Wills Estates and Trust

I. Probate v. non-probate
 Probate Assets- Owned by the decedent alone and require the decedents signature to
transfer. These also include property owned as tenancy in common
 Exceptions are: washer dryer or house good items that does not require a
signature.
 Probate assets can be transferred in two ways
 Intestate- decedent dies without a will
 Testate- decedent dies with a will. Property will be devised according to
the will
 $64,500

 Non- probate assets- these or assets that are not owned in the decedents name alone
 Joint tenancies or tenancies by the entireties
 These types of property transfers via operation of law
 Another type of non-probate asset is those that does not require the decedents
signature to transfer
 Life ins pol. 401k or IRA
 Transfer via contract
 Life insurance pol can be a probate asset- general rule is that life ins are
non-probate assets. However, they can become a probate asset in certain
circumstances.
 For the life ins to be paid out, the insured has to die. However, if
the beneficiary dies before the insured and the policy owner did not assign
another beneficiary before the death of insured. The beneficiary amount
will get paid to owner 's estate as a probate asset.
 Death of the owner of the policy creates a probate asset because
you need a signature to transfer.
 
II. Calculating Gross Probate
 The master calculation- add up all decedent probate assets which will equal the gross
probate estate
o Probate assets- owned in the decedents name alone and require decedents
signature to transfer
 Can also be revoked gift causa mortis- a gift causa mortis is a gift that was
made during the contemplation of death. If the donor does not die or is dead but
not in the manner that was predicted, then the gift is revoked and is now part of
the gross probate calculation.

III. Family protection plan

a. After the gross probate has been calculated, the family has rights to claim under
the family protection plan in the following order.
i. Homestead Allowance (the residence used by the decedent and the
decedents family.)- a decedents surviving spouse is entitled to a
homestead allowance of $22,500. IF there is no surviving spouse, each

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 minor child and each independent child of the decedent is entitled to a
homestead allowance amounting to $22,500.
o The homestead allowance is exempt from and has priority
over all claims against the estate.
 
ii. Family allowance (the allowance is the amount necessary to keep then in
the style of living to which they were accustomed while the decedent was
alive for one year after the decedent's death.)- in addition to the right to the
homestead act, the decedent's surviving spouse AND minor children
whom the decedent is obligated to support or is being supported by the
decedent are entitled to reasonable allowance in money out of the estate
for their maintenance for a period not to exceed one year. Can be paid as a
lump sum or in periodic instalments.
o The family allowance is exempt from and has priority over all
claims except the homestead allowance.
o If the estate is otherwise sufficient- the family
allowance is to be paid in a lump sum not to exceed
$27000 or periodic installments not exceeding
$2,250 per month for 1 year
 
iii. Exempt property (the surviving spouse and minor children are often
granted the right to retain certain personal property free from the claims of
creditors. Exempt personal property is tangible in nature.)- in addition to
homestead allowance, the surviving spouse (if none then decedents
children) is entitled from the estate to a value not exceeding $15,000 in
excess of any security interests. If there is not $15,000 worth of exempt
property in the estate, the spouse or children are entitled to other assets of
the estate to make up the necessary $15,000 value.

iv. Therefore, the surviving spouse or minor children may get up to

$64,500 and adult children may get $15,000

1. 120-hour rule- following rule applies for intestate succession,

homestead allowance and exempt property: an individual who was
born before the decedent, who failed to survive the decedent by
120 hours is deemed to have predeceased the decedent. That
individual is deemed gestation if not established by clear and
convincing evidence. Therefore, they are not qualified to claim
intestate succession, homestead allowance and exempt property.

IV. Calculating Distributable probate Estate- calculation is done by subtracting the family
protection claims and the creditors from the gross probate asset. Priority of creditors- if the
applicable assets of the estate are not enough to pay all the claims in full, then payment shall
be made in the following order:

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 a. Cost and expenses of administration- (lawyer) legal fees, accounting fees, court
fees
b. Reasonable funeral expenses
c. Debts and taxes with preference under federal law (income tax)
d. Reasonable and necessary medical and hospital expenses of the last illness of the
decedent (ambulance ride, the last illness that killed you)
e. Debts and taxes under other laws of the state (property and income)
f. All other claims
i. no preference should be given to charges of a claim in the same category.
Pro rata- by ratio. There for each creditor gets an equal percentage of
what is left.

