Estates and Trusts Outline

ESTATES AND TRUSTS OUTLINE

Prof. Zamperini, Spring 2003

Table of Contents

INTESTACY TERMS 4

WILL (TESTATE) TERMS 4

TRUST TERMS 5

PROBATE 6

I. Probate Property = Property decedent owns at the time of death. 6

II. Disadvantages to Probate: 6

III. Ways to Avoid Probate: 6

INTESTACY 6

I. INTESTACY IN GENERAL 6

A. Why Intestacy? 6

B. Intestacy Common Traits (see p. 67 for consanguinity chart) 6

II. INTESTATE SUCCESSION 6

A. Surviving Spouse’s Share -- Basic Statutory Schemes 6

1. California (Community Property State) -- §6400-6402 6

2. Massachusetts (No CP but same concept as CA) 7

3. UPC § 2-101 8

B. Kinds of Property Involved: 8

C. Lineal Descendants (Issue): 8

1. § 240 – Modern Per Stirpes (Division into Equal Shares by Right of Representation) 8

2. § 246 -- Strict Per Stirpes Distribution 8

3. §247 – Per Capita at Each Generation 8

D. Ancestors and Collaterals 9

E. The “Modern Family” 9

1. Halfbloods 9

2. Unborn Relatives of Decedent 10

3. Basic Parent/Child Relationship 10

4. Establishing Natural Parent Relationship: §6453 10

5. Non-Marital (Illegitimate) Children: §6452. . 11

6. Adoption 11

7. Foster or stepparent: §6454. 12

F. SPECIAL SITUATIONS 12

1. Simultaneous death 12

2. Advancement 12

3. Guardianship 13

4. Homicide 13

5. Disclaimer 14

III. TESTAMENTARY LIMITATIONS 14

A. Protection of Spouse 14

1. Non-Recognition of Dower/Curtesy, § 6412 14

2. Modern Elective Share Statutes 14

3. Waiver of Rights (Knowing) 14

4. Homestead and Family Allowance 14

5. Premarital Wills and Omitted Spouses 15

6. Community Property 15

B. Protection of Kids/Family 16

1. Pretermitted Heirs (Kids Passed Over in Will) 16

IV. CREATION OF A WILL 16

A. Testamentary capacity 16

B. Formalities 16

C. Wills not in compliance with formalities 17

1. Holographic Wills 17

2. Form Wills (California Statutory Will) 17

D. Proof of Will 18

E. Revocation 19

2. Lost wills 19

F. Revival 20

V. WILL CONSTRUCTION 20

A. Integration: 20

B. Incorporation by reference: 20

C. Acts of independent significance:

D. Codicils 20

E. Extrinsic evidence:

F. Meaning of specific terms 21

G. Class gifts 22

VI. LAPSED BEQUESTS 22

C. Anti-lapse statute 22

VII. CHANGES IN PROPERTY AFTER EXECUTION OF WILL 22

A. Classification of Types of Gifts (Transfers) 22

B. Ademption by extinction:

C. Ademption by satisfaction 23

D. Abatement:

E. Exoneration 23

VIII. PROTECTION OF SPOUSE AND CHILDREN 24

A. Spouse:

B. Children 24

3. Pretermitted heir

IX. CONTESTING THE WILL 24

B. Major Grounds for Contesting: (anyone who is an interested party may contest) 25

C. Commencement of Will Contest Proceedings 25

D. Undue influence 25

E. Fraud 26

F. No Contest Clauses 26

X. WILL CONTRACTS & SUBSTITUTES 27

A. Will contracts 27

B. Will substitutes 28

XI. WILL ADMINISTRATION 28

TRUSTS 28

II. CREATION OF TRUSTS 29

III. FORMAL REQUIREMENTS 29

A. Private express trust 29

B. Charitable trust 30

C. Resulting trust 30

D. Constructive trust:

IV. POWERS OF TRUSTEE 31

V. POUR-OVER TRUSTS 32

VI. SPENDTHRIFT, SUPPORT & DISCRETIONARY TRUSTS 32

A. Spendthrift trusts 32

B. Support trusts 33

C. Discretionary trusts 33

VII. MODIFICATION & TERMINATION 33

A. Termination: 34

B. Presumption of revocability: 34

C. Consent 34

1. Beneficiaries 34

2. Settlor and beneficiaries:

3. Guardian ad litem: 35

D. Trust with uneconomically low principal, Trust with Changed Circumstances:. 35

E. Combination of Trusts: 35

F. Division of Trusts:

VIII. POWERS OF APPOINTMENT 35

C. Taxation issues 35

IX. FUTURE INTERESTS 36

X. RULE AGAINST PERPETUITIES 36

B. Class gifts 36

D. Reformation: 37

E. Unborn widow N/A:

F. Posthumous Births: 37

G. Effect of invalid interest: 37

H. Charitable trusts:. 37

XI. ADMINISTRATION OF TRUSTS 37

POLICY 38

XII. Goals of Intestacy 38

XIII. Reasons for Creating Trusts 38

XIV. California Statutory Will – Advantages/ Disadvantages 39

INDEX 41

INTESTACY TERMS

administrator: Someone doing the filing if you have no will (cf, executor)

affinity: A relationship by marriage (e.g., in-laws)

ascendants: Persons related to the decedent in an ascending lineal line (e.g., parents, grandparents).

