Wills, Trusts and Estates Including Taxation and Future Interests
Authors:
McGovern, William M. / Kurtz, Sheldon F. / English, David M. / Gallanis, Thomas P.
Edition:
5th
Copyright Date:
2017
26 chapters
have results for Wills, Trusts, and Estates including Taxation and Future Interests
Chapter 15 Overview of the Federal Tax Laws Relating to Estates and Trusts 363 results (showing 5 best matches)
- The most common example of a retained life estate transfer that is included in the decedent’s gross estate occurs where a decedent transferred property in trust and retained the income interest in the trust for life. Similarly, if decedent transferred real property and retained a life estate in the property, express or implied, then at death the real estate will be included in the decedent’s gross estate.
- A future interest for gift tax purposes is “a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time.”
- Only the value of the interest subject to the power is included in the gross estate under . If decedent possessed the power to revoke the entire trust, then the value of the entire trust is included in the gross estate. If the decedent possessed only the power to revoke the principal interest, the entire trust is again includable because revocation of the principal would eliminate the income interest. But if the power to revoke affects only the income interest, then only the value of that interest is included in the gross estate under . For example, suppose Ron creates a trust to pay the income to Nancy for life, remainder to Bob. If Ron reserves the power to direct payment of income to Sue rather than Nancy, then under the value of the income interest is included in Ron’s gross estate although under Section 2036(a)(2) the entire trust is included in Ron’s gross estate based on the power to control income alone. If Ron reserves no power over the income but reserves a special...
- A gift is incomplete even if a retained power cannot be exercised for the donor’s personal pecuniary benefit. For example, suppose Mary transfers property into an irrevocable trust but retains the power to pay the income to such of Alice, Bob and Charlie as Mary from time to time directs. Upon Mary’s death the trust terminates and the principal is distributable to Alice, Bob and Charlie. In this case, Mary retains a power of disposition over the income interest but no power over the remainder interest. In measuring whether there is a completed gift, each interest in the trust is considered separately. Because of Mary’s retained power to determine how the income is distributed, the gift of the income interest is incomplete. The gift of the remainder interest is complete because Mary has no authority to alter the shares. The trust property will also be included in Mary’s gross estate under Section 2036 because Mary retained a power to control the beneficial enjoyment of the income
- equals the estate’s or trust’s gross income plus tax exempt income, if any, less net capital gains included in its gross income and deductions, other than the distributions deduction, and the deduction for the estate’s or trust’s personal exemption, which for an estate is $600 and for a trust either $100 or $300. For example, assume the estate or trust has $20,000 of rents, $5,000 of capital gains, and $8,000 of tax-exempt municipal bond interest. It paid $4,000 in state income taxes last year. Its DNI equals $24,000, which includes the rents and the municipal bond interest less the state income taxes. DNI excludes the capital gains.
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Chapter 11 Future Interests 310 results (showing 5 best matches)
- Lawyers should use formulas from the better formbooks in preparing wills and trusts with future interests. It is inefficient and risky to draft wills “from scratch”; the future interest cases strewn though the reports demonstrate the many chances for error.
- Some courts give little weight to precedents in construing wills on the ground that the language of every will differs. “Cases construing remainders created by wills are almost as countless as grains of sand on the seashore,” but they have little “controlling force . . . because no two wills are alike.” Other courts, however, rely on general rules of construction, either statutory or common law. According to one commonly cited rule, the law favors the early vesting of estates. Coke expressed this idea in the 17th century: “the law always delights in the vesting of estates, and contingencies are odious in the law, and are the causes of troubles.” and courts have begun to question it. For example, “the maxim favoring early vesting of remainders . . . frequently . . . frustrates what the ordinary settlor would have intended” and “should no longer be followed . . . without question.” The Uniform Probate Code (hereinafter UPC) presumes that a “future interest under the terms of a trust...
- Many wills and trusts create future interests, for example “to my spouse for life, remainder to our children.” If a child fails to survive the testator, a question of lapse arises ( If the interest is “vested,” it passes to the remainderman’s estate to be disposed of by his or her will apply only to devisees who predecease the testator and so are irrelevant in this situation. A remainder “to our children” is a class gift, so any children who survive will take the shares of children who did not. If no class member survives, or if the remainder was to an individual who failed to survive, the particular remainder will fail and be disposed of under the rules for failed dispositions. In the case of a will, the failed remainder will usually pass to the residuary devisees or other residuary devisees, if any, or by intestacy to the testator’s heirs. If a remainder created by a revocable inter-vivos trust fails, typically a “resulting trust” in favor of the settlor or settlor’s successors
- The exercise of a power of appointment is typically deemed to “relate back” to the donor, so that the appointee takes directly from the donor. The powerholder thus is viewed as akin to an agent who “fills in the blanks” in the donor’s will or trust, and not as the owner of the appointed assets. When the executors of the powerholder sought to include the appointed assets in the powerholder’s probate estate, the court refused, saying that to treat a power as “an interest in property” would hinder “one of the most useful tools in estate planning.”
- However, the question whether a remainder was contingent on survival usually arises after the life tenant has died, at which time the property is alienable whichever construction is chosen. Moreover, even before the life estate expires, the ability to transfer property burdened with a remainder does not often turn on whether the remainder is vested or contingent. Nearly all jurisdictions allow contingent as well as vested remainders to be assigned. Furthermore, most future interests today are beneficial interests in a trust, under which the trustee has the power to sell the trust assets, and the beneficiaries’ interests are inalienable because of the inclusion of spendthrift provisions. Although courts have traditionally applied the preference for early vesting to trusts as well as to legal remainders, the UPC distinguishes between the two. It implies a condition of survivorship only for future interests in a trust, because “the ability of the parties to sell the land would be...
