corporation, A.G.,a Liechtenstein Wills- 141

for in interest-freeinstallmentsover a 12-yearperiod after aninitial payment to MarlboroughGallery,Inc., a domestic Theyalsoconsigned of $200,000. paintings listed in a scheduleto be prepared.It corporation,some700 other later came to light that Reis was a director,secrctary,and treasurerof MarlboroughGalleryin additionto beingco-executorof theestate;thatStamos to artistfinanciallyandthatit wasto his advantage wasa not-too-successful failed to exercise ordiand that Levine with Marlborough Gallery; curry favor naryprudencebecausehewasawareof Reis'sconflict of interest.KateRothko, T's daughterlaterjoined by her brother,ChristopherRothko,andthe attomey generalof the state(Ps),bmughtsuitto removeDs, to enjointhe saleof the enteredinto,to haveretumedthepaintpaintings,to rescindtheagreements The tdal coun andfor damages. of the corporations, ingsstill in possession Ds contendappeal followed, court affirmed. This held for Ps.The app€llate ing thattheyactedin goodfaith andthattheplanwasfair

142- Wills

2)

a trust,musthe refrainfrom placing Issue.While a husteeis administering interestmayconflictwith theinterest himselfin a positionwherehispersonal of thebeneficiaries?

3)

Held.Yes.Orderaffirmed. a)

The duty of loyalty imposedon a fiduciary preventshim from accepting transacfrom a thirdpartywho is enteringinto a business employment is administerjng the tion with the trust.While the fiduciaryas trustee trust,he mustrefrainfrom placinghimselfin a positionwherehis personalinterestor that of a third pefton doesor may conflict with the Here,to assertthatthercwasno conflictof interestof thebeneficiaries. part of Reisand Stamosis to indulgein sheerfantasy. intereston the Reiswasnot only a dircctorandofficerof MarlboroughGallerybuthad financialinducements to favor Marlboroughthroughsalesof his own extensive ancollection.SotoodidStamosbenefitasanartistundercontract with Marlborough.

b)

andupontheadviceofcounLevinearguesthat,havingactedprudently We disagree. An executorwho sel, a completedefenseis established. is committingbreaches of tmst andwhonot knowsthathis co-executor to the only fails to exerteffortsdircctedtowardpreventionbut accedes breaches is legallyaccountable eventhoughhewasactingon theadvice of couNel.

c)

In general,whena fustee Wenow tum to thepropermeasureof damages. to selltrustproperty,but in breachof hust sellsit for less is authorized thanhe shouldreceive,he is liablefor the valueof the propertyat the time of the salelessthe amountthathe received.Ii the breachof trust with consistsonly in sellingit for too little,thetrusteeis not chargeable property. Howthe amountof any subsequentincreasein value of the otherthansolelyselling evet if thebreachconsists ofsomemisfeasance

tbr too low a price, appreciationdamagesmay be appropriate. A trusteemay beheld liable for appreciationdamagesif it was his duty to retain the property.The sane rule should apply herewherethereis a seriousconflictof interest.

2.

c.

Co-trustees.A co-trustee doesnot havethe powerto hansferor deal with the propeftywithoutconsultingthe otherco_trustees. Nor mav a trusteedelegatedecisionmaking powersto a co_truslee. Thesepowers canonly beexercised by theco-trustees togelher.

d.

Insidertrading.UnderSecurities Exchange Commission Rule l0b_5,a personwitl insideinfomationabouta stockcannotbuy or sellthestock unlesshe first discloses this information.A fiduciarywlll be boundby thisrulesincetheobligationsof a fiduciaiydo not includetheperforri ingofan illegalacr.

Fiduciary Dutiei R€lating to Care ofthe Tfust propefty. a,

Duty to collect and protect trust prcperty. A trusteehas the dutv to immediatelycollectthetust assetsandascenainthartheexecutorhas tenderedthe appropriatepropefty.

b.

Duty to earmark trust prcperty. A trusteehasa duty to earmarkproperty andis liable for any lossthat resultsfrom the failure to do so.

c.

Duty not to mingle trust funds with trustee'sown. A trusteehasa duryto notcomminglethetrustfundswith hisown andwill beliablefor lossesresultingfiom cortuningling.

d.

Duty not to delegate.A fustee hasa duty not to delegateactsthat the trusteecan reasonablybe requiredto perfom penonally. He may delegatecertainnondiscretionaryfunctions,but he hasa duty to supervise thoseto whomhe delegates. 1) Delegationof investmentpower--ShrinersHospitalsfor Crip_ pled Childrcn v. Gardiner,152Anz.527,733p2d lllO 0987). a)

Facts.LaurabelGardinerestablisheda ffust to Drovideincome to herdaughter, MaryJane.hergrandchildren, Charles and Robert,andher daughter-inJaw, passes Jean.The remainder to Shriners Hospitals for Crippled Children (p) uponlh;dearh of theincomebeneficraries. MaryJanewasappointed rrustee; Charleswas namedfirst altematetrustee:andRobert second altematetustee. Mary Jane,not anexperienced investor,placed thetrustassetswith DeanWitter.Charles,aninvestmentcoun_ selorandstockbroketmadeall investment decisionsandem_ bezzledin excessof $300,000.p broughta petitionto surcharge

Shriners Hospitals for Crippled Childrcn v. Gardiner

Wills - 143

Mary Janefor the full amount.The trial coufi deniedthe petrreversed. Mary Janeappeals. tion:a dividedcourtof appeals b)

Issues, (l) Is MaryJane'sdelegation powerto Charles of investment a breachof fiduciary duty? (2) Was Mary Jane'sdelegationof investmentpower to Charlestheproximatecauseof theloss? (3) Can Robertprcperly continueto act as successortrustee andasguardianandconservator for theprcdecessor tnrstee Mary Jane?

c)

Held. (1)Yes.Judgmentreversedandrcmanded.(2) Remanded for findings of fact by tdal cowt. (3) If the trial couft finds Mary Janeliable, Robertwould have to be removedsince,as herguardianandconservator, his intercstwouldconflictwith his fiduciary duty astustee to enforcethe surcharge. (1) A trusteebreaches the"prudentman"standard whenshe prudendy delegatesherresponsibilitiesto act andpersonally performher duties. (2) Charleswasa surrogatetrustee,andMary Janeunreasonablydelegated herinvestment autho.itytohim.It is ofno importthatCharleswasnamedasan altematetustee. (3) Mary Janewas under a duty to exercisecontrol over Chades'sinvestments andevaluateCharles'sadviceand thenmakeherown decisions.

e.

3.

Dennisv. RhodeIsland Hospital TrustCo. 144- Wills

Liability for contractsand torts.Thetraditionalruleis thata trusteeis personallyliableon any contractthe trusteemakes,in the absence of provisionin thecontractlimitingthetrustee'sliability.A trustee express is similarlyliablein tort.A tusteeis pe$onallyliableto thesameexten! that a beneficialownerof the trust propefiy would be liable.

Duty of Impartiality: Allocation to Income and Principal. A trusteehasa duty of impartiality betweenthe incomebeneficiaryand the remainderman, i.e.,shemustactto producea reasonable incomewhile at thesametimepreservingthe trust propertyfor the remainderman. a.

