Chapter 50 TRUSTS AND DECEDENTS’ ESTATES Trusts Types of Trusts [50-1] Express Trusts [50-1a] Testamentary Trusts Inter Vivos Trusts Charitable Trusts Spendthrift Trusts Totten Trusts Implied Trusts [50-1b] Constructive Trusts Resulting Trusts Creation of Trusts [50-2] Settlor [50-2a] Subject Matter [50-2b] Trustee [50-2c] Duties of the Trustee Powers of the Trustee Allocation of Principal and Income Beneficiary [50-2d] Termination of a Trust [50-3] Decedents' Estates Wills [50-4] Mental Capacity [50-4a] Testamentary Capacity and Power Conduct Invalidating a Will Formal Requirements of a Will [50-4b] Writing Signature Attestation Revocation of a Will [50-4c] Destruction or Alteration Subsequent Will Codicils Operation of Law Effectiveness of Testamentary Provisions Renunciation by the Surviving Spouse Abatement and Ademption of a Bequest Special Types of Wills [50-4d] Nuncupative Wills Holographic Wills Soldiers' and Sailors' Wills Conditional Wills Joint and Mutual or Reciprocal Wills Living Wills Intestate Succession [50-5] Administration of Estates [50-6] Cases in This Chapter Kenney v. Keeney In the Matter of the Estate of Rowe Prine v. Blanton Whatley v. Estate of McDougal Chapter Outcomes After reading and studying this chapter, the student should be able to: • Describe and explain the following types of trusts: (1) express, (2) testamentary, (3) inter vivos, (4) charitable, (5) spendthrift, (6) totten, (7) implied, (8) constructive, and (9) resulting. • Describe the powers and duties of a trustee. • Explain the formal requirements for making a valid will and the various ways in which a will may be revoked. • Define the following types of wills: (1) nuncupative, (2) holographic, and (3) soldiers’ and sailors’ wills. • Describe intestate succession and the administration of decedents’ estates. TEACHING NOTES TRUSTS • A trust is a fiduciary relationship in which one or more persons hold legal title to property while its use, enjoyment, and benefit (known as equitable title) belong to another. • A trust may be created by agreement of the parties, by a grant in a will, or by a court decree. • The party creating the trust is the settlor, the party holding the legal title to the property is the trustee, and the person who receives the benefit of the trust is the beneficiary. • A trust may be created for any purpose that is not against the law or public policy. NOTE: See Figure 50-1: Trusts. *** Chapter Outcome *** Describe and explain the following types of trusts: (1) express, (2) testamentary, (3) inter vivos, (4) charitable, (5) spendthrift, (6) totten, (7) implied, (8) constructive, and (9) resulting. 50-1 TYPES OF TRUSTS The many kinds of trusts fall into two groups: express and implied. Implied trusts, imposed upon property by court order, are categorized as either constructive or resulting trusts. 50-1a Express Trusts Voluntary action by a person to establish a trust; generally will be in writing. No particular words are necessary to create a trust, if the settlor’s intent to establish a trust is unmistakable. Words such as "hope" or "rely" are wishful and many courts have taken the view that without additional evidence, they do not impose a legal obligation on the recipient of the property to act as a trustee but rather such a transfer is a gift with a suggestion as to the use of the property. Testamentary Trusts — Trusts employed in wills. Inter Vivos Trusts — Trusts “between the living” established during the lifetime of the settlor. Charitable Trusts — Gifts in the form of a trust designed to benefit the general public. Spendthrift Trusts — A settlor who believes that a beneficiary cannot be relied on to preserve even the limited rights granted her as beneficiary may provide in the trust instrument that the beneficiary cannot, by assignment or otherwise, impair her rights to receive principal or income and that creditors of the beneficiary cannot attach the fund or the income. Such a trust is called a spendthrift trust. Totten Trusts — A totten trust is a tentative trust consisting of a joint bank account opened by the settlor. For example, Sally deposits a sum of money into a savings account in the name of “Sally, in trust for Justin.” This trust is tentative because the settlor may revoke it by withdrawing the funds or by changing the form of the account. Usually the transfer of ownership becomes complete only on the depositor’s death. 50-1b Implied Trusts The courts sometimes, in the absence of any expressed intent to create a trust, will impose a trust on property because the parties’ acts appear to warrant such a construction. An implied trust owes its existence to the law. Constructive Trusts — A constructive trust results when a court imposes a trust on property to rectify fraud, to prevent unjust enrichment or to undo a morally wrong situation. A court will establish a constructive trust where a confidential relationship has been abused or where actual fraud or duress constitutes an equitable ground for creating the trust. The mere existence of a confidential relationship prohibits the trustee from seeking any personal benefit during the course of the relationship. CASE 50-1 KEENEY v. KEENEY Court of Appeals of Kentucky, 2007 223 S.W.3d 843 http//scholar.google.com/scholar_case?case=17154555324430393535&q=223+S.W.3d+843&hl=en&as_sdt=2,22 Acree, J. This appeal from a judgment entered by the Pulaski Circuit Court began as Barbara Joanne Keeney’s petition for dissolution of her marriage to Milton Keeney. Barbara [joined] * * * as additional defendants Milton’s parents, Winfred (now deceased) and Ruth Keeney, and to establish her rights to 6.6629 acres near Nancy, Kentucky, titled in Winfred’s and Ruth’s names. The parties and trial court refer to this property as the “Nancy property” or, more frequently, the “Barlowproperty.” * * * Essential to Barbara’s claims is the premise that Milton, aided by Winfred and Ruth, intentionally avoided direct ownership of real and/or personal property in his name. The obvious purpose was to avoid, and in fact, to defraud at least one particular creditor who was in