T & E Outline (by Assignments)

Trusts & Estates Outline Professor Medlin Table of Contents Assignment 1: Policies, Dead Hand Control.......................................................................1 Assignment 2: Ethics, Probate Process................................................................................1 Assignment 3: Intestacy.......................................................................................................3 Assignment 4: Intestacy, Illegitimates, Adopteds................................................................5 Assignment 5: Prohibited Bs, Transfer of Shares................................................................6 Assignment 6: Testacy, Mental Capacity............................................................................9 Assignment 7: Mental Capacity, Fraud.............................................................................11 Assignment 8: Requirements of Execution........................................................................13 Assignment 9: Method of Execution.................................................................................16 Assignment 10: Mistake, Holographic Wills, Conditional Wills......................................17 Assignment 11: Revocation...............................................................................................18 Assignment 12: Dependent Relative Revocation, Revival, Operation of Law..................19 Assignment 13: Integration, Republication, Acts of Independent Significance................22 Assignment 14: Contracts re Succession...........................................................................23 Assignment 15: P-O-D, Joint Interests, Deeds, Gifts of Personalty..................................25 Assignment 16: Planning for Incapacity............................................................................28 Assignment 17: Extrinsic Evidence...................................................................................28 Assignment 18: Lapse, Anti-Lapse....................................................................................29 Assignment 19: Ademption, Abatement, Satisfaction.......................................................30 Assignment 20: Homestead, Support, Dower, Elective Share...........................................32 Assignment 21: Trusts Introduction...................................................................................34 Assignment 22: Creation, Intent, Property........................................................................35 Assignment 23: Testamentary, Revocable.........................................................................36 Assignment 24: Pour-over.................................................................................................38 Assignment 25: Discretionary, Creditor’s Rights..............................................................39 Assignment 26: Modification, Termination.......................................................................41 Assignment 27: Charitable Trusts......................................................................................43 Assignment 28: Cy pres.....................................................................................................43 Assignment 29: Powers of Appointment...........................................................................44 Assignment 31: Future Interests........................................................................................46 Assignment 33: Class Gifts, Class closing........................................................................49 Assignment 34: Rule against Perpetuities..........................................................................51

Trusts & Estates Outline

Trusts & Estates Outline Assignment 1: Policies, Dead Hand Control Shapira (Decedent’s will says son must marry Jewish woman to inherit $) o P arg: condition violates right to marry (14 th Amendment) o Ct. distinguishes: issue here is not right to marry but right to restrict devise o Ct was trying to draw the line b/w what it is permissible for the “Dead Hand” to control and what it is not permissible for the “Dead “De ad Hand” to control Rule: No right to inherit. o o Rule: Total restraint on marriage is contrary to public policy. Rule: Partial restraint on marriage, imposing a reasonable condition, is valid. o o Rule: Cts won’t enforce a condition/restriction in a will if it is illegal, deleterious to a family member, etc.; e.g. – if the father’s will said that his son would only inherit if he divorced his Jewish wife, then the ct probably wouldn’t enforce it Cts. usually won’t allow devise w/ conditions b/c dead person doesn’t suffer the consequences and can’t change the dead person’s mind. Assignment 2: Ethics, Probate Process Ethics In malpractice case, there are usually two causes of action: 1. Tort (Negligence) 2. Breac each of of K Simpson (Lawyer screws up will by leaving an ambiguous term; Bs sue him; tries to assert privity defense) Rule: Drafting atty had duty of reasonable care to intended Bs (who were 3 rd o parties) when drafting T’s will; intended Bs are the only ones who will have any interest in suing the atty b/c the client is now dead This is the exception to the privity defense. Foreseeability is the real issue. o In this case, atty’s notes used as extrinsic evidence to show that T had different intent. Should we stop notetaking? Perhaps attys should be more cautious when taking notes. Task of the Probate Court: determine the intent of T as expressed in the o language of the will Ct. distinguishes construed intent from actual intent; ruled that probate ct was trying to construe the testator’s intent and this is not what they should be doing PC can’t review extrinsic evidence??? Hotz v. Minyard (Family lawyer in conundrum when brother and sister begin feud; Conflicts of Interest problem) 1


Trusts & Estates Outline Assignment 1: Policies, Dead Hand Control Shapira (Decedent’s will says son must marry Jewish woman to inherit $) o P arg: condition violates right to marry (14 th Amendment) o Ct. distinguishes: issue here is not right to marry but right to restrict devise o Ct was trying to draw the line b/w what it is permissible for the “Dead Hand” to control and what it is not permissible for the “Dead “De ad Hand” to control Rule: No right to inherit. o o Rule: Total restraint on marriage is contrary to public policy. Rule: Partial restraint on marriage, imposing a reasonable condition, is valid. o o Rule: Cts won’t enforce a condition/restriction in a will if it is illegal, deleterious to a family member, etc.; e.g. – if the father’s will said that his son would only inherit if he divorced his Jewish wife, then the ct probably wouldn’t enforce it Cts. usually won’t allow devise w/ conditions b/c dead person doesn’t suffer the consequences and can’t change the dead person’s mind. Assignment 2: Ethics, Probate Process Ethics In malpractice case, there are usually two causes of action: 1. Tort (Negligence) 2. Breac each of of K Simpson (Lawyer screws up will by leaving an ambiguous term; Bs sue him; tries to assert privity defense) Rule: Drafting atty had duty of reasonable care to intended Bs (who were 3 rd o parties) when drafting T’s will; intended Bs are the only ones who will have any interest in suing the atty b/c the client is now dead This is the exception to the privity defense. Foreseeability is the real issue. o In this case, atty’s notes used as extrinsic evidence to show that T had different intent. Should we stop notetaking? Perhaps attys should be more cautious when taking notes. Task of the Probate Court: determine the intent of T as expressed in the o language of the will Ct. distinguishes construed intent from actual intent; ruled that probate ct was trying to construe the testator’s intent and this is not what they should be doing PC can’t review extrinsic evidence??? Hotz v. Minyard (Family lawyer in conundrum when brother and sister begin feud; Conflicts of Interest problem) 1

Trusts & Estates Outline o

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This case illustrates the problem of representing multiple parties in same transaction Ethics rules do not provide much bright line guidance for transactional lawyers I.e. Rules don’t say when not to represent H & W in same transaction Problem: expensive for H & W to have separate lawyers Conflict arises when representation of one causes impairment in ability to represent the other

Permissible Conflict of Interest: 1. Reasonably Reasonably believe believe that that you you can adequately adequately represent represent both 2. Disclose to the clients the possible problems 3. Obtain the clients informed consent Confidentiality: keep confidential what the client tells you and what you learn from your representation of the client Ethical confidentiality ≠ evidentiary confidentiality co nfidentiality Problem: H & W come to you for will drafting. After initial meeting in which reciprocal wills are drafted, H calls you and changes his will to exclude W from ½ of his estate, giving it to his mistress. What do you do? Answer: Best solution is to withdraw from representation of both. To avoid the situation in the problem above, give both clients an engagement letter at the beginning of the representation; the letter should say either “I agree to not tell H what W says, and vice versa” ver sa” or “I agree that all info given to me from either H or W can be disclosed to the other party;” 2 nd way is probably the best way to do this; engagement letter should also include something saying that if there is a conflict of interest then you will withdraw from representing both H and W Two Approaches: 1. Priestly: Priestly: get permissi permission on to keep confidenti confidential al info obtained obtained from from one person person w/o disclosing to the other 2. Civ: All info info is is open, free disclos disclosure ure to the other other Upon completion of estate plan, send termination letter which officially signifies the end of the engagement. This ensures that the estate planner does not owe a continuing duty to the client SCPC § 1-201: 1-201 : gives the general definitions in the SCPC

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Assignment 3: Intestacy Intestacy: deals w/ property of a person who either dies w/o a will, when the beneficiary or beneficiaries of a will predecease the testator, or when a will does not effectively dispose of all of the testator’s property (happens a lot when a will doesn’t contain a residuary clause, clause , although this is actually known as partial intestacy) Rule: if person dies intestate, then the statute of descent and distribution governs Personal Property: governed by decedent’s domicile Real Property: governed by state in which it is located Probate Property: passes by will or intestacy Non-probate Property: does not pass by will or intestacy Examples: life insurance, joint tenancy w/ right of survivorship Table of Consanguinity (p. 92 text) Two ways to measure closeness of relationship: 1. Parentela Method: estate passes first to decedent’s issue; if none, then to decedent’s parent’s issue; if none, then to grandparents’ issue, then to great-grandparents’ issue, etc. until heirs found 2. Degree-of-rela Degree-of-relations tionship hip Method: Method: estate estate passes passes to closest closest of kin, kin, counting counting degrees of kinship Policy: try to avoid inheritance by remote heirs (“laughing heirs”) when creating intestacy statute SCPC § 2-101 to 2-109 South Carolina’s intestacy statute (beginning on p.42 of Supplement) If there is no surviving issue, spouse gets entire intestate estate; if there is surviving issue, spouse gets ½ of the intestate estate

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Distinction b/w representation under old and new Probate Code:

Intestate dead

C1 (1/2) dead

GC1 (1/4)

C2 (1/2) dead

GC2 (1/4)

GC3 (1/2)

Figure 1: Old Code used Strict Per Stirpes

Strict Per Stirpes divides at every generational g enerational level whether there is a living heir in the level or not.

Intestate dead

C1 (1/2) dead

GC1 (1/3)

C2 (1/2) dead

GC2 (1/3)

GC3 (1/3)

Figure 2: New Codes uses u ses Modern Per Stirpes

Modern Per Stirpes divides at the generational level only if there is a living heir. If no living heir is present, then representation is used only to bring the surviving descendents of deceased descendents up to the level where a descendent is alive; see pp.82-83 of Supp Both versions of the per stirpes method are on pp.74 & 75 of textbook; also see pp.78 & 79 and SCPC § 62-2-103

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Assignment 4: Intestacy, Illegitimates, Adopteds Half-bloods: siblings who share one parent but not both Treated as whole-blood under the Probate Code § 2-107 Afterborn Heirs SCPC §2-108: Issue of the decedent (but no other persons) conceived b/f the decedent’s death but born w/in 10 months thereafter inherit as if they were born during the lifetime of the decedent; doesn’t address the possibility of in vitro kids or things of that nature Adopteds Adoption Rule: Adopted child treated as natural child for inheritance purposes. Once adopted, adopted child doesn’t take through natural parents § 2-109 Step-child Adoption Exception: adopted step-child can inherit from his natural relatives, but the natural relatives (who gave up their rights to the step-parent) can’t inherit from him. Stranger to Adoption Rule: the way this rule operates is that if A wills gift to his sister’s children, S’s adopted children are not included b/c A is a “stranger” to the adoption Illegitimates Progress of law: 1. CL: illegitimates can’t inherit 2. Then, illegitimates can inherit through mom. 3. Then, illegitimates can inherit through dad if paternity is proven. Legitimizing Factors: 1. most common example: parents marry after the child is born; can be legitimized even if the parents attempted to marry and failed for some reason 2. § 2-109: follows modern trend by allowing inheritance from mother and from putative father if proven by adjudication 1 (not by acknowledgment); adjudication must be commenced b/f the father dies, w/in 8 months of the father’s death, or 6 months after the initial; illegitimate child has the burden of proof of proving that the testator is his/her biological father; must show this by a preponderance of the evidence; the burden is increased if the illegitimate child waits until after the father dies to initiate legal proceedings but the statute doesn’t say by how much; a putative father may not inherit from a deceased illegitimate child unless he has openly acknowledged the child as his own and provided support for the child

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In SC, family court has jurisdiction to determine paternity. Usu. paternity is proven by DNA evidence.

