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(M. Robinson, Fall 2006) (DUKEMINIER, ET AL., WILLS, TRUSTS & ESTATES (7th ed. 2005))
I. REVOCABLE TRUSTS....................................................................................................................................4
A.Introduction................................................................................................................................................4
B.Pour-over wills/trusts.................................................................................................................................4
C.Advantages of revocable trusts...................................................................................................................4
II. PLANNING FOR INCAPACITY.......................................................................................................................4
A. Durable power of attorney.........................................................................................................................4
B. Directives regarding health care and disposition of the body..................................................................4
CONSTRUCTION OF WILLS........................................................................................................................................4
I. MISTAKEN OR AMBIGUOUS LANGUAGE IN WILLS................................................................................4
A.Traditional approach: no extrinsic evidence, no reformation..................................................................4
B.Slouching toward reformation: correcting mistakes without reforming wills.........................................4
C.Openly reforming wills for mistake...........................................................................................................4
II. DEATH OF BENEFICIARY BEFORE DEATH OF TESTATOR.....................................................................4
A. Introduction................................................................................................................................................4
B. Antilapse statutes........................................................................................................................................4
C. Class gifts....................................................................................................................................................4
III. CHANGES IN PROPERTY AFTER EXECUTION OF WILL....................................................................4
A. Ademption by extinction.............................................................................................................................4
B. Other miscellaneous changes in property.................................................................................................4
RESTRICTIONS ON POWER OF DISPOSITION ................................................................................................................4
I. RIGHTS OF THE SURVIVING SPOUSE.......................................................................................................4
A.Introduction to marital property system....................................................................................................4
B.The elective share.......................................................................................................................................4
C.Property subject to the elective share.........................................................................................................4
D.Waiver of the elective share........................................................................................................................4
E.Rights of surviving spouse in community property...................................................................................4
F.Spouses omitted from a premarital will (pretermitted spouse).................................................................4
II. RIGHTS OF ISSUE OMITTED FROM THE WILL........................................................................................4
A. Protection from intentional omission........................................................................................................4
B. Protection from unintentional omission....................................................................................................4
TRUSTS: CREATION AND CHARACTERISTICS........................................................................................................4
I. INTRODUCTION..............................................................................................................................................4
A. Parties to a trust..........................................................................................................................................4
B. Creation of a trust.......................................................................................................................................4
1. Intent to create a trust.........................................................................................................................................4
2. Necessity of trust property..................................................................................................................................4
3. Necessity of trust beneficiaries............................................................................................................................4
4. Necessity of a written instrument........................................................................................................................4
II. RIGHTS OF THE BENEFICIARY TO DISTRIBUTIONS FROM THE TRUST.............................................4
III. RIGHTS OF THE BENEFICIARYS CREDITORS.....................................................................................4
A. Discretionary trusts....................................................................................................................................4
B. Spendthrift trusts........................................................................................................................................4
C. Self-settled asset protection trusts..............................................................................................................4
IV. MODIFICATION AND TERMINATION OF TRUSTS................................................................................4
A. Introduction................................................................................................................................................4
B. Trust modification......................................................................................................................................4
C. Trust termination and removal of the trustee............................................................................................4
III.PROFESSIONAL RESPONSIBILITY
A. Simpson v. Calivas (N.H. 1994) [8 CB 49]: Deceased consulted lawyer and wanted to
leave wife a life tenancy and remaining lands to his son. Lawyer drafted will so that the
life had a life tenancy in all the property, remainder to the son. Son sued fathers lawyer.
Rule: Lawyer who drafts will owes duty of reasonable care to the intended
beneficiaries of the will, including effecting the testators intent. The contractual
privity requirement is not ironclad and will be defeated where it is foreseeable that
an injury to the intended beneficiary will occur.
1. Some states continue to enforce the contract theory and thus prohibit a malpractice
suit against by the intended beneficiary against the drafting lawyer w/o strict privity
2. Many courts, though, allow suits based in tort or combo of tort and contract
B. Hotz v. Minyard (S.C. 1991) [8 CB 54]: Lawyer drafts will for father leaving property son
and daughter; father comes in, revokes, asks for re-draft that disinherits daughter, and
asks lawyer not to tell daughter. When daughter asks, lawyer lies per fathers
instructions. Daughter sues for breach of fiduciary duty. Rule: Law firm, which had
long represented daughter on other matters (and thus owed daughter a special
confidence), was conflicted and also owed daughter fiduciary duty.