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Chapter 10 Trusts 659 results (showing 5 best matches)
- Any legally cognizable interest in any real or personal property, tangible or intangible, may be transferred into trust. This includes not only money—as little as one cent—or a piece of land in fee simple, but also contingent remainders and other future interests, stocks, choses in action, mineral rights, leaseholds, life insurance policies and insurance beneficiary designations. However, property must be specifically identified in order to create a trust. It is not sufficient to gratuitously agree to make a gift without indicating the source and setting it aside. The requirement of an identifiable res creates a fiduciary duty as to that property, meaning it cannot be commingled or used as the trustee’s own. Usually, assets will be reregistered from the name of the settlor into the name of the trustee using the formalities normally required for title transfer, such as a deed in the case of real estate. However, problems can be encountered in the case of self-declarations of trust...
- Because trusts and legal life estates perform the same function, an instrument which creates a life estate may be construed to create a trust. A will which left property to the testator’s wife for life accompanied by a direction that the executors “handle my estate during the life of my wife,” was held to create a trust by implication. English legislation converts all life estates to trusts even for land. Such forcing of legal life estates into the trust mold coincides with the common advice of estate planners to use a trust whenever one wishes to create successive interests in property.
- The 1990 revision of the UPC extends many but not all rules of will construction to revocable trusts. Topics covered include requirement of survival by 120 hours; survivorship with respect to future interests; and the meaning of specific words including “descendants,” and “heirs.”
- Because many trusts are created to save or avoid estate taxes, and the future of the estate tax is uncertain, it has been suggested that the trustee (or perhaps another) should be authorized to terminate trusts if the purpose for which they were created has become irrelevant.
- Both the UPC and UTC convert honorary trusts into real trusts by allowing the settlor to appoint someone to enforce the beneficiary’s interest. A trust for the care of an animal is valid for the life of the animal, and a trust for another noncharitable purpose without an ascertainable beneficiary may be created but is valid for only 21 years. A great majority of states have enacted either the UPC version, the UTC version, or some combination. Because honorary trusts are often funded with far more property than needed to carry out the intended purpose, disposition of excess funds is a frequent issue. Both the UPC and UTC address this concern. Absent a provision disposing of excess funds in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest. Successors in interest for this purpose would include the beneficiaries under the settlor’s will, if the settlor has a will, or...
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Chapter 7 Extrinsic Evidence 308 results (showing 5 best matches)
- Many states subject testamentary trusts to close court supervision. Under the theory of incorporation by reference, the trust receiving poured-over assets from the decedent’s estate would be a testamentary trust subject to supervision. To avoid that result, the Uniform Probate Code provides that property passing under a pour-over devise “is not held under a testamentary trust of the testator, but it becomes a part of the trust to which it is devised.” However, for some purposes, the pour-over will and receptacle trusts are treated as a unit. The probate court has been held to have jurisdiction to determine the validity of both when they are challenged for undue influence. A provision in a trust for a spouse has been held to bar her claim to have been pretermitted in the pour-over will. And where the settlor of a pour-over trust and her husband divorced, the court found that the trust and will were part of a comprehensive estate plan and revoked the husband’s interest under the trust...
- The doctrines of incorporation by reference and facts of independent significance have been used to validate a modern estate planning device, the “pour-over” will. To illustrate, suppose a couple who had created a revocable trust later executed wills leaving property to the trustees of the trust to be held pursuant to the terms of the trust. Thus, the ultimate beneficiaries of the wills could only be ascertained by looking at the trust instrument, which was not executed with the formalities prescribed for wills. The couple amended the trust after executing their wills. Could property passing under their wills be governed by the terms of this subsequent amendment of the trust? Earlier cases had refused to allow this, based on the restrictions against incorporating future documents. But this court upheld the pour-over devise by treating the trust as a fact of independent significance; because the trust contained assets other than those which the will poured into it, its terms had...trust
- Pour-over devises have been accepted by courts and legislatures because they perform a useful function, allowing various parts of an estate plan to be consolidated. Many persons wish to put some of their assets into an inter-vivos trust and have other assets pass to a trust for the same beneficiaries when they die. Or a testator may wish to add assets to a trust created by another person. Spouses may wish to put their respective assets into a trust for their common children. Administrative costs can be reduced by consolidating the trusts of the two spouses. The wife can leave her estate to the trust created by her husband’s will and vice versa, depending on who dies first. Or a parent may wish to add property to a trust created by a child for the parent’s grandchildren. The Uniform Probate Code allows a pour-over to a trust created by “another individual’s will” if the testator of the latter will predeceased the testator of the pour-over devise.
- Some wills show on their face that a devisee was intended to give the devise to others who are not identified in the will. These are sometimes called “semi-secret” trusts as contrasted with “secret” trusts in which the will gives no clue that a trust was intended. Strangely, secret trusts can be enforced under constructive trust principles whereas semi-secret trusts typically are not. Arguably, semi-secret trusts provide a stronger case for enforcement because extrinsic evidence showing the intended beneficiaries is not inconsistent with the will but rather supplements it, rather like resolving a patent ambiguity. The Third Restatement of Trusts makes semi-secret trusts enforceable and dispenses with the higher burden of proof required for constructive trusts in this situation. But some courts, contrary to the Restatement, refuse to enforce semi-secret trusts. When a will directed the executor to distribute the estate “in accordance with the verbal guidelines last given by me,” the...
- The rule barring courts from adding words omitted from a will is sometimes displaced by another rule that allows courts to use extrinsic evidence in order to resolve “latent ambiguities” in wills. For example, a will left the testator’s estate to his “nieces and nephews.” The testator had only one niece and one nephew, but his wife had nineteen. He had told his lawyer that he wanted his estate to go to his 21 nephews and nieces including those of his wife. The court construed the will to include them even though words like “nieces and nephews” are normally construed to exclude relatives by marriage. “A latent ambiguity surfaced when the language of the devise did not square with the actual number of blood nieces and nephews,” and extrinsic evidence could be used to resolve it. Likewise, when a will expressed the testator’s “desire” that an individual be allowed to buy property, the court used extrinsic evidence to decide whether this language was precatory.