a position to execute on any property she could have found belonging to Milton. As it happens, Milton was involved in a two-vehicle accident in the early 1970s when he was 18 years old. * * * Despite the passage of more than thirty years, the Smith judgment has never been satisfied. On June 22, 1982, a decade or so after Milton’s accident, Barbara and Milton were married. Before and during their marriage, Milton was self-employed. He had begun and continued establishing a business known as K-Bar Trailer Manufacturing Company. He built cattle, horse, and flat bed trailers. Additionally, Milton started a pig farm, but that venture eventually failed. Barbara worked with her husband on many of his K-Bar ventures. * * * Not long after their marriage, in February of 1983, and without Barbara’s knowledge, Milton and his father attended a real estate auction where they were the successful bidders to purchase the Barlow property. Their winning bid was $61,700. * * * * * * Despite the fact that the funds to purchase the Barlow property came from Milton and Barbara’s K-Bar checking account, the property was deeded to Winfred and Ruth. * * * * * * Barbara and Milton separated in January 1995. She filed for divorce on April 17, 1995. It was not until then that Milton represented to Barbara that his parents actually owned the Barlow property. * * * * * * The [trial] court concluded Barbara was unaware that the Barlow property was placed in the name of Winfred and Ruth. To the contrary, the court found that Barbara “was informed ... that Milton had bought the Barlow property at Nancy” and that the property was paid for with funds from the K-Bar checking account controlled by Milton. The trial court ruled “as a matter of law that clear and convincing evidence [was] presented warranting the imposition of a constructive trust on the ‘Nancy or Barlow Property.”’ The court also ordered the property to be sold and the proceeds divided equally between Barbara and Milton. * * * * * * In summary, the Appellants * * * assert the trial court erred because “a constructive trust must result from an act of fraud, or, in the absence of fraud, must grow out of a fiduciary relationship.” [Citation.] We reiterate what our predecessor court said in response to that argument. * * * The rule perhaps is best stated in [citation], wherein, after citing authorities, the Court said: These texts and authorities state the rule to be that a constructive trust is created by equity regardless of any actual or presumed intention of the parties to create a trust where the legal title to property is obtained through fraud, misrepresentation, concealment, undue influence or taking advantage of one’s weakness or necessities, or through similar means or circumstances rendering it unconscionable for the holder of the legal title to retain the property. When legal title to property has been acquired or held under such circumstances that the holder of that legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. [Citation.] Constructive trusts are created by the courts “in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it.” [Citations.] “The fraud may occur in any form of unconscionable conduct; taking advantage of one’s weaknesses or necessities, or in any way violating equity in good conscience.” [Citations.] In fact, a court exercising its equitable power may impress a constructive trust upon one who obtains legal title, “not only by fraud or by violation of confidence or of fiduciary relationship, but in any other unconscientious manner, so that he cannot equitably retain the property which really belongs to another[.]” [Citation.] It is true, * * * that Kentucky courts have required the party seeking the imposition of a trust to establish a “confidential relationship” with the party upon whom the trust is to be imposed. * * * Furthermore, “[t]he tendency of the courts is to construe the term ‘confidence’ or ‘confidential relationship’ liberally in favor of the confider and against the confidant, for the purpose of raising a constructive trust on a violation or betrayal thereof.” [Citation.] * * * A careful review of this matter indicates there is no reason to believe that the circuit court was clearly erroneous in any of its findings of fact. The collaboration of Milton and his parents to avoid execution of the Smith judgment unquestionably falls in that category of behavior described variously in our case law as “unconscientious,” “unconscionable,” and “violating equity in good conscience.” * * * Winfred’s and Ruth’s efforts to hide Milton’s beneficial ownership of property from Mary Smith had an obvious and even greater dispossessory effect on Barbara than it had on its target. Even if defrauding Barbara of her beneficial interest was not Winfred’s and Ruth’s original intention, it became so when she decided to divorce their son. Their retention of the property thus deprived Barbara of her beneficial ownership of the marital residence. [Citation.] In this case, the trial court found that Winfred and Ruth placed the Barlow property in their names to conceal the identity of the beneficial owners; that Barbara and Milton were the beneficial owners of the subject property; that Barbara and Milton paid for the property; and that Winfred (or Winfred’s estate) and Ruth would be unjustly enriched by retaining it. We cannot say that the circuit court’s creation of a constructive trust, or its finding of any of the underlying facts necessary to support it, are clearly erroneous. * * * Affirmed. Resulting Trusts — A resulting trust effects the presumed intent of parties who have inadequately expressed their actual wishes. Since a resulting trust is created by implication and operation of law, it need not be evidenced in writing. The essence of a resulting trust is the presumption made by the law that the holder of legal title does not hold the property personally but as a trustee for another party. 