1. Lawyer need not have disclosed the second will, but he could not actively lie about it
2. In cases of multiple representations with possibility of conflicts, best course of action
is to advise parties to retain separate counsel or for lawyer to withdraw from rep
C. MRPC 1.8(c) prohibits lawyers from drafting documents for clients that benefit the
lawyer, except for minimal gifts, except where the lawyer is related to the client
INTESTACY
I. BASIC SCHEME
D. Shares of descendants
1. After the spouses share is set aside, the descendants take, and if any of the
descendants are dead, the issue of the descendant represent the descendant
2. Sons- and daughters-in-law typically take nothing under intestacy statutes, and
likewise, a deceased descendant without issue is treated as if she never existed
3. There are three basic systems for how issue of deceased descendants take:
i. English per stirpes / strict per stirpes Divide the property into as many parts as
there are first-line living descendants or deceased descendants with issue, with
issue representing the deceased descendant at the level of division; it is strict b/c it
treats each line of descendants equally
ii. Modern per stirpes / per capita with representation The estate is divided equally
among all at the first generation in which there are living descendants or issue of
the descendants, with issue representing any deceased descendant at the level of
division
iii. Per capita at each generation (1990 UPC) Division occurs at the first level of
survivors, with equal division among any survivors at that level; the remainder is
divided evenly between all descendants of any deceased descendant of the
decedent
B C Z System Distribution
English per stirpes D(1/2); F(1/4); G(1/8); H(1/8)
Modern per stirpes D(1/3); F(1/3); G(1/6); H(1/6)
D E F Per capita at each generation D(1/3); F(1/3); G(1/6); H(1/6)
G H
B. Advancements
1. At common law, advancements were considered deposits against the intestate share
i. A child that receives a lifetime transfer intended by the transferor to be an early
distribution from the transferors estate shares in the estate only to the extent to
achieve equality in distribution
ii. Ex: Lifetime transfer to A of $25, B of $0. Intestate estate of $75 to be distributed
between them; under common law, you add all advancements to the intestate
estate and divide evenly to determine hotchpot. Result: A($25); B($50)
iii. Advancement exceeding the size of the probate estate means the transferee simply
does not take advance is irrevocable, so theres no duty to return property
2. UPC 2-109(a) Inter vivos gift is an advancement only if decedent declared so in a
contemporaneous writing or heir acknowledgement that gift is an advancement or is
to be taken into account in distributing intestate estate (thus, UPC rejects common
law and presumption is against an advancement)
III.BARS TO SUCCESSION
A. Homicide
1. In re Estate of Mahoney (Vt. 1966) [17 CB 126]: Wife shot and killed husband and was
convicted of manslaughter. Probate court denied wife a share of the intestate estate
even though VT has no slayer statute. Rule: Manslaughter is an intentional killing,
even if done out of sudden passion, so the appropriate course of action would be
to prevent the slayer from profiting from his actions. A constructive trust in
favor of the decedents other heirs is the appropriate remedy.