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Preface 24 results (showing 5 best matches)
- In most law schools today, the formerly separate courses in Wills, Trusts, and Future Interests have been integrated into a single offering. This book reflects this trend. It covers the same ground (roughly) as Atkinson on Wills, Bogert on Trusts, and Simes on Future Interests. It also introduces students to federal transfer taxes. We think there are clear advantages in a unified treatment of these subjects.
- Professor McGovern, who has now achieved ‘‘senior status’’ on this book, was an Adviser to the Third Restatement of Trusts and the Third Restatement of Property (Wills and Other Donative Transfers). Professors Kurtz, English, and Gallanis are deeply indebted to him as the ‘‘founding father’’ of this book. Professor Kurtz is a member-emeritus of the Joint Editorial Board of the Uniform Trusts and Estates Acts (JEB-UTEA), the successor to the JEB for the Uniform Probate Code, and the author of numerous works in the area of property law. Professor English, who was the Executive Director of the JEB-UTEA until 2013, was the Reporter for the Uniform Trust Code. Professor Gallanis has been since 2013 the Executive Director of the JEB-UTEA and served as Associate Reporter for the Third Restatement of Trusts. Professors Kurtz, English, and Gallanis have served on multiple drafting committees of the Uniform Law Commission in the preparation of uniform statutes affecting the areas of Trusts and
- The law’s traditional preference for early vesting of future interests has been questioned by modern commentators. Sophisticated drafters usually postpone vesting and state expressly that ‘‘heirs’’ should be determined as of the date when their interest becomes possessory. Because most future interests today involve trusts where the trustee has a power of sale, postponement of vesting does not impede alienability. Thus, the revised Uniform Probate Code makes this the preferred construction. This may make it harder to get the consent of all the beneficiaries to modify a trust, though some states have sought to address this problem by the use of guardians ad litem. The ...to predominate in American law, but some authorities have questioned the traditional assumption that a spendthrift provision in a trust shows a purpose which would be frustrated by early termination (Section 10.9). Sophisticated drafters continue to urge the use of powers of appointment to provide... ...trusts, but...and
- Many law school courses in trusts and estates and related casebooks cover the various federal tax laws that affect wealth dispositions. Thus, it is appropriate that this edition continue to introduce students to the federal gift, estate, and generation skipping transfer tax laws and grantor trust rules affecting the wealth disposition process. (Chapter 15). In addition, we have somewhat expanded or added coverage in this edition of three topics which are prominent in the minds of many clients—planning for incapacity, end-of-life care, and anatomical gifts. (Chapter 14). Furthermore, with the increasing use of trusts for the purpose of passing property at death, we have beefed up the material on trust administration.
- The tax on generation skipping transfers (Section 15.5) has reduced the estate tax advantages of by-pass trusts in large estates. However, the commonest form of trust—one for the life of the settlor’s spouse—continues to have tax and other advantages. Despite improvements in the law of guardianship, a trust is usually the best way to manage property for persons who are incompetent to handle it. However, custodianships under the Uniform Transfers to Minors Act and durable powers of attorney have become popular substitutes for the trust in some situations (Section 9.3).
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Chapter 1 Terminology and Choice of Law 391 results (showing 5 best matches)
- A future interest reserved to a grantor, expressly or by implication. When A gives B a life estate and the deed says nothing about what happens when B dies, the land will “revert” to A. The Rule Against Perpetuities does not usually apply to reversions and similar interests like Section 12.6. Section 25.2 of the Proposed Restatement (Third) of Property would subsume all remainders, executory interests, reversions, possibilities of reverter, and rights of entry into the phrase “future interests.”
- A future interest that may not become possessory, as in a gift “to A for life, then to her children who survive her.” While A is alive, one cannot know whether she will have children who survive her. Contingent remainders are contrasted with “vested” remainders, ., “To A for life, then to B.” Even though B cannot take possession while A is alive, B’s remainder is vested; if B dies before A, the property will be part of B’s estate. For further discussion, Section 11.1. Proposed Restatement (Third) of Property, § 25.2 would discontinue the distinctions between remainders and executory interests and subsume all remainders, executory interests, reversions, possibilities of reverter, and rights of entry into the phrase “future interests.”
- The court which admits the will to probate also appoints the personal representative to administer the estate and continues to supervise the administration of the estate. For this reason, the term “probate” is often loosely used to include the ongoing administration of the estate, and the property subject to that administration is referred to as the “probate estate.”
- A general name for various devices whereby property passes at death. These devices are free from the formal requirements for wills, including probate and administration. Common examples are life insurance, certain types of bank accounts, pension plans, and revocable trusts. A recurring question is whether will substitutes should be subject to the rules governing wills themselves.
- A type of future interest distinguishable from a remainder on technical grounds. The distinction between remainders and executory interests was once important but is virtually obsolete today. Section 12.1. The Restatement (Third) of Property eliminates executory interests as a special category of future interests. It reduces all future interests to either reversions (future interests retained by a transferor) or remainders (future interests created in a transferee).
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Center Title 2 results
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Chapter 8 Limits on Testamentary Power 497 results (showing 5 best matches)
- In several states, a testator’s marriage has no effect on a will. Arguably spouses need no other protection than the elective share. However, the elective share is usually smaller than the intestate share of an omitted spouse. Under the Uniform Probate Code, the omitted spouse’s share and the elective share are measured against different bases. The omitted spouse’s share is a share of the probate estate only; the elective share, on the other hand, can include both probate and nonprobate assets. If the decedent’s only assets are in the decedent’s probate estate of $500,000 and the spouse could claim the entire probate estate as an omitted spouse, this would clearly be preferable to claiming an elective share against the probate estate as the maximum amount of the elective share would only be $250,000. But if the decedent leaves a probate estate of $1,000,000 but an augmented estate of $2,500,000 (consisting of the $1,000,000 intestate estate, plus a $1,500,000 revocable trust), the...