50-2 CREATION OF TRUSTS Each trust has: (1) a creator or settlor, (2) a “corpus” or trust subject matter, (3) a trustee and (4) a beneficiary. No particular words are necessary to create the trust, provided the settlor’s intent to establish a trust is unmistakable. Consideration is not essential to an enforceable trust; thus, a trust is more like a conveyance than a contract. 50-2a Settlor Creator of the trust. Anyone with legal capacity to enter into a binding contract can create a trust. 50-2b Trust Corpus or Property The trust corpus or res must be definite and in existence when the trust is created. The res may be any type of property that exists and is assignable. 50-2c Trustee A third party who holds legal title to the trust corpus for the benefit of the beneficiary. *** Chapter Outcome *** Describe the powers and duties of a trustee. Duties of the Trustee —The trustee’s 3 primary duties are: (1) to carry out the purposes of the trust, (2) to administer the trust prudently and carefully, and (3) to exercise a high degree of loyalty toward the beneficiary. No special skills are required of a trustee. He or she is simply required to act with the same degree of care that a prudent person would use in carrying out his or her personal affairs. The trustee has a duty to make the trust property productive and thus to invest it in income-producing assets. The duty of loyalty arises from the fiduciary relationship between the trustee and the beneficiary. In all dealings with the trust property, with the beneficiary, and with third parties, the trustee must act exclusively in the beneficiary’s interest. CASE 50-2 IN THE MATTER OF THE ESTATE OF ROWE Supreme Court, Appellate Division, Third Department, New York, 2000 274 A.D.2d 87, 712 N.Y.S.2d 662, appeal denied, 96 N.Y.2d 707, 749 N.E.2d 206, 725 N.Y.S.2d 637 (2001) http://scholar.google.com/scholar_case?case=7935201553540489298&q=712+N.YS.2d+662&hl=en&as_sdt=2,34 Mercure, J. P. Petitioner [Wilbur National Bank] was appointedtrustee of a charitable lead trust created under the will of Frances E. Rowe, deceased (hereinafter decedent). The trust was funded solely by 30,000 shares of International Business Machines (hereinafter IBM) common stock, which was trading for approximately $113 per share at the time of decedent’s death in April 1989 and approximately $117 per share when the trust was funded in September 1989. Under the terms of the trust instrument, petitioner was required to make annual distributions to qualified charities of 8% of the estate tax value of the trust assets, or $270,300; at the end of 15 years, the balance remaining in the trust, if any, was payable to respondents, who are decedent’s nieces, or their issue. In August 1994, respondents made a demand pursuant * * * that petitioner file an intermediate accounting, claiming that petitioner’s failure to diversify the trust assets had resulted in a decline in yield and forced sales of trust principal, thereby threatening the depletion of the trust corpus by the end of the trust term. In December 1994, Surrogate’s Court required petitioner to prepare an intermediate accounting for the period from September 8, 1989 to December 31, 1994 (hereinafter the accounting period). Petitioner filed its accounting and then commenced this proceeding for a judicial settlement thereof. Respondents objected to the accounting upon the grounds (among others) that petitioner’s failure to diversify the trust was imprudent in that it violated petitioner’s own policy requiring diversification, the policy of the Comptroller of Currency, and regulations of the Federal Reserve Bank. The evidence adduced at the July 1996 trial of the proceeding to settle petitioner’s intermediate account showed that petitioner’s own written policy required diversification of the trust assets. At the time of the original funding of the trust in 1989, petitioner’s Trust Policy Manual provided: “[I]t is the [Trust] Committee’s recommendation that where practicable, the Investment staff follow a balanced and diversified approach in the management of those funds. Any trust accounts not conforming to this principle must be brought to the Committee’s attention with supporting data as to the reason for these exceptions.” The policy became even more specific in 1994, then providing: “[I]t is the Committee’s recommendation that the Investment staff adhere to the principles of the ‘Prudent Investor’ rule by using modern portfolio theory and following a balanced and diversified approach in the management of those funds. Any trust accounts not conforming to these principles must be brought to the Committee’s attention with supporting data as to the reason for these exceptions. Exceptions to diversification may be made when an agency customer or the trust instrument specifically permits, or where large capital gains would be incurred, or when the cost basis of the property has the potential to be written up in the near future.” Further, the 1994 policy advised that existing holdings exceeding 10% of a portfolio should be trimmed down over a period of time, supported by several research houses and reviewed annually by petitioner’s Trust Committee (hereinafter the Committee). As for the actual investment activity engaged in by petitioner, the evidence showed that the Committee reviewed the trust in October 1989. Because the value of the stock had dropped from the time the trust was funded, the Committee felt that it would be imprudent to diversify immediately, but gave its approval to a plan of diversifying at a later time when the stock had reached a higher price. In the meantime, petitioner generated some income by selling various call options, and several small sales and in-kind distributions were made of IBM stock in order to fulfill the annual payout requirements. The first move toward diversification came in February 1991, when petitioner sold 5,000 shares of IBM stock at $125 per share and an additional 2,959 shares at $136 per share. As of the close of the accounting period on December 31, 1994, petitioner still held 19,398 shares of IBM stock valued at $74 per share. Over the course of the accounting period, the market value of the trust assets had dropped from $3,521,250 to $1,853,937. In August 1997, Surrogate’s Court