V. Intestacy- where the decedent dies without a will

a. Calculating Surviving Spouse Share
i. If the surviving spouse and the decedent has mutual children. Then the
surviving spouse formula is $150,000 + ½
ii. If the decedent and the surviving spouse has no children, but the decedent
is survived by parents, then the surviving spouse formula is $150,000+ ¾
iii. If the decedent died leaving children that are not children of the surviving
spouse, then the surviving spouse formula is $100,000+ ½
iv. If the decedent left no surviving parent or does not have any children, then
the surviving spouse formula is the entire estate.

b. Procedure to determine share of descendants

i. Per stirpes (common law)- distribution that determines takers by the root
or stock. The younger generation divides the share that the older
generation would have received if they had survived the decedent.
Example and Explanation book 2.4.2
ii. Per capita (modern view UPC)- distribution is done equally amongst
like- related persons. Once the division into shares is done, at the first
generation with survivors, the share created on behalf of the deceased
members of that generation are combined and then are distributed per
capita. Examples and Explanation book 2.4.4

c. Share of heirs other than surviving spouse- any part of the intestate estate not
passing to the decedent's spouse (dead persons wife or husband) or if there is no
surviving spouse passes in the following order.
1. To the decedent's children by representation
2. If there is no surviving children, to the decedents parents equally if
both survive or to the surviving parent
3. If there is no children or parents, then to the children of the
decedents parents (brothers and sisters)
4. If there is no surviving children, parents, or siblings but is survived
by grandparents on both sides, (maternal and paternal) or children
of grandparents (aunt and uncle) then:

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 5. Half to the paternal grandparents equally if both survive or to the
surviving grandparent if only one survives, or the grandparent’s
children if both grandparents are deceased.
6. Half to the maternal grandparents equally if both survive or to the
surviving grandparent if only one survives, or the grandparent’s
children if both grandparents are deceased.
 
7. No takers (escheat)- if there is no one for the property to be
passed down to, then the intestate estate passes to the state.

a. Half Blood- relatives of the half-blood inherit the same

share they would inherit if they were of full blood
 
b. Effect of parent child relationship- if a parent- child
relationship exists or is established, under these subparts
then- the parent is a parent of the child and the child is a
child of the parent for purpose of intestate succession.
Excepts as otherwise provided in section 2-119 b-e

c. No distribution based on marital status- except as

otherwise provided in section 2-114 a parent child
relationship exists between a child and the child's genetic
parents regardless of the parent’s marital status.

d. Adoptee and adoptee's adoptive parent or parents- a

parent child relationship exists between the adoptee and the
adoptive parent or parents.

e. Adoptee and adoptee's genetic parents- except as

otherwise provided in subsections b- e, a parent-child
relationship does NOT exist between the adoptee and the
adoptee's genetic parents.

f. Stepchild adopted by stepparent- a parent child

relationship exists between an individual who is adopted by
the spouse of either genetic parents and:
i. The genetic parent whose spouse adopted the
individual; and
ii. The other genetic parent, but only for the purpose of
the right of the adoptee or a descendant

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d. Disclaimer- where a person rejects their share of intestacy. Must be done within 9
months of decedents death.
i. Must be in writing
ii. State that they are disclaiming and describe what is being disclaimed
iii. Must be signed and delivered to the court or family representative
1. A disclaimer is irrevocable, it can be partial and once a person
disclaims, they are not allowed to take use and enjoyment of the
disclaim property. Nor can they take use and enjoyment of the
property then disclaim.
a. You can still disclaim when you have a creditor, however
they still have an interest on your share
i. Assignment of Expectancy- giving to someone
else something you have the right to or expect to get
upon the death of the decedent.
1. Assignments of expectancy are never
enforceable. You cannot by pass the heir,
you must wait for the heir to get paid then
you sue.
2. A person who have disclaimed their share is treated as predeceased
for distribution purposes. Their share is divided down the line of
their descendants ONLY. Therefore, it does not affect the shares of
others. Alive for division dead for distribution.

iv. Slayer Statute- felonious and intentional killing. A person who is found
guilty of a felony against the decedent amounting to voluntary
manslaughter and above is treated as having disclaimed. Before you start
adding look for property that the decedent and the slayer has in common.
1. Joint tenancy is severed and become a tenancy in common-
therefore decedents portion now becomes part of their probate
asset.
2. Are not entitled to benefit from family protection claim
3. Anything revoked from slayer gets added back to probate assets.
4. If it is an intestate estate a slayer’s portion is treated as being
disclaimed
5. If it is a testate estate, the share is treated as being revoked

e. Advancement- a special type of intervivos gift. The advancer intends the

advancement to be an early distribution from the advancer estate. Thus, the
advancee’s share of the advancer’s estate is reduced to compensate for the
advancement. This is referred to as HOTCHPOT
1. Must be in writing that is either by the decedent or the heir which
states “this is an advancement” or “to be taken out at the time or
distribution.”