Tfustee'sduty of impartiality-Dennis v. Rhod€Island Hospital Tfust Co.,744F.2d893(lst Cir 1984). 1)

Facts.The great-grandchildren ofAlice Sullivar (Ps)areremain-

and as such,aJe by their great-grandmother, dermenof a trustestablished theprinPs receive and entitledto incomeuntil 1991whenthe tlust ceases cipal.Psclaimedin the districtcowt thatthebanktrustee(D) hadbreached variousfiduciaryobligations.The courtfoundthatD hadfailed to actimpartiallyasbetweenthe trust'sincomebeneficiadesandremaindermenD ;old the trust'sreal estateat the lowestpoint of value.Both sidesappeal differentaspectsof thejudgment. Issue,Did D act unfairly as betweenthe incomebeneficiariesand the remaindermen? 3)

Held. Yes.Judgmentaffirmedasmodified. a)

D)

ThedistrictcourtfoundthatD failedto keepup therealestate,to renostepsthatmighthavegiven vate.modemize,orto takeotherreasonable propertyroughlycapableof continuingto produce the remaindermen supportfor theseconincome.Therecordprovidesadequate reasonable clusions,andwe will not overtuma distdctcourt'sfactualdeterminaparticularlyin a diversitycasewhere tionunlessit is clearlyerroneous, of statelaw is involved. constnrction a reasonable D did not appraisethepropertyperiodically, did not keepproperrecords' andmadeno accountingfor 55 years.An impa.rtialtrusteemustview theoverallpicture,not closeits eyesto relevantfacts.

c)

D couldhavesoldthepropertyin 1950andreinvestedtheproceedsso (Second)of as not to createa "partiality" problem.The Restatement Trustssaysa fustee is undera duty to the beneficiaryultimatelyentitled to principalnot to retainpropertycertainor likely to deprcciate' eventhoughthe propertyyields a high income,unlessD makesadequateprovisionfor amortizingthe income.

d)

discretionin fiduciary Statecaselaw allows the couft considerable a breachcasesto fashiona remedybasedon hypotheticalsale.The remedialchoicebecausethat date year 1950is not an unreasonable of marksa rcasonableouterbound the time the trusteecould plead ignoranceof the seriousfaimessproblem.

e)

The district court'ssurchargecalculationis approvedexceptfor the to reflect"appreciation" Thercis no leasonto additionalpercentage inflation. believeD wouldhaveoutperformed

0

D's removalis primarily a matterfor the disrict court.D can be femovedevenifchargesofmisconductarenot madeout.Ill feelingmight inlerfereherewithlhelrustadministration.

Wills' 145

Fletcherv. Fletcher

4.

Full DisclosureRequir€d-Fletcher%Fletch€r,253Va.30,480S.E.2d488 ( t991). Facts.Uponthedeathof her husband, ElinorFletcher(T) placedall of her assetsin a revocableinter vivos trust for which shewas the grantor andtfustge.Severalyearslater,sheamendedthe hust to coDtain,among otherthings,a provisionestablishingseveraltusts uponher death.Three of thesetrusts($50,000 each)werefor thebenefitof heradultson,James (P),andhis two childrcn.AnotheradultsonandF & M Bank-Peooles TrustandAsserManagement GroupfDs)wereappointed successor rustees.The fust for P authorizedthe trusteesto expendsuch amountsof incomeand principalnecessary to providehim andhis chil&en with adequatemedicalcareand insurancefor P's life or until his tlust is depleted.UponP's death,anyremainingtrustbalanceis to be paidto p's children.Upon T's death,her trust becameirrevocableandDs assumed their duties.P broughta proceedingagainstDs to compelDs to provide full and completecopiesof the trust instruments,alleging that T had transfered assetsdescribedon a "ScheduleA" attachedto the original tust instrumentto a "new trust" with Ds as trusteesand that Ds had failed to provideP wirh the detailsof this trust. P further allegedthat he wasgivenonly certainpagesfrom theoriginaltrustandtheamendment, andthat without a completelisting of the termsandassetsof thetrust,he cannotdetermineif the trust is being properly administercd.p alleged his brother'sclaimthatthek motherwantedthe tust keptconfidential ftom thebeneficiariesis without documentedsupport.Ds assertthatupon T's death,when separatehusts werc crcated,P was provided with all documentsthatrelateto him andhis childrenandwasnot entitledto any furtherinfomation. Ds filed thetrustagreementundersealwith thecout, but failed to file "ScheduleA." The trial court, after hearing,ruled in favor of P.Ds appeal. b.

Issue.Did the trial coufi err in finding that P had an absoluteright to the completecopies of the trust agreementand ordering Ds to Fovide p with same? Held. No. Judgmentaffirmed.

146- Wills

1)

Whilethisis acaseoffirst impression in Virginia,we areguidedby text writers andthe Restatement(Second)of Trusts.

2)

The beneficiariesaretheequitableownersof the ftust property;the fiusteesaremerelyreprcsentatives who keepthe tust propertysafe andadministerthe trust accordingto the prcvisionsof the tlust insrument.

3)

Becausethe beneficiaryenjoysthe trustpropertyindirectly,that doesnot imply thebeneficiaryis to havethenatureof thetrustprop-

keptftom him ty andits administration 4)

5)

6)

7)

8)

5.

eachof themis beneficiaries' "(W)herea trustis createdfor several entitledto infomation asto the fust " [Scoft'The Law of Trusts sl73 (4thed. 1987)l Evenifthe trusttermsregulatetheamountofinformation thetrustee withwhichit mustbegi\en thebenmuslgiveandlhefrequenc) asis reasonably to asmuchjnformation eficiaryis alwaysentitled to allowhim to enforcehis rightsor preventa breach necessary notbegiven.inthatP should. no provrqion Thelrusrhereconlains regardrng below formationandtherewas no e\identiaryhearing Ds'assenionthatT gaveoraldirectionsto thatpurposeTherefore' grantor we do not opineon whateffectanydirectiveof secrecyby the wouldhavehere. trustssomeDs' claimthatthe grantor'screationof threeseparate how makethe trustthreeseparateandindependenttrust docum€nts "unltary is without merit. Thereis onetrust agreementbasedon a corpus" TheinformationDs failedtodisclosetoPmayhavea materialbearof thetrustasfar asP is concemedWith' ing on theadmini$tration ou] ful disclosure'P cannotjudgeDs' investmentdecisionsand reacannotdeteminewhetherDsarecanyingouttheirdutyto use sonablecareandskill to makethe propertyproductiveand areacting imPartiallY

Tiust Constructive Fraud-National Academy of Sciencesv' Cambridge Co.,370Mass 3O3,346N.E 2d 879(1976)' a.

l-eonardT' Troland(T)' left a[ of his Facts.The will of the decedent, (D)' with orooertvto be held ln trustby theCambridgeTrusLCompany ii"'n.t'in.o-" to be paidto his wife for life as long as shercmained major unmarried.It furtherprovidedthat his wife shouldnot devoteany h€,F than ponionof herIncomelo thesupponor benelitof peopleother the self.T furtherprovidedthat on his wife's death'D would transter D C Councilof Washington' ' an to tiheNationalResearch trusteeship a ru^stfor { P' lo conslllute of Sciences olthe NallonalAcademy aqency rcmaniedbutfailed ,J."u.ln in pty.r'o-pt'y.icsThewidowsubsequently (P) a io notiiy o oi tfti. ihe NationalAcademyof Sciences brought D by petition seekinga rcvocationof the accountsof D andrestoration The if ttre$lO6,Od *rat waspaid to the widow afterher remariage chargand probatecourtheldfor P' orderingrevocationof the accounts distributedD appeals' ins D for theamountseffoneously

National Academyof v. Sciences Cdnbridge TmstCo.