- Efforts to avoid the elective share may fail. Some courts have subjected property that the decedent transferred before death to the elective share on the theory that the transfer was “illusory.” Generally, an “illusory” transfer is one in which there has been a change in the form of ownership but the transferor’s economic interest in the property both before and after the transfer is essentially the same. Thus, revocable living trusts are frequently characterized as illusory. Even though the transferred assets are owned by a trust and not the settlor, the only thing standing between the settlor and absolute ownership of the trust assets is a piece of paper stating: “I revoke the trust.” The Restatement of Property and the Restatement of Trusts both allow a surviving spouse to reach the assets of any revocable trust created by the decedent. If a trust is illusory, either the entire trust is invalidated and the assets become part of the probate estate or only enough assets to fund the...
- What factors should the spouse (and the lawyer) consider? A simple comparison between the size of the elective share and the benefits given to the spouse by the will is clearly relevant but not always determinative. Suppose that the decedent’s will creates a bypass trust which gives a widow the income for her life, with the corpus to be If the widow has enough property to generate an estate tax when she dies, she may decide not to take an elective share even if it would give her more money, because the additional money would be taxed in her estate at death. The widow’s failure to take an elective share, like a disclaimer, does not constitute a taxable transfer. On the other hand, if the decedent husband’s estate is large enough to incur an estate tax and his will does not qualify for the marital deduction, the widow may wish to elect against the will in order to reduce the taxes on her husband’s estate.
- Some statutes explicitly include certain nonprobate property in computing the elective share. The Uniform Probate Code gives spouses a share of the “augmented estate.” The augmented estate includes the probate estate and property transferred by the decedent during lifetime if the transfer was made within two years of the decedent’s death. It also includes property transferred by the decedent at any time during the decedent’s life, if the decedent reserved either the right to revoke the transfer or reserved the income from the transferred property for life. It also includes joint tenancies, to the extent of the “decedent’s fractional interest” therein. The fractional interest is presumptively based on the number of joint tenants, if there are two, the decedent’s interest is assumed to be one half, ...be altered due to the source of the funds in a joint account. Thus, if the surviving party contributed all the funds, the decedent would have no fractional interest for purposes of...estate
- A lawyer can help a surviving spouse choose intelligently whether to claim the elective share, but if the lawyer drafted the decedent’s will, an ethical problem is raised by Rule 1.9 of the Model Rules of Professional Conduct: “a lawyer who has formerly represented a client in a matter shall not thereafter (a) represent another person in the same or a substantially related matter in which the other person’s interests are materially adverse to the interests of the former client. . . .” One court held that an attorney who drafted a will could properly advise the testator’s widow of her right to an elective share, but another reprimanded a lawyer who had drafted wills for a husband and wife and then represented the husband’s estate against which the wife claimed an elective share. It may be advisable for the surviving spouse to have independent counsel, because the attorney for the estate may feel an obligation to preserve the testator’s estate plan. ...estate should observe Model Rule...
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Chapter 6 Ademption, Abatement, and Lapse 264 results (showing 5 best matches)
- Antilapse statutes focus on the question of whether a devisee survived the testator. If the devisee survives the testator, these statutes are silent regarding whether the devisee must survive some later date. But the UPC implies a condition of survival to the time of distribution for any “future interest under the terms of a trust,” whether or not the trust is revocable. In the case of a testamentary trust, this would include some time after the testator died. For example, suppose the testator devises property in trust to pay the income to David for life, remainder to Cy. Both David and Cy survive the testator so the wills antilapse statute is inapplicable. Nonetheless, the UPC implies a substitutional gift to Cy’s descendants who survive David if Cy survives the testator but predeceases David. This substitutional gift applies not only to trusts but also to life insurance policies, pension plans, and POD or TOD registrations. Joint tenancies and joint bank accounts, on the other...
- When property passes to the estate of a deceased person, the question arises whether the property is distributed to the deceased person’s heirs or devisees. In the case of a vested inter-vivos gift, the answer is simple because when the holder of the vested interest dies, he or she has a property interest that is included in his probate estate and, thus, passes to whoever succeeds to the probate estate. But, in the case of a testamentary devise to the estate of a deceased person, such as the gift of Blackacre “to Alice’s estate,” some cases hold that Alice’s will cannot dispose of the property by her will. The theory is that because she did not own Blackacre when she died, Blackacre did not become part of her estate so her will is irrelevant in determining the takers to Blackacre. In states adopting that view, Blackacre passes to Alice’s heirs rather than to the beneficiaries of her will. The UPC, however, rejects this view, allowing Alice’s will to control who takes Blackacre, at...
- Even a testator who voluntarily disposes of a specifically devised asset may not intend to adeem the devise. A testator’s decision to shift money from a savings account to a certificate of deposit in order to get a higher interest rate probably shows no intent to adeem. But in some cases ademption reflects the testator’s probable intent. The reason for a specific devise may disappear when the property is disposed of. When a business is devised to employees in the hope that they will carry it on, and the testator later sells the business, it seems reasonable to infer an intent to adeem. Many wills specifically devise the testator’s house and tangible personal property in order to avoid putting them into a trust which holds the residue of the estate. If the testator later sells the house, there is no reason why the sale proceeds should not go into the residuary trust, so ademption seems the proper result. Ademption also avoids administrative ...no longer in the estate or the price...