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Guardian: takes care of personal/physical needs of someone who can’t (like minor child or incapacitated person); a parent is automatically the guardian of their minor children unless guardianship is terminated by a ct Conservator 2: takes care of property or financial affairs of someone who can’t (like minor child or incapacitated person); a parent is not automatically the conservator of their minor children Example of use: Litigation by minor. Need conservator to receive settlement or damages award. Uniform Gifts to Minors Act Vehicle to transfer property to minors w/o conservator; the transferee must choose a custodian who is to make certain decisions regarding the acct; custodian is not a trustee but is a fiduciary UGMA adult age is 21 Assignment 5: Prohibited Bs, Transfer of Shares Prohibited Bs In re Estate of Mahoney (W kills H. Heirs are W and H’s parents.) o Issue: Can killer inherit from their victim’s estate? o Holding: Legal title passes to the killer but killer is constructive trustee for heir or next of kin of the decedent. o Rationale: legally correct w/ an equitable twist. Exceptions: o Doesn’t apply if killer insane. Doesn’t apply to property the killer already has a vested interest in. For rule purposes, o Murder ≈ voluntary manslaughter Voluntary manslaughter ≠ involuntary manslaughter SCPC § 2-803 Rule applies for testacy, intestacy, and non-probate transfers; the “slayer” is treated as having pre-deceased the victim so they will not take Murder and voluntary manslaughter fall under 2-803; involuntary manslaughter does not Conviction is conclusive proof on the civil side Rationale: Criminal burden of proof greater than civil burden. o However, if there is anything else going on (e.g. – guilty plea, nolo contendre, verdict of not guilty, etc) then the facts have to be re-litigated in a civil trial and the burden of proof is preponderance of the evidence Subsection (g) deals with murder-suicide scenario; here, the killer is viewed as having predeceased the victim if they die w/in 120 hrs after 2

Usu. court appointed.

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feloniously and intentionally killing the decedent; killer cannot inherit from the victim but the victim does still inherit from the killer Transfer of Shares Expectancy If the person you expect to die intestate is still living, then you are only an o expectant heir or “heir apparent” Heir apparent has expectancy (not a legal interest); heir apparent may not o take for 2 reasons: the person you expect to inherit from creates or amends a will that cuts you out or you predecease that person Expectancy is non-transferable o Exception: K to transfer expectancy  May be enforceable in equity  Must be fair Release o Example: Son gives up inheritance for $ now. o This is enforceable. Advancement 3 A partial release: rather than giving up all rights, the expected heir is charged o w the transfer o Def: A gift that the intestate intends to be offset against death time transfers. o § 2-110: need writing to prove advancement Hotchpot: method by which the advancement is accounted for in the estate o and then distributed (not a requirement to participate) Example of Hotchpot: o I advances $30 to C1. I dies with a probate estate of $120

C1 C2 C3 o o

o o o

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Advancement 30 0 0

Hotchpot 120 (PE) + 30 (advance.) =150

End 20 50 50

What if advancement is greater than the expected heir’s share? Must refund. What if “advanced” child predeceases parent? The advancement is deducted from the shares of such child’s descendants if other children of parent survive. CL Burden: child has to establish that gift was absolute, not an advancement Modern Burden: gift presumed not an advancement unless other intent shown Waiver: other expected heirs can waive the requirement that the advancement go into the hotchpot

The analog concept to testacy is satisfaction.

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Uniform Simultaneous Death Act (SCPC §§62-1-501, et seq) Applies when we can’t determine whether the beneficiary predeceased the • testator or vice versa; applies to testacies, intestacies, and non-probate transfers In a simultaneous death situation (e.g. – plane crash), we presume that • the beneficiary predeceased the testator • When you have 2 people who are beneficiaries under each other’s wills (e.g. – husband and wife die in a plane crash) , you assume that husband predeceases wife for the purposes of wife’s will and that wife predeceases husband for the purposes of husband’s will • Purpose: to have estate pass to alternative living Bs (avoids the property simply transferring back to the estate) Disclaimer Def: a renunciation of a gift o Recognized by CL or statute that a recipient of a gift, received during grantee’s life or at grantee’s death, may refuse to accept, either in whole or in part o Operation: a legal disclaimant is treated as never owning the gift Danger: disclaimant cannot control where the property goes, so if a o beneficiary goes thru w/ disclaimer, it is definitely an excellent idea to know where the property is gonna go; failure to properly advise a client on the effect of a disclaimer  malpractice o Practical Reason for Disclaimers: Tax (§ 2518 of IRS Code)  Transfer tax on gifts  Estate planners look at avoiding tax  Every donative nonexempt gift is taxable • Marital gifts and charitable gifts are exempt Avoid creditors o Practical Advice: when disclaiming, need to consult both tax & property issues SCPC § 2-801 for property IRC § 2518 for tax Pate v. Ford (SC case in Supp) o Facts: A mother’s will creates two trusts. Trust 1: C1 is life beneficiary, then to GCs Trust 2: C2 is life beneficiary, then to GCs When C1 or C2 die, their share goes into a community pot that will be split evenly amongst ALL the then living GCs C1 has children and C2 doesn’t at the time of their mother’s death, so C1 disclaims and his children get his share. o Issue: Was the disclaimer effective in accelerating the remainder interest? o Holding: Yes, the disclaimer was effective in accelerating the remainder interest.

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Rationale: Disclaimers are guided by § 2-801. A life interest is disclaimable; a beneficiary may disclaim; disclaimant is treated as if predeceased the decedent; therefore, the interest devolves on the remainderman o State of Disclaimer Law in SC: disclaimer must satisfy property and tax law US Sup Ct decision on disclaimer Facts: disclaimant disclaims to avoid federal tax lien o Holding: can’t do o o Rationale: Right to disclaim is itself a right to which the lien can attach o HYPO: Disclaimant, while treated as deceased for purposes of the gift is still treated as living for purposes of dividing the gift; e.g. – a woman dies w/ 1 son who is living (C1) and another who predeceased her (C2); C1 has 2 children (GC1 & GC2) and C2 has one kid (GC3); C1 believes that he could disclaim the inheritance and all GCs could receive 1/3 of the estate; however, since C1 is treated as alive for purposes of dividing the estate, C2’s kid will get ½ of the estate and C1’s children will get ¼ each (See chart on next pg) Rationale: Can’t manipulate the rules of representation by disclaimer. § 2-103 and 2-106. o

Intestate dead C2 (1/2) Predeceased testate

C1 (1/2) disclaims

GC1 (1/4)

GC2 (1/4)

GC3 (1/2)

§ 2-114: deals w/ deadbeat parent taking from their deceased child, give probate judge wide discretion Assignment 6: Testacy, Mental Capacity Elements of Mental Capacity: 1. Ability to know what you own 2. Ability to know who property would go to (“natural objects of your bounty”) 3. Ability to know you are making a will What is the standard? Ability to know not actual knowledge Incompetency under conservatorship ≠ incapacity to make will o

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Trusts & Estates Outline o o

Capacity to make will less than competency to make K or gift Capacity to make will greater than capacity to marry

Rationale for Mental Capacity Requirement: 1. will should represent T’s intent 2. protect T’s family 3. protect T from exploitation 4. legitimacy from rational decisions In re Estate of Wright (testimony from multiple Ws that Wright was crazy and frequently acted erratically) 1. Ct ruled that Wright was competent to make a will; he may have been eccentric but he met the three prongs of the test; also the Ws in this case all stood to gain something if Wright was deemed incompetent and therefore the will invalid In re Strittmater (NOW member hates men and wills estate to NOW) Will contested by cousins. o This is more of an insane delusion case b/c it dealt w/ whether her hatred of o men was an insane delusion or not; she may have had a valid reason for hating men which would mean that this is not an insane delusion at all o Judge sets aside the will likely b/c he disagrees w/ T’s feminist views but holds that she has an “insane delusion” Chronic Incapacity o Burden shifts to proponent who must show that the will was executed during a lucid moment Insane Delusion o Def: false conception of reality to which the T adheres against all evidence & reason to the contrary SC: not clear that insane delusion is a separate ground to attack a will o Majority Rule: not reasonable according to the facts; person attacking the will o must prove the insane delusion and they must prove that there is a nexus b/w the insane delusion and the will that they are challenging In re Honigman (H thinks W is unfaithful so he cuts her out of his will) 1. Ct found no basis for H’s insane delusion and overturned his will 2. When this case was decided, the overturning of H’s will didn’t do much; it only gave his wife a remainder in property that she would’ve only had a life estate in under the will; however, in today’s world, overturning H’s will would have had disastrous effects on his estate

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Assignment 7: Mental Capacity, Fraud Undue Influence o Def: coercion or coercing someone to do what he doesn’t desire o Test: Look at coercion Look at testator (Susceptible to coercion?) Look at perpetrator (Motive, Opportunity, and Intention to coerce?) Look at disposition itself (Is disposition a result of the coercion?) Then weigh The law is malleable in this area and is fact specific. o Burden of proof: on contestant o Proof may be entirely circumstantial/inferential Estate of Lakatosh (p.159 in textbook is a classic example of undue influence) Lipper v. Weslow (T disinherits her son’s widow and kids, gives to C2 and C3) o See chart next page o Problems: Sophie’s son is drafting atty, B, and Independent Executor. This certainly has the appearance of undue influence; he also had a large amount of contact w/ his mother and he received a larger sum of $ than anyone else under the will that he drafted Additionally, there is evidence that Sophie didn’t read the will before signing. B didn’t get along with his half-brother and hated his half-bro’s widow, which perhaps gives him a motive to disinherit the GCs. Ct ruled that, although there were many suspicious circumstances surrounding the creation of the will, there was no undue influence here

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Sophie Block (marries below)

H1 (dead) C1 (dead)

H2 (dead)

C2 (∆)

H3 (dead)

C3 (∆

GC1 (π)

GC 2 (π)

GC 3 (π)

Figure 3: the parties in Lipper v. Weslow

No-Contest Clause o Majority Rule: enforceable unless probable cause for contest § 3-905: codifies enforceability of no-contest clauses o unenforceable if probable cause exists for contest o Cts. can avoid enforcement by saying not a contest by some other issue Precaution: get declaratory judgment on whether contest will trigger the clause Bequest to Attys o Presumption of undue influence when atty drafter receives legacy Rebut w/ clear and convincing evidence May be unethical o In re Will of Moses (T wills to atty-lover) o Sister attacks on grounds of undue influence. o T and atty-B had two relationships: a/c relationship and personal romantic relationship Ct. indicates that undue influence is possible where atty isn’t the drafter. o Issue: was presumption overcome by independent counsel? o Holding: No, b/c independent counsel gave no substantive advice but merely o was scrivener; it appears that the ct really didn’t approve of the relationship or atty-B’s behavior; the reasons they gave for holding the will invalid were pretty arbitrary Dissent: o

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focuses on T’s competency (T was competent although she was an alcoholic), evidence that atty-B had no knowledge of the will’s existence, and witness testimony of 3 rd party atty Fraud o Two Types: Fraud in the inducement: occurs when a person misrepresents facts thereby causing the testator to execute a will to include particular provisions in the wrongdoer’s favor or to refrain from executing or revoking a will Fraud in the execution: misrepresents character or contents of the instrument signed by T, which does not in fact carry out T’s intent Duress: category created by textbook authors that is somewhere b/w undue influence and fraud Test: o T deceived By misrepresentation But for misrepresentation T wouldn’t have done what was done Misrepresentation: o Intent to deceive Purpose: influence the testamentary disposition Tortious Interference w/ Expectancy o Hot topic in estate planning o Focus not on mental capacity of T but on action of perpetrator o Elements: the interference involved conduct tortious in itself, such as fraud, duress, or undue influence; theory cannot be used when it is based on the testator’s mental incapacity Goal: seeks to recover tort damages from a 3 rd party for tortious interference o Atty fees & Punitives may be recoverable o Not available in SC But Court of Appeals says it looks like recognized economic torts Other Js o Can’t bring until probate actions exhausted Res judicata, collateral estoppel issues may arise Assignment 8: Requirements of Execution § 2-502 o Requirements for a Valid will (assuming T is mentally competent) Writing Signed by Testator or Proxy  Proxy Requirements: • In T’s presence • At T’s direction

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Signed by 2 Witnesses  Witness Requirements: W must observe • Signing or • Acknowledgement of signature or Acknowledgement of will •  Three Functions of Ws Observe • • Sign • Testify that T is mentally competent (CL gloss) Problems w/ § 2-502 No timing requirement W doesn’t have to know what he is observing No simultaneity requirement