Wills - 147

b.

Issue. Doesthe failure to make any reasonableeffort to ascertain thetruesetof factsconstitutea sufficientbasison whichto hold a trusteeresponsible for a constructiveflaud on beneficiariesof atrust? Held. Yes.Judementaffimed. l)

6.

B.

Estateof Collins

Changing Tfustees.Unlessthe trusteehasbeenguilty of breachof trust or hasshownunfitness, thebeneficiaries cannotremovethetrusteeand havea newoneappointed. Thesettlor'sspecialconfidence in thedesignatedtustee haspriority.

POWERS OF THE TRUSTEE 1.

General Managerial Powers.The trusteeis obligatedto carry out the setdor'sintentandin doingsois grantedadministrative powersasspecified in the trustinstrument. In additionto the powerslistedin thetust instrument, the fustee'spowerscanbe broadened by statestatutes, or theymaybe impliedto accomplish thepurposes of thetust.

2.

Powersof Investnent. UndertheUniform PrudentInvestorAct, a fustee mustobservethestandards in dealingwith thetrustassets thatwouldbe observedby a prudentpersondealingwith the propertyof another.If the tustee hasspecialskills or is namedtrusteeon the basisof representationsof specialskillsor expertise, he is undera duty to usethoseskills. Thehusteemustconsiderthefollowing factorsbefoleinvesting:(i) safety of pdncipal,(ii) liquidity,and(iii) rateof retum. a.

Duty to diyersify--Estateof Collins,T2 Cat. App.3d 663,139 Cal.Rptr.644(1977). 1)

148- Wills

Ifapersonmakesa representadon of factin relationto subject mattersusceptibleof knowledgeandsuchreprcsentationis not true,andif anotherpartyto whom it is madereliesandacts upon it, it is fraud and deceitfor which the party makingit is responsible. Weholdthatthe"fraud"in theapplicablestatute contemplates this standardof constructivefraud, at leastto the exteflt that the fiduciary hasmadeno reasonableefforts to ascertainthe tlue stateof facts that it hasmisrcpresentedin the accounts.Herc, the probatecowt found that D madeno effofi at all to ascertain if thewidowhadremaried.

Facts.The will of the decedent,RalphCollins, authorizedthe trustees(Ds), the decedent'sbusinesspartner and lawyer, to purchaseevery kind of property and make every kind of investment,andfufiher providedthat all discretionconfered uponthetrustees shallbeabsolute. After thewill wasadmitted to p'robateanddistributionof theestatemade,therewas$50,000

rcmaining for Ds to invest. They loanedthe money to two real estate developers, DowningandWard,who assured Ds thatthey werenot in default on any of their loans.Thereafter,Downing andWard Constuction Companywent bankrupt,resulting in a loss to the trust fund of $60,000.Ds filed a petition for approvalandfor setrlingof the first and final accountand for their discharge.The beneficiariesunder the trust (Ps)objectedon thebasisthatDs hadimproperlyinvestedthe$50,000. Thetrial courtheldforDs. Psappeal. Issue.Is a trust€€undera duty to the beneficiariesto distributethe risk oflossby a reasonable diversification of investments?

3) Held. Yes.Judgmentrcvelsed.

b.

a)

Atrusteeis undera dutyto distributethedsk ofloss by reasonable diversification.Here,Ds investedtwo-thirdsof thetrustDrinciDalin a singleinvestment.

b)

The generalrule is that secondor otherjunior mortgagesare not propertrustinvestments.Here,Ds investedin realpropertysecured only by a seconddeedof trust.

c)

Also, in buying a motgage for trust investinents,the truste€should give careful aftentionto the valuationof the property,in order to makecertain that the margin of securityis adequate.Here, Ds investedwithoutadequate investigation of eithertheborowersor the collateral.

Balancing gains and losses.Couns typically apply the prudentpersonstandard to eachinvestmentdecisionof the trusteeratherthan to the trust portfolio asa whole.Thus,thetrusteeis notpermittedto balancegainsandlossesif thebreaches of trustareseparate anddistinct. ERISA. TheEmploymentRetirementIncomeSecurityAct of 1974(..ERISA") prcvidesrulesgoveminginvestment ofp€nsionfundsby thefusteesmanaging the fundsandimposesa prudentinvestorrule.The trusteemust discharge hisduliessolelyin rheinterest of thebeneficiaries.

Wills - 149

XIV. WEALTH TRANSFER TAXATION: TAx PLANNING A. INTRODUCTION

150- Wills

1.

A Brief History of the Federal Estate Tax. Under the Tax Refom Act uritedthegift andestatetaxes.The samerateschedof 1976,Congress thusremovingthetaxincentive ulewasappliedtobothgiftsandestates, "unified credit" wasenactedwhich, gifts death. A single to make before in effect,operatescumulativelyto both lifetime and deathtransfers Moreover,thenewunified tax computationrequirestheestatetax to take transfers sothatall gratuitous into accountlifetimegmtuitoustransfers, of transfer taxation consists Federal wealth arcnow taxedcumulatively. transthreetaxes:(i) gift tax,(ii) estatetax,and(iii) generation-skipping fer tax.

2.

Estate and Inheritance TaxesDistinguished.An estatetax is a ta-{upon the value of all propertyownedby a decedentthat is transfered to the death.On theother heirsor beneficiaries uponthedecedent's decedent's tax is a tax uponthe valueof propertyreceivedby hand,an inheritance death. an heiror beneficiaryon accountof a decedent's a.

Estate tax computation. A single set of deductions,exemptions, ratesareappliedto the decedent's estate;with few andgraduated share it doesnotmatterhowmanyhein orbeneficiaries exceptions, in the estate,or who they are.

b.

Inheritance tax computation. Separateexemptionsandlates arc appliedto thesharereceivedby eachbeneficiaryand,typically,the vary accordingto the relaIatesof tax andallowableexemptions to thedecedent. tionEhipof thebeneficiaries

3.

The Unified Federal Estate and Gift Tax. Under the unified system, unified taxesareimposedon theestatesof decedentsdying afterDecem' ber31, 1976,andfor giftsmadeafterthatdate.Theratesareprogrcssive basedon cumulativelifetimeanddeathtransfels.

4.

Liability for Payment ofTaxes. a.