i. Court notes that probate court is court of limited jurisdiction without full equitable
powers so case remanded to chancery court for imposition of constructive trust
ii. Court notes that in absence of statutory guidance, a court can take 3 options:
a. Distribute to the slayer Effect the language of the descent statutes
b. Prohibit the slayer form taking Right result, but heavy-handed by judiciary
c. Allow slayer to take, but impose constructive trust in favor of other heirs (note
that this isnt a real trust, but an equitable remedy that vests title in the proper
party other than the wrongdoer and then trust terminates)
2. UPC 2-803(b) (1997) Intentionally and feloniously killing the decedent bars the
slayer from taking from the decedent in any form, including nonprobate assets
i. The slayer is treated as having disclaimed any share
ii. UPC 2-803(g) (1997) A conviction is conclusive of the slaying, but if slayer
would be found guilty under preponderance of evidence standard, that suffices too
(even if the wrongdoer was otherwise acquitted of any crime in court)
B. Disclaimer
1. Disclaimer Refusal to take property by an heir or devisee, with the disclaimant
treated as if he had predeceased the decedent so that the disclaimant never takes the
property for all legal purposes
i. Qualified disclaimer under the IRC allows disclaimant to avoid gift tax so long
as disclaimant has no enjoyment of property and has no say in who gets property
ii. Relates back to the date of the decedents death so that disclaimants creditors
cant reach the share of the estate that was disclaimed (in a minority of states, a
disclaimer by an insolvent debtor might be a fraudulent conveyance)
iii. UPC 2-1106(b)(3)(A) (2002) Disclaimer only affects the disclaimants share,
so disclaimants heirs cant get more than the share to which disclaimant would be
entitled if disclaimant hadnt disclaimed
B. Insane delusion
1. Insane delusion is a form of impaired incapacity where evidence shows that testator
adhered to some incorrect belief against all reason
A. Undue influence
1. Many formulations are attempted for undue influence, but few answer the question
directly of when particular influence is undue (there is always influence)
2. Estate of Lakatosh (Pa. Super. 1994) [22 CB 159]: Neighbor Roger took care of elderly
testator Rose including getting power of attorney and getting the bulk of Roses estate
under her will, which was drafted by a Rogers second cousin. Roger converted
nearly half of Roses estate before her death (transferring a chunk of it to his lover),
and left Rose to live in squalor. Rule: Contestant arguing undue influence can
shift burden to proponent to prove lack of undue influence where (1) there was
confidential relationship, (2) person enjoying such relationship got bulk of estate,
and (3) decedents intellect was weakened. These elements are met in this case.
i. This is about as close as you get to the quintessential undue influence case
ii. A confidential relationship can occur where the weaker party comes to rely on the
stronger one and the weaker party is otherwise in a compromised position
iii. Courts remedy is constructive trust, which is typical remedy for undue influence
B. Fraud
1. Fraud Testator is deceived by a misrepresentation and does that which he wouldnt
have done but for the misrepresentation; usually requires that the defrauder have
intent to deceive testator and purpose influencing testamentary act
i. Any portion of the will touched by fraud will be excised
2. Fraud in the inducement Misrepresentation of facts causing the testator to execute a
will to include particular provisions or to refrain from executing or revoking a will
3. Fraud in the execution Misrepresentation regarding the nature of the document
executed by the testator
C. Duress
A. Attested wills
1. Formalities serve four functions in the law of wills:
i. Ritual function Ensures that testator appreciates the consequences and gravity of
his act and that everybody involves knows the seriousness of whats going on
ii. Evidentiary function B/c testator will be dead at point of proving the will, the
formalities ensure that the testator knew what he was doing and that the testator
acted freely so that we have a document that reflects testator intent
iii. Protective function Protects the testator to ensure that the will is what he wants
iv. Channeling function Makes wills all take same form so that theyre easy to
identify and so that testators have a functional safe harbor to ensure effective wills
2. UPC 2-502(a) Except as provided in (b), a will must be (1) in writing; (2) signed
by the testator or by some other individual in the testators conscious presence and at
the testators direction; and (3) signed by at least two individuals each of whom
signed w/in reasonable time after witness sees the signing of the will as provided in
(2) or after the testators acknowledgment of that signature or the will
i. UPC 2-502(b) A will not complying with (a) is a holographic will even if it
isnt witnessed so long as the signature and material portions are in testators
handwriting
ii. UPC 2-502(c) Extrinsic evidence can establish testator intent that its his will
3. In re Groffman (H.C.J. Eng. 1969) [26 CB 204]: Testator executed his will in presence
of Black, who then attested. Then Black left, and Leigh witnessed the will. Wills Act
required all parties to be present during witnessing. Rule: Although the court is
satisfied that the document represents the testators intent, the statute controls.
4. Stevens v. Casdorph (W.V. 1998) [26 CB 205]: Testator executed will in bank; bank
manager then separately went and had two witnesses (who didnt witness the
execution) sign. Rule: The formalities statute specifically required signing the
will in the presence of both witnesses and their witnessing in his presence, so the
execution fails to satisfy that requirement.