- Income of an estate that is not attributable to specifically devised property is divided among the residuary devisees and the trustee of any pecuniary devise in trust in proportion to their respective shares of the estate. The question as to how a devise should be classified sometimes arises in this context, as when estate assets change in value during the administration of the estate. For example, a will devised “25% of my estate remaining after debts, funeral expenses, and expenses of administration, but before taxes.” Was this a pecuniary devise not in trust to which no estate income was allocable or a fractional share of the residue which was entitled to some allocable portion of the estate’s income?
- More commonly, however, potential gifts to estates arise in the case of inter-vivos instruments, often where the estate is not even named as an alternate beneficiary. For example, if a donor transfers land to his wife for her life, remainder to his son, the son has a vested remainder. If the son predeceases the wife, then upon her death, the land passes to the son’s estate. Or, when a man had a bond registered in his name “as trustee for Audrey” and Audrey later predeceased the trustee, the bond passes to Audrey’s estate because the gift was vested. A similar result has been reached in construing wills made pursuant to a contract. A husband and wife executed a contractual will. The devisees named in the will who died after the wife but before the husband were held to have vested interests as soon as the wife died which passed to their estates. ..., a deed purporting to transfer land to a person who is dead when the deed is executed is generally held to be void, conveying no interest...
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Chapter 14 Fiduciary Duties and Administration 702 results (showing 5 best matches)
- , as executor and trustee, or as trustee of several trusts for the same family. Can the ABC Bank as trustee of an insurance trust buy assets from itself as the executor of the insured’s probate estate? Allowing such a transaction can provide a market for hard to sell assets, and the potential conflict of interest is attenuated because the Bank has no personal interest in the matter. The California Probate Code allows sales and exchanges between two trusts where the same trustee administers both if the transaction is “fair and reasonable with respect to the beneficiaries of both trusts” and the beneficiaries are properly notified. The UTC provides that the fact the trustee is acting in another fiduciary capacity “does not preclude a transaction between a trust and another trust, decedent’s estate, or conservatorship of which the trustee is a fiduciary.”
- Fiduciaries are not liable for losses to property in a trust or estate that occur without their fault. But the general duty of prudence and to preserve property may require them to take out insurance against such eventualities. Should the fiduciary profit from the breach personally, the fiduciary is liable for the greater of the damages to the trust or the profit made by the trustee. An example of a profit is when a trustee uses trust assets to secure a loan with which he made a profitable purchase for himself. In this case, the court awarded damages even though the trust suffered no loss. “Any benefit or profit inures to the trust estate, even though no injury was intended and none was in fact done to the trust estate.” The trustee is also liable for any profit that the trustee made from the trust even absent a breach. ...certainty. A bank that wrongfully invested trust funds in its own passbook accounts was not charged with its profits from use of the funds because they...
- Can a personal representative or trustee sell assets of the estate or trust or must they be preserved for distribution in kind to the beneficiaries when the estate is closed or the trust terminated? While the governing instrument may limit the fiduciary’s authority, most wills and trusts confer broad powers of sale on the executor or trustee. Some instruments are silent on this question, however, but for these, the applicable The Third Restatement of Trusts implies a power of sale for trustees unless the terms of the trust or the circumstances indicate “that assets of the trust are to be retained in specie.” but personal representatives mayell property only “by leave of court and upon such terms as the court directs” unless the will gives a power of sale. Additionally, most powers legislation expressly authorizes executors and trustees to sell on credit,
- A similar problem arises when an estate or trust owns a company which employs the fiduciary. A will named Chambers as co-executor and trustee. Chambers, who was then serving as general counsel in a company owned by the estate, thereafter became the president and received several salary increases, for which he was later surcharged. “Even attributing to Chambers an astute talent for business management one would be overly naive not to think that his position as . . . trustee did not assist him in ascending to the presidency. . . . A trustee, or one acting in a fiduciary capacity, is not permitted to place himself in such position that the interest of the beneficiaries and his own personal interest do or may conflict.” The Third Restatement, however, allows a trustee to receive a salary as an officer of a company controlled by the trust if the “salary is not greater than warranted by the services the trustee performs in the position with the enterprise.”
- A sale may be necessary to effectuate distribution when an estate or trust terminates. An executor was permitted to sell land even though the will said “it is my desire that the farm land which I own remain in the family.” The court found that the “desire” was merely precatory, and that a sale would be “in the best interests of the estate;” because the children to whom the land was devised did not get along, shared ownership would be inconvenient. A sale can take place after the termination date of a trust, since trustees’ powers continue for a reasonable period to allow “winding up” of the trust.
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Chapter 2 Intestate Succession 622 results (showing 5 best matches)
- A lawyer planning a client’s estate should find out if an adoption has actually occurred in the client’s family and, if so, how the client wishes to deal with it. Even if there has been no adoption, one may later take place, particularly if the will creates future interests.
- A drafter who decides to use a gift to “heirs” in a will should make clear example, a trust provided that at the death of the settlor’s grandson, his widow “shall receive such portion of the trust estate as she would be entitled to had her husband died intestate.” This portion was greater under Maryland law, where the trust was created and administered, than under the law of Texas, where the grandson was domiciled at death. The court held that Maryland law governed, The Restatement of Property would have looked to the law of Texas including its choice of law rules, which might in turn look to the situs of any real property involved. A well drafted will can avoid controversy by specifying the relevant law, , the Uniform Statutory Will Act refers to “the individuals who would be entitled to receive the estate as if the property were located in this state and [the ancestor] had then died intestate domiciled in this state.”
- Even if a person wants all her property to pass to the heirs designated by the intestacy laws, and if no trust is needed, a will may still be desirable. A will can designate an executor to administer the estate and can give the executor powers beyond those conferred by law. Administration of an estate is more efficient when the executor has such powers. For example, some states may require the administrator of an intestate’s estate to seek court approval prior to selling intestate’s real estate, whereas a testator’s will can confer a power of sale on an executor exercisable without court approval.