Payment of gift tax. The donoris prjmarily liable for paymentof the gift tax.However,if thedonorfails to paythetax,the govemmenthasa lien on thedonatedpropertyto theextentof thetaxdue, andalsohastherighttoholdthedoneeliablefor theunpaidgifttax, to the extentof the value of the propertyreceivedby the donee.

b.

for Paymentof estatetax. The executoris p marily responsible paymentofthe estatetax.Theexecutoris personallyliablefor payfrom liability,but she mentofthe taxuntil shehasbeendischarged estate. out ofthe decedent's is senerallventitledto reimbunement

B.

THE FEDERAL GIFT TAX 1.

Code Natureofa TaxableGift. Section2501(a)of theIntemalRevenue gift The courts of 1986levies a gift tax uponthe hansferof propertyby haveheld that a "gift" occurcwhenthe donorrelinquishescompletedominion andcontrol.In a revocabletrust,a taxabletransferdoesnot occur until thepowerofrevocationceases. a.

Discretionary power in trustee-Holtz's Bstate v. Commissioner' 38"t.C.31(1962). 1)

Facts. A trust instrumentof the decedent,I-€on Holtz, provided that the ffusteeshoulddistributethe net incometo the settlor as the ffusteethinks desirable,and upon the setdor's death,if his wife survivedhim, the incomeof the trust should be paid to her for life, and upon the deathof both the setdor andhis wife, thetrustwould teminate andthercmainingprincipal would be paid to the estateof the survivor. The settlor transfenedpropertyhaving a valueof $384,000into the trust andthereafterhetransfered anadditional$50,000to the trust The Commissioner(D) determinedthat as a result of these transfers,Holtz madetaxablegifts in the amountof $263,000' which weresubjectto the gift tax.The settlor'sestate(P) petitions the coult andcontendsthat the tansfers were not completedgifts andthat no part thereofwassubjectto the gift tax.

2)

powerin thetrusteeto lssue.Doestheplacingof discretionary invadecorpusmake the gift of corpusincompleteand hence not subjectto thegift tax?

3)

Held. Yes.Decisionfor P. a)

The placing of discretionarypower in the ftusteeto invadethe corpusmakesthe gift of the corpusincomplete The rule of thumb is generundercertaincircurnstances. ally that if the tustee is frce to exercisehis unfettercd discretionandthereis nothingto compelhim to invade that a mereexpectancy thecotpus.thenlhesettlorretains if the exergift However, incomplete. doesnot makethe ciseof thetrustee'sdiscretionis govemedby someexternal standardthat a court may apply in compelling compliancewith the conditionsof the tust agreement' andthe tustee'spowerto invadeis unlimited,thenthe gift of corpusis incomPlete

b)

Here, the trusteehad unfetteredpower to use all of the corpusfor thebenefitof the settlorif it thoughtthat it was

Holtz'sEstate v.Commissioner

Wills- 151

desirablefor thewelfarc,comiort, andneedsof the settlor It is reasonable to assume thatthetrusteewould.andcouldbe requiredto, invadethecorpusif this wasdesirablefor thewelfare,comfort,andneeds of thesettlorIt wasthuspossiblethat theentirecorpusmightbe distdbutedduringthesettlor'slifetime.Hence,the settlorhadnot abandoned sufficientdominion andcontol over the propedytransfered to makethe gift consummate. b.

Income tax basis,Under the federalincometan, a tax is imposedupon capital gain from the saleof property.The amountof the tax variesaccordingto the amountofgain, whichis thedifferencebetweenthe"basis"andthe sellingprice.

The Annual Exclusion.Undersection2503(b)of theCode,a taxpayermay excludefrom taxablegifts the first $10,000givento anypersonduringthe year.InCongress's 1997Amendment to theCode,theexclusionwasindexed for inflation.Theexclusionnow increases in $1.000increments asthecostof living rises.The Codealsoprovidesan unlimitedexclusionfor tuitionfees andmedicalexpenses paidon behalfof another. The annualexclusionis not applicable to gifts of futue intercsts.

Estateof Cristofaniv Commissioner

a.

Tfansfer for the benefitof minor, Section2503(c)of the Codeprovidesa way to avoid havinga gift to a minor classifiedasa futurc interest.An annualexclusionfor propertytransfenedto a tust for a minor is authorizedif all thepropertyandthe incometherefrcmmaybe expended for the benefitof the minor beforehe attainsage2 I , aslong asthepropertyandanyaccumulated incomewill be distributedto theminorat age 21 or, if thechilddiesbeforeattainingage21,to his estateor appointee.

b,

Gifts of a presentinterestin pmperty--Estrte of Cristofani v, Commissioner,97 T.C.74 (1991). l)

152- Wills

Facts. The decedent,Mada Cristofani (T), had two children (Cs) andfive grandchildren(Gs).T executedanirevocabletrust;Cs werc tustees.BothCsandGshadtheright underthetust terms,during a 15-daypedodfollowinga contribution,to withdrawan amount notto exceedthe,lmountspecifiedforthefederalgift taxexclusion undersection2503(b).Cs couldapplyasmuchof theprincipalas necessaryfor thef propersupport,health,maintenance,andeducation,takingintoaccountsevemlfactorsincludingT's desircto considerCstheprimarybeneficiariesandGsthesecondarybeneficiaries. T intendedto fund the trust with a one-third individual intercstin certainrealprcpefiyfor 1984,1985,and 1986.T did this for two years,tansfering an intercst valuedat $70,000eachyear.T died prior to makingthe 1986transferT did not reportthetlansfelson federalgift tax retums.T claimedsevenannualexclusionsunder

section2503(b)for 1984and 1985with respectto Cs andGs' Gs did not exercisetheir rights to withdnw underthetrust duringthose years.The IRS (D) allowedT's estate(P) to claim the exclusions with rcspectto Csbut disallowedit for Gsfor 1984and1985,determining that Gs' claimed exclusionswere not transfersof present P apPeals. interests.

3.

2)

Issue. Do transfeNof propertyto a tust' wherethe beneficiaries possesstheright to withdrawanamountnot in excessof the section constitutegifts 1503(b)exclusionwithin 15daysof suchtransfers, meaning of section property within the of a presentinterestin 2503(b)?

3)

Held. Yes.Decisionenteredfor P a)

is considered a fiustbeneficiary oftheexclusion, Forpurposes a doneeof a gift in tlust

b)

The exclusionappliesto presentinterestsin property'an unreor enjoyment strictedright to the immediateuse'possession, of propertyor incomefrom property.

c)

ln Cnonmevv. Contnksioner 397F.2d82 (9th Cir 1968),the courtfocusedon theminor beneficiaries'legalright to demand paymentftom thetrustee,not on thelikelihood that theywould actuallyrcceiveprcsentenjoymentof the property lf the beneficiarieshad a legal right to makea demanduponthe trustee that could not be resisted,the coult determinedthe beneficiaries re-ceiveda presentinterest.

d)

Revenuerulings arc not authorityfor this court but this ruling a prcsentlnshowstheIRS'Srecognitionof whatconstitutes terest.

e)

the wercallowedfor Cs,who possessed Here,theexclusions sameright of with&awalasGs. Gs'legal right to withdra\' specifiedamountsconstitutesa gift of a presentinterest.

0

It is not requircdthat trust beneficiarieshavea vestedprcsent interest or a vestedremainderintercst in the trust corpus or incomein orderto qualify for the exclusion.