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 a. If a lawyer writes it, then it will most likely have the
language stating advancement. If written by decedent or
heir may not have that language.
2. If the decedent is the one who writes it, the decedent has to declare
it in contemporaneous writing simultaneously to giving the gift.
ii. Hotchpot- ensures that each child gets an equal share from the intestate
accounting for both intervivos and at death transfers.
1. When calculating advancements
a. Add amount of advancement back to distributive asset
b. Divide by how many heirs
c. Subtract the amount of advancement from advancee’s share
d. Check your work
iii. Advancements are irrevocable therefore; the advance is under no
obligation to the advanced amount to intestate estate.
iv. Advancements are typically valued as of the date of the advancement.
Thus, subsequent appreciation or depreciation of advance property is
ignored when going into hotchpot.
v. If the advancee predeceased the advancer, the property is not taken into
account in computing the division, unless the decedents writing states
otherwise.

VI. Testacy
a. Will- an instrument that instruct something to be done after death. A will must be:
i. In writing
ii. Signed by the testator or in the testator's name by some other individual in
the testator's conscious presence and by the testator's direction and either:
1. Signed by at least two individuals, each of whom signed within a
reasonable time after the individual witnessed either the signing of
the testator or representative as described or the testator
acknowledgement of that signature or acknowledgement of the
will.
a. An interested witness does not automatically invalidate the
will (meaning, if the person who signs as a witness, is also
someone who is name in the will, it does not make the will
invalid.)
b. A witness must be generally competent. Your ideal witness
would be someone 18 who is capable of writing their own
will.
2. Acknowledged by the testator before a notary public or other
individual authorized by law to take acknowledgments
3. Holographic wills- a will that does not comply with subsection (a)
is valid as a holographic will, whether or not witnessed, if the

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 signature and material portions of the document are in the testator's
handwriting.
a. This is a will that is handwritten by the testators
b. Needs to be signed by the testator
iii. Material portion has to be in testators handwriting
iv. Extrinsic Evidence- intent that the document constitutes the testator's will
can be established by extrinsic evidence, including, for holographic wills,
portions of the document that are not in the testators handwriting.

b. Conditional will- a testator may condition the effectiveness of a will on the

occurrence or non-occurrence of a stated event or the truth of a given statement.
i. In order to have a conditional will the language that is being purported
must be clear and unambiguous
ii. Codicil- making an amendment to the will

c. Substantial Compliance- for document or writing added upon a document was

not executed in compliance with the requirements of a will, then if proponent can
show by clear and convincing evidence that the testator intended for the document
to be their will the court will admit the invalid will. Have to show intent
i. The person who wants the will to come in has the burden of proof
ii. First you need to identify if it is a valid will
iii. You do not need to determine whether the will should come in. just talk
about what would happen if the will gets to come in, and what would
happen if it does not.

d. To execute a will
i. An individual 18 or older who is of sound mind is allowed to execute a
will.
1. Testamentary capacity- the person has to be of sound mind:
a. comprehend the action that is being taken and its effect.
b. knew the nature and extent of the testator’s property.
(does not need to be able to provide a precise accounting of
each asset the testator owns and its value)
c. recognize the natural objects of the testator’s bounty (must
know or be able to understand the individual who would
naturally benefit from the death)
d. simultaneously held the first three elements in the testator’s
mind long enough to make a reasoned judgement regarding
property disposition. (must have capacity at the time the
testator executes the will)