rendered its decision that, from the period September 8, 1989 to December 31, 1994, petitioner was negligent, that it had violated its own policy manual and that it should have diversified most of the trust’s holdings in IBM in January 1990. Ultimately, Surrogate’s Court ordered that petitioner’s Letters of Trusteeship be revoked, appointed successor cotrustees, directed petitioner to turn over the trust property to them, ordered petitioner to refund its commissions to the trust and directed that petitioner pay damages of $496,259, together with $133,990 in interest, for a total of $630,249. Petitioner appeals. Initially, we are unpersuaded by petitioner’s various challenges to the finding by Surrogate’s Court that petitioner acted imprudently in failing to diversify the trust’s investments. During petitioner’s administration of the trust, New York followed the “prudent person rule” of investment [citation], which provided: “A fiduciary holding funds for investment may invest the same in the kinds and classes of securities described in the succeeding subparagraphs, provided that investment is made only in such securities as would be acquired by prudent [persons] of discretion and intelligence in such matters who are seeking a reasonable income and the preservation of their capital.” To determine whether the prudent person standard has been violated, the court should engage in “‘a balanced and perceptive analysis of [the trustee’s] consideration and action in the light of the history of each individual investment, viewed at the time of its action or its omission to act”’ [citation]. All of the facts and circumstances of the case must be examined to determine whether a concentration of a particular stock in an estate’s portfolio violates the prudent person standard [citation]. Further, each individual investment decision should be examined in relation to the entire portfolio as an entity [citation], and a trustee can be found to have been imprudent for losses resulting from negligent inattentiveness, inaction or indifference [citation]. At trial, the generalized testimony of Herbert Simmerly, who was petitioner’s vice-president and trust officer and a supervisor of the trust, Benjamin Nesbitt, petitioner’s senior vice-president and senior trust officer, and investment officers Lynda Peet and Erica Decker was directly contradicted by the testimony of respondent’s expert, Loren Ross. Significantly, Ross expressed the strong opinion that petitioner had acted imprudently in failing to diversify the trust’s assets immediately upon receipt of the IBM stock, in furtherance of its initial goal of creating a diversified portfolio of fixed income oriented assets and equity or growth assets. According to Ross, both the 15-year duration of the trust and the 8% annual payout requirement made the investment in IBM stock particularly inappropriate. First, IBM’s dividends of less than $5 per share fell far short of satisfying the “extremely heavy burden” of having to pay out “an unvarying $270,300 a year” to charities, thereby requiring that capital be depleted to supplement the shortfall. Second, the extreme volatility and over-all downward trend of IBM stock during this period and the fact that IBM itself was undergoing an “extremely stressful time” made it unsuitable for fulfilling the trust’s investment goals. Moreover, Ross stated that petitioner’s tactic of waiting for the IBM stock to rise was based on “wishful hoping” and that any hesitancy on the part of petitioner to sell the IBM stock below acquisition costs was a “cosmetic kind of consideration.” Finally, Ross testified that the use of call options increased the risk of the portfolio. In addition to Ross’s testimony describing petitioner’s decision to delay diversification as unwise and unreasonably risky, the evidence reveals that petitioner failed to follow its own internal protocol during the administration of the trust up to the time of the intermediate accounting, that petitioner failed to conduct more than routine reviews of the IBM stock and that the target prices set for the trust’s IBM stock were department-wide positions affecting many accounts, giving no particular consideration to the unique needs of this particular trust [citation]. Finally, we note that neither adverse tax consequences nor any provision of the trust instrument restricted petitioner’s freedom to sell the IBM stock and diversify the trust’s investments. In view of the foregoing, * * * we perceive no basis for disturbing the determination of Surrogate’s Court that petitioner acted imprudently in retaining the IBM stock. * * * Ordered that the order is affirmed, with costs. Powers of the Trustee — A trustee's power will be determined by state statutes which indicate what type of investments are deemed prudent, and by express authority granted by the trust instrument. Allocation of Principal and Income — Trusts sometimes give a life estate to one beneficiary and a remainder to another. Ordinary receipts and expenses are billed to the income beneficiary while extraordinary income and expenses are charged to the remainderman. The Uniform Principal and Income Act. was amended and updated in 2008 to implement technical changes related to developments and interpretations relating to tax matters. At least thirty-four States have adopted the 2008 amendments. NOTE: See Figure 50-2: Allocation of Principal and Income. 50-2d Beneficiary There are very few restrictions on who or what can be a beneficiary of a trust, and the trust may have virtually any legal purpose for its existence. The beneficiary may accept or reject the trust. 