Gifts Between Spousesand from One Spouseto a Third Person' Under the EconomicRecoveryTax Act of 1981,a husbandand wife may transfer their propertyto eachother without the paymentof any transfertaxes However,whenthe assetspassto a third person,a transfertax is imposed' Wills - 153

C, TIIE FEDERALESTATETAX l.

Introduction. The federalestateta,r taxesthe value of propertyowned or passingat deathandthevalueof propertygivenawayduringlife.

,,

The Gross Estrte: Property Passingby Will or Intestacy.

3.

a.

Section2033:Property ownedat death.Underthis section,the valueofthe grossestateincludesthevalueof propefiyto theextent of thedecedent's interestat thetime oi death;it includesall property ownedat deaththatpassesby will or intestacy.It doesnot reach a decedent's life estatecreatedby anotherperson.

b.

Section2034: Dower or curt€sy.Section2034of the Codeincludesin a decedent's grossestate"the valueofall propertyto the extentof anyinterestthereinof the survivingspouse,existingat the time of the decedent's deathasdoweror cufiesy,or by virtue of a statutecreatingan estatein lieu of dower or curtesy."This doesnot apply to communityproperty.In communityproperty states,on the deathof eitherspouseonly that spouse'shalf is includablein thegrossestate;theotherhalfbelongsto thesuryiving spouseandis not includable.Notethat the importanceof section 2034is grcatlyoffsetby the maritaldeduction,which operates to takeout ofthe taxableestatemostofthe propertyincludedtherein undersection2034.

The Gross Estste: Nonprobate Property. a.

154- Wills

Section2040:Joint tenancy, l)

Joint tenancy betw€en persons other than husband and wife, Undersection2040(a),the entirevalueof the propeny heldin j oint tenancy,exceptthatpart attdbutableto theamount of consideration fumishedby the otherioint tenantmustbe included.

2)

Joint tenancyand tenancyby the entirety betweenhu.sband and wife. Undersection2040(b),half rhe valueof property heldbythedecedent andthedecedent's spouseasjoint tenants with right of survivorshipor as tenantsby the entiretyis includableinthedecedent's g.ossestate.Itdoesnotmatte.which spousefumishedtheconsideration for theproperty'sacquisition. Sinceeachspouseis deemedto own half of the amount of thejoint tenancywith right of survivonhipor tenancyby theentirety,the decedent's spouse's half interestin theproperty includedin the grossestatewill receivea stepped-upbasis at death.

4.

b.

Section2039:Employeedeath benefits.Under section2039,the value of amountsreceivableby a beneficiaryunder an agrcementwhefe the ls duringlife, wasreceivingor hada rightto rcceivepayments decedent, includedin the decedent'sestate.Deathbenefitsarenot includableirr the estateif he is preventedfrom selectingthe beneficiarybedecedent's cause,for example,a statuterequircsthe benefitsto be payableto his spouseor children.If benefitsarepayableto a beneficiaryat a scheduled time or uponthe happeningof anevent,irresp€ctiveof whetherthe de{edent is living or dead,they are not taxable under section 2039, even thoughthe decedentmay be deadat the time scheduledfor payment'

c.

Section 2042: Life insurance. Under section2042,a decedent'sgrcss estateincludesthe value of any life inswanceproceedsif the decedent possessed at deathany of the incidentsof ownelshipunderthe policies werepayableto theinsured'sexecutorol estate. or if thepolicyproceeds

The GrossEstate: Lifetime Transfers with Rights Retein€d. a.

S€ction2036:Transfers with life estateor power of control retained' section2036(a)(l)appliesto propertytransfenedduringthedecedent's lifetime if the decedentretaineda life estatein the tansferred property The transferis subjectto estatetaxationbecausethe decedentretained the right to possessandenjoy the propertyor the right to incomeftom it until his death.Section2036(a)(2)exposesto estatetax any property transferredby the decedentwhereintherewasrctainedthe right, either alone or in conjunction with anotherperson,to confol the beneficial enjoymentof the propertyor incomethereftom The tax will attachdespitethe fact thatthe transferorcould not haveexercisedthe power soas to secufea personaleconomicbenefit. 1) No bona fide sale--Estateof Maxwell v. Commissioner'3 F.3d 591(2d Cir 1993). a)

Estateof Maxwellv. Commissioner

Facts. The decedent,Lydia Maxwell (T), conveyedher home to her son and his wife in 1984for $270,000.T leasedthe premisesfor five yearsat $ 1,800permonth.T forgave$20,000 of the puchase pdce as part of the annualgift tax exclusion and held a mortgagefor the remaining$250,000.The buyers paid expenses. The rent essentiallycanceledout the mortgage payments,andthe buyefi werenevercalleduponto pay mortgageprincipal.UponT's death,thebuyerssoldthe homefor $550.000.On T's estatetax retum, the estate(P) reported $210,000remainingon themortgagedebt.The Commissioner (D) found that the 1984transactionconstituteda transferwith a deficiencyto adjustfor the a retainedlife estateandassessed differcnce between the fair market value and the reported amount.P appealedto the tax court, which affirmed D. P appeals. Wills - 155

b)

Issues. (l) Did T retainpossession or enjoymentofthe Fopertyfollowingthe aansfer? (2) If shedid, wasthe transfera bonafide salefor an adequateandfull considerationin moneyor money,sworth?

c)

Held. (l) Yes.(2) No. Judgment affirmed. (l)

Section2036(a)rcquiresinclusionin thevalueofthe srossestateof all propeflyransferredunderwhich the decedenlritained a life estate, r'.e.,possession, enjoyment, or rightto incomefromtheprop_ erty.

(2) Possession or enjoymentis retainedwhenthereis an expressor implied understandingto that effect amongthe partiesto the trans_ ICI.

(3) The mortgagenotghadno valueif therewas,asthe tax court determined from the conductof the parties,no intention that it would everbe paid. (4) The forgivenessof the initial $20,000stongly suggeststhe exist_ enceof an undentandingbetweenT and the buyersthat T would forgive 920,000eachyearuntil her deathandthe balancewould be foryivenby T's will.

OldColony TrustCo.v UnitedStates

156- Wills

Requir€mentof an ascertainablestandard-Old ColonyTfust Co. y. United States,423F.2d601(lst Cir l9t0). a)

Facts. The decedenthadestablisheda trust for the benefitof his sonand namedhimself as a ftustee.The fust pe.mitted the ftusteesto incrcase the percentageof incomepayableto the sonbeyondthe prescribedgoqo whenin theiropinionsuchincreasewasneededin caseof sickness or wasdesirable in viewofchangedcircumstances. In addition,thetrustees werc giventhe discrctionto ceasepayingincometo the son.Another article gavebroad administrativeand managementpowe$ to the trust_ e€s.A deficiencywasassessed againsttheestate.The executor(p) paid the tax andsuedfor its recoveryin district court.The court ruled foi the govemment(D). Old ColonyTrustCompanyappeals.

b)

Issue. If thereis no ascertainablestandardwith which a settlor_tustee mustcomplyin his distributionof tlust income,will the settlor'sestate be taxedaccordingto the valueof the principal that the settlor contrib_ uted?

c)

Held. Yes.Judgmentaffirmed.