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e. Surviving Spouses Rights under a will
i. Waiver of rights to elect and of other rights-The right of election of a
surviving spouse and the rights of the surviving spouse to homestead
allowance, exempt property, and family allowance, or any of them, may
be waived, wholly or partially, before or after marriage, by a written
contract, agreement, or waiver signed by the surviving spouse.
1. has to be in writing and signed by the party waiving their rights
2. Has to be voluntarily
3. Have independent representation
4. Financial disclosure (have to know of the finance of the other
spouse’s assets)

ii. Rights of an omitted spouse

1. Abide by the terms of the will
2. Forced share (elective share): (1/2 x intestate) – (1/2 x non-
probate transfer)
a. Non-probate only includes decedents portion, also includes
half of anything the decedent owns with any other person
jointly
3. Omitted Spouse share (fact driven)- (Distributive estate) – (devises
to non-mutual descendant) = adjusted distribution then apply
intestate formula
a. the decedent and their spouse were married after the will
was made unless:
i. The will was made in contemplation of marriage
ii. The will clearly states that marriage has no impact
of distribution
iii. The decedent provided for the spouse in another
way outside of the will. (the court will be the judge
of that based on the amount and size of the transfer)

f. Rights of an omitted child- a child who was born or adopted after the will was
executed. UNLESS
1. They were left out intentionally
2. Were provided for outside of the will
Another way to qualify as an omitted child is an individual who was mistakenly
believed to be dead. They would not have to go through the UNLESS test
ii. First question to ask: was there any child alive at the time the will was
executed?
1. If No

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 a. the omitted child gets their intestate share UNLESS
everything goes to the omitted child surviving parent.

2. If Yes- then were the other children given something in the will
a. No- then child gets nothing. Because if the testator did not
give something to the children he knew about, why would
he want to give something to a child he doesn’t know about
b. Yes- the most the omitted child could get is how much the
other children named in the will would get. This is a pro
rata calculation.
c. Pro Rata Calculation:
i. Add the amounts together
ii. Divide by how many children (including omitted
child)
iii. The amount that the omitted child is entitled to can
be subtracted from the other children pro rata
iv. Calculate percentages
v. Multiply each percentage by the quotient
vi. Subtract difference from original amount
VII. Will Challenges
a. Burden of proof is on the proponent to show
i. The will was duly executed
ii. Deliver death certificate and heirship
iii. If you are contesting the validity of the will, then burden of proof is on
you to show the lack of capacity of the testator
iv. The petitioner who seeks to establish intestacy has the burden of
establishing prima facie proof of death and heirship.

b. Mental Capacity- you can have insane delusion all day long, as long as it does
not affect your will.
i. The testator must understand the business in which they are engaged
ii. Their property
iii. The natural objects of their bounty; AND
iv. The disposition they desire to make of their property

v. The courts will interpret contents of a home to be tangible property

normally associated with the home.
vi. One can be capable of making a will, but incapable of selling or
contracting for property

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 c. Undue influence- does not reflect the intent of the testator, but those of the
influencer. (factors)
i. Opportunity / confidential relationship
ii. Susceptibility- absolute control (must have this factor)
iii. Disposition- motive
iv. Procurement- initiating the steps
v. Unusual or suspicious circumstances

d. Mistake- Mistake in the inducement- a mistake that forces you to write your will
in a specific way
i. Mistake in omission- normally deals with omitted child "mistakenly that
they were dead"
ii. This can be solved with substantial compliance

e. Fraud- intent and an outside influence. There is fraud in the inducement and
fraud in the execution. (elements)
i. Statement which are false
ii. Which are known to be false by the party who made them
iii. Which are material
iv. Which are made with the intention of deceiving the testator
v. Which deceives the testator
vi. Which cause the testator to act on reliance upon such statement

VIII. Settlement of Wills contests

a. competent successors may agree among themselves to alter the interests, shares,
or amounts to which they are entitled under the will of the decedent, or under the
laws of intestacy, in any way that they provide in a written agreement executed by
all who are affected by its provisions.

b. In terrorem clauses (Horvath no like)-

i. Takes away a gift in a will if the devisee challenges a will
ii. Intend to deter will challenges
iii. Court will disregard the clause if there is reason to bring a will challenge

IX. Revocation- the three ways which a will can be revoked

a. Revocation by subsequent will
i. Writing a new valid will (expressly)
ii. Inconsistent will (look for intention)
1. When a will is inconsistent, look to see if the new will is a codicil
(amending the will) or is it to totally replace the will

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 a. If it is a complete disposition, then the new Will will
revoke the prior will
b. If incomplete disposition, then new will is a codicil o prior
will
i. We read both wills together and any inconsistency
is read in favor of the new will.