i. Dissent: Majority slavishly worships form over substance and ignores the spirit of
the testamentary law through an illiberal and inflexible construction
B. Curative doctrines
1. Common law Wills Act required conformity with all formalities to have valid will,
with almost any straying from the Act to invalidate the will
2. Doctrine of substantial compliance Will is admitted to probate if theres clear and
convincing evidence that the purposes of formalities were served despite a defective
execution
i. In re Will of Ranney (N.J. 1991) [29 CB 226]: Will included self-proving affidavit,
but not an attestation clause, so when witnesses executed affidavit, they swore
that they had previously attested the will, which was untrue. Rule: The self-
proving affidavit signatures do not comply with signature requirement of NJ
C. Holographic wills
1. A holographic will is handwritten and signed by the testator w/o attesting witnesses
i. Idea is that handwriting requirement provides a proxy for evidentiary proof that
its testator intent and thus precludes probate of a forged document
ii. Some states also require that the holograph contain handwritten date
iii. Signature can appear anywhere in the document, but if its not at the end, it raises
questions of whether the decedent intended it to be the signature for the will
III.COMPONENTS OF A WILL
B. Republication by codicil
1. Doctrine of republication by codicil A will is treated as reexecuted (republished)
as of the date of the codicil
2. Can have very broad consequences, e.g., Will #2 revokes Will #1, Codicil to Will
#1 executed, with result being that Will #1 is republished and Will #2 is revoked
by implication
3. Republication is not applied automatically, but only where updating the will
carries out the testators intent
4. Cf. incorporation by reference: republication by codicil only applies to a prior
validly executed will, while incorporation by reference can incorporate into a
valid will language or instruments that have never been executed
C. Incorporation by reference
1. UPC 2-510 Any writing in existence at the time of a wills execution may be
incorporated by reference if the will manifests this intent and describes the writing
sufficiently to incorporate its identification
2. UPC 2-513 A will can refer to a written statement/list of property disposition
not specifically disposed of by the will (except for money); it must be signed by
the testator and must describe the items and devisees with reasonable certainty;
and it can be prepared before or after the will and can be modified after the will
(and may be a document with no significance aside from its effect on the will)
3. Clark v. Greenhalge (Mass. 1991) [37 CB 273]: Testators will provided that all
property would go to Greenhalge except that specifically listed on a memo, but
also left what look like disposition instructions in a separate notebook not named
in the will. Codicils were executed after the notebooks came into existence. Rule:
Testator retained the right to modify her will without formal amendment of
the will by changing the memorandum, which could be understood to
encompass the instructions in the notebook. The dispositions in the notebook
are incorporated by reference by republication through the codicils.
i. Without the codicils, the notebook couldnt be incorporated by reference b/c it
didnt exist at the time of the original execution of the will
ii. If the notebook had been signed, it couldve been incorporated by reference
under UPC 2-513 even if the notebook was written after the will and there
had been no execution of the codicils.
4. Johnson v. Johnson (Okla. 1954) [38 CB 279]: We have a typewritten will that was
never signed. At the bottom is a handwritten addition that is executed. Rule: The
will is not properly executed, but it is still a will because of its testamentary
character. The handwritten text is a holographic codicil, and through
A. Introduction
1. A typical inter vivos trust is created through a deed or declaration of trust where
settlor transfers legal title of property to another person (the trustee) pursuant to
writing where settlor retains power to revoke, alter, or amend the trust and right to
trust income during life (deed if third-party is transferred title as trustee)
i. Equitable title in an inter vivos trust rests with the beneficiary of the trust
ii. Trustee owes fiduciary duties of loyalty and prudence (and a host of related
subsidiary obligations such as the duty to make an accounting) to the beneficiary
iii. If trustee is sole beneficiary of trust, then the legal and equitable titles merge and
no trust is formed b/c there is nobody to hold the trustee accountable for breach
2. Farkas v. Williams (Ill. 1955) [42 CB 299]: Farkas purchased stock as trustee for
another, but the deed of trust allowed Farkas to retain all lifetime dividends as well as
power to revoke the trust. The corpus passed to the beneficiary at Farkas death.