(l)

If there is an ascertainablestandard,the trusteecan be compelledtofollow it. If thercis not,eventhoughheis a hduciary,it is not unreasonableto say that his retention of an unmeaswablefrcedom of choice is equivalentto retainingsomeof the incidentsof ownership.Hence,if standard,the settlor-tustee'sesthereis an ascertainable if there is not,it is taxed tateis not taxed,but

(2) Here, the settlor retainedthe unrestrictedpower to distribut€ the trust income Accordingly, the tax was propedy assessed. b.

S€ction 2038: Revocabletransfers. Under section2038, the value of the grossestateincludesthe valueof all property"of which the decedent has at any time madea ransfer . . . by trust or otherwise,where the enjoymentthereofwassubject. . . to anychangethroughthe [decedent's] . " Unless ofa power. . . to alter,amend,revokeor terminate. exercise power, subject to such a transfer the decedenthastheright to exercisethe Thisis trueevenifthe powerisvested poweris nottaxablein herestate. in onewho lacksa substantialadverseinterestto the decedent,suchasa kusteeor evena subordinateparty (e.9.,transferor'sspouse)

c.

Section 2037: Iiansfers with reversionary interest retained' Under section2037,the decedent'sgrcssestateincludesthe valueof Foperty transfenedduring his life if (i) possessioncan only be obtainedby surviving the decedent,(ii) the decedentreserveda reversionaryinterestin theprop€rty,and(iii) that rcvercionaryinterestwasworth morethan57, of the valueof the propertyirnmediatelybeforethe decedentdied.

5. The Gross Estater Tfansfers Within Thr€e Yearsof Death. Under section 2035,certainint€r vivos transfersmadewithin threeyearsprior to deathare grossestate. bfoughtwithin thedecedent's

6.

The Grcss Estate: Powers of Appointment Given Dec€dentby Anoth€r. Undersection2041,the grossestateincludesthe valueof propertyoverwhich the decedentheld a generalpower of appointmentat the time of her death. The owner of a generalpower of appointmentis consideredthe owner of the propertysubjectto the power Whenthe generalpower of appointmentis exercisedor released,the doneehasmadea taxablegift lf the decedentmerely possessed a genelalpower of appointmentat the time of her death,the property is taxablewhetheror not thepowerwasexercised.Propertysubjectsolely to a specialpoweris not taxablein thedonee'sestateundersection2(Xl. a.

Comfort limited by ascertainablestandard"Estlte of Viss€ringv. 990F.2d578(l0th Cir 1993). Commissioner, 1)

Estateof Visseringv. Commissioner

(T's),mothercreateda NormanVissering's Facts.Thedecedent's, tust controlledby Floridalaw.T anda bankservedasco-tustees. W ills' 157

T receivedall the incomefrom the trust after his mother's deathandon T's deaththe assetswereto be dividedin equalpartsfor T's two children.T developed Alzheimer'sdiseaseandentereda nulsinshomein 1984butneverresigned asrustee.Ar T s death.hepossessed ; po\aerof appointmentthat permittedhim to benefit himself, his estate.his creditols or theestate'screditorcfor his 'tontinuedcomfort."The tax couft heldthatT heldat his deatha generalpowerdefinedby I.R.C.section 2041,requiringthe trustassetsto be includedin T,s glossestate.T's estateappeals.

Estateof Kurz v. Commissioner

b.

2)

Issue.Did T holdpowerspermittinghim to invadethe principalof the trustfor hisown benefil.unrestrained by anascenarnable srandard relating to health,education, suppofi,or maintenance?

3)

Held.No. Judgment reversedandremanded. a)

Statelaw determineslegal intercstsandrights createdby the trust instrument, butfederallaw determines taxconsequences.

b)

Floridalaw wouldholdthata trustdocument permittinginvasionof principalfor "comfort,"withoutqualifyinglanguage, crcatesa gen_ eral powerof appointrnent.

c)

However,thereis modifyinglanguagein the tust here_.,to the extentrequiredfor continued comfort,'-thatwe believewouldlead Floridato holddoesnotpemit anunlimitedpowerofinvasion.

d)

Examplesin theTreasuryRegulation,suchas,,supportin reason_ ablecomfort," "maintenance in healthandreasonable comfort," and "supportin hisaccustomed mannerof living,,'deemedto belimited by an ascertainablestandardarc no differcnt from the languagein T's trustprovision.

e)

IfT soughtto usethe tlustassetsto significantlyincreasehis stan_ dardofliving, hisco-trustee wouldhavebeenobligatedto withhold consentandtheremainderbeneficiaries couldhaveDetitioned the counto disallowsuchexpendilures asinconsistent with theserrlor.s intent.

Sequentialtrusts-Estateof Kurz v. Commissioner, 6g R3d lO27(7thCir 1995). 1) Facts.Between1971(theyearofher husband's dearh)and 19g6.Erhel KuIz was the incomebeneficiaryof two trusts.From the marital trust, shewasentitledtoasmuchprincipalasshewantedby wdttenrequestto theruslees.Fromthefamily trusl.shewasenlilledto 5aoof theprinci_ palin anyyearonlyifthe marilallrustwasexhausted. UponKurz.ideaLh in 1986.themaritaltrustwasworth$3.5mi ion andthefamilvrrusr

158- Wills

$3.4million. The estatetax rcturnincludedthe full valueof the marital trust but noneof the valueof the family trust The IRS astheassesssessed additionalestatetaxes.Theestate(P)challenged general power of Kurz held a held that ment. The tax court appointmentover570of thefamily trustandanother$170,000should P apbe includedin herestateunder26 U S.C.section2041(aX2). peals.

,|

2)

Issue. Does a sequenceof withdrawal rights prcvent a power of appointmentfrombeing exercisable?

3)

Held. No. Judgmentaffirmed. a)

Section2041 is designedto include in the taxableestateall possessed or controlledby thedecedent. assets

b)

If only a condition the decedentcould havecontrolledhad to be satisfiedto receivethe moneyfrom the family trust, then poweris exercisable. thedecedent's

c)

section P eroneouslyrelieson thercgulationsaccomPanying "[A] powerwhichby 2041,andin particular,onestatement: its terms is exercisableonly upon the occurence during the whichdid not lifetimeof aneventor a contingency decedent's in fact takeplaceor occurdudngsuchtime is not a powerin death" P's claim that existence on thedateof thedecedent's thercquired"contingency"did not occurherefails. The examplesof contingenciesfollowing this sentence(if a decedent reacheda certainage,if a decedentsurvivedanotherpeNon,or areoutsideof the decedent's if shedied without descendants) control.Expedientlyarrangingtrustsin a sequenceandalranging a sequenceof withdrawal doesnot createa contingency and doesnot removethe beneficiary'sdominion and control over all funds that canbe withdnwn at any given moment.

The Marital Deduction. a,

maytransferbetweenthem2056,spouses Intmduction. Undersection selvesunlimited amountsof propefiy (exceptterminableinterests)without incurdng any gift or estatetaxes

b.