Rationale for Execution Requirement: 1. To Protect T’s intent: it’s a lot harder to perpetrate a fraud w/ a lot of people w/o that fraud being discovered 2. Evidentiary Function: some of the requirements increase reliability of proof 3. Channeling Function: compliance w/ requirements ensures enforceability and is judicially efficient, therefore it encourages people to go to an atty to get their wills made 4. Ritualistic: demonstrates the importance and seriousness of making a will to the person having the will made In re Groffman (W unhappy w/ H’s will so contests based on execution) Rule: Will not valid unless o Writing Signed by T at end or foot Acknowledged by two Ws present at same time (SC statute doesn’t require this but it is still a good idea to do) o Paradoxical Result: very reqs calculated to ensure intent actually defeat T’s intent; judge said that he had no doubt in his mind that the will reflected the intent of the testator but still held the will invalid b/c he was bound by formalities Rationale: allow this anomaly b/c long-term benefit outweighs short-term detriment Burden of Proof: on contestant as to execution reqs and mental capacity Witness Presence Two Tests: o Line of Sight Test: W doesn’t have to actually see creation of the will, but must be able to see it  Blind Man Exception

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Conscious Presence Test: W must comprehend that T is signing through sight, hearing, or general consciousness of events Any mark on the will intended to be the W’s signature is considered the W’s signature and a W can sign a will by proxy also SC Law § 2-502: only mentions presence when speaking of proxy but implicitly requires presence for observation of the will signing SC CL gloss suggests we use Conscious Presence Test

§ 2-504: Disinterested Witnesses o General Rule: W must be credible (this is fact specific inquiry) o Presumption: interested W not credible b/c will profit from testimony § 2-504 operates as a purging statute by removing the interest of the o interested W, thereby making him a disinterested W; it takes away the gift to the W in the will Rationale: the will is valid by making the interested W a disinterested W by taking away the gift. This ensures that T’s intent is carried out as fully as possible. o Application: Compare the interested W’s share under intestacy w/ his testate share. Take away the profits (the amount of testate share that exceeds the intestate share) and W becomes disinterested. Ex. 1: Will gives 1000 to IW. IW intestate share is 1000. Therefore, IW is DW. Ex. 2: Will gives 1000 to IW. IW intestate share is 500. Therefore, IW is purged of 500 to make him DW. Ex. 3: Will gives 1000 to IW. IW intestate share is 0. Therefore, IW is purged of entire 1000 to make him DW. Purging does not apply to appointed positions (Executor, Trustee, etc.). o Doctrine of Substantial Compliance (Ranney case) o Although not properly executed the will is treated as so if there is substantial compliance w/ the regs; ct requires clear & convincing evidence of T’s intent also o A rule of function: use to remove procedural peccadilloes as bar to probate Dispensing Power (Hall case) o Statutory analog to the CL Doctrine of Substantial Compliance Operation: gives court power to validate a doc T intended to be a will even o though formalities not complied with; still need clear and convincing evidence of intent o Professor Langbein argues that dispensing power is preferable to substantial compliance b/c “ courts read in their substantial compliance doctrine a nearmiss standard, ignoring the central issue of whether T’s conduct evidenced testamentary intent” § 2-505: Choice of Law 15


Either/or Test: will valid if executed in compliance w/ § 2-502 at time of execution or T’s death or execution complies w/ law of  situs of execution;  domicile of T at time of execution  domicile of T at death Signature o SC: whatever T intends as his signature is his signature o Some states have requirement that signature be at foot or end of doc o

Publication o Def: declaration of T that the will is his; disclosure of will contents to Ws o SC: no publication req Will does not have to be dated nor does it have to be on paper. Assignment 9: Method of Execution § 2-503: Self-proving Affidavits and Attestation Clauses o Deals w/ later proof not w/ execution o Rationale: once we have an executed will, it can be proven before death by going before a public official o Subsection (a) is a one step process where the will and self proving affidavits are executed at the same time Subsection (b) is a two step process where the self proving affidavits are o executed after the will; can occur on the same day just has to be after the will Attested will can be self-proved after execution by:  Acknowledgement by T before notary,  W testimony, or  W affidavit before notary (self-proving affidavit) o Attestation Clause: clause included in the will that says the Ws witnessed certain things during the execution of the will; this is signed by the Ws; it is most likely malpractice not to include an attestation clause Steps in Execution and Supervising Tips 1. Advise the client 2. Note potential hang-ups 3. Draft will 4. Send draft to T for review 5. Make sure T understands the will 6. Have T and Ws sign/initial & date each page 7. Make sure pages are consecutive 8. Self-proving affidavit/Attestation Clause 9. Make sure Ws present during entire execution ceremony

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Avoiding a Will Contest 1. Have DWs who know T 2. Make sure T is mentally competent (send to doctor) a. Pro: Doctor testimony given more weight b. Con: Exam can be used to infer incompetence 3. Videotape the ceremony a. Pro: compelling statement b. Con: T may not look competent Assignment 10: Mistake, Holographic Wills, Conditional Wills Mistake o Two Types: Mistake in the execution (3 Kinds)  Something is in the will that T didn’t intend to be in the will  T excluded something that he meant to include  There is a mistake as to the entire document itself meaning that the document is not T’s will Mistake in the inducement (e.g. – T leaves nothing to her son b/c she believes he is dead but he really is not dead) o Mistake cases depend on ct’s willingness to admit extrinsic evidence, but most cts reluctant to do so. Construction Stage: cts likely to use extrinsic evidence to fix mistake Qualification/Validation Stage: cts not likely to use extrinsic evidence  Main Determinations: mental capacity and proper execution  Exception: if T makes mistake in signing will, then ct will use extrinsic evidence. o Rule: Cts only refuse to probate a will if the mistake goes to the will itself. Holographic Wills Def: a will handwritten by T and signed by T o No Ws required o Rationale: Ws substituted by T’s handwriting o SC doesn’t recognize holographic wills (unless already declared valid by another state) o What about pre-printed forms? Intent of T still controls Rule: If pre-printed language is mere surplusage, then the will is holographic. Conditional Wills Meant to be valid only if a certain condition occurs o o Rule: not valid if truly conditional Rule: valid if not truly conditional o

17


Distinguish b/w valid will w/ internal conditions

Assignment 11: Revocation §2-506 2 Ways to Revoke o Subsequent writing executed w/ testamentary formalities  Can be total or partial revocation  Can expressly revoke or revoke by inconsistency Physical Act  Burn, tear, cancel, obliterate, destroy  T must intend to revoke  Proxy allowed if T is present and directs  Destruction of original will leads to presumption that T destroyed all duplicates as well  Thompson v. Royall case: T revoked will by having atty write “I revoke” on the will and atty kept copy as a memo; the words didn’t touch any other written part of the will; ct held that this was not a revocation b/c the subsequent writings were not executed according to statute, and b/c they didn’t in any way physically obliterate, mutilate, deface, or cancel any written parts of the will; this holding probably only applies to cancellation but not any of the other physical acts Revocation by Inconsistency o Rule: if subsequent will doesn’t expressly revoke but makes a complete disposition of T’s property, then presumed to revoke prior will by inconsistency; if subsequent will doesn’t make complete disposition, then presume the subsequent will is not revocation but a codicil4. Lost Will o Presumption: presume that lost will was destroyed by T w/ intent to revoke o Rebut by Proving that will properly executed Prove that T didn’t destroy the will 5 Lost will probated if contents proved by clear and convincing evidence o Burden of proof is on the proponent of the lost will Proof: copy, drafting secretary Should attys keep the original will? o Pros: Certain availability 4 5

An amendment to the will. Very difficult to prove.

18


Ensure proper revocation $ on the probate side more profitable than on estate planning side o Cons: May prevent revocation Avoid escrow violations No notification of client’s death Attys should most likely only keep a copy of the will and not the original Duplicate Original Wills o How do we know if the will is a duplicate original? Use language “This is a duplicate original.” But there is really no benefit to using a duplicate original. Assignment 12: Dependent Relative Revocation, Revival, Operation of Law Dependent Relative Revocation Def: if T revokes on mistaken assumption of law or fact, the revocation is o ineffective if T would not have revoked had he known the truth o Analysis6: Is revocation valid? If revocation was made by mistake, what is T’s true intent?  Possible factor: familial relationship, friendship, causes  Ironically, must use extrinsic evidence o If revoked will is closer to T’s intent, then it becomes valid; if intestacy is closer to T’s intent, then T becomes intestate DRR is CL rule, not statutory o Medlin Rule: DRR applies only when there is a physical act revocation o Revival o Only possible fact pattern: Will 1  Will 2 revokes Will 1  T revokes Will 2: Is Will 1 revived? Views: o English View: Will 1 not revoked until Will 2 takes effect (at T’s death). Therefore, Will 1 is “revived.” Majority View: Will 1 revived if T intended; shown thru extrinsic evidence Minority View: No revival unless testamentary formalities satisfied. § 2-508: Revival if clear, cogent & convincing evidence; there is a o presumption against revival o Hypo: Will 1  Will 1 revoked Will 2  Will 2 revoked: Is Will 1 revived? A: No Rule: Revival doesn’t apply when there is no relationship b/w Will 1 and 2. Will 1 must be revoked by Will 2 for revival to take effect. o Hypo: Will 1  Will 1 revoked T going to execute Will 2 but dies: Is Will 1 revived? A: Maybe 6

Must use extrinsic evidence in this analysis.

19


o

Rule: DRR applies if W1 is closer to the testamentary scheme of W2 than intestacy. White v. Wilbanks (SC case) Will 1 is revoked by Will 2; T dies; SCPC becomes effective after T dies; can’t find Will 2; there is only a copy; if we can’t find the original, then we assume that the original was destroyed as an act of revocation; this is a rebuttable presumption but it is very hard to prove The general rule everywhere is that the law in effect at the date of death controls the inheritants’ rights over property as to who owns what There was not enough evidence to overcome the presumption that Will 2 had been revoked B/f the SCPC, there was a presumption that Will 1 is revived as valid; under the SCPC, this presumption is reversed and it is presumed that Will 1 is not revived as valid unless there is clear, cogent, and convincing evidence to the contrary, so T dies intestate The Ct of App gets the right result for the wrong reason; SC Sup Ct gets the wrong result for the wrong reason The SC Sup Ct ignored lots of law to the contrary and applied the statutory rule against the presumption of revival; they applied the new rules to a case where a guy died b/f they were in effect; their decision took a long history of one set of owners of property and replaced them w/ another; this could’ve been disastrous from a property law standpoint The SC Sup Ct continued to make this mistake over and over again A committee later took the word “instrument” out of (b)(5) hoping the SC cts would quit interpreting the statute that way Ct of App has issued subsequent decision suggesting they finally got the law right

Revocation by Operation of Law First Situation: § 2-507: Revocation by divorce statute o Rule of Construction, not Rule of Law; creates a presumption o Hypo: H & W  H Will in favor of W  H & W divorce  H dies: Does W get share of will proceeds? A: No Presumption: divorce ≈ disinherit spouse of share and appointments o Rebutted if will says otherwise o Rationale: even if divorce is amicable, property division occurs during divorce o Problem Period: § 2-507 doesn’t apply while divorce is pending o Problem Application: doesn’t apply to non-probate transfers. See § 7-114. Hypo: H & W  H Will & Life Insurance in favor of W  H & W divorce  H dies: what result?  A: W can’t get probate assets. § 2-507. W can get Life Insurance proceeds. § 7-114. H’s estate may have malpractice action. Second Situation: §2-301: The Omitted Spouse 20


o o

o

o

o

Hypo: T has will  T marries S  T dies survived by S: what result? § 2-301: revokes will to extent necessary to give omitted spouse an intestate share (at least ½); applies to CL spouses too but they have a stricter time limit as to how long they can wait b/f they present their claim Distinguish b/w omitted spouse share and elective share: Omitted spouse share applies to omitted spouses. There are exceptions to § 2-301. Elective share applies to every surviving spouse. There are no exceptions to the elective share. Problem: § 2-301 and Elective Share have different time limits.  Solution: Plead in the alternative to ensure time doesn’t run on you Hypo: T dating G  T will leaves house/car to G  T & G marry  T dies w/o issue: What result? A: G gets entire estate. Rationale: While the devisees argue that § 2-301 applies and that G only gets house and car. G argues that the will was not made “in contemplation of marriage.” Ct. agrees w/ G and gives her the whole estate. CL Gloss: need “contemplation of marriage” for § 2-301 to apply Three Situations where § 2-301 doesn’t apply: If T provides for spouse in will “in contemplation of marriage” Intentional Omission § 2-301(a)(1); cannot do this for elective share Non-probate Transfer in lieu of omitted spouse’s portion of estate § 2301(a)(2)

Third Situation: Pretermitted Children Hypo: T makes will  Afterborn Child  T hasn’t changed will  T dies: o What result? o § 2-302: revokes will to the extent necessary to give child intestate share o Four Situations where § 2-302 doesn’t apply: If T provides for afterborn child in his will  Drafting Tip: Use class terminology Intentional Omission § 2-302(a)(1) Non-probate transfer in lieu of share § 2-302(a)(3) If T has children at time of execution but gives substantial share to spouse § 2-302(a)(2)  Caution!: If H & W don’t have children at time of will and then have afterborn children, the afterborn may get ½ of estate through intestacy  Solution: Discuss possibility and ramification of afterborn children w/ the • childless couple • Then make sure afterborn children are intentionally disinherited.  Additional Problem: Original will is read as of date of codicil so afterborn child will not be considered afterborn if codicil subsequently executed.