Rule: A valid inter vivos trust was created b/c the settlor intended some present
interest to pass to the beneficiary (fiduciary duties as well as beneficiary interest
to inherit the property). Thus, this is non-testamentary and need not conform to
the Wills Act formalities.
i. Importantly, the deed of trust bound Farkas to act as trustee, so he owed particular
fiduciary duties and did not continue to owe the property absolutely (court has
hard time finding this, ultimately says there are lots of formalities so that it looks
like we shouldnt be worried about fraud)
ii. Inter vivos trust transfers allow the settlor to control during his lifetime as well as
after his death by choosing the beneficiary (its a form of will substitute)
B. Pour-over wills/trusts
1. Pour-over wills are used to accomplish unified administration with the will and all
probate assets naming the pour-over trust as the beneficiary and the decedent just has
to decide beforehand who will benefit from the pour-over trust
2. A pour-over will depends on the doctrine of incorporation by reference of the trust or
on the doctrine of acts of independent significance
a. Incorporation by reference works where trust exists at time of will execution and
so long as there arent any amendments to the trust
b. Acts of independent significance works where trust is in existence at death
(regardless of when created) and is funded must be funded to demonstrate that
there was purpose separate from the testamentary scheme
3. Questions regarding validity of these instruments was validated in the Uniform
Testamentary Additions to Trust Act (UTATA), which has been incorporated in every
jurisdiction and is incorporated into the UPC
4. UPC 2-511(a) A will may validly devise property into an established trust or into
a trust to be established either during the testators life or at the testators death if the
trust is identified in the testators will
i. UPC 2-511(b) Property devised to such a trust is held according to the terms
of the trust document including any amendments thereto after the testators death
ii. UPC 2-511(c) A revocation/termination of the trust before the testators death
causes the devise to lapse
5. Clymer v. Mayo (Mass. 1985) [45 CB 313]: Wife creates trust with husband as
beneficiary, then pour-over will. They then get divorced. Wife dies. Rule: Although
state statute only revokes ex-spouses share of will, a pour-over trust of the kind
CONSTRUCTION OF WILLS
I. MISTAKEN OR AMBIGUOUS LANGUAGE IN WILLS
A. Introduction
1. Beneficiarys failure to survive testator means that gift fails (it lapses) unless the
testator specifically provides otherwise, with this treatment at common law:
i. Specific or general (money) devises enter the residue
ii. Residuary devise with one residuary fails, then the heirs take by intestacy (as if
there were no residuary clause)
iii. Residuary devise with multiple residuary takers and only one share fails, only that
share enters intestacy (no residue of a residue rule)
iv. If one member of a class to whom a devise is given predeceases, remaining
members of the class share the lapsed devise (it doesnt enter residue)
v. Void devise (e.g., devise to a pet) same rules as for lapsed devises
2. Estate of Russell (Cal. 1968) [48 CB 388]: Testator left bulk of estate to her caretaker
and her dog. Contestant argues that 1/2 the gift to dog is void and thus should pass by
intestacy of law to heirs. Rule: Theres no ambiguity that 1/2 the estate was left to
the dog, and as a void gift, the dogs share passes by intestacy to the heirs.
i. Appears way out of line with testator intent as intent was to provide for dog
ii. Testator clearly didnt want to benefit heirs b/c he had already left two small
specific gifts to these heirs, i.e., theyd already been provided for under the will
iii. If court had rejected no-residue-of-a-residue rule, the dogs 1/2 couldve reentered
the residue where it wouldve passed to the caretaker
3. UPC 2-604(b) Rejects the no-residue-of-a-residue rule so that any failed share of
the residue reenters the residue (although most well-drafted wills already do this)
4. Lapse and nonprobate assets
i. POD accounts beneficiary does not have to survive benefactor, although UPC
6-212, 6-307 changes this for POD bank accounts and brokerage accounts
ii. Revocable trusts No requirement of survivorship on the part of beneficiary w/r/t
to a remainder of the trust
B. Antilapse statutes
1. Antilapse statutes dont prevent a lapse, but rather substitute other takers for the
lapsed gift, typically requiring particular relationship between the lapsed taker and the
testator and that the lapsed taker have survivors (default rule so testator can avoid it)
2. UPC 2-605 If devisee is a grandparent or lineal descendant of grandparent of
testator is dead at time of will execution (a void gift) or fails to survive testator (or
treated as if he predeceased testator) (a lapsed gift) issue of deceased devisee who
survive by 120 hours take place of decease devisee
i. If all of same degree of kinship to the devisee, they take equally
ii. If of unequal degree of kinship, those more remote degree take by representation
iii. One who is devisee of class gift, if he had survived testator, is treated as devisee
for purposes of this statute regardless of whether death occurs before or after will
execution (i.e., a void gift to a class member can trigger the antilapse statute)
iv. Antilapse statute applies if theres disclaimer, simultaneous death, or slayer stat.