collaterals: Persons related to the decedent but not in a lineal line (e.g., brothers, sisters, nieces).

consanguinity: A biological or blood relationship. Legislative preference is for consanguinity.

descendants: Persons related to the decedent in a descending lineal line (e.g., kids and grandkids). Legislative preference is given to descendants over ascendants

descent: when someone dies, realty passes to heirs

distribution: How you distribute personal property

distributees: Those who receive personal property from distribution

hotchpot: All of the money distributed to heirs as advancements plus decedent’s net estate.

intestacy: Passage of property when the decedent dies w/o a valid will.

personal rep.: Someone in charge of administering the estate of decedent. They gather assets, pay debts, and administer whatever is left.

· executor – if you have a will

· administrator – if you have no will

probate: the process of moving goods from decedent to the beneficiary

WILL (TESTATE) TERMS

beneficiary: Generic term for person who receives property under a will.

bequest: a gift of personal property in a will

codicil: A written amendment to an existing will

devise: A gift of real property in a will

devisee: Person who receives the devise

executor: Someone who does the filing if you have a will (cf, administrator)

legacy: a gift of money in a will.

legatee: Person receiving a legacy

probate: to prove a document or declaration to be the decedent’s valid will.

testator: Person that dies with a valid will.

will: A written document or oral declaration directing who will own the decedent’s property upon the decedent’s death.

TRUST TERMS

beneficiary: person who receives the equitable title to trust property and the right to benefit from that property according to the settlor’s instructions.

income: the profits or other earnings made by property after it’s conveyed in trust form.

principal: The property conveyed in trust form. (also referred to as res, corpus, estate).

settlor: the person who creates a trust by making the property transfer which divides title and imposes duties.

trust: A property conveyance whereby the owner divides title to the property into legal and equitable interests and imposes fiduciary duties on the holder of the legal title to deal with the property for the benefit of the holder of the equitable title.

trustee: person who holds legal title to the property and has the fiduciary duty to manage the property according to the settlor’s instructions.

PROBATE

I. Probate Property = Property decedent owns at the time of death.

II. Disadvantages to Probate:

A. Delay in getting stuff from decedent to beneficiaries

B. Public disclosure

C. Expense (lawyers)

III. Ways to Avoid Probate:

A. Gift/Sale (either outright or conditional...but see problem of Klimt painting case)

B. Jt. Tenancy

C. “POD” – pay on death accounts.

D. Life insurance (not probate property)

E. Inter Vivos Trusts

INTESTACY

I. INTESTACY IN GENERAL

A. Why Intestacy?

1. No Will

2. Will Fails

3. If will says to go w/intestacy statute

B. Intestacy Common Traits (see p. 67 for consanguinity chart)

1. Provision for Surviving Spouse (legally married)

2. Descendants (issue) – in general, presence of descendants blocks anyone else.

3. Ascendants

4. Collaterals (people who share ascendants w/you, such as siblings)

5. Escheat

II. INTESTATE SUCCESSION

A. Surviving Spouse’s Share -- Basic Statutory Schemes

1. California (Community Property State) -- §6400-6402

Basics: The surviving spouse receives the 1/2 of the community and quasi-community property which belongs to the decedent, and some fraction of the separate property. § 6401.

· Note: Community Property doesn’t apply to the “Domestic Partner”

(a) §6401(a): Spouse gets ½ of Community Property of Decedent (plus their ½ of the CP).

(b) §6401(b): Spouse gets ½ of Quasi-CP (plus their ½ of quasi-CP)

If: / Surviving Spouse (or Surviving Domestic Partner under § 37(b)) Gets:
1.
no issue
no parent
no sibs
no sib issue / 100% of SP § 6401(c)(1)
2.
one kid OR
grandkids from dead kid OR
no kids but parent(s)
no parent(s) but parent issue / 1/2 of SP to Surviving Spouse § 6401(c)(2)
3.
More than 1 Kid OR
1 Kid + grandkids from dead kid OR
grandkids from 2 or more dead kids / 1/3 of SP to Surviving Spouse § 6401(c)(3)

(d) Intestate Estate NOT passing to Surviving Spouse (or the entire estate if no surviving spouse) goes as follows:

If Decedent Has: / Then:
Living Issue / To Issue in equal shares under §240
No Living Issue / To Decedent’s Parent(s)
No Living Issue or Parent / To Issue of Decedent’s Parents (in equal shares under §240)