Interests that qualify for th€ d€duction. For an interestto qualify asa marital deduction,the following requirementsmust be met: (i) The decedent wasa citizenof theUnitedStates; (ii) Thedecedent wassurvivedby his spouse;

Wills 159

(iii) Thevalueof theinterestdeducted is includablein thedecedent's grossestate; (iv) Theintercstpasses to thesurvivingspouse; and (v) The intercstis a deductible interest(i.e.,theinterestpassingto the surviving spouseis subjectto taxationin her estateto theextentnot consumed or disposedof duringherlifetime). Estateof Rappv. Commissioner

1) Failure to qualify for the deduction--Estateof Rapp v. Commissioner, t40 F.3dt2tt (9thcir 1998). a)

b)

160- Wills

Facts.Whenthe testatorBert Rapp(T), died,survivedby a wife and two children,hewilledall ofhis household andpersonalpropertyto his wife and one-halfof the communitypropertyto a tlust for his wife for her life. T's children,asco-trustees, were givenabsolutediscretionto disribute ftom the principal and income such amountsas they determinednecessary for theirmother'shealth,education, andsupport. Upon the wife's death,theremainingtrust assets,if any,were to be distributed amongT'schildrenandtheirissue. UponT'sdeath,Mrs.Rappaskedthe probat€courtto modify thewill sotheaboveprovisionwould qualify for the maritaldeduction.Sheallegedit wasT,s intentionthat the income from the trust wouldbe paidto l\fts. Rappat leastannually,or duringher lifetime. Califomia law allows the court to modify or terminatea trust uponthe consentof all partiesor dueto changedcircumstances,After a hearingof which the IRS did not receivenotice and during which no witnesses werc called,the courtgrantedMrs. Rapp'spetitionandentered an order changingthe languageof the trust so as to authorizethe executorto treat the fust as a qualified terminable interest property ("QTIP") trust.The orderbecamefinal andunappealable on April 30, 1989.After the order was entercd,but beforc it was final. the executor (P)filed with theIRS @) an applicationfor anextensionof timeto file the estatetax rctum.P indicatedon the applicationthathe intendedto make a QTIP election and he submittedan estimatedDavmentof $ 156.204. Theretumwasfiled in May.afterrheorderbecamefinal,and P claimedthe QTIPdeductionfor $3,683,899, asmuchof rheestateas wouldbring the taxesto the amounthe hadpreviouslypaid.D senta deficiencynotice,claimingP failedto providefull subsranriation for the deductionandit wouldbe allowedonly for the valueof the household and personalgoodsthat had passeddirectly to Mrs. Rapp, i.e., P appealed. $435,262.50. ThetaxcourtclaimedthattheCalifomiacourt's decisionhadnot beenaffirmedby theCalifomia SupremeCourt andwas not binding, that the probatecoufi haderred,andthat the trust wasnot a QTIPtrust.P appeals. Issues.

(1) Doesthe trustcreatedby T's will constitutea QTIP trust,which qualifiesfor themaritaltax deduction? (2) Is the tax court boundby theCalifomia probatecourt'srefomation of T's will? c)

Held. (l) No. (2) No. Judgment affirmed. (l) IntemalRe'renue v. EstateofBosch,387U.S.456(1967),is controlling with regardto the effect of the statecout's determination. In reviewingthe legislativehistoryof the marital deductionstatute, the Bosct court determinedthat Congressintendedthat "proper regard" be givena statecourt'sinterpretationaftera "bonafide adversaryproceeding," but notfinality.Congress did not intendthestate coudsto detemine fedemllaw. (2) While the probatecourt's orderwas final and cannotbe overuled by the califomia SupremeCowt, this hasno effect on the fact that the federalcourt is not boundby statecourt prcceedingsfor determining federalestatetaxes.The statecowt refomation is still in effect for Mrs. Rapp,but shewill not receiveQTIP benefits.

R€formation allowed--Pondv. Pond.424 Mass.894.678 N, E.2d l32l (1997\. a)

Pondv. Pond

Facts,In 1991,The settlor,SidneyPond(T), executedhis will leaving all of his personalproperty to his wife and the residueto a revocable trust, naming himself and his wife truste€s,executedon the sameday. All of their assetsexceptthe family homewere transfered to the trust. The trust providedthat incomeand suchprincipal asnecessarybe paid toT andhiswife duringtheirlives,butmadenoprovisionfor anyt)?e of paymentto his wife ifshe survivedhim.Thetust Fovidedthatit would terminateon the deathof both tustees andits assetswerc to be divided theirchildren. Thewill providedthatthewife hadabsoequallybetween lute discretior whetheror not to electto qualify undersection2056(b)(7) all or a portionof thetrustfor the federalandanystatemarital deduction. However,section2056(b)(7)requiresincometo be paidto the surviving spousefor life in orderto qualify for the marital deduction.without this deduction,the estatewould be liable for $70,000in taxes.Trustee(P), allegesthat a scrivener'seror is apparcntwhenthe estateplan is viewed asa wholeandthatT intendedto providefor his wife. P asksthe court to insertinto the hust a provisiongrantingthewife fust incomeanddiscretionary principal paymentsfor her lifetime. P futher requeststhat the cout incorporateinto the tlust languagethat would corect the ambiguity in the terminationprovisions.All beneficiaries(Ds) assentto the reouestedrcformation.

Wills - 161

b)

Issue.Shouldthe trustbercformedto give effect to T's intent?

c)

Held.Yes.Soordered. (1) Clearanddecisiveprcof of mistakeis requiredto refom a aust instrument to embodya settlor'sintent. (2) Both the will and h.trstwere executedon the sameday; the trust was clearly intendedto prcvide for the marital deduction.It wasessentialto the estateplan.All of T's assetswere fansl-erredto it. The income and orincioal wereavailable lo T andhiswifeduringlheirliue".Clearly. T intendedthe sameto continueafterhis death.Only a scrivener's elrorcouldhavecausedthe requisiteclauseto be omitted.Thereis no indicationthatT intendedto depdvehis wife of theaust assetsduringher lifetime.

c.

162- Wills

Tax planning. Eachspouseis entitledto oneexemptionfrom estateand gift tax, in the fo.m of a unifiedcredir.By taking advantage of borh spouses' exemptions, thecombinedcreditcanbe passedto thecouple,s childrenwithoutincur.ingestatetaxes.Becauseofthe gnduatedtaxmtes, the total estatetax payableon the deathof a husbandand wife will be lowerif thetwo estates areequal.Equalization is notnecessarily thebest solutionin all cases.Fomula clausesremainusefulin producingpreciselytheright amountto putin a creditsheltertust or a maritaldeduction tust. A credit sheltertrust is a tlust designedto hold an amount equal to the exemptionof the first spouseto die (i.e., the amountnot taxableon his death)in sucha mannerasnot to be taxableon the surviving spouse's death.

8.

The Charitable Deduction, Under section2055 of the Code,unlimited deductionsmay be taken for ftansfels for public, charitable,or religious purposes.

9.

Exe€utor's Elections: Post.DeathTax Planning. a.

Valuation of estateassets.For estatetax putposes,assetsar€ valuedat their fair marketvalueasof the dateof death,or asof the altematevaluation date,which is the date six months after death(exceDtfor assets distributed.sold.exchanged. or othenaisedisposedof duringthe six. monthperiod,for whichit is thedateof distributionor sale).

b.