50-3 TERMINATION OF A TRUST Unless the settlor reserves the power to revoke the trust, the general rule is that a trust, once validly created, is irrevocable. If the settlor does reserve the power of revocation, she may terminate the trust at her discretion. Normally, the instrument creating a trust establishes the date on which the trust will terminate — perhaps for a period of years or, alternatively, for the lifetime of a named individual. The death of the trustee or beneficiary does not terminate the trust if neither of their lives is the measure of the trust’s duration. A court will usually decree a trust terminated if the beneficiary acquires legal title to the trust assets. A court will not order the termination of a trust simply because all of the beneficiaries petition the court to do so. The purposes the settlor set forth in the trust instrument, not the beneficiaries’ wishes, will govern the court’s actions. DECEDENTS' ESTATES A testator is a person who dies having left a will. Intestate means dying without a will. In the absence of a will a person who dies has his property distributed by intestate succession. If a person dies without relatives his property reverts (escheat) to the state. 50-4 WILLS A will is a written instrument, executed according to statutorily dictated formalities, whereby a person makes a disposition of his property which is to take effect after his death. A key characteristic of a will, in contrast to a deed or a contract, is that it is revocable at any time during life. There is no such thing as an irrevocable will. A will takes effect only on the death of the testator. In 1969, the Uniform Law Commission and the American Bar Association approved the Uniform Probate Code (UPC), an attempt to encourage throughout the United States the adoption of a uniform, flexible, speedy, efficient, and, in most cases, less expensive system of settling a decedent's estate. At least seventeen States have adopted the UPC. 50-4a Mental Capacity The law of wills is based upon implementing the testator’s intent and therefore requires that the testator have the mental capacity to form such an intent. Thus, a minor does not have the legal capacity to make a will. To make a valid will, the testator must have both the “power” and the “capacity” to do so. The required testamentary intent must also be present. Testamentary Capacity — For a will to be valid , testator must be capable of (1) knowing and understanding in a general way (a) the nature and extent of his or her property, (b) the natural objects of his or her bounty, and (c) the disposition that he or she is making of that property; and (2) relating these elements to one another and forming an orderly desire regarding the disposition of the property. Restatement (Third) of Property: Wills and Other Donative Transfers. Under the UPC, any person eighteen or more years of age who is of sound mind may make a will. Section 2-501 Conduct Invalidating a Will — Any document that appears to be a will but reflecting an intent not that of the testator is not a valid will. Duress, under influence, or fraud are arguments that may be effectively employed to invalidate a will. Any mistake as to identity voids a will but a clerical error in drafting may be corrected by clear and convincing evidence. CASE 50-3 PRINE v. BLANTON Supreme Court of Georgia, 2012 290 GA. 307, 720 S.E.2D 600 http://scholar.google.com/scholar_case?q=Testamentary+Capacity+and+Power+&hl=en&as_sdt=2,34&as_ylo=2011&case=9029015898403998192&scilh=0 Hunstein, J [Debra Prine challenged the validity of her father's will on the grounds that he lacked testamentary capacity and was operating under undue influence. Testator Melvin H. Blanton's 1990 will and family trust divided the majority of his assets equally among his four surviving children and a granddaughter who was the child of his deceased daughter. In August 2008, Blanton met with his attorney and directed him to change his will and trust to exclude Debra Prine, his one surviving daughter. On September 17, 2008, while in the hospital, Blanton executed a new will and trust that left most of his property to his three sons through the Blanton Trust and excluded Debra Prine as a beneficiary. The following day, Blanton was placed in intensive care. He was discharged three weeks later to hospice care and died in February 2009. Blanton's sons and co-executors, Timmy M. Blanton and Greg Blanton, filed a petition to probate the will. Following a bench trial, the probate court found that Melvin Blanton was of sufficient sound and disposing mind and was not subjected to undue or illegal influence at the time he executed his will and trust amendment. Debra Prine appealed to the superior court, and the executors filed a motion for summary judgment, which the superior court granted.] * * * A testator possesses the mental capacity to make a will if he understands that he is executing a document that will dispose of his property after death, is capable of remembering the property that is subject to his disposition and the persons related to him by blood and affection, and “‘has sufficient intellect to enable him to have a decided and rational desire as to the disposition of his property.’” [Citation.] "The controlling question . . . is whether the testator had sufficient testamentary capacity at the time of executing the will." [Citation.] * * * In this case, the propounders [supporters of the will] presented the affidavit of the attorney who drafted and witnessed the will stating that Blanton was of a sufficient sound and disposing mind and memory at the time he instructed the attorney on how to prepare the will and at the time he executed it. The other subscribing witness and the notary public who executed the self-proving affidavit attached to the will also verified that Blanton knew he was signing his last will and testament and he appeared to be of sound and disposing mind and memory at the time. His treating physician testified in a deposition that during office visits in 2008 Blanton was "sharp as a tack," showing no symptoms of mental instability, confusion, dementia, hallucinations, or declining mental condition. Blanton was admitted to the hospital on September 15, 2008, after he complained of abdominal pain and fever. Two days later he executed the new will and trust amendment. His physician testified that Blanton was his usual self on the morning the will was executed, his condition was improving, and his medications would not have affected his mental ability. During his rounds on the following morning, the physician