- An adult adoption may be used to create a right to inherit in an intestacy. Suppose John is terminally ill and wants a friend to take a share of the estate of a living parent of John. John can accomplish this by adopting the friend if John dies before the parent and the parent later dies intestate. The scheme will not work if John’s parent executes a will, but the parent may not know about the adoption, because notice of an adoption is not usually given to the adopter’s parents. However, this scenario is not nearly as common as the one in which a will leaves a future interest “to John’s issue” and he decides to adopt someone after the will has become irrevocable.
- Estate planners sometimes draft wills in anticipation of a possible disclaimer by a devisee. If a will devises property “to my wife Mary, but if she predeceases me, to Andrew,” Andrew would take if Mary survived the testator but disclaimed. Mary may need property for her support for life, but also may wish to reduce her estate taxes at death. The best solution may be to have the property pass to a trust in which Mary gets the income for life without the trust property being taxable in her estate when she dies. A testator, when executing a will, may be uncertain whether his estate at death will be large enough to warrant such a trust and may want to leave it to his widow outright with the idea that she can disclaim all or part of it if this is appropriate. A will can provide that any property the widow disclaims shall go into a trust for her for life.
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Chapter 3 Formalities 516 results (showing 5 best matches)
- Many living trusts are the functional equivalent of wills; the settlor retains the right to control and enjoy the property for life, and the beneficiary’s interest becomes meaningful only when the settlor dies. Some older cases and the First Restatement of Trusts held such trusts were testamentary and invalid unless executed with the formalities prescribed for wills. The Second Restatement, however, says that a trust is not testamentary “merely because the settlor reserves a beneficial life interest or because he reserves a power to revoke the trust . . . and a power to control the trustee as to the administration of the trust.” A claim that a trust is invalid as “testamentary” is unlikely to succeed today. The UPC reflects the modern attitude in providing that trusts (and other) provisions “for a nonprobate transfer on death” are “nontestamentary.”
- The legal effect of wills that contain language suggesting that a devisee should use property for someone can be ambiguous. The language could evidence the testator’s intent to impose a trust or other legal obligation upon the devisee for the benefit of another, or the words could be merely precatory, When a will left property to the testator’s father “for the reason that I feel confident that any property which . . . my father . . . receive[s] from my estate will be used in the best interests of my said children,” the children claimed that this created a trust, but the court disagreed. “This language does not impose any sort of clear directive or obligation (other than perhaps a moral or ethical one) . . . The purported trustee is given no direction as to how the supposed settlor intends his estate to be used to further ‘the best interests’ of the children.” Vagueness as to the beneficiaries and their interests “tends to suggest that the transferor did not intend to create a trust.”
- Present gifts require no consideration, but promises to make a gift in the future do. A similar distinction applies to trusts. A declaration that the settlor “will” create a trust is not sufficient without consideration or some recognized substitute. Thus, a letter stating that “in the event of a sale” of specified land, the writer “will hold the sale proceeds in trust” did not create a trust. A man cannot create a trust of property which he does not yet own, any more than he can make an outright gift of an expectancy. A man who agreed to acquire football tickets for another person did not thereby create an enforceable trust because he had no right to the tickets when the agreement was made and “mere expectancies cannot be held in trust.” Also, claims for personal injury are generally held to be not transferable and, thus, cannot be put into a trust.
- If property is located in a community property state, the spouse should get half of any community property of the marriage even though the deceased spouse was a party to an earlier contractual will. Where the promisor (the survivor of the parties to a contractual will) and his second wife had “made substantial financial contributions to the construction of a house and to a joint savings account,” the court refused to subject these assets to a constructive trust for the beneficiary of the earlier contractual will, which it enforced only with respect to the husband’s “separate estate.” Some courts construe the contract as not intended to include
- (holographic and nuncupative will allowed if testator in armed services);
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Table of Contents 39 results (showing 5 best matches)
Chapter 12 The Rule Against Perpetuities 302 results (showing 5 best matches)
- Professor Dukeminier criticized the USRAP for inviting “lawyers unconversant with the law of future interests to create long-term ninety-year trusts [which] may lack the flexible powers an experienced estate planner gives to the trustee and beneficiaries to deal with changing circumstances over a long period of years.”
- Infractions of the Rule usually appear in the residuary clause of a will and result in property passing intestate. Claims that the Rule was violated are typically raised by heirs who hope to get property outright when it was left in trust. This effort may fail even if a Rule violation is found because normally the violation does not invalidate the income interests of the trust but only the remainder interests which were to vest in the distant future. “The rule against perpetuities voids only those interests vesting beyond the perpetuities period. The remaining valid interests take effect.”
- Although the Rule allows trusts to continue beyond lives in being plus 21 years if all the interests are vested, knowledgeable estate planners advise against keeping trusts going so long. Courts occasionally misunderstand the Rule and erroneously hold trusts invalid simply because they last too long. Also, if the trust gives the trustee discretion to accumulate income, invade principal, or sprinkle income, the beneficiaries’ interests are contingent upon the trustee’s discretion, and so their interests are invalid if the trust continues beyond the period of the Rule.
- at § 27.3. Nondonative transfers to which the Rule still applies include trusts or other property dispositions arising out of marital, divorce, and separation agreements, contracts to make or not to revoke a will or trust, a contract to exercise or not exercise a power of appointment, and a transfer in satisfaction of a duty of support.