b. Revocation by physical acts- burning, tearing, destroying or canceling the will

with the intent to revoke.
i. Can be done by the testator or by someone under the operation of the
testator and in the testator’s conscious presence.
ii. Doesn’t have to touch the words a long as there is intent
 Lost will- subpart of revocation by physical act
 Court start with thinking the reason why the will is lost is it was destroyed
with the intent to revoke it.
 What you must prove
o It was a valid will to begin with- meeting the elements of a valid will
o What the will said
o Why it is unable to be found
 How to deal with lost will- keep a copy of the will in your file
 
 Doctrine of dependent relative revocation- the court would presume that
the testator would not want the revocation to be valid if they knew that the
change was not going to work
o Valid revocation
o Invalid replacement
 Revocation by physical act
 Elements of a valid codicil
 Substantial compliance
 If you win, follow the codicil
 If lose, the person who was revoked can argue doctrine of
dependent relative revocation

c. Revocation via operation of law- because the law said so

i. Slayer- intentional and felonious killing
ii. Divorce-
1. Revokes everything in a will or governing instrument
2. Joint tenancy becomes tenancy in common
3. Revokes everything to spouse or former in- law

d. If a testator writes a codicil to a will, then the will be read as if it was executed on
the date of the codicil. Therefore it can destroy an omitted spouse or omitted
child's share

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 X. Revival of Revoked Will- it is evident from the circumstances of the revocation of the
subsequent will or from the testator’s contemporary or subsequent declarations that the
testator intended the previous will to take effect as executed.

a. The testator wrote his first. Then he wrote a second will that either wholly
revokes the will expressly revokes the first will or is inconsistent with the
complete disposition of the first will. Then the second will is revoked by a
physical act. The result is that the prior will (#1) will remain revoked, therefore
the testator has died intestate.

b. The testator wrote will one, then wrote a second will that partially revokes the
prior will. This means that will 2 is a codicil. Then will 2 is revoked by a physical
act. The result is that the prior will (will 1) is revived.

c. The testator wrote will one, then wrote will 2 which partially or wholly revokes
will 1 either through express or inconsistent writing. Then wrote will 3 . Will 3 is
then revoked by a physical act. Will 1 will remain revoked unless will 3 revived
it. If not, then the testator dies intestate.

XI. Abatement- not enough money in the distributable estate is not enough to cover all of the
distribution
Specific devise- tangible personal property. A devise of a specific identifiable thing
General devise- devise of general value
Residuary devise- what is left over
Demonstrative devise- general amount of money from a specific source ($50 from my
account)
 
a. You get rid of the residuary devises, pay out the specific
devises then pro rata the general devises
 How to deal with demonstrative devises- if we have
a demonstrative devise
 The demonstrative devise is treated as a specific
devise to the extent that the source can cover. Any
short fall abates with general devises

XII. Testacy Matters of inclusion and Ademption

 What are the facts that triggers matters of inclusion?

o Incorporation by reference- cannot be amended
 A will can refer to an outside written document and that document will be
incorporated into the distribution provisions of the will, so long as
 the will manifests in attempt to incorporated it,
 it's in writing,

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  it is an existence in at the time the will was executed and
 the will adequately describes the document.

o Disposition by lists- allows the testator to dispose of tangible personal property by

using a list rather than writing all those things out in their will
 Written list
 Will has to refer to the list
 The list has to describe the people and items with reasonable certainty
 The will can only dispose of tangible personal property not already
disposed by the will

o Events of independent significance- the testator can dispose of property by

referring to an outside event or act or piece of information so long as that event or
act or piece of information exists for a reason other than the will. (we have to rely
on that information)

o Ademption by exemption- only applies to specifically devised items

 Common Law rule- you are shit out of luck if that piece of property you
are devised in a will is not in the testator's estate at the testator's death

 Nonademption of Specific Devises- unless the facts and the

circumstances indicate that ademption of the devise was intended by the
testator or ademption of the devise is consistent with the testator's
manifested plan of distribution. a specific devisee has a right to the
specifically devised property in the testator's estate at death and all of the
following:
 Any balance of the purchase price, together with any security
agreement owing from a purchaser to the testator at death by
reason of sale of the property
 Any amount of a condemnation award for the taking of the
property unpaid at death- (eminent domain)
 Any proceeds unpaid at death on fire or casualty insurance on, or
other recovery for, injury to the property
 Property owned by the testator at death and acquired as a result of
foreclosure, or obtained in lieu of foreclosure, of the security
interest for a specifically devised obligation.