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Testamentary Libel: new tort, can include rationale for disinheritance, be careful

Assignment 13: Integration, Republication, Acts of Independent Significance Integration Def: all papers intended to be part of the will and present at the time of o execution are integrated into the will Problems: o Pages not physically connected No internal coherence Staple removed Different font type Did we revoke will entirely by substituting a page? Republication by Codicil o Def: will treated as reexecuted as of the date of the codicil, whether or not the codicil expressly republishes the prior will o Must have a valid will for republication to happen Two views: o Narrow: can republish on a currently valid will Broad: can republish any will that was at one time valid but currently is not SC View: unclear o Hypo: Will 1  Will 2 revokes Will 1  Codicil to Will 1: What result? A: Will 1 is reexecuted and Will 2 revoked by implication. Distinguish b/w Integration and Republication: o Integration applies to incorporate docs not validly executed o Republication applies to prior validly executed will Incorporation by Reference o Allows you to make an earlier document that never had testamentary validity part of a will § 2-509: To incorporate a doc into the will: o writing must exist prior to execution language in will shows intent to incorporate the writing language describes the writing sufficiently to identify o Clark v. Greenhalge: T’s will references a “memorandum”; memo was made after execution of T’s will; however, T executed a codicil to her will later and the memo was in existence then; Ct held that the memo was valid since it was incorporated by the codicil Acts of Independent Significance 22


o o

o

o o

o

Def: when the beneficiary or property designations are identified by acts or events that have a lifetime motive and significance apart from their effect on the will, the gift is upheld under Doctrine of Acts of Independent Significance § 2-511 Effect: Nontestamentary act becomes part of will Nontestamentary act construes the will Rationale: Pragmatic recognition that actions in life affect testamentary disposition Usually involves identification of property or Bs Property Hypo: A intends to give ’82 Saab to B. A executes will giving car to B. A sells Saab and buys Porsche. A dies. What result: A: Using the Doctrine of Acts of Independent Significance, B gets Porsche. Reach same result by using rule of construction that will speaks as of date of death. Bs Hypo: E’s will says “$10,000 to employees who’ve been w/ me for more than 10 years”

§ 2-512: Separate Writing identifying bequest of tangible property o Allows for incorporation of a list or memo created after the execution of a will or codicil Requirements: o Intent T’s handwriting or signed by T Must refer to the memo or list o Should dispose of residual tangible personal property in the will Gives effect to writing disposing of tangible personal property o Excludes cash, cash like instruments, real estate, stock, docs of title as o defined under UCC, or property used in a trade or bus o Includes personal property (jewelry, cars, furnishings, etc.) o Rationale: Personal property may be more important b/c of sentimental value rather than for its monetary value Efficient b/c doesn’t require new will for each change o Must put clause in will that if memo isn’t found w/in X number of days then presume there isn’t one Assignment 14: Contracts re Succession •

•

Questions to ask H & W that are making wills together or at same time: confidentiality questions, do they already have a will in existence, who do they want to remember or leave their property to, what happens if your #1 beneficiary predeceases you, your #2 beneficiary predeceases you, etc Never make a joint will for a couple

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Basic Types of Ks re Succession: 1. K to make will a. Hypo: K b/w T and F in which T gives house to F and F cares for T. T dies but his will doesn’t give F the house. What remedy does F have? Under equity F gets house. 2. K not to revoke will a. Hypo: H & W have joint & mutual wills. W dies. H changes will and dies. What result? K law applies and H will have to perform. b. Seldom used b/c it is unilaterally rescindable 3. K to die intestate Ks in this T&E world are not a good idea b/c the majority rule is that K is unilaterally rescindable by revoking the will as long as H & W alive. SC Minority Rule: unilateral rescission if notice given to the other party Technical Problem: H can survive W and still honor K not to revoke. However, H can circumvent the will and K by giving away his estate or setting up an intervivos trust. What remedy? Unclear b/c, once given away, property can be difficult to trace. Hypo: H & W have K not to rescind; they have children; W dies; H gets remarried and predeceases 2nd W who now has an elective share; do the children of H & W1 who take under the K win or does W2 win? The ct says that W2 wins for public policy reasons §2-701: Ks concerning succession • Need some kind of writing to prove a K; what constitutes that writing is fairly broad No presumption of a K regarding joint/mutual wills • If a K was entered into b/f 7/1/87, then the K could be an oral K and still be • valid; to determine if this section applies we look at the date the K was entered into Consideration Requirement o K law requires exchange of consideration General Rule: Moral obligation not sufficient consideration to make K o enforceable. The Consideration Requirement in SC o Chapman v. C&S: moral obligation is enforceable Rule: Once part-performance of K to make will, then will must be made and o promise enforced. Can enforce K to will while T alive and can enjoin T. o Can make promissory estoppel argument. o State of SC Law: very liberal in granting remedies to potential devisees 24


Assignment 15: P-O-D, Joint Interests, Deeds, Gifts of Personalty Hypo: T wants to leave $ to sister b/c W is independently wealthy and healthy. But T only wants the $ to pass to his sister at his death b/c she is a spendthrift. How do we do it? The goals here are to have control (by T) and make the transfer non-probate. Options: POD Payable to one or more persons on request during their lifetimes, and, upon the deaths of all of them, to one or more POD payees Joint Account Trust Account Insurance Policy § 6-201 Partnership Agreement w/ POD provision o

§ 6-101 et seq (p. 65 of supp.) Insurance Policy o Two Factors in ins. policy Risk Factor  Term Life Insurance Risk + Investment  Whole Life Ways for ins. policy to proceed to probate: o B is estate B predeceases policyholder • Wilhoit: Mrs. Wilhoit made a K w/ an ins company for a POD acct; the B of her will is suing the 3 rd party B of the POD K; the $ in the POD acct was originally her husband’s LI policy; when he died she made a K w/ the ins company that they would hold the $, pay her interest, and she could collect the $ whenever she demanded it; ct ruled that this is not an ins policy but more like a bank acct b/c there is no risk involved; also ruled that the 3 rd party B of the K doesn’t take b/c the K is a testamentary transfer and it wasn’t executed w/ the proper formalities Partnership Agreements Estate of Hillowitz: Deceased was a partner in an investment club; provision • in the partnership agreement that gives his portion to his wife when he died; ct ruled this is a valid non-probate transfer and his wife shall enjoy the same rights as her husband did

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Nontestamentary Transfer o Takes place effectively at death but there is a transfer of some interest during lifetime o Transferor retains control thru right to revoke or cancel Distinguish from Testamentary Transfer o Passes only at death Passes through probate o Examples: Ins. policy, Revocable trusts, etc. Multi-Party Accounts o Types: True Joint Tenancy Account: both can draw + survivorship rights; each party can only w/draw proportionately to what the deposited; Franklin v. Anna Nat’l Bank (p.342 in textbook)  Lifetime Rights: If A, B, and C all put in $10,000 and the way the acct is setup shows that only one signature is required to take out any $ and C goes and takes out $20,000, then A and B will have an action against C b/c he took out more than his share; the bank is not liable to A and B b/c they are not the watchdog of the acct; however, if A, B, and C had an agreement, which the bank knew about, that more than 1 signature was required to take out any $ and the bank allowed C to take out $20,000 w/o requiring another signature, then they would be liable to A and B for allowing C to do that  Deathtime Rights: there is a right of survivorship; this means that if A dies, then his share will pass equally to B and C; it doesn’t matter whether B and C put the same amt into the acct or not; this means that if A put in $10K, B put in $20K, and C put in $5K and A dies, then B and C still get $5K apiece even though they didn’t put in the same amt; next, B dies which means that his entire share then goes to C; when C dies, the acct will be dispersed under C’s will; you can override the survivorship of your joint acct up to the amt you contributed; this means that if A wants his $10K to go to his daughter, then he can provide for that in his will POD Account disguised as Joint: one party has no withdrawal right but has survivorship rights Agency Account:  Power to withdraw / no survivorship rights  Proceeds at death to depositor’s estate Trust Account o Rights: Amongst parties  While alive  When account holders w/ Bank §6-106 says that these are non-testamentary transfers •

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Joint Account Hypo: A B C D 10 5 10 5 A can’t take out more than 10 Bank not liable for overwithdrawal, unless there is evidence that they should’ve known better What if A dies? His amount is split equally among the account holders. B C Current 5 10 Add A’s Amount 3.3 3.3 New Amount 8.3 13.3 Go through same process if B and C die. If D dies last, the entire 30 goes to his estate.

D 5 3.3 8.3

Rule: Account holder can override right of survivorship in will, giving his net contribution to someone else (§ 6-104(e)). POD Acct v. Trust Acct POD Acct Trust Acct Original Payee Trustee Tier 1 POD Payee B Tier 2 Rule: Tier 2 gets when Tier 1 dies. Rule: If Tier 2 members predecease Tier 1, split among remaining Tier 1 members. Tier 1 members, while alive, have right of w/drawal up to the amt they put in When a member of Tier 1 dies, there is a right of survivorship; but, unlike joint accts, this right cannot be overridden by a will Once the last member of Tier 1 dies, the members of Tier 2 get to split up what’s left Once we get to Tier 2, it is no longer treated as a joint acct but as a tenancy in common; this means that if one of the members of Tier 2 dies, their share is transferred according to their will and does not go to the surviving beneficiaries Bank’s liability is the same as w/ a joint acct Totten Trust o Def: A savings account trust that is: Revocable If not revoked  POD New B can be named

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Joint Tenancy o Operation: When JT1 dies, JT2 owns absolutely. o CL Theory: decedent’s interest vanishes at death. Therefore, no probate necessary b/c interest passes. Avoids cost & delay of probate o o Three Factors: Creation of JT  equal interests upon creation  Irrevocable JT not devisable Creditor rights: must seize during JT’s life Assignment 16: Planning for Incapacity Conservator: ct appointed guardian of property and economic interests Elder Law: estate planning + health care issues (MedicAid) Dealing w/ incapacitated person: o Agency Law applies Problem: agent’s power derives from principal Solution: Durable POA  Lasts through incapacity to death  Termination: At any time if principal is competent  Written instrument requirement SC: allows Durable POA if executed w/ testamentary formalities and is recorded Rule: Atty-in-fact can’t change will.  But can give gifts. (IRS may not allow however) Health Care Issues o Statutory way to plan in advance: Living wills Health Care POA (no recording requirement) If T does both, agent can’t contradict living will o Federal Law: every hospital that receives federal funds is required to ask patient if he has an advanced health care directive o “Do Not Resuscitate” Order obtainable only from doctor Problem: emergency personnel don’t find o Uniform Determination of Death Act No breathing = death No brain functions = death Assignment 17: Extrinsic Evidence