- When a remainder is held to violate the Rule, the preceding income interests may also be stricken as “inextricably intertwined” with them. If the trust was created in order to bypass the estates of the testator’s children, and if the Rule violation causes the remainder to fall to the children as intestate property, why should the trusts be established at all? On the other hand, the testator may have had another purpose which would be defeated by early termination. When a remainder after a life estate in the testator’s grandson was held invalid, the court declined to void the life estate itself, because a spendthrift provision in the trust showed that “the testator’s obvious purpose was to protect the [grandson] against his own improvidence,” and this would be frustrated by an outright distribution to him.
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Chapter 13 Probate Issues 231 results (showing 5 best matches)
- An increasing number of courts and state legislatures allow the decedent’s creditors to reach the assets of a trust that was revocable by the decedent at death, at least if the settlor’s probate estate is insufficient to satisfy claims. Under the Uniform Trust Code (UTC), the provision pertains only to revocable trusts. Both the UPC and UTC also allow creditors to reach the revocable trust and, in the case of the UPC, other non-probate assets, in satisfaction of statutory allowances, which would include the family allowance, homestead and exempt property. California Probate Code imposes time limits on claims against a revocable trust after the settlor’s death analogous to those on claims against a deceased debtor’s probate estate.
- When an individual dies, most nonprobate assets can be transferred relatively easily. To collect on life insurance and retirement benefits, ordinarily all that is required is the furnishing of a death certificate and the filing of a claim form with the insurance company or retirement plan administrator. To change title to jointly owned or tenancy by the entireties real estate, practice varies by state but in many states all that is necessary is to file with the land records an affidavit reciting the death to which a copy of the death certificate will be attached. Often these documents are not filed until the surviving joint tenant or spouse sells the property. Administering property in a revocable living trust is more complicated. If the settlor was trustee until her death, the successor trustee will first normally sign an acceptance of office. Once in office, the successor will need to verify the assets held in the trust, pay the decedent’s debts and expenses as directed in the
- and may reach different outcomes. The heirs of a woman whose will had been probated in Florida were allowed to contest her will in Kentucky where she owned land. “A contest of a foreign will in another state, where the real estate affected by the will is located, does not violate full faith and credit required under the Federal Constitution.” California similarly recognizes wills established in another jurisdiction including a foreign country, except one which does not “provide impartial tribunals” or “due process of law.” Both the California and Uniform Probate Code provisions apply only if the other probate was in the state of the decedent’s domicile, and only if all interested persons were given notice and an opportunity to contest the will.
- This chapter focuses on issues relating only to decedent’s estates. Administrative issues relevant to both estates and trusts are discussed in Chapter 14–Fiduciary Duties and Administration.
- Fiduciaries have been allowed to contest wills in some cases but not in others. A trustee designated in the will was not permitted to challenge a codicil, because it did not affect the property interests passing to the trustee. The wish to manage the trust and receive trustee’s fees did not give the trustee standing. Personal representatives have been allowed to contest a will on behalf of the heirs or beneficiaries of an earlier will. But the UPC does not allow personal representative to seek probate of a will if all the devisees object.
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Chapter 5 Incapacity and Undue Influence 215 results (showing 5 best matches)
- In determining the donor’s capacity, courts usually apply the same standards to will substitutes and to wills. The Restatement of Trusts agrees, but suggests that “a standard slightly higher than that for a will” is appropriate for irrevocable gifts and trusts; as to these, the donor or settlor must be able to “understand the effects the disposition may have on the future financial security of the settlor/donor” and his or her dependents.
- In order for the challenge to succeed the will must be the product of the insane delusion. In other words, the terms of the will must be explainable by reference to the insane delusion. Thus, a will, allegedly motivated by an insane delusion that contestant intended to harm the testator was probated when the court found that the testator had other reasons for the will: she wished a family business to continue and left most of her estate to a child who was also interested in its continuation.
- In re Estate of Glennie, 265 P.3d 654 (Mont. 2011)
- Undue influence sufficient to invalidate a will is ‘[t]he degree of influence necessary to be exerted over the mind of the testator to render it improper, [and] must from some cause or by some means be such as to induce him to act contrary to his wishes, and to make a different will and disposition of his estate from what he would have done if left entirely to his own discretion and judgment. That his free agency and independence must have been overcome, and that he must, by some dominion or control exercised over his mind, have been constrained to do what was against his will, and what he was unable to refuse and too weak to resist. But that moderate and reasonable solicitation, entreaty or persuasion, though yielded to, if done intelligently and from a conviction of duty, would not vitiate a will in other respects valid.’
- Decisions in will contests upholding wills often rely on the testimony of the lawyer who drafted the will and supervised its execution. This creates a problem when the same attorney represents the estate in a will contest. A lawyer in this situation was disqualified under DR 5–102 of the Code of Professional Responsibility:
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Chapter 9 Planning for Incapacity 95 results (showing 5 best matches)
- Over the past couple of decades, estate planning practice has changed dramatically. Federal estate and gift tax planning has receded in importance as the estate tax exemption has increased from $60,000 as recently as 1976 to $5,000,000 in 2011, with the amount to be increased even further for subsequent inflation. Litigation involving estates and trust matters has increased dramatically, giving birth to a new law practice specialty, that of fiduciary litigation. But perhaps most importantly, fueled by concerns that individuals are living longer than formerly but not necessarily in a state of good health, planning for incapacity has become part of the standard estate planning counseling session. In addition to a will and possibly revocable trust, it is customary for a client to sign a durable power of attorney for property management and some type of advance health-care directive. Less commonly, the client will sign a document indicating an intent to be an organ or tissue donor.
- First, and in recognition of the patient’s autonomy rights, life-sustaining treatment may be withdrawn or withheld “when it is clear that the particular patient would have refused the treatment under the circumstances involved.” The patient’s intent may be evidenced by a living will, oral declarations, a power of attorney for health care, the patient’s reactions to the medical treatment others received or deduced from the patient’s religious beliefs or from other decisions the patient might have made with respect to his or her medical treatment. The probative value of the evidence varies depending upon several factors, including the “remoteness, consistency, and thoughtfulness of the prior statements or actions and the maturity of the person at the time of the statements or acts.” For persons who had never clearly expressed their wishes, the court adopted two additional tests—the limited objective best interest test and the pure objective best interest test.