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 Right of exoneration- I give you my house free and clear. If there is a debt attached to
an item, it is non-exoneration and you take that item subjected to any debt attached to it.
Ademption of satisfaction- property a testator gave during his or her lifetime to a person
is treated as a satisfaction of a devise in whole or in part only if any of the following are
true:
 The will provides for a deduction of the gift
 The testator declared in a contemporaneous writing that the gift is in satisfaction
of the devise or that its value is to be deducted from the value of the devise
 The devisee acknowledges in writing that the gifts is in satisfaction of the devise
or that its value is to be deducted from the value of the devise.
XIII. Anti-Lapse
a. First question to ask is whether the devisee predeceased the testator?
i. No- follow the will
ii. Yes- is there an alternative devise (does the testator state what to do in
such event
1. Yes- follow the terms of the will
2. No- is the devisee a grandparent, descendant of grandparent or a
stepchild?
a. If yes- substitute gift will be created
i. Does the devisee have any descendants?
1. Yes- the gift goes to descendants
2. No- the gift becomes a residuary

b. What happens if the predeceased devisee is the residuary devisee?

i. Look to see if they left descendants
1. Yes- the descendant gets it
2. No- is there another devisee
a. If so it goes to them
b. If not- because intestate
c. Class gifts
i. Whether the devisee predeceased the testator
ii. Was the devisee part of a class gift?
1. Yes- is the class gift a family class gift or a regular class gift
a. If a regular class gift- divide between the class
b. If it is a family class gift
i. Does the devisee have descendants?
1. Yes- there share is divided between their
descendants per capita
2. No- divided between remainder of the class

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 d. Words of Survivorships- where the testator states in the provision…. “if they
survive me” these words cancel Anti-lapse

XIV. A contract to make a will or devise not to revoke a will or devise, or to intestate may be
established only by 1 or more of the following:
 The will states the material provision of the contract
 Express reference ion a will to a contract and there is an outside contract
 A writing signed by the decedent to the contract (so you have the contract)
 
Accessions- only applies to devises of a specific number of shares
Stock- ownership in a cooperation
Merger, stock split, dividend reinvestment plan.
But for the original ownership for the share I would not have these shares.

XV. Trust
A. A general trust scenario arises when a property owner wants to bestow benefits on a
worthy individual or charity but does not want to make an unrestricted outright gift.

B. Creation of a trust
a. Methods of trust creation- the settlor may create a trust while the settlor is alive or
delay the time of creation until the settlor’s death by including trust gifts in the
settlor’s will.

b. During the settlor’s lifetime- this is known as an inter vivos trust or a living trust.
Settlors may use one of the two basic methods:
i. Declaration of trust- in a declaration of trust, the settlor declares him or
herself to be the trustee of specific property and then transfers some or all
of that property’s equitable title to one or more beneficiary.
ii. Transfer in trust- in a transfer or conveyance in trust, the settlor transfers
legal title to another person as trustee and imposes fiduciary duties on that
person.

c. Upon the settlor’s death- a settlor may create a trust to take effect upon the
settlor’s death by including a gift in trust in the settlors will.
i. Pour-over provisions- A clause in a will that makes a gift to an inter
vivos trust. Very common because many testators wish to obtain the
benefits of trust but do not want to create them in their wills.

d. Requirements for a valid trust:

i. Competent settlor- The level of mental capacity needed to create a trust
is the same as to create a will.

ii. Intent to make a trust-

1. A trust must be "mandatory" to be enforceable.
2. For a trust to be active and valid, it must have duties to perform

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 3. The trust can fail where the settlor fails to give the trustee duties to
perform
4. It can also fail where the trustee is doing all the duties, but run out
of duties to perform

1. Illusionary trust (retention of power)- An illusionary trust is

where the settlor wants to create a trust but may want to retain
considerable interests and power over the trust property.
2. Passive Trust: A trust wherein the settlor is the sole trustee and
sole beneficiary during their lifetime and settlor uses their assets in
whichever way they choose.