v. UPC 2-603 Use of words of survivorship are not, in the absence of additional
evidence, sufficient indication of intent contrary to application of antilapse statute
3. Allen v. Talley (Tex. Ct. App. 1997) [49 CB 393]: Will gave to my living brothers and
sister to share and share alike. Issue is whether this is survivorship language so as
to avoid applicability of antilapse statute. Rule: These are words of survivorship as
to construe them as descriptive (i.e., not words of survivorship) b/c law already
does not recognize devise to a person dead at the time of wills execution. Anti-
lapse statutes does not apply and only siblings who have not predeceased testator
may take.
i. UPC 2-603 rejects the majority rule of this case that use of survivorship words
is a signal that testator wants to preclude application of antilapse statute
4. Best way to avoid predecease/lapse problem is to provide substitute takers
5. Lapsed versus void gifts and treatment under antilapse statutes
i. A lapsed gift occurs if taker was alive at time of execution of will, but predeceases
testator all antilapse statutes cover this situation
ii. A void gift occurs if the taker is dead at the time of will execution (its void b/c
you cant devise to a person already dead) some antilapse statutes, including
UPC 2-605, apply to this situation
C. Class gifts
1. Class gifts do not lapse and thus do not trigger antilapse statute
i. Class takers are determined at the time of the wills probate so that if there are any
living members of the class, none of the class gift lapses
ii. Class gift arises if testator uses language demonstrating that he is group-minded
(but note that if you name specific people, youre going to be treated as if youre
making specific gifts)
2. Dawson v. Yucus (Ill. App. Ct. 1968) [49 CB 400]: Desiring to transfer farmland she
inherited from her husbands side of the family back to that side of the family, testator
provided that two nephews on that side would each get 1/2 of her farmland. One of
the nephews predeceases, and the other argues class gift so it doesnt lapse. Rule:
A. Ademption by extinction
1. Bright line doctrine that provides that if the property devised by a specific gift is not
owned by the testator at the time of her death, the gift is adeemed by extinction
i. 1969 UPC 2-608 adopted the identity theory of ademption
ii. UPC 2-606 Adopts the intent theory of ademption but creates a presumption
in favor of ademption by placing burden on party seeking to avoid ademption to
show that ademption is inconsistent with testators intent
a. UPC 2-606(a)(5) Specific devisee has right to proceeds of specific
adeemed gift
b. Also contains a set of exceptions borrowed from the 1969 UPC for what
devisee can get in light of adeemed gift: remaining balance on purchase price
of specific property sold, condemnation award for specific property, insurance
for specific property
2. Ademption does not apply to general, demonstrative, or residual devises
i. Specific devise: Blackacre to X
ii. General devise: $10,000 to X
iii. Demonstrative devise: A general devise payable from a specific source ($10,000
to X to be paid from sale of GM stock), but if the specific source is not there or
insufficient to satisfy the devise, other assets must be sold to satisfy it
iv. Residual devise: Rest and remainder to X
3. Two theories of what happens after an ademption
i. Traditional identity theory: If specifically devised item is not in testators estate,
the gift is extinguished
ii. Intent theory of ademption: If gift is adeemed, beneficiary may be entitled to cash
value of item if beneficiary can show this is what the testator wanted
iii. Wasserman v. Cohen (Mass. 1993) [51 CB 406]: Trust left apartment building to
plaintiff as remainder, but apartment building was not in trust at time of settlors
death (it had never been conveyed to the trust). Plaintiff sought claim to proceeds
of apartment sale, which had been put into the trust. Rule: Although this
involves a trust, rather than a specific devise in a will, ademption by
extinction applies to this nonprobate asset. Because it was the testator that
failed to convey the apartment to the trust, court will not go behind that to
divine intention.