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Hypo: T wills to “brother.” T dies. T has brother, half-brother, and step-brother. Who’s a brother? Patent Ambiguity: uncertainty that appears on the face of the will; e.g. – “I leave ½ my estate to A, ½ my estate to B, and ½ my estate to C.” Latent Ambiguity: uncertainty not on its face but disclosed by some collateral fact Two Rules: 1. Plain Meaning (Old) Rule: can’t use extrinsic evidence to disturb plain meaning; Mahoney v. Grainger – atty uses word “heirs” instead of “cousins” which is a patent ambiguity; T’s aunt takes b/c she is only “heir”; ct rules that aunt alone shall take b/c even though this is contrary to T’s intent, they are bound by plain meaning on face of the will; classic example of strict adherence to plain meaning rule 2. Modern Rule (SC): can use extrinsic evidence to find and resolve ambiguity Exceptions to Plain Meaning Rule Falsa demonstratio non nocet (false description does not vitiate): this o happens when the will accidentally bequeaths a piece of property that the testator doesn’t own; the testator actually means another piece of property but has the wrong address in his will (Arnheiter case; latent ambiguity) o Personal usage exception: this occurs when the testator ambiguously or erroneously describes a person who is to take under their will; e.g. – the use of the word “bros” to refer to friends of yours or something of that nature (Gibbs case; latent ambiguity) Modern (SC) Analysis: 1. Determine ambiguity using extrinsic evidence 2. Resolve ambiguity using extrinsic evidence Trend w/ respect to latent ambiguities is that you can use extrinsic evidence to show that they exist, and you can use extrinsic evidence to resolve it; Cts are more willing to resolve patent ambiguities using extrinsic evidence w/ the exception of when the testator leaves a blank in their will; Cts more willing to allow extrinsic evidence at the construction stage than at the validation stage. Medlin Rule: cts should be just as willing to allow extrinsic evidence to fix patent ambiguities as they are to fix latent ambiguities. Assignment 18: Lapse 7, Anti-Lapse What happens when B dies before T? Hypo: Will 1. Car to F (dies) 7

Lapse means a gift fails b/c the B predeceases T.

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2. House to S 3. Residue to Y & Z

What result?

General Rule: If B dies before T, then devise lapses (or fails). 1. Specific/General Devise: if lapses, devise  residue 2. Residuary Clause: if lapses, residue  heirs of T by intestacy 3. Class Gift: if class member dies before T  apportion amongst remaining class members 4. Void Devise: if devisee dead at execution  devise is void Figure 4: CL Lapse

Anti-Lapse 8 Process (See Attached Hypo at the end of the outline) 1. B predeceases T 2. Is there an express substitute in the will? If not, apply § 2-603 (SC AntiLapse Statute) 3. § 2-603 Requirements a. R must be in great-grandparent parentela b. R must have issue c. No words of survivorship in the devise 4. If § 2-603 anti-lapse statute doesn’t apply, apply § 2-604. a. If non-residuary devise fails, it goes into residue. b. Subsection (b): if residuary is devised to 2 or more persons and the share of one of the residuaries fails for some reason, his share passes to the residuary devisee or to the residuary devisees in proportion to their interest in the residue 5. If will specifically states that §2-603 doesn’t apply, then it will not apply; it is a statute of construction 6. Summary: if a pre-residuary devise fails, then it passes to the residuary; if a residuary devise fails, then it passes according to §2-603 or, if that fails, the intestacy laws; if a residuary fails partially, then it passes to the other residuaries § 7-113: anti-lapse applies to trusts Class Gifts o Classic Rule: must be alive on T’s death to be part of class o However, § 2-603 applies anti-lapse to class gifts. Problem may arise in that § 2-603 suggests that anti-lapse applies even if B dies before date of execution. o If a class member dies, the survivors divide. Assignment 19: Ademption, Abatement, Satisfaction Ademption 8

Operation: substitute Bs (not lapse prevention)

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o o o

Hypo: T wills car to A, rest to B. T sells car. T dies. What result as to A? A gets nothing because his gift of car is adeemed. Applies only to specific devises (a specific asset). Doesn’t apply to general devise (a general benefit like $) Doesn’t apply to demonstrative devise (general legacy payable from specific source)

§ 2-605: deals with accretion in specific devise Hypo: T wills B some stock. The stock value grows.  If accretion caused by normal rise in value, the accretion remains with the specific devise.  If accretion caused by T buying more shares, the specific devisee not entitled to the accretion. § 2-606: Nonademption of specific devises in certain cases; unpaid proceeds of sale; condemnation or insurance; sale by conservator a. Paragraph (a): if T disposes of property that is specifically devised and there is $ still owing on that disposition, then the specific devisee is entitled to whatever $ is still owing on that devise (think of the Tiger Woods golf clubs example from class) b. Paragraph (b): same situation as (a) w/ one extra tweak; if the conservator of T disposes of property that is specifically devised, then the specific devisee is entitled to all the $ from that disposition What if conversion occurs through Durable POA? Unclear o Theories: § 2-606(b) should apply when agent acts for principal § 2-606(b) should apply only if principal is incompetent Differences in form vs. differences in substance 1. T devises “Bank Acct 12345” to B; later moves $ from one bank to another; cts will probably see this as difference in form b/c bank accts are the same as far as the $ is concerned which means B will inherit the new bank acct 2. Same as above but T later removes $ and buys IBM stock w/ it; ct will probably see this as a change in substance and the gift will adeem Abatement o Hypo: see attached hypo o Abatement problem arises when estate has insufficient funds to pay debts and all devises; some devises must be abated or reduced. § 3-902: Order of Abatement o Property not disposed of by will Residuary Devise General Devise Specific Devise 31


After ordering, apportion and reset the scheme.

Satisfaction 9 § 2-610: if T gives a gift to a devisee during his life and intends for this to be a o satisfaction, then it reduces what the devisee takes under the will; very similar to advancement under intestacy Exoneration of Liens Issue: does devised property subject to lien come w/ or w/o the lien? o § 2-607: specific devises pass subject to lien (rebuttable presumption) o Assignment 20: Homestead, Support, Dower, Elective Share Homestead—not on exam Two marital property systems: 1. Separate Property (CL): separate owners unless joint owners 2. Community Property: equal undivided shares a. Operation: deceased spouse has power over ½ b. Elective Share prevents disinheriting of at-home spouse c. Exception: pre-marriage property remains separate Support Schemes to Support Surviving Spouse: o Social Security Private Pension Plans Homestead: secures family home to SS & minor children free of creditor claims Personal Property Set-Aside: homestead concept applied to personal property Family Allowance: for maintenance and support (may have fixed period) Dower: life estate in 1/3 land  Attaches to all land owned by H; not extinguished after sale of land  to extinguish need signatures of H & W to be free of dower; have been found unconstitutional Elective Share § 2-201 to 2-207 o guarantees SS 1/3 probate estate (excluding non-probate transfers); this doesn’t include funeral costs, administration costs, etc SC anomaly: 1/3 elective share if 1/3 property transferred in trust in way that obtains the federal estate tax marital deduction SS defined in § 2-802 o Hypo: H has $600K probate estate (PE); wills house (worth $80K) to W, rest to D. What result? 9

Testamentary analog to advancement by intestacy.

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o

o

o

o

o

o

o

o

o

PE = 600,000 PE times1/3 = Gross Elective Share (GES) GES – Offset = Net Elective Share (NES) (200,000 – 80,000 = 120,000) SC doesn’t have true elective share b/c even if surviving spouse disclaims he is treated as if he received the devise To avoid elective share: minimize probate estate by non-testamentary transfers Gift Life estate w/ remainder Insurance policy Multi-party Bank Account Revocable Trust Seifert: South Carolina Supreme Court holds that revocable trust is illusory transfer b/c right to revoke is ultimate power over property Court overlooks fact that revocable trust universally recognized as a valid non-testamentary transfer despite right to revoke. Legislature fixes by enacting § 7-112 which re-confirms that revocable trust is a valid non-testamentary transfer Dreher case had similar facts and came after §7-112; ct held the same thing as in Seifert, but on different grounds; Ct of App even quoted an article Medlin had written, which stood in direct contradiction to its opinion To avoid elective share in SC after Seifert: Irrevocable transfer Revocable transfer other than revocable trust (w/ disclaimer to client) Life Estate in 1/3 PE w/ remainder Hypo: H wills to W life estate in 1/3 property, rest to D. What resu lt? PE = 600,000 D gets 400,000 outright and remainder in 200,000 W gets L/E in 200,000  § 2-207: L/E valued as full 200,000. Why? To get the federal estate tax marital deduction. Result:  H retains control  H cheats W out of value  H still satisfies the elective share § 2-203: Who can exercise the elective share: Surviving Spouse Atty-in-fact for SS Ct order for incompetent SS When to exercise the elective share: § 2-203: during SS lifetime § 2-205: Requirements for making elective share claim; must notify personal atty or personal representative of estate by mail Problem: what if SS presents claim and dies during adjudication? Right treated as if vested when filed and estate can proceed.

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Rationale for elective share: Reward SS for economic benefits Prevent SS from becoming ward of the state § 2-204: Waiver can waive in whole or part can waive before or after marriage can waive b/f or after the death of the spouse can only be waived by a signed writing after full and fair disclosure ; there are issues over whether there is a full and fair disclosure of what the party is actually waiving their rights to and over whether there is a full and fair disclosure of the rights that a party is waiving; also a question of whether both parties need their own attys present when reviewing the prenup (remember De Lorean case) no consideration required no K required

Assignment 21: Trusts 10 Introduction

Settlor

Legal

Trustee $

Equitable

Beneficiary

Figure 5: The Trust

The Trust’s distinguishing feature is the division of legal and equitable title; one reason for using the trust is privacy; this is b/c the beneficiary doesn’t have to be entered into the public records The Players in a Trust: o Settlor: creator of the trust Trustee: carries all the responsibility 11 (if accepts) o Legal title holder Fiduciary duty to B Subject to personal liability If no trustee  no failure of trust b/c ct will appoint trustee 10

Private Express Trust: a trust gratuitously created for the benefit of individual Bs. Responsibilities include: preserve property, income to B, duty of fairness to B(s), duty to keep separate trust property from personal property, duty of accounting 11

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Duty of loyalty: Trustee must administer the trust solely in the interest of the Bs; self dealing is sharply limited and often prohibited Duty of prudence: under this duty the trustee is held to an objective standard of care Subsidiary Duties/Rules: the duty of impartiality b/w classes of Bs such as income Bs and remaindermen; the duty to keep trust property separate from their own property; the duty to inform and account to the Bs Beneficiary: benefits from the trust Equitable title holder Has personal claim against Trustee; Trustee’s personal creditors cannot touch the trust property If no B  trust fails

General Rule: one person can’t be both trustee and beneficiary. Why? No division of legal and equitable title means no trust. Settlor

Trustee

Beneficiary

M

A

A



M

A&X

A&X



A

A

A&X

not valid trust

valid trust § 7-603  valid trust

Trust Creation Methods: 1. Declaration of Trust: settlor is the trustee a. An inter vivos trust (SOF applies) b. No delivery or deed required c. Need Settlor’s manifest intent d. If real property, SOF requires written instrument e. §7-401(a)(2) – must be a written declaration signed by the owner of property that the owner holds identifiable property as trustee 2. Deed of Trust: settlor transfers to another trustee a. An inter vivos trust (SOF applies) b. Need Settlor’s intent c. Delivery required 3. Testamentary Trust a. Statute of Wills applies Assignment 22: Creation, Intent, Property Trusts that arise by operation of law:

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Trusts & Estates Outline 1. Resulting Trust: arises when express trust fails (e.g. – B dies) or makes an

incomplete disposition; if no alternative disposition trust fails; Trustee must convey trust property back to settlor or settlor’s estate 2. Purchase Money Resulting Trust: arises when one person pays the purchase price for property and causes title to the property to be taken in the name of another person who is not the natural object of the bounty of the purchaser a. Hypo: O owns Blackacre. A pays O $1,000 for Blackacre; the deed conveying Blackacre names B as grantee. What result? i. If B (recipient of property) is object of A (purchaser) bounty  gift to B ii. If B not an object of A’s bounty ≠ gift to B b. SOF doesn’t apply 3. Constructive Trust: flexible remedy imposed to prevent unjust enrichment a. Operation: If legal title holder can’t retain beneficial interest in good conscience, equity converts him into a trustee. b. Constructive Trustee has duty to convey c. Requirements to impose constructive trust: i. Confidential/fiduciary relationship ii. Express/implied promise by transferee iii. Transfer in reliance on promise iv. Unjust enrichment Trust Property Brainard v. Commissioner o Rule: no trust if no trust property. o Rule: expectancy can’t be subject matter of trust. o Rule: trust property + intent must be concurrent to have trust. Speelman v. Pascal (gift of unrealized movie rights) Rule for creating trust of future profits: must manifest intent + have means to o create future profits (e.g. – trust that is a gift of land that settlor does not yet own is not enforceable trust but a gift of movie rights and future profits from them is enforceable b/c the “tree” already exists) Analogy: tree bearing fruit; in some states, you can create a trust that gifts only the “fruit” as long as the settlor can prove that he owns the “tree” Assignment 23: Testamentary, Revocable Oral Inter Vivos Trust of Land Hypo: O orally trusts property to X, income to A, then to B. SOF prevents enforcement. Who gets the property? Old Rule: X keeps property. o Modern Rule: Constructive trust imposed on X if o

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Fraud/duress by X Confidential relationship Transfer in anticipation of death Hieble v. Hieble (Mother gives land to Son on condition that will re-convey; M believes she might die of cancer soon) Facts: the agreement b/w M and S in effect operates as a trust o S arg: SOF requires writing o Problem w/ S arg: can’t use SOF to perpetrate fraud o Ct. imposes constructive trust as remedy. Pappas v. Pappas Facts: similar facts as Heible except the reason is to avoid creditors o Ct. doesn’t impose constructive trust b/c “unclean hands.” So S gets the land, o but not a good result b/c S rewarded for helping Dad cheat. o Best remedy: let creditors take Oral Trust for Disposition at Death Olliffe v. Wells (will devises residue to W with instruction to discretely distribute according to T’s wishes) Rule: indefinite will  resulting trust o More rules: o Setting up trust doesn’t impair rights of heirs. If trust not set up  property to devisee If lawful trust set up  benefits Bs If unlawful trust set up  resulting trust  heirs Secret Will Hypo: A & B share charitable inclination. A tells B will devise estate to B if will distribute to charities. A dies. B fights to keep. What result? Result: Use extrinsic evidence to make sure no fraud. Constructive trust imposed.

Semi-secret Will Hypo: Same facts as last, but A’s will shows intent to create trust. What result? Result: No extrinsic evidence needed. Trust fails b/c indefinite; Trustee must return $ to Settlor’s estate

Revocable Trusts o §7-601: mental capacity to make a revocable trust is same as that to make a will; mental capacity to make an irrevocable trust is much higher Presumption: o SC CL: trust presumed irrevocable unless right to revoke reserved SCPC §7-602: presumption completely reversed; inter vivos trust is now presumed revocable

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o

o o

Uniform Trust Code: trust presumed revocable unless expressly irrevocable Revocable Trusts provide us w/ flexibility and privacy; settlor is often beneficiary and trustee for life; can also avoid probate fees but not a big deal in SC b/c probate fees are cheap Power to amend ≈ power to revoke Universal Rule: revocable trust is a valid non-testamentary transfer. Seifert is the only case (wrongly) holding otherwise.

Farkas o Holding: revocable trust is valid non-testamentary transfer. Revocation CL Rule: if trust specifies revocation method, must follow the method o §7-602 of SCPC says that substantial compliance w/ revocation method is o enough o If no exclusive method stated, several ways to revoke Revoke by later valid testamentary document (will or codicil); must be clear and convincing evidence If something other than valid testamentary document is used to revoke, then it must be in writing, delivered to the trustee, and must be proven by clear and convincing evidence Other SCPC Revocable Trust Provisions o §7-603: As long as trust is revocable, Trustee only owes duties to the settlor §7-605: Rule of “no contest clauses” for wills applies to revocable trusts o o §7-606: Same anti-lapse provision for wills applies to revocable trusts §7-607: Same revocation by divorce procedure for wills applies to revocable o trusts Also, unlike wills we do not need the original revocable trust document for the revocable trust to be valid Assignment 24: Pour-over Pour-over Will o Concept: when will takes effect it calls for transferring the assets into a trust o Goal: simplify and unify estate administration Allows for flexibility and the T can have someone else manage her property if she doesn’t wanna do it Avoids publicity (will is publicized in probate, trust is private) o § 2-510: allows pour-over No trust property need be in the trust if the trust is part of a pour-over 12 Provides that a trust can be a beneficiary under a will 12

This is the exception to the general rule in most jurisdictions.

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If trust is in existence b/f or at the same time the will is executed, then trust is absolutely valid Trust viewed as “property container” Examples:  Funded Scenario: Inter Vivos trust (w/ property). Then pour-over will executed. T dies. What result? Will funds pour over into the trust.  Concurrent Scenario: Inter Vivos trust (w/o property) and pour-over will executed at the same time. T dies. What result? Will funds pour over into empty container.  Questionable Scenario: Inter Vivos trust (w/o property). Then pour-over will executed. T dies. What result? Unclear. Args: Incorporation by Reference, Constructive Trust • Trust can be revocable, irrevocable, amendable (which is the same thing as revocable).  Problem: what if trust is revoked? Then no “property container” exists, so the will needs to have an alternate disposition or partial intestacy occurs. Not a method by which to escape transfer/estate taxes, creditor claims, or elective share/pretermitted child share/omitted spouse’s share Pour-over Theories: 1. Incorporation by Reference: trust must exist at time of will execution a. No amendments allowed 2. Independent Significance: trust must have some property transferred to it during life a. Amendments allowed Assignment 25: Discretionary, Creditor’s Rights Creditors o Two Types: Creditor of Settlor Creditor of B o Creditor of Settlor Creditor can stand in the shoes of debtor once attached if revocable trust In an irrevocable trust, the settlor relinquishes all rights that he may have, therefore, his creditors cannot get to the trust property (SCPC §7-505: creditors can reach irrevocable trust property if a settlor is also a beneficiary of that irrevocable trust, but only to the extent of the settlor’s beneficial interest in the trust property) If Settlor dies, right to revoke doesn’t exist, therefore (depending on the jurisdiction one of the following rules applies); State Street Bank v. Reiser case  Creditor can still reach the trust property (SCPC §7-505: creditors of settlors can reach revocable trust property after the settlor’s death)  Creditor can’t reach the trust property b/c right to revoke is terminated 39


Creditor of B Creditors can reach if no restriction on B To avoid creditors use Spendthrift Provision which prevents voluntary/involuntary alienation of property  CL Exceptions: Child support • Alimony • • Necessities; not allowed by all cts (e.g. – landlord who is owed rent can attach their interest in the trust) Taxes • Torts victims; this was not allowed by all cts •  Rule: Settlor can’t create spendthrift trust in his own favor to avoid creditors13 (Re FN 13: these states allow self-settled trusts to avoid creditors and the settlor cannot be held in contempt of ct b/c, unlike the Cayman Islands example, he trusts the banks of AK and DE so he is not a trustee)

South Carolina Spendthrift Rule (§7-502 and §7-503) o Rule: spendthrift provision works against income interest but not principal interest14(I don’t have this rule anywhere in my notes but it may be true) To be valid, a spendthrift provision must restrain both voluntary and o involuntary transfer of B’s interest in the trust o Hypo: S trust gives income interest to K, principal interest P. What can creditors reach? K’s creditors can’t attach his income interest P’s creditors can attach the principal interest (by standing in P’s shoes: can get only if P can get) o Under §7-503, only exception to Spendthrift Provision is child support; and not even this can but thru a special needs trust Forfeiture Clause o Operation: If B tries to alienate or B’s creditors try to attach, then B loses his interest and the interest goes to an alternate B. Distinguish from spendthrift b/c B loses interest o Discretionary Trusts (§7-504) o Mandatory Trust: trustee must distribute all income o Discretionary Trust: trustee has discretion over distribution of income, principal, or both Trustee has due diligence responsibility Operation: Bs have no interest until trustee makes a decision  only then do Bs have an alienable interest 13 14

Not the rule in Alaska and Delaware. In most states the spendthrift works against both the income and principal interest.

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o

Since B has no alienable interest until Trustee makes a decision, their creditors don’t have an alienable interest until then either If Bs have special needs discretionary trusts can be used to avoid disqualification of government benefits (this will occur if the trust states that the $ will be used for purposes other than those which the govt can provide, e.g. – healthcare) Trust Code tweak: discretionary trust is subject to child support claims but only if the trustee breached the good faith standard

Support Trusts o Trustee determines level of support To be a support trust, there must be a connection b/w support o Providers of necessities can get at trust property as creditors of Bs but no o other creditors can o Rule: Settlor can’t create support trust in his own favor in order to avoid his creditors o Can combine spendthrift provision w/ support trust Assignment 26: Modification, Termination Modification/Termination (Under CL) Distinguish b/w dispositive and administrative provisions: o Administrative Provision: management of the funds (usu. giving Trus tee o discretion) Amendability: only if reasonable necessity Hypo: F creates trust with income to family. Then interstate highway will be built across the land, making it more valuable as commercial real estate. Trustee wants to sell the land, invest the sale proceeds, thereby increasing income. What result? Ct. will allow modification because deals with administrative provision. o Dispositive Provision: who gets what & when? Most important part of the trust Amendability: only if  Settlor and Bs consent or  If Settlor is dead, (1) Bs consent and (2) all material purposes are accomplished  Ct can construe the document to allow certain types of modifications (this is more about construction than modification)  “Family Settlement Agreement”; cts don’t want families fighting so they will allow a trust to be modified to prevent that; sometimes it is necessary to create a family dispute to get a trust modified Problems w/ “Settlor is Dead” Test:  What is a “material purpose”? Look at Settlor’s intent  Can be difficult to get all Bs consent b/c some Bs may not be ascertainable

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Potential Solutions: ♦ Guardian ad litem to represent unborn and/or minor Bs; problem is that Bs can sue the guardian ad litem when they come of age if the guardian made a poor decision ♦ Doctrine of Virtual Representation: known, adult Bs can consent on behalf of unknown and/or minor Bs  Policy: known, adult Bs already have an identity of interest in the trust  Problem: when the unborn and/or minor Bs reach adulthood, they can argue that they didn’t consent and wouldn’t have consented to what the representative did Types of Trusts that can’t be terminated: Spendthrift Trust B not specified until specified age Discretionary Trust Support Trust •

o

Modification/Termination (Under SCPC §7-410 – 7-418 o §7-411 Paragraphs (a) and (b) repeat the common law rules w/ one little tweak; requires ct approval to amend a trust either thru settlor’s and Bs’ consent or Bs’ consent and material purposes have been achieved Paragraph (d) says that a ct can approve modification in either of the 2 ways mentioned just above even if not all of the Bs consent; opens up the possibility that the ct can approve a modification over the outright objection of a B §7-412 o Says that a ct can amend the administrative OR dispositive provisions b/c there has been a change of circumstances Under CL, cts could only do this w/ regard to administrative provisions §7-414 o Idea is that if a trust gets too small, then it won’t make economic sense to try and continue administering it Paragraph (a) allows a trustee to terminate a trust if it has less than $100K in it Paragraph (b) allows the ct to modify or terminate a trust or to remove a trustee if it determines that the value of the trust has become too low §7-415 o Ct can reform a trust if there is clear and convincing evidence that there has been a mistake of fact or law Reform means that the terms of the trust are not being altered; the document is simply being fixed to reflect the settlor’s intent This is arguably not a taxable event o §7-416 Ct can modify the terms of a trust to satisfy tax objectives