e. Beneficiary intended- the settlor and the trustee cannot be the same person

f. Duties of the trustee

i. Loyalty
1. No self-dealings or comingling of funds
2. Trustee cannot engage as an individual with trust property
permissible UNLESS:
a. The court approves
b. All the beneficiaries approve
c. Terms of the trust dictates it is permissible
3. Damages: transaction is voidable, or keep for himself of any
benefits of the transaction.
ii. Duty of care- a trustee must minister the trust as a prudent person would.
The trustee shall exercise reasonable care, skill, and cautions.
1. If you are chosen as the trustee because you are in attorney, you
must administer the trust as a reasonable attorney would.
iii. Prudence- distribute and pay on time. Expected to act in a reasonable
manner when it comes to investment moves.
iv. Impartiality- must remain impartial if there is more than one beneficiary
v. Inform and account- provide information about proposed significant
changes, respond promptly to beneficiaries. Keep records of transactions.
vi. Removal of trustee- can be removed for breach of trust, lack of
cooperation amongst the trustees, unfitness, unwillingness, persistent
failure to administer effectively.

g. Split in title- Any separation of legal and equitable title coupled with the
imposition of fiduciary duties on the holder of the legal title is sufficient to
satisfy the split of title requirement for a valid trust.
i. The trustee holds legal title and the beneficiary holds equitable title

C. Interpretation of a trust- when looking at interpretation of a trust, you have to

determine what language protects the trust. Spendthrift or discretionary language.

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 a. Generally, the beneficiary of a trust has the power to transfer the beneficiary’s
interests to the same extent the beneficiary could transfer a non-trust interest. The
equitable interests of the beneficiary may be subjected to attack from the
beneficiary’s creditor UNLESS
b. Spendthrift clause: a provision of a trust that does two things: prohibits the
beneficiary from selling, giving away, or otherwise transferring the beneficiary’s
interest. Also prevents the beneficiary’s creditors from reaching the beneficiary’s
interest in the trust. Unless the creditor is:
i. A claim of child support
ii. Alimony/ spousal support
iii. Government and state taxes
iv. A creditor who has provided services for the protection of a beneficiary’s
interest such as lawyers, accountant, CPA
1. In able for a spendthrift to be valid, it must restrain both voluntary
and involuntary transfer of a beneficiary’s interest.
a. Voluntary- beneficiary assigns spendthrift
b. Involuntary- creditors try to attach with lien
i. Spendthrift only protects the interest
ii. Discretionary protects the principle

c. Discretionary clause: settlors give their trustees the discretion to determine

which beneficiaries to pay and how much to pay each. Trustee decides to when/
how/ amount the beneficiary is to receive.
i. creditor cannot compel any discretionary payouts by trustee, even if
trustee is violating his duty in the process of withholding.
1. Creditors cannot attach to the principal because of discretionary

d. Reformation- the courts will permit reformation if there is clear and convincing
evidence that both the settlor’s intent and the terms of the trust were affected by a
mistake of fact or law.

e. Support Trust- the settlor may restrict the use of the trust income, prinicipal, or
both to the beneficiary’s basic needs such as: food, clothing, medical care, and
educational expenses.
i. A support trust can either be mandatory or discretionary in nature.
1. If mandatory, the trustee must make distributions to support the
beneficiary
2. If discretionary, the trustee may, but is not required, to pay for the
beneficiary’s support and may not, under any circumstances, make
distributions for other reasons such as vacation or second home.

D. Modification of a Trust
a. Charitable trust- a charitable trust is a trust established for the benefit of the
community as a whole or for a relatively large segment of the community.

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 i. The settlor may specify the charitable class in extremely broad terms. The
trustee and the court have the discretion to select the means for carrying
out the settlor’s charitable purpose.
ii. Where a charitable trust is illegal or impossible to carry out, if the courts
can find a general intent, it will modify the trust to make it legal and
possible. Doctrine of Cy Pres.

E. Trust Termination- upon termination, all legal and equitable title to any remaining trust
property becomes reunited in the hands of the remainder beneficiaries.
a. Early terminations- beneficiaries often seek to terminate a trust early because
they would prefer to own the property outright and be free from limitations the
settlor imposed.
i. For a trust to be terminated by beneficiaries the following elements should
be present:
1. All beneficiaries must agree
2. No material purpose remains (requirements by settlor)
b. Express terms of trust- the settlor ties trust termination to an event or date.
c. Revocation by settlor- once the settlor revests legal and equitable title to all the
trust property, the trust ends
d. Merger- by working together, the trustee and the beneficiaries may terminate a
trust by uniting all legal and equitable title in one person.
i. Some courts will not permit a trust to terminate because of merger if a
material purpose remains. Instead, the court will appoint a new trustee to
be sure the legal and equitable title are split
e. Lack of property- a trust must have property and thus may terminate because it
runs out of property.

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