found that Blanton had declined sharply and referred him to a specialist for a neurology consultation and admitted him into the hospital's intensive care unit. * * * The caveator [opponent of the will] * * * relies on the affidavits of four lay witnesses. These witnesses either did not see Blanton until after he was admitted into intensive care or were vague about when they had seen him confused or hallucinating. The caveator testified that she did not see her father in the hospital until after work on the day he executed his will, he knew who she was at that time, and she had no knowledge of his mental condition earlier in the day. Evidence that the testator was aged, ill, and in pain when he executed his will or that his medical condition deteriorated while he was in the hospital does not show lack of testamentary capacity to make a will. * * * Construing the evidence in this case in the light most favorable to the caveator, she has not presented a genuine issue of material fact that the testator lacked the requisite mental capacity when he signed his will. To invalidate a will, undue influence must amount to deception or coercion that destroys the testator's free agency. [Citation.] The testator's choice of naming one relative instead of another as the favored beneficiary is an insufficient reason to deny probate of the will. [Citation.] The caveator has not presented a genuine issue of material fact on the question of undue influence. Blanton's attorney and the subscribing witnesses attested that they believed he signed his will freely and voluntarily. His treating physician and other witnesses described the testator as strong-willed, stubborn, opinionated, and not susceptible to influence. There is no evidence that the propounders exerted any power or control over Blanton, coerced him into signing the will, or prevented the caveator and others from visiting him in the hospital or at his home. * * * Judgment affirmed. * * * *** Chapter Outcome *** Explain the formal requirements of making a valid will and the various ways a will may be revoked. 50-4b Formal Requirements of a Will By statute in all jurisdictions, a will must comply with certain formalities to be valid. Such formalities not only indicate that the testator understood what she was doing but also help prevent fraud. Writing — A basic requirement is that a will be in writing. The writing may be informal as long as it meets the basic statutory formalities. Valid wills have been made on scrap paper and on an envelope. Another document that is not in itself a will may, however, be incorporated into a will by reference. To incorporate a memorandum into a will by reference: (1) the memorandum must be in writing; (2) it must be in existence when the will is executed; (3) it must be adequately described in the will; and (4) it must be described in the will as being in existence. Signature — A will must be signed by the testator; the signature verifies that the will has been executed. Most statutes require the signature to be at the end of the will. Attestation — With a few exceptions, a written will must be attested, or certified, by witnesses. The statute specifies the number of witnesses, their qualifications, and the manner of attestation. Usually the number of witnesses is two or three. Witnesses serve to acknowledge that the testator did execute the will and that she had the required intent and capacity. It is important that the testator sign first in the presence of all the witnesses; each witness should then sign in the testator’s presence and in the presence of the other witnesses. The most common restriction on a witness is that she must not have any interest under the will. This restriction may be effected in two ways: by a statute that disqualifies a witness who is also a beneficiary under the will and by a statute that voids any bequest to an interested witness. 50-4c Revocation of a Will By definition, a will is revocable by the testator — yet, in most jurisdictions, certain formalities may be required for revocation. Under certain circumstances, a will may be revoked by operation of law. Destruction or Alteration — Destroying a will, such as by burning or tearing it, is strong evidence that the testator intended a revocation. In some jurisdictions partial obliterations will serve as a partial revocation. Any substituted words will not be effective without reexecution and reattestation. One question that the courts have addressed is whether a will should be viewed as destroyed or just mislaid if it is missing from the decedent's personal effects. CASE 50-4 WHATLEY v. ESTATE OF McDOUGAL Court of Appeals of Arkansas, 2013 430 S.W.3d 875 Gruber, J. Bettye McDougal died at home on February 17, 2011, at age sixty-four. She had become unable to leave her recliner or bed in her final days, was under the care of hospice, received visits from a home health-care nurse, and was constantly cared for by close friends and relatives. The Circuit Court of Union County admitted to probate a copy of an April 6, 2007 will proffered on March 21, 2011, by her brother, Bobby Long, as her last will and testament. The will nominated Mr. Long as executor; left the bulk of the estate to him; excluded Ms. McDougal's only child and intestate beneficiary, Todd Whatley; and made specific bequests to friends including Albert Warren, who had lived with her for twelve years, as well as to a trust for her two grandchildren. Mr. Whatley objected to probation of the copy of the will, stating that the original had not been located and that he believed his mother had intentionally destroyed it before her death. He asked the court to find that she died intestate and—because Mr. Long had a conflict of interest with the estate—to appoint a different executor. At trial—conducted on February 6 and June 11, 2012—Mr. Whatley stipulated that his mother properly executed a will on April 6, 2007, at the office of her lawyer. The parties did not dispute that Ms. McDougal left the lawyer's office with the original will and that it was not found after her death. Much of the testimony at trial focused