A. Parties to a trust
1. The settlor is the person who creates the trust
i. Inter vivos trust is created during settlors life, while a testamentary trust is
created by the settlors will
ii. Can be created either by declaration of trust (where settlor declares that he holds
certain property in trust) or deed of trust (conveyance to a 3d-party trustee)
iii. One person can be both the settlor and the beneficiary of the trust (but the trustee
must owe duties to someone other than herself, i.e., there has to be another taker
somewhere along the line, or the trust fails leaving the settlor with absolute title)
2. The trustee is the legal titleholder of the trust property
i. If settlor intends to create a trust but fails to name a trustee, the court will appoint
a trustee to carry out the trust (trust never fails for want of a trustee)
ii. Trustee owes the beneficiary fiduciary duties of loyalty, prudence, and a host of
subsidiary duties (the duty of prudence is an objective standard)
3. The beneficiaries hold equitable interests and can enforce rights as against the trustee
for breach of fiduciary duty
i. Beneficiaries can recover wrongfully distributed trust property (unless the
property comes into the hands of a bona fide purchaser for value)
ii. Breach of fiduciary duty is a personal liability against the trustee
4. Its possible for one person to be settlor, trustee, and beneficiary (although you would
need at least one other beneficiary in order for the trust not to fail)
5. Trust is especially useful b/c it allows settlor to affect behavior of beneficiaries
6. Trusts vs. resulting trusts vs. debts
i. Trust involves specific property separate from the trustees funds, while a debt
entails commingling of the debt with debtors other property and remains debtors
property until creditor can demand it
ii. Resulting trust is another form of equitable trust that comes into play only so long
as its necessary to transfer ownership from the party holding the property to the
party to whom the property should belong; arises in two situations:
a. Where express trust fails or makes an incomplete disposition
b. Where one person pays purchase price for property and causes title to be taken
in the name of another person who is not natural object of purchasers bounty
B. Creation of a trust
1. Intent to create a trust
i. Words trust or trustee need not be used as the sole question is whether the
grantor manifested an intention to create a trust relationship
B. Spendthrift trusts
1. Uniquely American invention that pays tribute to the dead hand by putting trust
beyond reach of beneficiarys creditors on the grounds that by having a spendthrift
clause, settlor intended to keep the money safe from the beneficiarys creditors
2. Scheffel v. Krueger (N.H. 2001) [66 CB 549]: Defendant sexually assaulted plaintiffs
minor child. Plaintiff got judgment and sought to assert it against spendthrift trust
established for defendants benefit. Rule: Spendthrift trusts are generally
inalienable unless they are self-settled or funded by a fraudulent transfer. The
existence of these statutory exceptions suggests that legislature did not intend to
craft an exception for tort creditors.
i. Almost all states recognize these two limited exceptions for spendthrift trusts
ii. Some states statutes do recognize an exception for tort creditor trying to satisfy a
tort judgment against a spendthrift trust
3. Shelley v. Shelley (Ore. 1960) [67 CB 550]: Testamentary trust w/Grant Shelley as
beneficiary, mandatory income distribution, and spendthrift provision. Also had
provision where trustee could pay out corpus for unusual and extraordinary expenses
incurred in support and care of Grant or his children. Grant disappears, leaving two
wives and children by both. They seek to satisfy spousal and child support against
the trust. Rule: B/c income is mandatory, judgments can be satisfied from that.
The spendthrift provision, however, is sufficient to protect the spendthrift corpus
from the judgments. But b/c trustee has discretion to distribute corpus in
emergency situation, the support of children needed here b/c Grant disappeared
qualifies, and thus trustees must make distribution to satisfy child support
judgments.
A. Introduction
B. Trust modification
1. In re Trust of Stuchell (Ore. Ct. App. 1990) [70 CB 574]: Grandfather establishes
testamentary trust and petitioner is sole remaining beneficiary. Trust will terminate
on death of last income beneficiary and remainder distributed to petitioners lineal
descendants. Petitioner sought to modify trust to prevent the reversionary taker from
being disqualified from public assistance. Rule: There is no common law or
statutory basis for the modification requested and the modification cant be
made simply b/c its more advantageous to beneficiaries than compliance with
the direction.
2. One way to draft around modification problems is to give the lifetime beneficiary a
special power of appointment to designate or change the reversionary takers
3. You can also make use of trust protectors who have the power to modify the trust in
order to serve the changing needs of the beneficiaries particularly with
intergenerational trusts where there may be changes not anticipated by the settlor
i. Although not clear that fiduciary duties keep the trust protector in check, it would
seem impossible if the trust protector didnt owe duties to beneficiary
ii. If allowed, a trust protector typically needs court approval to change the trust,
which always opens doors for a disgruntled beneficiary to object