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In some cases, the IRS will not recognize the modification as having corrected the tax issue §7-417 The trustee can divide and combine trusts if he doesn’t affect the rights of the beneficiaries E.g. – H and W create trusts w/ identical provisions; they both die; trustee can combine both trusts b/c it becomes easier to administer Can help w/ generation skipping transfer tax

Assignment 27: Charitable Trusts Charitable Trusts o Why people create charitable trusts: Promote charity Tax Incentives (Estate planners need to know property-tax law interplay) To create charitable trust must be for: o Benefit of society (not individual Bs)  Must be an indefinite group that is large enough • Exception: Send X to med school on condition that X work in your city. (real benefit is to the community) Charitable Purposes (§7-405):  Relief of poverty  Advance education  Advance religion  Promote health, literary, scientific, or “beneficial” purposes  Governmental/municipal purposes  Catch-all: other purposes the accomplishment of which is beneficial to the community Exempt from RAP o Rule: Can’t create charitable trust whose goal is contrary to law or public o policy o Rule: Can’t create trust that perpetually funds a political party Shenandoah v. Taylor (charitable trusts to all 1st, 2nd, 3rd graders on Easter and Christmas) o Ct. held gift not for advancement of education b/c kids will not use the money for education; not for poverty b/c all kids get it, not just poor kids o Ct. draws line b/w beneficent and charitable giving, holding this case to be beneficent o This is a minority case; most cts bend backwards to find a charitable trust valid. Assignment 28: Cy pres Modification of Charitable Trusts

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Two ways to modify charitable trusts: Cy pres : modify specific dispositive provision but still satisfy general purpose  When to use: when specific purpose becomes impossible, impracticable  Cannot use Cy pres to validate an otherwise defective charitable trust Equitable/Administrative Deviation : modify administrative provision  Can have same effect as Cy pres  SC: doesn’t follow Cy pres but has equitable deviation (§7-413)

Hotz v. Minyard (charitable trust w/ discriminatory purpose) o Issue: Is state enforcement of discriminatory trust unconstitutional? Holding: Yes, but ct will allow modification to make it a non-discriminatory o trust. Rule: private individual can discriminate o o Rule: State can’t discriminate o Also SC example about the guy who wanted to provide housing for White Presbyterians only SC Trust Code Provisions o §7-405 Paragraph (a) lays out what are charitable purposes as mentioned above Paragraph (b) says that a ct can choose a charitable purpose or B that is consistent w/ settlor’s intentions; this only occurs when the trust doesn’t specifically state this o §7-408 Allows for a Pet Trust that can provide for animals that are alive or currently in gestation o §7-409 Allows a non-charitable, but beneficent trust that can continue as long as RAP allows You can have some non-charitable trusts that aren’t subject to RAP; e.g. – a trust for maintenance of a grave or memorial o §7-413 Allows equitable deviation Paragraph (b) says that if there is a provision in a charitable trust that would result in distribution of the trust property to a non-charitable beneficiary, then it prevails over the power of the ct, under paragraph (a), to modify or terminate the trust ONLY IF,, when the provision takes effect, the trust property is to revert to the settlor and the settlor is still living, or it defeats the rule against perpetuities Assignment 29: Powers of Appointment 15 15

See p. 84 of the Supplement for Medlin’s outline on powers of appointment.

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Powers of Appointment o Def: power conferred by one on another to appoint the person(s) who will receive an interest or estate in property o The Players: Donor: power creator Donee: has “all power, no duty” Objects: potential receivers Appointees: actual receivers Takers in Default of Appt: persons designated by donor to take if power not exercised o Types based on object: General: donee can give to self or anybody else  Ex: Adam has P/A to give to “people in Medlin’s T&E class.” This is a general P/A because I can give to myself (as a member of the class)  Donee is considered an owner of the property  Once donee decides where property goes, it is seen as a 2 step process: from donor, to donee, to appointee(s) Special: donee can’t give to self; can give to anybody else  Ex: My mom has P/A to give to “students.” This is a special P/A because mom isn’t a student, so she can’t appoint to herself.  Donee is not considered the owner of the property  Once donee decides who he is giving property to, it is seen as a one step process: from donor to appointee o Types based on timing: Testamentary: exercisable only by will of donee Presently Exercisable: exercisable during donee’s lifetime o Donee must abide by donor’s reqs if there are reqs. Exercise/Non-Exercise of POA K to exercise POA o Enforceable if lifetime POA not enforceable for testamentary POA Can unilaterally “release” or give up POA, even for testamentary transfers o Deciding when donee has exercised POA Implied exercise  By referring to the POA itself (e.g. – donee’s will says I leave everything to X; the ct may infer that donee meant to exercise POA)  By referring to the appointive property (e.g. – O gives A POA to appoint Blackacre; in A’s will it says I give Blackacre to B)  W/o exercise of POA, the gift makes no sense (e.g. – I give $1 million to X; I don’t have $1 million unless I exercise the POA so that must be what I meant to do  Capture and Blending: only works for general POAs b/c special POAs cannot become part of donee’s estate; e.g. – Donee of a general testamentary POA dies; in his will he attempts to give A the POA and then gives the rest of his estate to B; donor anticipated the possibility

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o

o

o

o

that there may be no exercise so he created a TID; if A is alive, then there is no problem; if A is predeceases the donee and has living issue, they may try to argue that they are entitled to A’s share under Anti-lapse statute but this probably won’t work; the next argument is gonna be b/w B and the TID; B’s argument will be that, in attempting to exercise the power, the donee failed and “captured” the POA as part of his estate which now should go to B In SC, residuary clause in will cannot exercise the POA Possible to appoint by creating a trust? General: yes Special: yes, as long as donor didn’t manifest contrary intent Can POA be exercised by creating a new POA? Can create General POA in object of Special POA Can create Special POA in any donee to appoint to object(s) of original special POA Can the donee exclude objects? Depends on the donor’s rules Presumption is yes unless intent otherwise Fraud on the power Appointment by donee of special power to an object w/ ultimate intent to benefit a non-object No definitive law as to what should be done

Assignment 30: Future Interests Linguistic Approach: look at order of language Classification Focus: right to posses Distinction b/w present and future interest: possession Present interest: possession now o Future interest: possession later o Present Interests FSA: right to possess forever o o Defeasible Fees Fee Simple Determinable (FSD):  Words: “for so long as” “while” “during” “until”  Ex: O to A for so long as USC is a public school. Fee Simple Subject to a Condition Subsequent (FSSCS)  Words: “but if”  Ex: O to A, but if USC stops being a public school, to X Fee Tail (obsolete) o Life Estate Ex: O to A for life

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Future Interests Interests in the transferor Reversion Possibility of Reverter Right of entry

Interests in the transferee Vested Remainder Contingent Remainder Executory Interest

Figure 6 : Types of Future Interests

Interests in the transferor Reversion o Ex: O to A for life. What interests? A has L/E. O has reversion. Possibility of Reverter Follows a FSD o Ex: O to A for so long as USC is a public school. What interests? A has FSD. o O has possibility of reverter b/c if USC stops being a public school the estate reverts back to O. o Operation: Once the condition defaults, the reverter automatically takes effect. Right of Entry o Follows FSSCS Ex: O to A, but if USC stops being a public school, back to O. What interests? o A has FSSCS. O has Right of Entry. Operation: o Once the condition defaults, affirmative action is required w/in a reasonable time to trigger the right of entry. If O doesn’t act on the right of entry, then O loses that right and A’s FSSCS  FSA. Interests in a transferee Intro to Remainders: o Def: a future interest that follows a present interest that expires naturally o Rule: L/E expires naturally. Therefore, remainder interest follows a L/E. Vested Remainder Two-part Vesting Test: o Is the remainderman known and ascertainable at the effective date of the grant16? Must be yes Is there any condition precedent that must be satisfied before remainder takes possession? Must be no  Rule: Life tenant’s death is not a condition precedent for vesting purposes. 16

Effective date of the grant ≈ date the grant becomes irrevocable

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o

o

Indefeasibly Vested Remainder: Ex: O to A for life, then to B. What interests? A has L/E. B has VR. Vested Remainder Subject to Open (VRSO) Ex: O to A for life, then to A’s children. (A has C1.) What interests? A has L/E. C1 has VRSO. “A’s children” is a class that remains open while A is alive. If A has more children, C1 is subject to partial divestment . Vested Remainder Subject to Complete Divestment: Ex: O to A for life, then to B, but if B fails college, to C. What interests? A has L/E. B has VR subject to complete divestment. C has EI (b/c doesn’t follow a L/E).

Contingent Remainder o Any remainder that fails the vesting test o Ex: O to A for life, then if B survives A, to B. What interests? A has L/E. B has CR because fails part 2 of vesting test. O has reversion when he gives away a life estate or a life estate and a contingent remainder o Ex: O to A for life, then to whoever is USC’s basketball coach at A’s death; What interests? Fails the 1st prong of the test b/c we don’t know who the coach is A has LE Coach has a contingent remainder O retains a reversion (its not likely but theoretically he does) o Ex: O to A for life, then to USC’s football coach (at A’s death). Assume that A dies but USC is currently looking for a football coach. What happens? CL: Need continuous possession for CR to vest  CR destructible. Reverts to O. Alternative Contingent Remainder o Ex: O to A for life, then if B is married to C, to B, but if B not married to C, to D. What interests?  A has L/E.  B & C have ACRs.  O has reversion. Why? B/c life tenant could forfeit life interest. If A loses possession before his death (fraud, treason), then the estate reverts back to O b/c CRs operate only at the life tenant’s death. Executory Interests o Def: an interest that follows something other than a L/E o Ex: O to A, but if USC no longer a public school, then to B. What interests? A has FSSEI. B has EI. Shifting EI o Ex: O to A for so long as USC is public, then to B. What interests?

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o o

A has FSD. B has EI. Shifting EI Rule: If the future interest follows a FSD, then it is an EI. Ex: O to A for life, then 1 year later to B. What interests? A has L/E. B has EI. O has reversion. Springing EI

Life Tenant Disclaimer CL: need continuous possession; life tenant disclaims and vested o remaindermen don’t take immediately b/c vests only upon life tenant’s death. Reverts to O. o Modern Disclaimer Statute: acceleration of interest Assignment 31: Class Gifts, Class closing 

 

A class gift is a gift to a group of people whose classifications to fit into the class will be determined at some point in time; at some point in time we are gonna have to determine who is a member of the class according to the qualifications that the settlor, grantor, etc has imposed Class closing rules are rules of construction; once we close the class, anyone conceived and born after that date cannot be a class member Present Interest Situation: “O’s will grants Blackacre to the children of A”; a couple of scenarios could arise • Scenario #1: A could’ve predeceased O; if this has happened the class is closed physiologically b/c A is the procreator of that class and now A is dead so there will be no more kids ♦ A has no children, then the gift fails; the class is closed physiologically and there is no one in it ♦ A has children; the class closes and A’s children will receive the gift; there will be no more children however • Scenario #2: A is alive at O’s death; the procreator is still alive and can still procreate; when the class hasn’t closed physiologically, we look to the Rule of Convenience ♦ ROC: if, on the first day that someone could demand possession or enjoyment of the property, we have a class member who is qualified to do so, then we close the class; premised on the theory that we wanna close the class as soon as possible so we can settle the estate ♦ In Scenario #2, if A has a child or children when O dies, then the class closes as soon as O dies; if we close the class under the ROC in this case, then any of A’s future children will be cut out of the grant