on decedent's strong-willed personality and business acumen; on knowing what she wanted; on her fifteen-year strained relationship with her son; and on the fact that she often publicized her intention to cut him out of her will. Her estrangement with him began after his wife, Regina Whatley, stole money from decedent's trucking business and his relationship with his wife continued despite decedent's wishes. From then on, neither Todd Whatley nor his and Regina's young son visited decedent again until the week before her death. She began spending all holidays with her brother and his wife, Janice Long, and never had a visit with her second grandchild, who was born after the estrangement began. *** [The trial court concluded that the estate had satisfied the statutory requirements of Arkansas Code and had sufficiently rebutted the presumption of revocation by destruction. The original will was therefore found to have been in existence at the time of her death and to have been lost or misplaced.] Mr. Whatley appeals, contending that the circuit court clearly erred in admitting the copy of the will to probate. *** Under [the Arkansas] statute, the proponent of a lost will must prove two things: first, the will's execution and its contents by strong, cogent, and convincing evidence; second, that the will was still in existence at the time of the testator's death (i.e., had not been revoked by the testator) or was fraudulently destroyed during the testator's lifetime. [Citation.] Proof of the second statutory element is necessary because the law presumes that an original will that cannot be found after a testator's death has been revoked. [Citation.] *** It will be presumed that a testator destroyed a will executed by the testator in his or her lifetime, with the intention of revoking same, if he or she retained custody thereof or had access thereto, and it could not be found after the testator's death. [Citations.] The burden is upon the proponent of the will to prove by a preponderance of the evidence that the decedent did not revoke it during his or her lifetime. [Citation.] Thus, it is not necessary for the trial court to determine what became of the will; it is enough that the court determine that the will was not revoked or cancelled by the decedent. [Citation.] *** In the present case, the circuit court found that the second prong of the statute was established by indirect evidence that the original will was in existence at the time of decedent's death. Decedent's safe was secured by both a key and a combination lock, and it was accessible only by her or someone at her direction. Albert Warren knew how to access the safe and had done so before at her direction; Bobby Long knew the location of the key, but decedent kept the combination to the safe. Todd Whatley visited her only the one time after their estrangement, was never alone with her, and was never alone in the house. Family and friends who were periodically alone with her in her last days were the beneficiaries under the will. Decedent had told them that all the papers for her estate were in the safe; other documents were found in there, but not the will. Decedent kept valuables in odd places, Albert Warren had the onset of dementia during her last year, and no one made a thorough and exhaustive search of the house. *** In the present case, *** the testimony and attending circumstances were sufficient to overcome the presumption of revocation. It was up to the circuit court to determine the credibility of the witnesses and the weight to be accorded their testimony. There was ample evidence that decedent was determined that her son inherit nothing upon her death; that she believed, and told many people, that her plans for distribution of her estate were taken care of; and that she, as well as relatives and friends attending her in her final days, believed the necessary papers were in her safe or her attorney's office. This evidence argues against revocation or destruction of the will that insured her plan would be carried out, and it supports a conclusion that the will was in existence at the time of her death. It was not necessary that the circuit court determine what happened to decedent's original will; it was enough that the court found that the will was not revoked or cancelled by her. Affirmed. Subsequent Will — Execution of a subsequent will does not necessarily revoke a prior will, except to the extent of any inconsistencies. If that is the intent, a well-drafted subsequent will should say it revokes all prior wills. Codicil -- is a subsequent will that augments or revises a prior will. It is executed with all the formal requirements of a will, and the codicil and the will are regarded as a single instrument. The most frequent problem such an instrument raises involves the extent to which its terms, if not absolutely clear, revoke or alter provisions in the will. Operation of Law — A marriage generally revokes a will executed before the marriage. Divorce generally does not revoke a provision in the will of one party for the benefit of the other. The birth of a child after a will is made may revoke the will, at least as far as that child is concerned, if the testator apparently has omitted making a provision for the child. 50-4d Effectiveness of Testamentary Provisions Renunciation by the Surviving Spouse — Most states permit a surviving spouse to renounce a will in order to permit taking a spouse's share of the estate under the intestate succession laws, if that would be more advantageous. Abatement and Ademption of a Bequest —When the value of an estate decreases after the execution of a will, some bequests may be abated. The first items to abate in a will are the residue, or those items remaining after provisions for specific (identifiable items) and general gifts. For example, suppose John, after making gifts in specified amounts to certain charities, leaves “all the rest, residue, and remainder of my estate to my daughter, Mary.” John may have intended for this remainder to be a much greater amount than it turns out to be if the total value of his estate has decreased. Ademption, or the removal or extinction of a gift by act of the testator, occurs when a testator neglects to change his will after changed circumstances have made the performance of a provision in the will impossible. An example would be a house and land which was sold after the execution of the will. Nonetheless, the courts sometimes have modified this doctrine to reflect the perceived intent of the decedent, and would perhaps award as a substitute the comparable house later bought by the testator. *** Chapter Outcome *** Define the following types of wills: (1) nuncupative, (2) holographic, and (3) soldiers’ and sailors’ wills. 