- Later cases from New Jersey and many other states have developed standards to guide decisionmakers. In addition, sparked a national interest in both living wills and durable health care powers of attorney (sometimes called “advance directives”) which has ultimately led to the adoption of statutes throughout the country designed to empower patients to have health care decisions consistent with their wishes made on their behalf.
- , the Supreme Court concluded that Missouri’s interest in the preservation of life was sufficiently strong to allow it to err on the side of life by disallowing withdrawal of treatment unless the patient had clearly and convincingly expressed her wishes on the matter. In addition to preservation of life, other countervailing factors that states have taken into account include the protection of the interests of innocent third parties, the maintenance of the ethical integrity of the medical profession, and the prevention of suicide. As of early 2017, physician assistance in suicide was recognized in six states and the District of Columbia.
- The durable power of attorney for financial affairs, along with the revocable living trust, are the principal alternatives to guardianship of an individual’s property. The growth of the durable power has been truly remarkable. From a little used device only a few decades ago, the power of attorney has become a standard part of the estate planning package.
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Chapter 4 Revocation, Gifts, and Will Substitutes 238 results (showing 5 best matches)
- The Second Restatement of Trusts stated that living trusts could not be revoked unless the trust instrument reserved a power to revoke, but the Third Restatement presumes that a trust is revocable if the settlor “has retained a beneficial interest in the trust” on the ground that this may “protect the settlor from unanticipated, adverse tax consequences.” Some state statutes and the Uniform Trust Code (hereinafter referred to in the text and footnotes as the “UTC”) as the “ say that all trusts are revocable unless they otherwise provide. Because many trusts are created with tax considerations in mind, and the tax consequences are radically different for revocable and irrevocable trusts, most trust instruments make clear whether or not the trust was intended to be revocable.
- The Restatement of Trusts allows settlors of bank account trusts to revoke them by will, but general language in a will may not suffice, , a devise of all the estate “of whatsoever nature” did not revoke the testator’s bank account trusts. Even when the intent to revoke a living trust is clear, it may be rejected for failure to satisfy a requirement in the trust that amendments be delivered to the trustee during the settlor’s lifetime. The UTC allows living trusts to be revoked by will, but only if the trust does not provide an “exclusive” method of revocation. Some states do not allow living trusts to be revoked by will at all.
- In order to revoke a trust the settlor must comply with any method of revocation specified in the trust instrument. A settlor reserved the right to alter a trust “by an instrument in writing signed by her and delivered during [her] life to the Trustees.” After she died, an unsigned slip of paper was found clipped to the trust instrument, but this paper was not effective to change the beneficiary. “The term ‘instrument in writing’ suggests . . . substantially more than an unsigned scrap of paper.” Moreover, the settlor had not delivered the writing to her co-trustee. A court construed another trust which allowed changes by a signed writing “delivered to the Trustee” to require delivery during the settlor’s lifetime, and, thus, an amendment delivered after the settlor died was invalid. In another case, a person executed a will and a trust at the same time. The latter provided that it could be revoked by an instrument in writing. When the person died, neither the will nor the trust...will
- Some statutes extend to all will substitutes the rule that divorce revokes devises. Under the UPC, a divorce “severs the interests of the former spouses in property held by them” as joint tenants, and revokes any revocable disposition made by one spouse to the other in a “governing instrument” which is defined to include trusts, insurance policies, POD accounts, and pension benefits as well as wills.
- Most wills contain a clause or phrase expressly revoking prior wills. Even if a will does not have such language, an implied revocation may occur if a later will contains provisions that are inconsistent with an earlier will. Courts are reluctant to find a revocation by inconsistency, however. Thus “a grant of an option to one son to purchase certain real estate at below market price is not inconsistent with a bequest of all the assets to all the testator’s children in equal shares,” and the provisions in both wills were On the other hand, where a testator’s first will left substantial devises to two children and the residue to his wife and thereafter the testator and his wife divorced, he remarried, and in a later will he left $100 to the two children, the substantial devises in the prior will to the two children were impliedly revoked by inconsistency.
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Table of Cases 1528 results (showing 5 best matches)
Summary of Contents 9 results (showing 5 best matches)
Index 313 results (showing 5 best matches)
Table of Restatement References 681 results (showing 5 best matches)
- Restatement (Third) of Property (Willsand Other Donative Transfers) Division 5, Scope Note
- Restatement (Third) of Property (Willsand Other Donative Transfers) § 1.1
- Restatement (Third) of Property (Willsand Other Donative Transfers) § 1.1,
- Restatement (Third) of Property (Willsand Other Donative Transfers) § 1.1,
- Restatement (Third) of Property (Willsand Other Donative Transfers) § 1.1, illus. 20
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Copyright Page 3 results
- The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- is a trademark registered in the U.S. Patent and Trademark Office.
- West, West Academic Publishing, and West Academic are trademarks of West Publishing Corporation, used under license.
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- Publication Date: July 18th, 2017
- ISBN: 9781628101843
- Subject: Trusts and Estates
- Series: Hornbooks
- Type: Hornbook Treatises
- Description: Expert authors provide an analysis of the law of trusts and estates. Among the topics covered are intestate succession, wills, trusts, estates and future interests, nonprobate mechanisms, the construction of donative documents, and planning for incapacity. The book incorporates the latest provisions of the Uniform Probate Code, the Uniform Trust Code, and the other uniform laws relating to the donative transfer of wealth. The book also includes an overview of the federal transfer tax laws. An essential guide for students and practitioners.