Sections2053and 2054 deductioDs.Section2053 allows a deduction for funeralexpenses,administrationexpenses,claims againstthe estate, andunpaidmortgages. Section2054allowsa deducdonfor lossesincurredduringthe settlement of estates arisingfrom fires,storms,shipwrecks.or othercasualties. or from thefl,whensuchlossesare not compensated for by inswanceor otherwise.

D. THE GENERATION.SKIPPING TAX The Tax ReformAct of 1986prcventswealthyperuonsfrom creatinginter vivos or testamentarytrustsfor the purposeof avoiding estateor gift taxes. transfeftax is thata transfer Theunderlyingprincipleof thegeneration-skipping andcannotbeavoidedbygivingthe taxshouldbeimposedoncea generation generation next only a life estateor nothing at all. If a trust createsa generation-skippingtransfer,the tax is due when the transferoccus. The tansfers Thetypeof transarctaxedat a flat rate,whichis thehighestrateapplicable. fer determines theamounttaxed andwhois liableforpayment.Undersection 2631(a),an exemptionof up to $l million may be takenby eachindividual makinggefleration-skippingtransfers.A marriedcouplemay give awayup to transfeNwithouthavingto paya tax. $2 million in generation-skipping

E. STATE WEALTH TRANSFER TAXFS All statesexceptNevadaimposedeathtaxes,butlessthan12imposea gift tax on lifetimetransfers.

Wills- 161

TABLEOF CASES (Page numbers of briefedcases in bold) Album,Estateof - 37 AIIenv. TalJey- 64 AmericanSecudty& Trust Co. v. Clamer127 Anderson,ln/e Estateof - 132 Azcuncev. EstateofAzcunce- 81 Ba k e rv N e l s o n - 7 4 Bealsv. StateStleetBank& TrustCo. - 108 Blanchette v. Blanchette - 49 Brainardv. Commissioner- 89 Brown,1zre Estateof - 102 Buck,1, re Estateof - 137 CarlJ. HerzogFoundation,Inc. v. Universityof Bridgeport- 138 Carterv FirstUnitedMethodistChurch ofAlbany- 36 Clark v. Campbell- 91 Clark v Greenhalge- 40 Clobberie'sCase- 116 Clymerv. Mayo - 54 Collins,Estateof - 148 Connecticut JuniorRepublicv. SharonHospital - 63 Cook v. EquitableLife AssuranceSociety47 Coope4In le -'74 Cooper,1r,re Estateof - 74 Crisofani,Estateof v Corrmissioner - 152 Cross,1rl/e Estateof - 73 Crummeyv Commissioner - 153 Cruzanv. Director, Missouri Departinentof Health- 58 Dawsonv. Yucus- 67 Dennisv. RhodeIslandHospitalTrustCo. 144 DewirevHaveles-117 Dickersonv Union NationalBank of Little Rock- 124 DukeofNorfolk'sCase- 123

Ericksonv. Erickson- 62 Espinosa v Sparber, Shevin,Shapo,Rosen& Heilbronner- 82 Estate of _ (Je" name of party) Farkasv. Williams - 50 First NationalBank of Bar Harborv Anthony - lt4 Fleming v. Mordson - 60 Fletcherv. Fletcher- 146 Franklinv.AnnaNationalBankofAnna - 48 Fnnzenv. NorwestBankColorado- 57 Gerbade,1n/e Estateof - 78 Gilbert,h rc Estateof - 113 Cttoffman,In re - 26 Gustafson v. Svenson- 60 Hall v. Vallandingham- 12 HarrisonvBird-34 Hartmanv. Hartle - 141 Hayrner,In re - ll The HebrcwUniversityAssociationv Nye (HebrewUniversityAssociationt1 - 86,87 The Hebrew Unive$ity Association v. Nye (HebrewUniyersityAssociationII1- 86,87 Hechtv. SuperiorCourt- 14 Hicksv. Miranda- 74 HieblevHieble-93 Hillowitz,Estateof - 46 Hodelvlr ving- 1 Hofingv. Willis - 66 Holtz'sEstatev. Commissioner - 151 Hontgm n, ln rc - 20 Hotz v. Minyard - 8 IntemalRevenuev. EstateofBosch- 16l IrvingTrustCo. v. Day - 1 Irwin UnionBank& TrustCo. v. Long - 104 Jackson v. Schultz- 65 Janusv. Tarasewicz - 10 Jimenezv. Lee- 84

Wills- 165

Johnson,lnre Estateof - 32 Johnsonv. Gifiman - 44 Johnson v. Johnson- 4l Kaufmann'sWill, 1r /e - 23 Kimmel'sEstate- 32 Kurz,Estateof v. Commissioner - 158 Lathamv. FatherDiYine- 24 Laura,1'' re Estateof - 82 Lipp€rv. Weslow- 21 Ioring v. Marshall- 110 Lux v Lux - 121 Mahoney,/n re Estateof - 16 Mahoneyv. Grainger- 59 Marsmanv. Nasca- 95 Maxwell,Estateof v. Commissioner - 155 Minary v. CitizensFidelity Bank & Trust Co. - 119 Moses,Ir /e Will of - 22 Moss,In re - CI NationalAcademyof Sciencesv Cambridge Trust Co. - 1.47 Neher,1zze- 136 Old ColonyTrustCo.v. UnitedStates- 156 Olliffe v. Wells - 94 O'Neal v, Wilkes - 13 O'Shaughnessy, United Statesv. - 99 Parsons,Estateof - 27 Pavlinko'sEstate,1nre - 29 Pilafas,1, re EstateandTrust of - 52 Pondv. Pond- 161 Ranney,In re Will of - 30 Rapp,Estateof v. Commissioner- 160 Reyn'olds,In re - 17 Rothko,1z re - 141 Russell,Estateof - 60 Scottv BankOneTrustCo. - 98 Searight'sEstate,1r,re - 92

166- Wills

SecondNationalBankofNew Havenv Harns Trust & SavingsBank - 130 SecurityTrustCo. v Irvine - 115 Seidelv. Wemer- 106 Shannon,Estateof 80 Shapirav. UnionNationalBank- 3 Shelleyv Shelley- 97, l2l, 128 Shenandoah ValleyNationalBankv.Taylor135 Shrimp v Huff - 44 ShrinersHospitalsfor CrippledChildrcnv. cardiner - 143 Simpsonv. Calivas, T Sp'eelmanv. Pascal- 90 StateStreetBank & Trust Co. v Reiser, 53 Sremerv Nelson- 105 Strittmater,h rc - 19 Stuchell,lnre Trustof- 101 Sullivan v. Burkin - 75 Thompsonv. Royall - 35 Troy v. Hart - 17 United Statesv. _ (seeopposingparty) Unthankv. Rippstein- 87 Via v. Putnam- 43 Vissering,Estateof v. Commissioner - 157 Wardv Vander Loeff - 126 Wassermanv. Cohen- 69 WellsFaryoBank v Title lnsurance& Trust Co. - l2O Wilhoit v. PeoplesLife Insurance Co.- 45 Wold, 1are Trust of - 132 Woodworth.Estateof - 119