50-4e Special Types of Wills Nuncupative Wills — An oral will made before witnesses that is generally limited as to amount of property it can convey. Usually, the testator must be suffering from a final illness. Holographic Wills — A handwritten, unwitnessed will which meets specific statutory requirements is permitted by some states. Soldiers' and Sailors' Wills — Less formal wills executed while on military duty. Generally, they cannot convey title to real estate. Conditional Wills — Takes effect as a will only on the happening of a specified contingency, which is a condition precedent to the operation of the will. Joint and Mutual or Reciprocal Wills — A joint will is one where the same instrument is made the will of two or more persons and is signed by them jointly. Mutual or reciprocal wills are separate instruments with reciprocal terms made by two or more persons. Living Wills — A living will is a document that complies with the statutory requirements by which an individual states she does not wish to receive extraordinary treatment in order to preserve her life. *** Chapter Outcome *** Describe intestate succession and the administration of decedents’ estates. 50-5 INTESTATE SUCCESSION Property not effectively disposed of before death or by will passes in accordance with the law of intestate succession. The law assures an orderly transfer of title to property. The intent of an intestacy statute is to carry out the probable wishes of the deceased. However, even if the statute’s requirements run contrary to the clear intention of the decedent, the intestacy statute will still govern the distribution — and the rules apply to the excess portion of an estate where there is a will but no residuary clause. The rules of descent vary widely among states. Generally, except for specific statutory or dower rights of the widow, property passes in equal shares to the decedent’s children living at the time of his death; the share of any child who dies before the decedent is to be divided equally among that child’s children. Per stirpes denotes a division of property whereby lineal descendants of predeceased children take, as a group, the share to which the deceased ancestor would have been entitled — as in the example, where D1 and D2 take the one-third share of their deceased parent D. D1 and D2 represent their parent, D, upon the division of A’s property. Per capita denotes a division of property in which an equal share is given to each of several persons; all stand in equal degree to the decedent without reference to the right of representation. The common law did not consider a stepchild as an heir or next of kin — that is, one to whom property would descend by operation of law — and this rule prevails today. Legally adopted children are, however, recognized as lawful heirs of their adoptive parents. Parents and collateral relatives (brothers and sisters, nieces and nephews, aunts and uncles): Laws vary by state as to their rights. The rights of heirs cannot reasonably be predicted without knowledge of the exact terms of the statute. NOTE: See Figure 50-3: Per Stirpes and Per Capita. 50-6 ADMINISTRATION OF ESTATES The rules and procedures controlling the management of a decedent’s estate are statutory; thus, they vary somewhat from state to state. But in all jurisdictions the estate is managed and finally disbursed under the supervision of a court. The procedure for managing the distribution of decedents’ estates is referred to as probate, and the court that supervises the procedure is often designated the probate court. The first legal step after death is usually to determine whether the deceased left a will. If a will exists, the testator has likely named her executor in it. If there is no will or if there is a will that fails to name an executor, the court will, on petition, appoint an administrator. The closest adult relative who is a resident of the state is entitled to be appointed the administrator. Once approved or appointed by the court, the executor or administrator holds title to all the personal property of the deceased and is accountable to her creditors and beneficiaries. The estate is his or her responsibility. If the will is contested, the witnesses must prove it before the court by testifying to the signing of the will by all signatories and by confirming the mental condition of the testator at the time she executed the will. If satisfied the will is proved, the court will enter a formal decree admitting the will to probate. Soon after the will is admitted to probate, the executor or administrator must file an inventory of the estate. The executor or administrator then collects the assets, pays the debts, and disburses the remainder. The executor or administrator occupies a fiduciary position not unlike that of a trustee. The administration of an estate involves probate expenses, fees to the executor or administrator and to the attorney who handles the estate. In addition, taxes are imposed by both the federal and state governments. Federal: an estate tax on the transfer of property at death. State: an inheritance tax on the privilege of an heir or beneficiary to receive the property. The estate must all pay income tax on income received during estate administration. Instructor Manual for Smith and Robersons Business Law Richard A. Mann, Barry S. Roberts 9781337094757, 9780357364000, 9780538473637
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