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The other possibility in Scenario #2 is that A doesn’t have any children at the time of O’s death (for simplicity assume that A has never had a child at the time of O’s death); under the ROC, the class is not closed so we forget about the ROC; now we wait for the class to close physiologically; the class doesn’t close until A dies Present Interest – Express Survivorship Requirement: “O wills Blackacre to the children of A who reach 21 Scenario #1: A predeceases O • ♦ A has no living children so gift fails ♦ A has a child or children; they are class members b/c we close the class at O’s death; let’s assume that A has 2 children, C1 and C2; C1 is 21 and C2 is one yr old; the class closes as of O’s death; C1’s class status is vested; C2’s class status is contingent; however, since C2 is already a class member, they get the chance to try to make the class • Scenario #2: A is still alive at O’s death ♦ A has no children when O dies so the class isn’t closed physiologically; we look to the ROC and the class would not be closed b/c we don’t have anybody who can demand the gift; anyone born during A’s lifetime will be a member of the class and when A dies we close the class physiologically; A may have some kids who are 21 and are vested and may have some kids who aren’t 21 and are contingent and they get a chance to meet the class requirements ♦ A has children, one of whom is 21 and the other one is 1; the class closes b/c of ROC just like above ♦ A has children, one of whom is 11 and the other one is 1; we can’t close the class b/c neither child can demand possession b/c neither is 21; under the normal ROC, we would wait until A dies and close the class physiologically just like if A had no children at O’s death; some states in this situation, give the ROC a 2nd chance once one of the kids reaches 21, so on the day that the first of A’s children reaches 21, the class would close and all of the children currently in the class would be considered part of the class but no future kids Future Interest: “O wills Blackacre to A for life, then to B’s kids.” A predeceases O; this becomes just like a present interest gift to • B’s kids since we won’t have a life tenant; we would just erase A’s life tenancy A lives but B predeceases O; if B predeceases O, the class is • closed as of O’s death; either B already has kids and will never have anymore or B doesn’t have kids and will never have any at all A and B don’t predecease O; we can’t close the class • physiologically so we look to the ROC; on O’s death A is still alive ♦





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•

and B is still alive w/ 2 kids, one of whom is 21; the class is not closed b/c O’s death is not the first day that one of B’s children can demand possession or enjoyment; the ROC won’t apply until A’s death or until B dies if B’s death predeceases A B has no children as of the time of A’s death but is still alive; we throw ROC out the door and wait for the class to close physiologically

Assignment 32: Rule against Perpetuities 1.

RAP and Its Policies a. Purpose is to promote the marketability of private property b. This is a rule that says there is a commercially reasonable time that we will allow unknown owners to exist but beyond that point we need to know who the owners are c. Classical Application i. Stands on the effective date of the grant; looks to see if any of the interests in the grant leaves a question as to who owns the property; if there are questions, the rule says “we have to imagine anything that can happen based on the facts that exist today to make sure that under every possible scenario we will remove those questions” ii. If we cannot assure ourselves that the property will have a known owner by a commercially reasonable period of time, then we will say that the offending interests violate the rule iii. Once we fix the grant then we will know for sure that the owner will be ascertained w/in the commercially reasonable amount of time d. Unresolved Ownership Interests i. We talk about the vesting of interests ii. There are 3 interest that we consider not to be vested for RAP purposes 1. Contingent Remainders 2. Executory Interests 3. Class Gift Subject to Open (vested remainder subject to partial divestment) e. Rule Period – w/in 21 years after some life in being (a measuring life) plus 21 years i. Who’s the measuring life? To be a measuring life, all you have to do is be a “life in being” at the effective date of the grant ii. It is difficult to ascertain who’s a measuring life when you have a situation where the grant doesn’t name the measuring life f. Examples

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i. O in her will says “to my grandchildren who reach 21”; on the effective date of the grant, O is dead 1. Possibility #1 a. O has no children alive, therefore no grandchildren alive b. This is fine under the RAP b/c we know who owns the property c. The gift lapses and falls to the residuary devisees d. We will know on O’s death who owns the property 2. Possibility #2 a. O has one child, C1, when O dies b. C1 can still have grandchildren; but C1 cannot have children after she dies; we know that any grandchild born to O thru C1 has to be born in C1’s lifetime c. This means that C1 can be a measuring life; we can say that when C1 dies, we can start the RAP clock running and that we have 21 yrs for the gift to vest d. This gift passes the RAP b/c all of the grandchildren will already be alive when the 21 yr clock starts running which means that they can all reach 21 yrs b/f the clock runs out 3. Possibility #3 a. O has no children alive but has one grandchild, GC1, alive b. The grandchild herself is her own measuring life; she will reach 21 w/in her own life or she will fail to do so ii. O makes a lifetime transfer via an irrevocable trust that says “to my grandchildren who reach 21” 1. Possibility #1 a. O has no children or grandchildren alive on the effective date of the grant b. This grant fails c. One scenario is that after O creates this grant, he has a child, C1; he is hit by a truck and killed on the way to see C1; at the same time, every other measuring life on earth is killed for one reason or another; C1 is not a measuring life b/c C1 wasn’t in existence on the effective date of the grant d. C1 can affect vesting by waiting forty years to have GC1, who would then take 21 more yrs to

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2.

3.

reach age 21; we have violated the rule by 40 years 2. Possibility #2 a. O’s alive, has C1 who has GC1; GC1 is 20 yrs old b. This grant fails c. GC1 dies b/f reaching 21; O has C2 after the effective date of the grant; all the measuring lives die off which starts the 21 yr RAP running; C2 can affect vesting in a way that violates the rule New Examples a. O’s will to the grandchildren of A when they reach the age of 25 i. If we have no children alive and only grandchildren, then we don’t violate the rule when the grant takes effect; if they are alive, then they are measuring lives, so we don’t even need the extra 21 yrs and since no children are alive, then we can’t have anymore grandkids ii. If there are living children (C1), then we have a problem; C1 has GC1 b/f O dies but has GC2 at the end of O’s life; all measuring lives die when GC2 is born and the 21 yrs start rolling; GC2 won’t reach age 25 w/in 21 yrs so the gift fails iii. If there are living children but one GC is 25, then the class closes at O’s death; this means that all living grandkids are class members Fine Tuning Examples a. O wills to A for life, then A’s kids for life, then to A’s grandkids i. A is 80, infertile, widow, nun, ugly, etc, etc; under the law, A can still have a child; this means that no matter what the facts are, A can have C2 born after the effective date of the grant who will not be a measuring life; every measuring life dies so the clock starts running; the rule is violated b/c C2 can wait however long after 21 yrs to have a GC and this will violate the rule so the grant fails ii. How could we construe this grant (assuming that A is alive at O’s death) so that it doesn’t violate the rule? 1. We could construe the grant to read “O to A for life, to A’s kids for their life, then to A’s grandkids who are alive upon O’s death” b. O wills to my issue then living when USC stops overcharging i. If O has no issue living at the time of his death, then nobody vests ii. If O has living issue when O dies; let’s say that after O dies, GC1 is born (this would be O’s issue but is not a measuring life); then every measuring life dies; the grant fails b/c it

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4.

5.

could take longer than 21 yrs for USC to stop overcharging which would violate the rule iii. This means that if O has any issue alive, then the grant will fail c. O to A for life, then to A’s widow for life, then to A’s issue then living i. This means that the issue of A who are alive when A’s widow dies will take under the grant ii. 1st Scenario: on the effective date of the grant, A’s alive and so is A’s wife; A has a child (C1); the rule can be violated; A’s wife isn’t necessarily gonna be A’s widow; A’s widow could be born after the effective date of the grant; A and his current wife get a divorce; then A and widow (who is born after effective date of grant therefore not a measuring life) get married; A and widow then have a child (C2); A then dies, as well as everyone who is a measuring life; widow could live longer than 21 years after the death of all the measuring lives which means that C2 won’t take w/in 21 yrs; gift fails under these facts; we could construe this by saying that O was thinking of A’s current wife when the grant went into effect and not any potential future wives of A when he used the term “widow” which means that the gift does not fail d. O to A’s kids who reach 30 i. A is alive and has C1 who is not 30; after the grant takes effect, A has C2; all measuring lives die; a violation of the rule by about 9 yrs ii. A is alive but at least one of the kids is 30 on the date the grant takes effect; this means that the class is closed and limited to A’s kids who are living at the time the grant takes effect Basic Paradigm (3 steps) a. Can we create a non-measuring life after the grant takes effect? b. If so, we then kill off all measuring lives (theoretically, of course) c. We then see if it will take longer than 21 yrs for the non-measuring life to take under the grant Gift of a Future Interest Examples a. O to B for life, then to A’s kids who reach 30 i. B is alive but A is predeceased and has no children; the remainder fails on the date the grant becomes effective b/c none of A’s kids will ever reach 30 ii. B is alive but A is dead and has kids; the only kids of A who will be given a chance to reach 30 and vest will be those that are currently alive; they will serve as their own measuring lives; they will reach 30 or die trying iii. B is alive, A is alive, and has a child who is 30; we don’t close the class on the effective date of the grant even if B’s alive b/c B is a measuring life; now we have to do our 3 step

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6.

7. 8. 9.

analysis; we kill off all the measuring lives; the grant fails b/c C2 has to live to 30 which will take longer than 21 yrs What happens when the rule is violated? a. O to A for life, then to A’s kids who reach 25 i. If A is dead and one kid is 25, then the RAP is not violated; anything else means that the grant will fail or, at least, not vest ii. Lets assume that A is alive and has a living child 1. A has a life estate and C1 has a contingent remainder 2. The part of the grant to A’s kids who reach 25 is stricken 3. We then reclassify as if it reads w/o the stricken language 4. It now reads O to A for life; this means that O has a life estate and O has a reversion b. O to A for so long as USC overcharges, then to B’s issue then living i. A has a fee simple determinable; B’s issue has executory interest ii. As long as B or any of his issue is alive on the effective date of the grant, we violate the RAP iii. The executory interest violates the RAP so it is stricken iv. Now we have to reclassify the grant as “O to A for so long as USC overcharges” v. A still has an FSD and O now has a possibility of reverter c. O to A, but if USC stops overcharging, to B’s issue then living i. A has fee simple subject to executory limitation; B’s issue has an executory interest ii. The RAP is violated iii. Everything from “, but for…” is stricken iv. The grant now reads “O to A” v. A now has a fee simple absolute RAP doesn’t apply to wholly charitable gifts; these are gifts where all the interests are charitable interests If there is a split interest where one part is private and one part is charitable, then we have a problem; private part is probably subject to RAP Ways Around RAP a. Construe the problem away (as has been noted above several different times) b. Some cts have reformed the grants i. Example 1. O to A for life, then to A’s kids who reach age 25 a. In some jurisdictions the ct may change the grant to say “O to A for life, then to A’s kids who reach age 21; this will satisfy the RAP c. Some jurisdictions take a “wait and see” approach

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i. The problem w/ this is how long do we wait and see d. SC Statutory Rule i. We first must measure a grant to see if it satisfies the common law rule; if it does then we satisfy the statutory rule ii. If it does not satisfy the common law rule, then we wait 90 yrs and see; if the interests all vest w/in 90 yrs then we satisfy the statutory rule iii. If we fail the 90 yr vesting test, the statute also says that the ct can reform the grant iv. If the grant was effective b/f 7/1/87 and we have to reform it, then we must reform it to satisfy the common law rule; if the grant was not effective b/f 7/1/87, then we must reform it to satisfy the 90 yr statutory rule

T's will provides as follows: 1. 2. 3.

"$100,000 to be paid from my 1000 shares of Dave Odom, Inc. to A." "$100,000 each to B and to C." "Rest to D."

On the date of execution, T owned 1000 shares of Dave Odom, Inc. valued at $100 a share, a house worth $250,000, and bank accounts totaling $2 million. Two years later, T sold 500 shares of Dave Odom, Inc. for $25,000 ($50 per share). One year later, T died. On the date of her death, T's entire probate estate consisted of 500 shares of Dave Odom, Inc., now worth $10 a share, and bank accounts worth $100,000. What do you suppose happened to T's wealth from the date of execution until the date of death? She could’ve set up her estate to pass as non-probate gifts; she could’ve gotten sick; she could’ve made an outright gift; she could’ve lost a lawsuit; the possibilities are really endless What do A, B, C, and D take?

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T & E Outline (by Assignments)

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