2. Massachusetts (No CP but same concept as CA)

If X Leaves: / Kids / Kin / Size of Estate / SS Gets:
1. / No / Yes / <$200,000 / 100%
2. / No / Yes / >$200,000 / $200K + ½ of Real Personal Property (1/2 of estate)
3. / Yes / N/A / N/A / ½ RPP
4. / No / No / N/A / 100%

3. UPC § 2-101

If: / Surviving Spouse Gets:
1.
· No (X)-kids AND no parents
OR
· (X)-kids are SS’s kids AND SS has no non-(X) kids / 100%
2.
· No (X)-kids, but parent(s) / $200K + 75%
3.
· All (X)-kids are SS’s kids AND SS has non-(X) kids / $150K + 50%
4.
· 1 or more (X)-kids are NOT SS’s kids (X’s kids from a former marriage) / $100K + 50%

B. Kinds of Property Involved:

1. Community property is property earned or accumulated by either spouse during the marriage. See § 28.

2. Quasi-community property is property acquired in a non-community property state that would have been community property had the couple resided in California at the time. See § 66.

3. Separate property is property that a spouse receives by gift or inheritance during the marriage, or that either spouse owned before marriage.

4. Most courts presume that property acquired during marriage is community property.

C. Lineal Descendants (Issue):

1. § 240 – Modern Per Stirpes (Division into Equal Shares by Right of Representation)

· Divided into equal shares starting at the nearest generation of issue then living.

· each living member of the nearest generation gets a share

· the living issue of each deceased member of the generation divides the deceased person’s share

2. § 246 -- Strict Per Stirpes Distribution

· Divides X’s estate at the level of X’s kids (whether or not living at the time of X’s death)

3. §247 – Per Capita at Each Generation

· (share and share alike). Achieves equality among like-related persons. Begins w/per capita w/representation, but once the division at the first generation is done the shares are divided equally among the next generation.

D. Ancestors and Collaterals

1. If no issue, look for collaterals and ascendants (see p.67 for Table of Consanguinity)

2. §6402 -- Intestate Estate NOT passing to Surviving Spouse (or the entire estate if no surviving spouse) goes as follows:

If Decedent Has: / Then:
6402(a): Living Issue / To Issue in equal shares under §240
6402(b): No Living Issue / To Decedent’s Parent(s)
6402(c): No Living Issue or Parent / To Issue of Decedent’s Parents (in equal shares under §240)
6402(d): No surviving issue, parent or issue of parent / To Grandparent(s) equally, or to the issue of grandparent(s) if they’re dead (under §240)
6402(e): No living issue, parent or issue of parent, grandparent or issue of grandparent / To Issue of a predeceased spouse (under §240)
6402(f): No surviving issue, parent or issue of parent, grandparent or issue of grandparent, or issue of predeceased spouse / To the Next of Kin in equal degree, but where there are two or more collaterals in equal degree who claim through different ancestors, the preference is to those of the nearest ancestor
6402(g): No surviving next of kin and no surviving issue of predeceased spouse of decedent / To parents of predeceased spouse or issue of such parents if the parents are dead (under §240)

E. The “Modern Family”

1. Halfbloods

(a) Definition: When two people share one parent, but not the other.

(b) Treatment Under the Law Differs by State

(1) California -- §6406: Halfbloods and wholebloods are treated the same (half=whole)

(2) “Ancestral Property” – some states say that if property comes through an ancestor, that property would only go to wholeblood.

(3) Some states say that halfbloods get half of what a wholeblood gets

(4) Some states (MS) allow wholebloods to take to the exclusion of halfbloods

2. Unborn Relatives of Decedent

(a) §6407 – relatives conceived before decedent’s death but born afterward inherit as if they were born during decedent’s lifetime.

3. Basic Parent/Child Relationship

(a) How to get a Parent/Child Relationship: The Parent/Child Rltshp exists in two situations:

(1) Between a child and the NATURAL parents. §6450.

(2) Between a child and the ADOPTING parents. §6450(b).

(b) What the Parent/Child Relationship does: The Parent/Child Rltshp allows one (parent or child) to inherit:

· BY

· FROM

· THROUGH the other (parent or child)

4. Establishing Natural Parent Relationship: §6453

(a) General Rule: Child usually has a simple time knowing who Naturalmom is, but may have to await result of paternity action to find out who Naturaldad is. Once that is established, then have a parent/child relationship so that the parties can inherit BY, FROM, THROUGH each other. No req’t that naturalmom and dad be married.

(b) A “natural parent” is:

(1) The Naturalmom is one who gives birth to the Child.

(2) The Naturaldad is presumed to be the one who:

a. Receives the child into his home and openly holds out the child as his natural child.

b. Was married to Naturalmom and Child born during their marriage

c. Is found by the court to be so in paternity action but in order to have the Parent/Child Relationship for inheritance, one of the following must also exist: