TRUSTS AND ESTATES OUTLINE

THE BASICS
• Introduction
• Policies that Inform Estate Planning • (1) Freedom of Disposition • “Unless the will provides otherwise” in all the statutes • Strong cultural tradition to be able to do what you want to do with property when you’re alive and when you die • Exceptions • 49/50 states have law that states that you cannot disinherit your spouse • Rule against perpetuity (see below) • Tax rules limit your ability to give away all your money • Public policy limits your ability to do certain things, like discriminate, etc. • (2) A Need for Certainty • To prevent litigation • Creates a set of default rules • (3) Reducing Possibility of Fraud • Legislature and judges have required a fair amount of formality to create a valid will (makes it hard for someone to defraud) Definitions • (1) Estate • Depending on the context, estate may mean: • (1) The interest which a person has in property, or • (2) The aggregate of property which a person owns. • (2) Property • Anything that may be the subject to ownership, and is real or personal property • (3) Will [§1-2.19] • (1) A will is an oral declaration or written instrument, • (2) to take effect upon death, • (3) whereby a person • (a) disposes of property • (b) directs how property shall be disposed of, • (c) disposes of his body or any part thereof, • (d) exercises a power, • (e) appoints a fiduciary, or • (f) makes any other provision • (4) which is revocable. • (5) Unless the context otherwise requires, the term “will” includes a “codicil.” • (4) Codicil • (1) A supplement to a will, either 1

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• (a) adding to, • (b) taking from, or • (c) altering its provisions, or • (d) confirming it in whole or in part by republication, • (2) but not totally revoking such will • Prof – A codicil re-dates the will (5) Disposition • A transfer of property by a person during his lifetime or by will • Distribution – for intestacy, both real and personal property • Gift/Bequest – for personal property in wills • Devise – for real property in wills (6) Distributee • A person entitled to take or share in the property of a decedent under the statutes governing intestacy. (7) Testamentary Beneficiary • A person in whose favor a disposition of property is made by will. (8) Personal Representative • A person who has received letters to administer the estate of the decedent • Termed “executor” if there is a will or “administrator” if there is not. (9) Fiduciary • A person who • (1) meets the description of “personal representative,” • (2) is designated by the creator or court to act as an assignee for the benefit of creditors, or • (3) is a committee, conservator, curator, custodian, guardian, trustee, or donee of a power during minority. (10) Issue • Unless a contrary intention is indicated, • (1) Issue are the descendants in any degree from a common ancestor • (2) including adopted children

INTESTATE SUCCESSION

Disposition Per Stirpes or by Representation
• EPTL § 1-2.14: Per Stirpes • (1) Disposition/distribution of property • (2) who take as issue, • (3) where property is divided into as many equal shares • (a) at the nearest generation with surviving issue • (b) plus any deceased issue who left surviving issue, if any. • (4) The share of a deceased issue shall be distributed in the same manner. EPTL § 1-2.16: Representation • (1) Disposition/distribution of property 2

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(2) who take as issue, (3) where property is divided into as many equal shares • (a) at the nearest generation with surviving issue • (b) plus any deceased issue who left surviving issue, if any. (4) The remaining shares, if any, are then combined and then divided in the same manner as if the surviving issue who were allocated a share above had all predeceased the decedent, without issue. EPTL § 2-1.2: Issue to Take by Representation • Whenever a disposition of property is made to issue, such issue takes by representation, unless a contrary intention is expressed. How Does This Work? Difference Between Per Stirpes and Representation • Hypo 1: Great-grandfather

X 1

Y 2 3

Z 4 5

• In per stirpes, 1–3 each get 1/3 of 1/3 and 4–5 each get ½ of 1/3. In representation, 1–5 each get 1/5 of 2/3.

• Intestacy
• Overview • Remember, if any property is not covered under the will, intestacy applies. • A child in gestation at the time of the decedent’s death is considered a valid distributee if she is born alive (codified in EPTL § 2-1.3). • Step-parents and step-children are not considered distributees unless a contrary intention is indicated. • Survival, if only by an instant, is sufficient for intestate succession. • See below for simultaneous deaths in NY. • Intestate succession only deals with estate in decedent's own name -- doesn't affect joint property, joint accounts, pensions, life insurance, and other will-substitutes. Policy Behind Intestacy • Designed to effect the orderly distribution of property. • Purpose is to distribute property that approximates what the decedent would have done if they had made a will. • Spouses and children enjoy a favored position under the intestate laws because, on statistical average, they are the nature objects of most people’s bounty.

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Serves society by protecting and promoting the family, avoiding the complication of titles to property, encouraging accumulation of property, and avoiding familial strife. EPTL § 4-1.1: Intestacy • (1) Applies to property that is not disposed of in decedent’s will • (2) In computing the distribution, debts, administration expenses, and reasonable funeral expenses are deducted and all estate taxes are disregarded • (3) If the decedent is survived by: • (a) Spouse and issue  $50,000 and ½ of residue to spouse and rest to issue • (b) Only spouse  all to spouse • (c) Only issue  all to issue • (d) Only parents  all to parents • (e) Only issue of parents all to issue of parents • (f) Only grandparents or issue of grandparents  split in half, to give equally to paternal and maternal sides. Issue of grandparents shall not include issue more remote than grandchildren of such grandparents. • (g) Only great-grandchildren of grandparents  split in half, to give equally to paternal and maternal great-grandchildren, who take per capita (in equal proportion). • (4) Half-bloods are treated the same as whole bloods and adopted children are treated the same as biological children (as governed by DRL §117, see below). EPTL § 4-1.2: Inheritance by Non-Marital Children • (1) A non-marital child is a legitimate child of his mother for inheritance purposes • (2) A non-marital child is a legitimate child of his father for inheritance purposes if: • (a) A court with jurisdiction, during life of father, made an order of filiation • (b) The mother and father have executed and filed an acknowledgement of paternity • (c) The father has signed an instrument of paternity, provided that it is made/ acknowledged before witnesses and a notary, filed within 60 days, and the department of social services sends a written notice in the mail to the mother • (d) The paternity has been established by clear and convincing evidence and the father has openly and notoriously acknowledged the child as his own, or • (e) A DNA test along with other evidence establishes paternity by clear and convincing evidence • Will of Hoffman • Held that the word “issue” standing alone, when appearing in a will, should be construed to refer to biological and non-marital children alike, in the absence of an express qualification by the testatrix (codified in EPTL 2-1.3). Adoption and Inheritance Rights • EPTL § 2-1.3: Adopted Children as Members of a Class • Unless the creator expresses a contrary intention, a disposition of property to persons described in any instrument as the issue, distributees, etc, includes: • (1) adopted children and their issue in their adoptive relationship. Their rights are governed by DRL § 117. • Domestic Relations Law § 117: Effect of Adoption on Intestacy 4

can C inherit from her? • Yes. and • (b) an adoptive parent ο (i) is married to the child's birth parent. because W is an awful mother. Exception applies. • Hypo 3: S has three children. including the rights of intestacy (3) When a birth or adoptive parent. W and H divorce and. Later. W marries H-2. and duties of that relation. in which case the adoptive child shall then be entitled to inherit pursuant to the adoptive relationship only.• • • • • (1) After the making of an order of adoption • (a) the birth parents shall be relieved of all parental duties. If C predeceased H without a spouse or issue. In addition to the people already mentioned. • Hypo 2: W marries H and has child C. S’s brother B-2 died intestate. B-1. • (b) the rights of an adoptive child to intestacy from and through his birth parents shall terminate (2) The adoptive parents and child shall sustain toward each other the legal relation of parent and child and shall have all the rights. such consent shall not change her parental duty or rights of such consenting spouse and such adoptive child to intestacy. C-2. C-4. issue or parents. and C-3. an adoptive child who is related to the decedent both by birth relationship and by adoption shall be entitled to inherit only under the birth relationship unless the decedent is also the adoptive parent. B-1 and S died last year. Exception does not apply and the general rule kicks in  After adoption. with no wife. • the rights of an adoptive child to intestacy from and through either birth parent shall not terminate upon the making of the order of adoption. and H-2 adopts C. B-2 was survived by another brother. Later H dies. If H’s mother dies intestate. and rights by intestacy. C-2. and C-3 each get 1/6. who had no children. When C-1 was four years old. This year. birth parents are relieved of intestacy rights. C-1 does not take as an adoptive 5 . C-1. responsibilities. responsibilities. S surrendered him for adoption to her brother. or ο (iii) is descended from such grandparent. who had a child. • How Does this Statute Work? • Hypo 1: W marries H and has child C. marries or remarries and consents that the stepparent may adopt such child. (4) Exception • If: • (a) the decedent is the adoptive child's birth(?) grandparent or is a descendant of such grandparent. ο (ii) is the child's birth grandparent. having lawful custody of a child. The decedent is the adoptive child’s grandparent and the adoptive parent is married to the child’s birth parent. Who gets what in B-2’s estate? • B-3 gets ½ and C-1. can H share in C’s estate? • No. (5) However. B-3. her mother adopts C after a court has terminated H’s parental rights.

annulment. • abandoned child or • lost parental rights. be deemed to include an adoptive child who was a member of such class in his or her birth relationship prior to adoption. both by birth relationship and by adoption shall be entitled to benefit only under the birth relationship. in which case the person shall then be entitled to benefit only under the adoptive relationship. while the child is under 21 years-old. or dissolution. annulment or dissolution when decedent died • (b) the marriage is void as incestuous. not valid in NY • (d) a final decree of separation. unless the testator or creator is the adoptive parent. in effect when the decedent died • (e) the spouse abandoned the decedent up to and including time of death • (f) the spouse failed in his duty to provide for the deceased spouse though he had means to do so up to and including the time of death. but instead takes under the biological relationship. rendered against the spouse. and the issue of such child. • The section does not apply to parents who were fraudulently induced to give child up for adoption. • (c) A person who would be a member of the designated class. and • (b) the testator or creator is the child's birth grandparent or a descendant of such grandparent. which does not express a contrary intention or does not expressly include the individual by name or by some classification not based on a parentchild or family relationship. or • (iii) is a descendant of such grandparent. • (2) In a will.4 • No distributive share of a deceased child shall be allowed to a parent • if the parent. adopted children and their issue do not take under a will of birth relatives. bigamous. • Of Spouse: EPTL § 5-1. only if: • (a) an adoptive parent • (i) is married to the child's birth parent. • • Domestic Relations Law § 117: Effect of Adoption on Inheritance through Wills • (1) After the making of an order of adoption. • Estate distributed as though the parent had pre-deceased the child. • (ii) is the child's birth grandparent.2 • (1) A surviving spouse inherits unless it is established in court that: • (a) there is a valid divorce. valid in NY. whether executed before or after the order of adoption. Disqualification • Of Parents: EPTL § 4-1. 6 . a designation of a class of persons shall.child. unless the will or instrument expresses a contrary intention. or invalid • (c) the spouse procured outside NY a final decree of judgment of divorce.

• (3) Protective function: reason to think that directions were product of D's free choice • (4) Testamentary capacity: mental capacity to comprehend the property owned. EPTL § 3-2. right of election. • Burden is on the proponent. Formal Requirements • Every will must be in writing.1: Execution and Attestation of Wills. by another person in his presence and by his direction. inheriting exempt assets. A lack of own signature will invalid the will whereas a lack of address will not. and state of family relations. declare to each witness that the instrument bearing his signature is his will (this proves intent) 7 • • . • (c) Any person who signs the testator’s name. Purposes of Statutory Formalities • (1) Evidentiary function: will gives you best evidence of existence and content of testator’s directives. damages from wrongful death lawsuit WILLS: EXECUTION • Due Execution • Overview • Who may make a will? • Every person over 18 years old who has testamentary capacity may make a will. subject to the following: • (a) If there is writing after the testator’s signature at the time of execution. shall sign his own name and add his address. and will not count a valid attestation witness. • Who may receive property in a will? • Any person who has capacity to acquire and hold the property. except if the court believes: • (i) the will is too incomplete without it. signed in the name of the testator. • (5) Channeling function: We want some level of uniformity and formality to channel all these funds. either all together or separately. • The mental capacity item is a definition of testamentary capacity. • (2) The testator should sign or acknowledge his signature in the presence of the witnesses. those it is being given to. and executed and attested in the following manner: • (1) Signed at the end by testator or. it will not invalidate the writing appearing before the signature. • What property may be disposed of by will? • Every estate in property. • (3) The testator shall. Wills channels to takers in a way that's organized. • (2) Cautionary function: indication that directions were not casually arrived at. or • (ii) to give effect to the writing before the signature would subvert the testator’s original plan • (b) No effect will be given to any writing after the signature in the will or subsequent in time to the execution.• (2) Surviving spouse gets disqualified from taking in intestacy. at some time during the ceremony.

is entitled to receive so much of his intestate share as does not exceed the value of disposition in the will. • (2) Holographic: written entirely in testator’s hand. upon the expiration of 3 years from time will was made. or other armed conflict • (b) A civilian who serves alongside armed forces above • (c) A mariner while at sea.2: Competence of Attesting Witness Who Is a Beneficiary • (1) An attesting witness who is also a beneficiary under the will is a competent witness (and can testify accordingly) subject to the following: • (a) Any such disposition made to attesting witness is void unless at least 2 other attesting witnesses to the will who were not beneficiaries were present • (2) Subject to sub-(1). and limited to its facts. • The 30 day period is a rebuttable presumption • (5) This procedure does not have to be followed in the precise order. in which case the disposition is void. Crossed Wills: Matter of Stride • What happens when a couple signs each other’s wills by accident? Under NY statute.• • (4) There shall be at least 2 attesting witnesses. sign and affix their addresses to the end of the will. • Note: Although there is no requirement that an attorney supervise a will ceremony. • (3) These wills are only valid if made by • (a) member of armed forces while in service during a war. upon the expiration of 1 year following his discharge/end of service • (b) If made by mariner. so long as all the requisite formalities are observed during a period in which the surrogate is satisfied that the ceremony continued. seemingly we wouldn’t allow the wills to go to probate. the court said the wills were valid.1. • (4) Share recovered as follows: 8 . the testator will lose the presumption of regularity if the attorney is not present. and not executed under 3-2. • (3) Any attesting witness whose share is void. and who would be a distributee through intestacy. • (4) These wills become invalid: • (a) If made by member/civilian of armed forces. any such disposition to an attesting witness is effective unless the will cannot be proved without testimony of such witness. • • Witnesses as Beneficiaries • EPTL § 3-3. provided that they are applied consistently with their character. who shall. declared or undeclared. • (5) If the testator loses capacity. and at the request of the testator. with the making thereof and its provisions clearly established by at least 2 witnesses. BUT. within one 30 day period.2: Nuncupative and Holographic Wills • (1) Nuncupative: unwritten. here. • (6) These wills are subject to other provisions. EPTL 3-2. This is substantial compliance. both attest to the testator’s signature. the length of time before invalidity tolls until 1 year after regains capacity.

(8) Execute Only The Original • In special circumstances (i. Lawyers often offer to keep ORIGINAL will in their will vault.) • Witnesses sign signature and add their addresses. If there will be a disinheritance. in case goes to litigation • Use witnesses younger than the testator. (6) Witnesses Prepare Their Signatures • Attestation clause… she has one witness read the clause aloud to know what they're signing (that this person signed in their presence.• • (a) In case void disposition becomes part of residuary. ratably from the distributees who succeed to such interest (disposition is residuary) • Turano’s Will Ceremony • • • (1) Person reads and understands the will. Cannot be notarized by a witness. • You shouldn’t generally use yourself as a witness. Usually the drafting lawyer serves as the notary. • Introduce the witnesses and have them make small talk with testator • This helps the witnesses gauge capacity. • • • • • 9 . get the testator to discuss it with the witnesses and write a memo later on describing it. (4) Testator Questions • Can you tell us what this document is? My last will and testament • Does this will express your wishes? • Not specifically in statute. and try to get lawyers to be witnesses. (7) Witnesses Sign Self-Proving Affidavit • Witness sign SPA so that you can probate the will without their testimony.e. (2) Staple the will together after the person has approved • Clerks look for second set of staple holes. but it's to counter any undue influence claim. from the residuary disposition only (disposition is pre-residuary) (b) In case the void disposition passes in intestacy. had sound mind. and if they are there. person is in hospital) check to make sure that you complied with the institution’s requirements. • Then you can make copies of it. And the witness should see the testator sign the will. It needs to be notarized. • But can't use self-proving affidavit if • (a) someone is contesting the will or • (b) it’s a deathbed will. (3) Two witnesses in NY • Witnesses should come into the room and stay during the ceremony. Staple it to the back of the will. • Do you want X and Y to serve as witnesses and sign your will? • Do you want them to sign the self-proving affidavit? (5) Testator Signs Will and Initials Each Page • Testator signs the will at the end of the will. etc. particularly if someone is being disinherited. need to fill out an affidavit.

• • • But the practical reason is also to keep the will out of the safety deposit box. provided that such contest is based in PC • (b) An infant or incompetent may affirmatively oppose the probate of a will • (c) The following conduct. IMPORTANT: if the testator possessed her own will and kept it. Includes healthcare proxy. and proponents in probate proceeding • (v) The institution of. subject to following: • (a) Such condition is not breached by contest to establish will is forgery or that it was revoked by later will. • (2) A condition. Therefore. • Courts will usually resolve a question of a condition in favor of validity. i.D. • Conditions in Wills • Overview • Freedom of disposition is one of the strongest themes we have. there is no presumption of revoked will. • (3) Durable Power Of Attorney • Endures beyond a person's incapacity. and it's missing at her death. to let other parties make an objection or get the court sua sponte to examine will’s validity • (iii) Refusal/failure to join probate petition or execute consent/waiver of notice to proceeding • (iv) Deposing the proponent’s witnesses. designed to prevent disposition from taking effect in case the will is contested by the beneficiary [in terrorum clause]. violate public policy. rule against perpetuities. Turano’s Recommended Three-Pack of Documents • (1) Will • (2) Living Will • Statement of what you would like to happen to you if you can't make your own decisions.e. conditions are almost always enforcement • Exception: the disposition can't violate other rules. Dr. EPTL § 3-3. because then there’s a special proceeding required to open that S.'s can be compelled to honor this. disinherit spouse. singly or in aggregate. is operative despite presence or absence of PC. shall not result in the forfeiture of any benefit under the will: • (i) Objecting to jurisdiction • (ii) Disclosure of any information relating to any document offered/relevant. the nominated executors. This is not true if the will's in the lawyer's vault and is lost there. but not beyond death.5: Conditions Qualifying Dispositions • (1) A condition is operative despite the failure of testator to provide for an alternate gift to take effect upon the breach or non-occurrence of such condition. it's presumed that she destroyed it with the intention of revoking it. and is effective immediately upon signature. or the joining or acquiescence in a proceeding for the construction of will or any provision • 10 . box. • Someone else is appointed as your agent to handle your financial matters. will preparer.

• Tax issue – In US. So might lose exemption. offered for a 2nd time EPTL 13. or to the residuary if not in residuary share. A lot of time joint wills state first goes to spouse. the will is offered for probate. just holds until children die. • Hypo 2: I give $ to the last person that I give a flower – not OK because its very easy to manipulate this. or under intestacy. meant to give outright because theory is we don’t care about taxing twice at generation. • • Joint Wills • Overview • Think of it as a bad thing – don’t do it for clients because problems always arise. the will is revoked and the contestant might take under a prior will. If contestation is ineffective. • Single document that serves as the will of two people • When one dies.7. • Q to ask: Does it have significance independent of making a bequest to someone? Examples • Hypo 1: I leave $ to whoever is my cleaning lady at my death – OK because you’re not apt to change cleaning lady to manipulate will. IRS can argue that doesn’t give spouse outright. In order to be incorporated. the document must be executed with all the normal will formalities. • Hypo 4: I give to A my summer house and its contents – probably OK unless has contents switched out right before death. then goes to children. • Hypo 3: I give to A my bureau and its contents – Book says OK but prof wonders. • • Acts of Independent Significance • General Rule • All jurisdictions give effect to devises that identify the property or the devisee by reference to acts and facts that have independent significance. only once when couple dies. NY Rule • NY is a strict jurisdiction. revocable living trusts (see below in the trusts section).2. pay no estate taxes.5 • A writing that is not valid as a will but is in existence when a will is executed may be incorporated by reference into the will if the will manifests an intent to incorporate the writing and the writing to be incorporated is identified with reasonable certainty. if give estate to spouse. There are some requirements – generally. the contestant loses his share and that share passes in intestacy if it is a residuary share. • Exception • EPTL §3-3. [CONFIRM] • Incorporation by Reference • Restatement § 3.1: Will Contracts • 11 .• Effect: If contestation is effective. and refuses to recognize a general incorporation by reference. and 2nd dies.

where the question is one of degree. (2) testamentary capacity. and • disposition that he is making of that property (who’s getting what) • (2) The testator must be capable of relating these elements to one another and forming orderly desire regarding disposition of property. he would not have done. • Testamentary Capacity • Restatement § 8. What Is Not Lack of Capacity • (1) Stage 2 Dementia • Old age. feebleness. (3) undue influence.1: Requirement for Mental Capacity • (1) The testator must be capable of knowing and understanding in a general way • the nature and extent of his property. filthy personal habits. except for that delusion. and (4) fraud. and depends upon the proportion that the value of the gift bears to the estate. Miscellaneous • • 12 . etc). physical disability. personal eccentricities. courts have held that inter-vivos gifts by the survivor of substantial portions of the property can be set aside. • Exception: Insane delusion doesn’t necessarily affect the validity of the will. or not to revoke a joint will can be established only by an express statement in the will that the instrument is a joint will and that the provisions thereof are intended to constitute a contract between the parties. The survivor is free to make reasonable gifts. absentmindedness. • (2) Contract to make a joint will. • Prof’s sample language: “We declare this to be our joint will and we have agreed upon the foregoing disposition of our property which shall be forever binding on us and shall not be revoked by either of us or the survivor” Survivor’s Gift Rights • To prevent a survivor from breaching an obligation under a will contract. forgetfulness. kids. • (2) Lucid Intervals • A person who is mentally incapacitated part of the time but who has lucid intervals during which she meets the standards for capacity. • natural objects of bounty (spouse.• • (1) Statute of Frauds Provision: every agreement is unenforceable unless it or some memorandum thereof is in writing and signed by the party to be charged. if such agreement: • (a) is a contract to make a trust or testamentary provision of any kind. springs from diseased condition of mind. WILLS: GROUNDS OF CONTESTATION There are 4 general ways to contest a will: (1) due execution. and mental confusion. • (3) Insane Delusions • Belief to which testator adheres to against all evidence and reason. unless evidence goes further and establishes that the will itself is a product of that delusion and that the testator devised his property in a way which.

opportunity. • Undue Influence • Restatement § 8. Lawyers as Beneficiaries/Executors • As Beneficiary: If an attorney both drafts the will and receives something from it. Witnesses to testify about capacity include expert witnesses and attesting witnesses. nursing home administrator • Classic – marries new wife. and • (c) if such attorney or an affiliated attorney renders legal services in connection with the executor's official duties. children get nothing and object • Usually not successful unless marriage of very short duration • Presumption: Where have confidential relationship. the testator shall be informed prior to the execution of the will that: • (a) Any person. such attorney or is entitled to receive just and reasonable compensation for such legal services as well. and make enormous amounts of money. Duress • Any will is invalid to the extent that it was procured by: • (1) Undue Influence: If wrongdoer exerted such influence over the testator that it overcame the testator’s free will and caused him to make a will that testator otherwise wouldn’t have made (basically same in NY) • (2) Duress: If wrongdoer threatened to perform or did perform a wrongful act that coerced testator into making will that testator otherwise wouldn’t have made (not separated out in the NY definition) Confidential Relationships • Often. Attorney would get testator to name him as executor. and result.3: Undue Influence. younger. priests/clergy. jury is permitted to draw an inference that you unduly influenced the testator • NY Rule: Inference can only be drawn if can show a confidential relationship and some other factors. • (2) Testator's written acknowledgment of disclosure: An acknowledgment by the testator of the disclosure must be • (a) set forth in a writing • (b) executed by the testator • (c) in the presence of at least one witness other than the executor-designee • • 13 . • Susceptibility. undue influence comes up when there’s a confidential relationship • Spouses. • (b) Any person who serves as an executor is entitled to receive an executor's statutory commissions.• • • Burden is on the contestant. there is a presumption of undue influence • As Executor: Executor has the right to hire an attorney. character of accused. Capacity is measured at time of will execution. is eligible to serve as an executor. he would do both. lawyers. including an attorney. The passage of • SCPA 2307-a: Putnam affidavit • (1) Disclosure: When an attorney prepares a will and is therein an executordesignee.

If it is residuary and it lapses.] • Fraud in the Inducement . 14 • . • (3) Effect of absence of acknowledgment: Absent compliance with the requirements. • (c) such disposition does not lapse but vests in such surviving issue.Occurs when testator are defrauded about the nature or contents of the documents they are signing. EPTL § 3-3. Don’t let the statute make the rule for you. leaving issue surviving the testator. Most often proved by circumstantial evidence. Miscellaneous • Burden is on the contestant. • • Fraud • Restatement § 8. it goes to the residuary. • WILLS: POST-EXECUTION EVENTS AFFECTING WILLS • Death: Lapse and Anti-Lapse (do not apply to intestate succession/ invalid wills) • Overview • At common law.3: Anti-Lapse Statute • (1) Unless will.” it passes in intestacy. a person had to survive the decedent in order to receive under a will. • (b) and such beneficiary dies before the testator. may be executed prior to. • Undue influence is a pattern. over time the legislature realized that a person who goes to the trouble of doing a will doesn’t want bequests to lapse into intestacy.3: Fraud • Any will is invalid to the extent that it was procured by: • (3) Fraud: If wrongdoer knowingly or recklessly made a false representation to testator about a material fact that was intended to (knowingly caused reliance) and did lead testator to make will that he wouldn’t have otherwise made (reliance) Two Types • Fraud in the Execution . and must be filed in the proceeding for the issuance of letters testamentary to the executor-designee. provides otherwise: • (a) Whenever a testamentary disposition is made to issue or to brother/sister. fraud occurs in one moment of time. concurrently with or subsequently to a will. [akin to palpable undue influence. the commissions of an attorney who serves as an executor shall be 1/2 the statutory commissions to which such attorney as executor would otherwise be entitled pursuant.• (d) Such writing must be separate from the will (but which may be annexed to the will).When testators are intentionally misled into forming a testamentary intention that they would not otherwise have formed. by representation. But. It will only come up in litigation. • If a gift is pre-residuary and it lapses. • Always draft around the lapse statutes. whenever executed.

• (5) nor has an alternative disposition been made in will.” Another child is born after D executes his will. • Hypo 3: D’s will contained the following clause: “I give my Aresiduary estate to my brothers and sisters in equal shares. Part of a class. and • (4) anti-lapse does not apply to such an ineffective part. ratably. in the proportions that their respective interests bear to the aggregate.000. $400. which is only triggered by the death/renouncement of a beneficiary. The niece’s issue gets nothing. B. and N had all predeceased D and each left two children surviving him. $40. Habitat gets 540. or • (b) in such beneficiaries. Deactivating Anti-Lapse • A testator can put language into her will in order to deactivate the anti-lapse statute. Is that child entitled to a share of the estate? • Yes. EPTL § 3-3. provided that she survives me.000) to Habitat for Humanity. • Hypo 2: D’s will contained the following clause: “I give my residuary estate to my children.” D’s eldest sister was already dead when D made his will. brothers/sisters as a class as if disposition made by individual names. leaving issue surviving her.000 to his brother B.• • (2) Provisions above apply to disposition made to issue.000 to his wife W. Is that child entitled to a share of the estate? • No.000 to his niece N. D bequeathed $200. Who gets what in D’s estate? • Each of the brother’s children get 100. • 15 . Sadly.000. D died yesterday. • This statute is triggered anytime a residuary gift is ineffective • As compared with the anti-lapse statute. His children get nothing. “to sister. • (6) such ineffective part shall pass to and vest • (a) in the remaining residuary beneficiary. • • Death and More: Residue of a Residue • Overview • This is also a default statute that should be written around. • (a) Exception: no benefit shall be conferred here on surviving issue of an ancestor who died before execution of will in which the disposition to the class was made. and the residuary estate (which amounted to $100.4: Consequence of Partly Ineffective Disposition to 2+ Residuaries • (1) Whenever a testamentary disposition of property of 2+ residuary beneficiaries • (Have to first ask whether it is a residuary gift) • (2) are ineffective in part • (3) as of the date of the testator’s death. • In NY. W.” that is enough to deactivate How Does This Statute Work? • Hypo 1: In his will.

Both S and D-2 predeceased her. D-2’s issue gets it all – they take on status of residual beneficiaries via 3-3. look for evidence – statute only applies if there is not sufficient evidence that the persons died other than simultaneously (even 1 minute is enough) • Hypo: H & W died in a plane crash.3. Everyone survived D. the court found that H died immediately but W had carbon monoxide in her blood so she could not have died immediately-thus W survived her husband and the statute did not apply EPTL § 2-1. X gets 2/3 and N gets 1/3. • Hypo 2: D died yesterday. • (c) Insured and beneficiary: the proceeds shall be distributed as if the insured had survived the beneficiary.6: Disposition of Property Where There is No Sufficient Evidence that Persons Have Died Otherwise Than Simultaneously • (1) Where title depends on priority of death and • (2) there is no sufficient evidence that persons have died other than simultaneously. provided Y had not resumed her relationship with the notorious Z. She left her residuary estate as follows: ½ to her friend X. But. If more that 2 joint tenants. • This is considered a residuary gift. and S left none. • At first 2:1:1 ratio. new ratio of 2:1. except: • (a) 2+ Alternative beneficiaries by survivorship: the property shall be divided into as many equal portions as there are alternative beneficiaries and such portions distributed respectively to those who would have taken the whole property in the event that the designated beneficiary through whom they take had survived. D-2 left issue surviving D. • (d) Owner and beneficiary of a security: the security shall be treated as if the owner had survived the beneficiary. S and ½ to her daughter. Y’s share lapses. property distributed in the proportion that one bears to the whole number of joint tenants. • Death: Simultaneous Deaths (applies to both wills and intestacy) • Overview • Purpose of the statute is two-fold: (a) get property to the right beneficiary and (b) lessen administrative costs (avoids property going through two estates) • The average person would rather have property go to their own distributees or beneficiaries rather than the other person’s distributees or beneficiaries • In NY. ¼ to her cousin Y. but Y had resumed her relationship with the notorious Z. survived by grandchildren and no other relatives.• How Does This Statute Work? • Hypo 1: D died yesterday. and ¼ to her niece N. Therefore. D-2. leaving her estate ½ to her son. • (b) Joint tenants/Tenants by the entirety: the property shall be distributed ½ as if one had survived and ½ as if the other had survived. • (4) This is a default provision and can be written around. Intestacy does not kick on. • (3) the property of each person shall be disposed of as if he had survived. • 16 .

000.000. Both were intestate and each left one child surviving. They died survived by two children.500. How are their estates distributed? A 1 G-1 — 2 B 3 G-2 • ½ the estate comes via A’s will and ½ the estate comes from B’s will. He designated Y as the primary beneficiary and their children 1 and 2 as alternate beneficiaries. Who gets the books? • Divide it into quarters and divide that quarter into thirds. Neither had a will. or if he predeceased. if she survives me. Triggers anti-lapse. Who gets the money in the Totten Trust account? • Goes to X’s child • ?? Hypo 6: T made a will with the following provision: I give my books to my sister. A.6 was written around in K. but he is deceased. T and her four sisters died simultaneously in a crash. They died simultaneously. X and Y died simultaneously in an accident. 1 gets ½ of A’s ½ and ½ of B’s ½ = ¼ + ¼ = ½ of the total estates of A and B. and two grandchildren.500. if she survives me. C. so his ½ share gets split between G-1 and G-2 (¼ each) via the anti-lapse statute. Therefore. They died simultaneously in an airplane crash. Who gets the life insurance? • 1 and 2 split the life insurance because 2-1. Same goes for 2. (3)(a) seems to supersede rule that language in the statute causes the gift to lapse. to their children 1 and 2. Their wills were silent on simultaneous death. from child 2. • Hypo 3: X and Y owned their home as joint tenants with a right of survivorship. • Hypo 2: X owned a house worth $1. X and Y died simultaneously in a car crash. If she predeceases me. 17 . and both were survived by their parents.000. I give the books to my sister. Who gets the house? • Their parents each get ½ interest in the house. and if the other failed to survive. • Hypo 4: X had life insurance on his life in the amount of $1.000. X’s will gave everything to Y. • Hypo 5: X had a Totten Trust bank account payable to Y upon X’s death. How should their estates be distributed? • F gets the 1. I give my residuary estate to my three sons in equal shares.• How Does This Statute Work? [go through again] • Hypo 1: A and B had mutual wills: Each left the entire residuary estate to the other. 1 and 3.000 for the house and the Nature Conservatory gets the securities. G-1 and G-2. If she predeceases me. to X’s friend F. or if she predeceased. I give the books to my sister. They had no spouses or children. If she predeceases me. I give the books to my sister. Y’s will gave everything to X. B. A and B died simultaneously in a boating accident. each survived by three daughters. if she survives me. who predeceased them.” Implausibly. D. to the Nature Conservancy. if she survives me. Y had securities worth $250.

• Advancements (applies to both wills and intestacy) • Overview • Established to prevent fighting if someone received a gift during decedent’s lifetime – it reduces the donee’s share of the probate estate after donor’s death • Remember that the gift is always valid. • (4) Unless otherwise provided in writing contemporaneous with advancement and signed by donor: • (a) An advancement may be adjusted out of property as may be equitable • (b) The advancement shall have value at which it is appraised for estate tax purposes. along with a writing that announced that S-2’s share of D’s estate should be accordingly reduced. When she died. except authorized by the testamentary substitute subsection of 5. what it would have been appraised if included therein [basically. FMV at death of donor] • (5) Nothing shall increase or decrease the elective share of a surviving spouse.800.1-1A. or • (b) by donee acknowledging that such was the intention. • How Does This Statute Work? • Hypo 1: D made a will giving her entire estate to her children in equal shares. never have to give it back EPTL § 2-1. the advancement is part of estate of donor for purposes of distribution. D had a net estate of $1. • (a) If equal or greater than interest of donee. or if not included in gross taxable estate. donee/successor in interest may not share in distribution. How is the estate distributed? • D Daughter S-1 S-2 H S-3 18 .000 to S-2. donee/successor in interest.000. D advanced $200. Her husband H did not elect against the will. • (b) when less than share/interest.5: Advancements and their Adjustment • (1) An advancement is • (a) an irrevocable gift • (b) intended by donor as an anticipatory distribution • (c) in complete/partial satisfaction of interest in donor’s estate. may take his share reduced by amount of advancement. • (d) either as • (i) distributee in intestacy or • (ii) as beneficiary under existing will • (2) No advancement shall affect distribution of estate unless proved • (a) by a signed writing contemporaneous therewith [within a couple days] evidencing his intention to make it an advancement. • (3)When proved.

Tragically and against all odds. survived by sons B and N respectively. He later advanced $300. and the residue to the Nature Conservancy.000 instead of $1. N gets 150.000. then divide by how many GCs there are (first line with surviving issue) to give you 200k that each would be entitled to.000.• $1. leaving a child surviving D.000 to his sister.000 to his son S-1 (with a contemporaneous writing). S. F. F and S had both predeceased. Later.000 bequest to S passes to N. All other children get $500. D S-1 1 • 2 S-2 3 4 5 S-3 6 Don’t know this answer. Advancement charged to issue? you would add the 300k advancement to the 900k. giving you 1200.000. He executed a simple will leaving his estate to his issue by representation. the residuary beneficiary gets the co-op.000 is split into 1/3s. that child gets nothing.000. • S-2 doesn’t get any of the net estate because his advancement was greater than his interest under the will. Therefore.000 of net estate. The apartment meant for F lapses. reduced by the 50. By the time he died. S-2 was advanced $200. both of D's other children also predeceased him.000 each. • Hypo 2: Assume the same facts as in #1.000 to S (with the contemporaneous writing). • since since the advancement was greater than 200k. her net estate was $10. S-1 predeceased D. except that when D died. D’s net estate was $900.800.000 advancement.000 + $200. • Hypo 3: D executed a will in which he gave his cooperative apartment to his father.000 = 2M. 2M / 4 = $500. F S D B N • The $200.800. • so you divide the 900k by the remaining GC and they take that much each • Categories of Dispositions • Overview • Two step process 19 . leaving issue surviving him as noted below. • Hypo 4: D was a widowed New Yorker. D advanced $50.000 so he only gets $300. $200. The $10.

usually of a specified amount of money or quantity of property. but is secondarily payable from the general assets of the estate to the extent that the primary source is insufficient.1 • A testamentary disposition. (2) Specific Disposition • EPTL § 1-2. or accession rules (1) General Disposition • EPTL § 1-2. etc). or demonstrative devise.1 • Testamentary disposition. • How Does This Work? • General • I give $10.1 • A testamentary disposition of property of the testator’s net probate estate not disposed by a specific. residuary. general. • If it is a general bequest and the testator does not have 300 shares of Amex stock.• • • • (1) identify the bequest • It is here where you ask about the testator’s intent! • If you give all of a certain property to X at the time of will execution. • Restatement § 5. (4) Residuary Disposition • Restatement § 5.3 • A demonstrative disposition is a testamentary disposition of property to be taken out of specified or identified property. abatement.17 • A specific disposition is a disposition of a specified or identified item of the testator’s property.8 • A general disposition is a testamentary disposition of property not amounting to a demonstrative. usually of a specified amount of money or quantity of property. it is also included in the bequest after death. • (2) apply the ademption. that is payable from the general assets of the estate • An executor can satisfy bequest in kind as well! (like in artwork. not necessarily the property that was available at the time of the bequest. as long as it fits the description (3) Demonstrative Disposition • EPTL § 1-2. • Restatement § 5. can get identified property. • I give 300 shares of Amex to Beatrice. • Restatement § 5. the testator will go out and buy 300 shares! • Specific • 20 . and that property increases in size. that is primarily payable from a designated source.000 to Camille.1 • A testamentary disposition of a specifically identified asset • These two statutes are different – under EPTL. or specific disposition.

not to determine whether the testator intended the ademption of the property. • Ademption (applies to wills only) • Overview • Occurs when a specific disposition is impossible because the testator no longer owns the property. • I give $10. NY Rule • NY follows the ademption by extinction rule: If the subject of a specific bequest is gone at the testator’s death.” EPTL § 3-3. • (3) Time-of-death construction technique • Assume that the will was written and “words were spoken at death. Residuary • I give the rest. Three Ways of Avoiding Ademption by Extinction • (1) Reclassification of the devise • Since ademption by extinction only refers to specific bequests. • Intent is only examined to determine what kind of disposition was made. • I give 300 shares of Geico stock from my American Express account to Vanessa. a disposition by the testator of all his property passes all of the property he was entitled to dispose of at the time of his death. • I give the sales proceeds/half the proceeds of the sale of my condo to Josh. although the subject matter of the devise is not in the estate in its “original form.000. • (2) Change in form • Courts avoid ademption of a specific devise by finding that. Erin gets the $20. NOT general or other bequests. courts can get around ademption by finding that the disposition is not a specific one. I give my co-op apartment/one-half interest of my co-op apartment to Cate. • If $100 in it when bequested and $20 in it when died. to Naira. residue and remainder of my estate to Jim.• • • I give my North Fork bank account #12345 to Erin. and is predicated upon the principle that the subject of the gift is annihilated or its condition so altered that nothing remain to which the terms of the bequest can apply. • I give my 982 shares/all of my of Geico stock to Justin.1: What a Testamentary Disposition Includes • Unless the will provides otherwise.” it is still in the estate in a “changed form” • Hypo: Like if a corporation merged and its stock was renamed. the beneficiary gets nothing.000 out of my Washington Mutual account to Biana. • The rule of ademption by extinction prevails without regard to the intention of the testator of the hardship of the case. • • • 21 . to be paid out of the proceeds of the sale of my condo. • I give my entire estate to Elizabeth. Demonstrative • I give $10.

• Hypo 5: D bequeathed her fountain pens to her daughter in her 2000 will. It’s not a specific disposition.000 from D’s estate? • Yes. In July 2007.4-4. • Prof – its strange that there is no “retain character of a specific disposition” here How Do the NY Ademption Statutes Work? • Hypo 1: D bequeathed her fountain pens to her daughter in her 2000 will. which yesterday paid her $75. In 2004.5. The guardian has $70. Does D’s daughter have any claim to it? • Yes.000 left from the sale of the fountain pens. In August 2007. she closed the Citibank account and never reopened it. and • (4) no order had been entered setting aside the incompetency/conservation ruling by the time of death.5 states that the insurance proceeds must be after testator’s death.000 to pay for round-the-clock nursing care. disgruntled with her daughter. a flood swept away D’s pens but (miraculously) spared D. § 3. D died yesterday.000 for the lost pens. § 3-4. • (5) the beneficiary of such disposition becomes entitled to receive any remaining money or other property into which proceeds from such sale/transfer may be traced. D died yesterday. Does the daughter have any claim to $100. In August 2007.” D died yesterday.000 for the loss of the pens. Can the daughter keep it? • Yes. General doctrine applies here. During her lifetime she lost all the pens.4: Conveyance of Property of an Incompetent/Conservatee • (1) In case of a sale or transfer by a guardian (not someone with a POA). The daughter applied to D’s homeowner’s insurance carrier. She put it in an account labeled “Insurance Proceeds of Pen Loss – Give to Daughter. are payable by him to the beneficiary of such disposition. • (2) during lifetime of incompetent/conservatee.• • EPTL § 3-4. In 2004. EPTL § 3-4. § 3-4. to the extent received by the personal rep. 22 • . D bequeathed $100.5: Insurance Proceeds from Specific Disposition Not Subject to Ademption • (1) Where insurance proceeds from property • (2) which was the subject of a specific disposition • (3) are paid after death. Is the daughter entitled to the money in the account? • No. • Hypo 2: D bequeathed her fountain pens to her daughter in her 2000 will and named her daughter executor.000 out of her Citibank account to her daughter. Does the daughter get anything from the estate? • No. a flood swept away both D and her pens. She applied to her homeowner’s insurance carrier. the guardian sold the fountain pens for $75. • (4) such proceeds. demonstrative bequests do not adeem. • Hypo 3: D bequeathed her fountain pens to her daughter in her 2000 will. • (5) such proceeds retain the character of a specific disposition for all other purposes. • Hypo 4: In her 2000 will. which paid her $75. • (3) of any property which they had previously disposed of specifically by will when he was competent. a hitand-run driver inflicted serious head injuries on D and the court appointed a guardian to handle her affairs.

3 will allow the earrings to be given to A Separation Agreements and EPTL § 3-4. BUT then the ring is made into earrings. . If the property is in the estate but the testator made a contract to sell it. . Settlement or Other Act Affecting Property Previously Disposed of By Will • (1) A conveyance.2: Agreement to Convey Property Previously Disposed of By Will • (1) An agreement made by a testator • (2) to convey any property • (3) does not revoke a prior testamentary disposition of such property. the wife had left a bequest in her will to her husband. . 3-4. the K does not revoke the gift.• • • EPTL § 3-4. • Gift adeems if the property no longer is in the estate.” Court held that wife did not intend to relinquish rights under will. and that the separation agreement was not totally inconsistent with her will. • (4) but instead the property that remains passes to the beneficiaries pursuant to the disposition. • Hypo: if testator made specific devise to A of a diamond ring. • Moral: If you mean to relinquish gifts in a will under a separation agreement. settlement or other act of the testator • (2) by which an estate in property. settlement or other act which is wholly inconsistent with such previous testamentary disposition does revoke it. • Specific devises of debts or obligations usually carry with them interest accrued but unpaid at the testator’s death. she relinquished “all claims or rights which may now exist or hereafter arise by reason of the marriage with respect to any property. general • 23 . • (4) but such property passes under the will to the beneficiaries. previously disposed of in his will. courts have held that specific devises transfer that specific asset together with any accessions and accretions occurring after the testator’s death.3: Conveyance. they later entered into a separation agreement. In one of the terms of the separation agreement. • Devisee is entitled to the rest of the selling price but not the $ already received by testator EPTL § 3-4. • (5) subject to whatever rights were created by such agreement. but instead. whether real or personal . the beneficiary succeeds to the K rights. • (5) Exception: Any such conveyance. • Collected interest on a specifically devised bond does not pass to the specific devisee even if the interests remained part of the testator’s estate NY Rule: Stock Splits • (1) Determine whether the devise is specific v. and she died. you have to be specific • Accessions and Accretions (applies to wills only) • Overview • In general.3 • In Matter of Maruccia. • (3) is “altered but not wholly divested” does not revoke such disposition.

Z gets the apt but has to pay off the mortgage.6: Encumbrances on Property/Life Insurance Proceeds • (1) Where any property (including life insurance) at the time of decedent’s death • (2) which is subject to any lien or security interest. the beneficiary has two options: • (1) Executor can sell the specific disposition and give you the remainder. if X gets a house worth 200K. • Hypo: so if Z gets an apt in the will. • Encumbrances on Property (applies to both wills and intestacy) • EPTL § 3-3. Even if the diamond was sold during testator’s lifetime pursuant to this statute. • This rule is followed by NY • Stock dividends are problematic and the law is still unclear. If they only get 140K from the sale. in case of a will. after death. Executor does not have to pay off mortgage unless will says something like “I want the executor to pay off the mortgage. if any • (2) You can keep the specific disposition and give back the difference.3: Assets Chargeable with Payment of Estate Obligations • (1) All property and any income therefrom is chargeable with payment. • (6) Nothing in this section imposes personal liability. Watson rule: In absence of anything manifesting a contrary intent. • When the estate requires that a specific disposition be abated. it will still be treated as a specific request when it comes to abatement. • (2) Priority of payment: • (a) funeral expenses • (b) administration expenses • (c) debts • (d) estate taxes • 24 . but if it’s general then the beneficiary will not.” • (5) A general provision in the will for payment of debts is not enough.• • (2) If it’s specific then the beneficiary gets all shares from the split. • (3) is specifically disposed of in a will or passed via intestacy. EPTL § 13-1. & apt has a mortgage. X is NOT responsible for the remaining 10K. the bank will foreclose & sell the house. the personal rep is not responsible for paying that lien [the property comes with the encumbrance] • (4) unless. • Relationship with 3-4. • Hypo: Therefore. but the remaining mortgage is 150K and she cannot pay it.4 (and presumably the other ademption statutes) • It’s really important that something is deemed specific. a legatee of stock is entitled to any additional shares received by a testator as the result of a stock split occurring in the interval between execution of a will and the testator’s death. • Abatement • Overview • Only comes into play when there’s not enough in the estate to cover all the distributions. it expressly or by necessary implication states otherwise.

$100k to S and $1M to T.000 from his Washington Mutual account to his daughter. Who gets what? • There’s no residuary gift here.1M .000 to W. Sadly. • (i) Demonstrative dispositions are treated as specific if the property/fund is still there.000 and daughter and son split the $10. then the will controls. S gets $66. and $660k in stocks and bonds. except that the will gave $200k from the Washington Mutual account to R.• • (3) Whenever such property is insufficient to satisfy the above + all dispositions under the will. and the residue to the Nature Conservancy. $200. including the books. Son gets ring. How Does This Statute Work? • Hypo 1: In D’s will he gave his book collection to Q. • Any bequests subject to marital deduction (4) If provisions in this section are inconsistent with express or implied intention. in accordance with the value of the respective interests of beneficiaries. $500k from his Washington Mutual account to R. • (d) Specific dispositions and any income derived therefrom. Who gets what? • Wife gets $300. ratably. But.1-A (as we shall see). R gets 500K from WaMu account. • 25 . Therefore.000.000 (treated as specific bequest) plus his portion of the other 100.667. the Washington Mutual account and $800k in securities.000 (1:10). The estate consisted of the ring and $200.000) to his son.000 in Washington Mutual account to his daughter. the property abates as follows: • (a) Distributive shares not disposed of by will (intestate distributions & invalid dispositions) • (b) Residuary dispositions • (c) General dispositions • (i) Demonstrative dispositions are treated as general if that property/fund has adeemed. the Washington Mutual account.667 more. R gets Wamu account with 100.360. and the residue to Wife. his wife.000 to his mother. and the residue to U and V equally.000 and T gets 600. R gets $66. $200. $300.000 including the book collection valued at $200k. S gets 60. and at his death the Washington Mutual account contained only $100k. the wife gets nothing. • D still gets the book collection.000 left in a 9:2 ratio.000) to his son. $100. including the Washington Mutual account. D's net estate was $1. $20. $100.000 ratably (because it’s treated as a general bequest). Who gets what? • Q gets books. Too bad so sad for U and V. The net estate consisted of the ring plus $220.667 and D gets $666. • Hypo 3: D’s will gave his ring (worth $90. • Hypo 2: Assume the same facts. • Hypo 4: D’s will gave his ring (worth $10. D’s net estate had dwindled to $1. daughter gets her account. wife can elect against the will under EPTL 5-1. U and V get nothing.000 in the Washington Mutual account.000 to his sister. 1:1:10 for R:S:T.000 to his mother.

in any court proceeding concerning property/estate. when do you give it to him? Do you subtract that now and give the remainder to B now? That would seem like a profit. B kills A. NY Common Law Gloss • Estate of Covert • Slayer killed wife then himself. • Estate of Macaro • Slayer killed the intestate-decedent’s heirs. • How Does This Work? • Hypo 1: G makes an irrevocable transfer in trust directing the trustee to pay income to A for life. after diligent search.7: Presumption of Death from Absence • (1) A person who is absent for a continuous period of three years.4: Slayer Rule • (1) A slayer is denied any right to benefit from the wrong. • (b) a conviction conclusively establishes it. 26 • . • Murderous Heirs • Riggs General Rule • You cannot profit from your own wrong • Restatement 8. without legal justification. Tough thing. he may still maintain an interest in any already-vested property – he does not forfeit his own property. is responsible for the felonious and intentional killing of another. • (3) he has not been seen or heard of or from. • (a) determined by a preponderance of the evidence in a civil proceeding. Court held that the Riggs doctrine nullifies any and all bequests from wife to him. • (6) to have died • (a) three years after the date such unexplained absence commenced. • (5) shall be presumed. or • (b) on such earlier date as clear and convincing evidence establishes as the most probable date of death. Court would commute the value of the life estate and give to A’s estate. but cannot deprive wife of her interest in house. But. • (7) The fact that such person was exposed to a specific peril of death may be a sufficient basis for (b) above. Court therefore computed an amount representing the wife’s life estate in the house. • (2) A slayer is a person who. Court treated wife as fictionally predeceasing husband.• Presumption of Death From 3 Years Absence • EPTL § 2-1. • (2) during which. • (4) and whose absence is not satisfactorily explained. and at A’s death to distribute the corpus of the trust to B. Court held that he was not entitled to take his now-larger intestate share. Should A’s estate be able to obtain an amount equal to the present value of the income interest based on A’s life expectancy? • B should not have to forfeit the remainder he would be entitled to if A lived. Held house as tenants by the entirety. • Matter of Gulbrandsen • Wife killed husband.

the afterborn share is his intestate share. the afterborn’s share is his intestate share.2: After-Born Children • • • • (1) Whenever a testator during his lifetime or after his death. • (C) If it appears that the testator’s intention was to make a limited provision which specifically applied only to the children born before the execution of the will. the afterborn’s interest shall be of the same character as the interest conferred upon the other children. • Apply only where there is a stated reason for disinheritance. • (b) If there is no children living at time of execution. then the afterborn shares in the estate: • (A) His share is limited to the max disposition made to the other children • (B) He gets such share as he would have received had the testator included all afterborn children. the character of the testamentary plan adopted by the testator shall be preserved to the maximum extent possible. • EPTL § 5-3. from the other testamentary beneficiaries.6: Disqualification of Joint Tenant • (1) A joint tenant convicted of murder-2 or murder-1 of another joint tenant • (2) shall not be entitled to any money in a joint bank account created or contributed to by decedent.• EPTL § 4-1. (4) every such child shall succeed to a portion of the testator’s estate as provided: • (a) If there is 1+ children living when testator executes the will • (i) If no child is provided for. either from the other children. (3) dies leaving the afterborn child neither provided for nor mentioned in the will (can draft around this statute). • (a) In abating the interests of such beneficiaries. • (3) except for those monies contributed to by the convicted joint tenant. and given an equal share of the estate to each child. then the afterborn gets nothing • (ii) If at least one child is provided for. (5) Afterborn means born in testator’s lifetime or in gestation at his death and born after. ratably out of the portions of such estate passing under the will. or if there are none. • (D) To the extent feasible. (2) has a child born after the execution of a last will. (6) The after-born child may recover the share of the testator’s estate to which he is entitled. • • 27 .

Husband gets 50k off the top plus ½. Child 3 was born in 2004.000 and $200. Do they have any rights in D’s estate? • Yes. Does he have any rights in D’s estate? • Yes. executed with normal will formalities • (b) A will may be revoked by [act – revokes entire will]: • (i) An act of burning. Does he have any rights in her estate? • No. she had children 1 and 2. she bequests to 1 and 2 are respectively $100. D had no children. effect on: • (1) A revocation or alteration. limited to 300k. obliteration. cancellation. Pushes husband’s share into intestate? • Hypo 3: D’s 2003 will stated: “I leave $10 to my son because he dropped out of school. but • (a) for nuncupative wills it must be clearly established by 2+ witnesses and 28 • . may be effect by following manner only: • (a) A will or any part thereof may be revoked/altered by [writing]: • (i) another will • (ii) a writing of testator clearly indicating intention to effect such revocation or alteration. as if died intestate. • Always need intent to revoke the will (and evidence of intent!) EPTL § 3-4. Take ratably from 3 siblings. proved by additional 2 witnesses (so cant call lawyer to rip it up) • (2) If you are allowed to create a nuncupative or holographic will. if intended by testator. tearing. • Hypo 2: At the time she signed her will in 2003." In 2005 D had another son.1: Revocation of wills. She later had children 1 and 2 in 2006. Siblings contribute in a 1:2 ratio.” In 2005 D had another son. or other mutilation or destruction performed by • (A) Testator • (B) Another person in presence and by direction of testator. She bequeathed her entire estate to her husband. In her will. and also to prevent people from revoking without thinking. give an intestate share.• How Does This Statute Work? • Hypo 1: When T signed her will in 2003. kids get the rest.000 and she gave the residuary estate to her husband H. • Hypo 4: D’s 2003 will stated: "I leave nothing to my son because he dropped out of school. Afterborn gets 100k. cutting. WILLS: REVOCATION AND RENUNCIATION • Revocation • Overview • Done with some formalities to prevent fraud. Does he have any rights in her estate? • Yes. then you can revoke or alter by the same type of declaration or alteration.

revokes all codicils thereto. • If this presumption is not rebutted by clear and convincing evidence.1. the pens would then pass intestate. The pens go to the residuary beneficiary of the will. Does F get the pens? • No. as provided in this section.000 to my Rabbi R instead. there’s no presumption • SCPA § 1407: Proving a Lost Will 29 • . Furthermore.000 because her bequest was not revoked. if the excised material cannot be determined. the later will revokes the earlier will only to the extent that the later will is inconsistent with the earlier will. so the earlier will would still be probated) •How Does This Statute Work? •Hypo 1: D validly executed a will and later crossed out with a thin line of ink a bequest of $5. • Codicils • A codicil can revoke a part or the entire will • BUT. “I revoke the gift of the fountain pens to F and I give them to my cousin C. in practice. • Unless the presumption is rebutted by clear and convincing evidence. Only way to revoke part of a will is by another will or a formally executed writing.” What result? • F gets 5.” Later he executed a codicil that said. if the codicil was destroyed. the later will is operative. I give the $5. it is presumed that the testator intended the later will to replace the earlier will.• • (b) for holographic wills it must be entirely in the hand of the testator. then it is presumed revoked • Every year. “I give my fountain pens to my friend F. She simultaneously wrote in the margin next to that bequest. •Hypo 2: D cuts out a provision of her validly executed will with scissors. Revocation of a later codicil does not revive prior will. revoking a codicil does not revive an earlier will (but. the court has to decide the hard question of whether to admit the will without it. and each will is otherwise fully operative. However. • Hypo 3: D’s will contained the clause. Has she revoked the gift to A contained in that provision? • No difference than above. lost wills are put into probate via SCPA 1407 • If attorney kept will. “Revoked. Evidentiary Presumptions • If the will is physically not there. it is presumed that the testator intended the later will to supplement rather than replace the earlier will.000 to her friend F. • If the later will does not make a complete disposition.” Later he tore up the codicil. • How Do You Know Whether a Later Will Is a Revocation and Not a Supplement? • The fundamental question is whether the later will “was intended to wholly supplant the earlier will. (3) Revocation of a will. nobody would even know it ever existed.” • Restatement 4. comment d • If the later will makes a complete disposition of the testator’s estate. if F was the residuary.

and because it's missing and testator had custody. It’s much harder when person takes will home. a revocation of the later will does not. or • (2) because of a false assumption of law. • (2) A revival of a prior will or of one or more of its provision may be effected by: • (a) The execution of a codicil which in terms incorporates by reference such prior will or one or more if its provisions • (b) A writing declaring the revival of such prior will or 1+ of its provisions. (2) Prove the contents of the will. • (b) The presumption established in subsection (a) is rebutted if allowing the revocation to remain in effect would be more consistent with the testator's probable intention. and • 1 and 2 are fairly easy to prove. or because of a false belief about an objective fact. • We do have the doctrine in NY. • Revival • EPTL §3-4. but it did not in fact substitute for it? • (Was testator disappointed in that assumption?) 30 • • . requiring re-execution of all the normal will formalities • Dependent Relative Revocation (Ineffective Revocation) • Overview • Gives testator results that come close to actual intention when actual intention though established to a court’s satisfaction. • This is the hardest – if lawyer had it they could say they that person never stated they wanted a new will.6 • (1) If after executing the will the testator executes a later will which revokes or alters the prior one. revive the prior will or any provision thereof. of itself. by showing a copy of original version or by witnesses (3) Prove that the will was not revoked.• • • (1) Prove that the will was duly executed with formalities. but its questionable because haven’t been to Court of Appeals Restatement 3d of Property • (a) A partial or complete revocation of a will is presumptively ineffective if the testator made the revocation: • (1) in connection with an attempt to achieve a dispositive objective that fails under applicable law. cannot be given effect. that is either recited in the revoking instrument or established by clear and convincing evidence. which is executed with the normal will formalities • (c) A republication of such prior will. Basic Analysis • (1) Did testator clearly revoke Will #1? • (2) Did testator revoke Will #1 on the assumption that Will #2 would substitute for it.

who has long been estranged from her daughter. D crossed out all the dispositive provisions of the June 1 will and noted at the bottom that the May 1st will was "restored in full force and effect. Do his children have any rights? • Not sure of the answer here. 2007. he had not changed his will. the estate would go to the surviving spouse. 2007.• • (3) Would testator have preferred Will #1 to intestacy? • This is the crucial step (and this is where NY courts are murky) – is Will #1 closer to her intent than intestacy? If answer is yes to all 3 questions. She clearly revoked the June will. The June will validly substituted for it. 31 . June will was revoked as well. Any application of DRR to May will? No. Still later. W then wrote a new will leaving everything to her children (omitting H's). then Dependent Relative Revocation applies •How Does This Work? • Hypo 1: T. and upon the surviving spouse's death. revoked on assumption that the May will would be restored.4 • (1) If. Later. (This is sort of reverse DRR). • (5) If revocation solely by this section. The will provided that upon the first spouse's death. after executing a will. Any application of DRR to June will? Yes. revival shall occur only on remarriage • How Does This and The Joint Will Statute Work Together? • Hypo1: H and W entered into a valid contract to make a joint will." Was it? What arguments can be made that June 1 will should be probated? • May will was revoked. she revoked it by a will dated June 1. When H died. validly executed a will on May 1. everything would go to H's children and W's children. • Renunciation (applies to both wills and intestacy) • Overview • Purpose: allows you to not have to accept property that you don’t want. H and W later divorced. and would clearly prefer the June will to intestacy. and his children and her children therefore shared his estate. In their separation agreement each relinquished the right to the other's property and released the other from any contracts they had executed. Enables you to pass it to someone else as if you had never owned the property. • Revocation By Divorce • EPTL § 5-1. the testator gets • (a) divorce • (b) annulment • (c) dissolution on grounds of absence • (2) it revokes any disposition or appointment to the former spouse • (3) unless the will expressly provides otherwise • (4) and the provisions of the will take effect as such former spouse had predeceased. D. which retained the generous bequest to U.

• • Why? Tax purposes. and • (6) interest must pass without direction by disclaimant to either: • (a) transferor’s spouse. Federal Disclaimer Statute • (1) Irrevocable. or • (b) disclaimant’s 21st birthday. • (5) Must not accept any interest or any of its benefits. you have creditors at your door. or • (b) person other than disclaimant. EPTL § 2-1. • 32 . might be an undesirable property. exercises control over. • Disclaimers = renunciation • Disclaimer is federal and renunciation is state • Applies to both intestacy and will dispositions • Can renounce in whole or part. • (3) in writing. you have to keep both federal and statute statutes in mind [you don't get an extension under federal statute].11: Renunciation of Property Interests • (1) A disposition includes: • (a) Will • (b) Totten trust bank account • (c) Power of appointment • (hypo: income to X. • (2) unqualified. and remainder to person of X’s choosing) • (d) Transfer of security (stocks and bonds) to beneficiary • (e) Insurance policy • (f) Joint tenancy • (g) Retirement/employee benefits • (h) Any trust or any disposition • (i) Or by operation by law • (j) Any of the foregoing created or increased by reason of a renunciation made by another person (has 9 months further to renounce) • (2) General Rule – any beneficiary can renounce a disposition (that he has not accepted yet) in whole or in any part • (a) Exception: A surviving joint tenant/tenant by the entirety may not renounce that portion of an interest which is allocable to amounts contributed by him. encumbers. • (b) An interest is considered “accepted” if a person voluntarily transfers. • Creditors generally cannot get at anything you renounce or disclaim • Hesitation is in the Medicaid cases of recent years. If you get an extension. • In NYS you can get the court to extend the renunciation period (for good cause). or indicates acceptance of the interest. to get marital deduction. executes a waiver. having your children or whoever inherit it. and • (4) filed in 9 months from: • (a) time of transfer. accepts delivery or payment of. or contracts to do either.

as if that person had died at time of filing or just prior to possession. and • (e) filed within 9 months after effective date of disposition. • (b) signed. to the effective dates above.• • (3) Renunciation has to be: • (a) in writing. or issue. Date of other joint tenant’s death. Date of death of the employee. • (c) acknowledged. Date of testator’s death. • (d) accompanied with an affidavit that renouncing party has and will not received any consideration. But: 33 • . • (b) Renunciation is retroactive. Date of death of the creator of the trust account. • (i) the filing of renunciation has same effect as if the renouncing person has predeceased the decedent. • (f) with notice of such renunciation served on all interested parties. Date of death of the insured. Will/ Intestacy Interest Under A Testamentary Trust Interest in Joint Property Life Insurance Pension/Retirement Plan Interest in Totten Trust Interest in a Lifetime Trust Interest Created by Presently Exercisable Power of Appointment Interest Obtained in Default of Someone's Exercise of a Power of Appointment Future Interest in a Trust • • (a) The time to file and serve the renunciation may be extended in the discretion of the court on good cause and on notice to interested parties. (5) Who may renounce? • (a) the beneficiary • (b) guardian of an infant or incompetent. provided: • (i) if property which was renounced is disposed in favor of attorney. his spouse. The date it becomes possessory. Date of the trust agreement [when made irrevocable or date of creation if already irrevocable] Date of the exercise of the power of appointment. or • (B) the court has authorized renunciation • (ii) anyone with a POA over a disabled person still needs authorization from the court (6) Effect of renunciation: • (a) Unless creator of disposition has otherwise provided. if authorized by the court • (d) attorney with durable POA. it shall not be effective unless • (A) the POA instrument authorizes renunciation. (4) When does the nine months start to run? Date of testator’s death. if authorized by the court • (c) personal rep of decedent. or • (ii) if the renounced interest is a future estate. • (b) Renunciation will accelerate any subsequent future interests. Date of previous holder's renunciation/ default/death. whichever is sooner.

it shall not be deemed a renunciation of any other disposition in favor of the spouse. • (ii) A person who has both a present and future interest and renounces the present interest in whole or part shall be deemed to renounce the future interest to the same extent. it will not cause acceleration. (7) Different Effect for Spouses: • If a spouse renounces in whole or part. unless otherwise provided in the renunciation. W can renounce the $100. Everyone else. other than the spouse. the renouncing person shall be treated as post-deceasing the decedent. (8) Renunciations are irrevocable. then solely for the mechanics of distribution. and still enjoy the income from it once it goes into the trust for life from that property. regardless of whether the property which would have passed under said renounced disposition is by reason of said disposition disposed to or in favor of the spouse. can NOT do this. • 34 . • (c) If the renunciation causes a disposition/distribution by representation.• • (i) If the future interest is limited on a preceding estate other than the renounced interest. • Hypo: Will says I give $100 to W. and residue to trustee to pay income to W for life and remainder thereafter to the Red Cross.

Within 9 months of his grandfather’s death. What result? • He renounces entire interest. What happens to the $500. then remainder factor is . • Hypo 1: Assume 6% interest rates. survived by two children. 9 and 10 get 1/8. X renounced his income interest. remainder to Z. . Second part – Y gets it. X renounced his income interest. then income to Y for life.89998. Within nine months of his grandfather’s death. S. duly renounced within nine months of D’s death. . Hypo 3: X’s grandfather made a trust. • Examples of Non-Probate Property 35 . Hypo 4: X’s grandfather made a trust to pay the income to X until he reached the age of 35. The statute alters distribution by representation. What result? D 1 A B C • 2 E F G 3 9 4 10 • • 1 and 3 get ¼. then remainder to him at that time. The value of her income interest is therefore . 4 predeceased T.000 to her son. remainder to Z? • First part – Y gets it all immediately. income to X for life.10002 of the trust. Hypo 2: Assume that in the preceding example.• • How Does This Statute Work? • Hypo 1: T duly executed a will in which she gave $500. . S. who had four children. and that 2. remainder to Y. and the residuary estate to Habitat for Humanity. and assume the trust provides for income to be paid to A for life and remainder to B. duly renounced his bequest. who had six children. WILLS: PROBATE AND PROCEDURE AFTER DEATH • Overview • The Probate/ Non-Probate Distinction • Why does it matter? • Only the property that is considered probate property gets probated through the will/intestacy. and A–G get 1/24 each. What result? What if the trust said income to X for life. If A is 30.000? • Anti-lapse statute kicks in and it gets split evenly between S’s children. with the income interest too. • Actuarial Valuations • Allows you to compute present interest when it actually is an income stream or remainder when a certain age/year is reached.

estate in land. • (f) Interpretation – procedure of applying law to determine testator’s intention (2) In General • (a) Real Property • Formal validity. it is admitted to probate. If no objections. right of election. or alteration of a disposition. and a petition to the court. • (b) made within or without NY by a domiciliary or non-domiciliary thereof. effect. leaseholds. effect. • EPTL § 3-5. or alteration of a disposition. i.e. revocation.legal foundation is contracts) • Pensions (matter of contract) • Trusts • Partnership interest s Probate Procedure • A probate proceeding is where a will is offered by the proponent. etc. fixtures/mortgages. • (b) Personal Property • Intrinsic validity. and intestacy are all determined by the jurisdiction in which the decedent was domiciled at death. death certificate. • Revocation/alteration of a disposition by subsequent writing/act is determined by jurisdiction in which testator was domiciled at time subsequent writing executed or act performed. and intestacy are all determined by the law of the jurisdiction in which the land is situated. They get it notarized and send it back. or • (ii) real property in NY. intrinsic validity. Need the will. revocation. • The court then appoints an executor/administrator through the granting of letters testamentary or letters of administration. • (c) is formally valid and admissible in NY. anti-lapse. If the will is found to be valid. interpretation. He figures out who the necessary parties are and serves them with a citation/waiver. if it is 36 • • . (3) Formal Validity • (a) A will disposing of • (i) personal property. court grants powers to executor and she uses those powers to do what is necessary to administer the estate. liens • (b) Personal property – everything besides real property • (c) Formal validity – formalities requirements • (d) Intrinsic validity – capacity • (e) Effect – legal consequences of statutes.• • Jointly owned property with a right of survivorship • Totten trust bank accounts • Life insurance (beneficiary .. • Interpretation of disposition of personal property is determined by jurisdiction in which decedent was domiciled at time of execution.1: Multi-Jurisdictional Estates • (1) Definitions • (a) Real property – land.

D’s wife W wants to elect against D’s estate. revocation. a New York domiciliary. (ii) signed by testator. and • (c) whether such power should be exercised at all. or alteration of disposition • (b) by which power of appointment is exercised. a New York domiciliary. In his will he gave it to his sister S. (5) Power of Appointment over Personal Property • (a) Intrinsic validity. effect. a domiciliary of Alabama. owned a summer home in Pennsylvania. including the house and furniture. In his will he gave it to his son. • Hypo 2: D. • Hypo 3: D. executed a will disposing of NY real property. • Exception – formal validity still governed by sub-(3) above. (4) Change in Domicile • A disposition of personal property intrinsically valid under testator’s domicile’s laws at time of execution shall not be invalidated by change of domicile to a place where disposition is intrinsically invalid. What law governs the effectiveness of the revocation? • PA law governs. are determined by: • (i) Presently exercisable power – jurisdiction in which donee was domiciled at time of death • (ii) General power: • (A) created by will – jurisdiction in which donor was domiciled at death • (B) created by inter vivos disposition – jurisdiction in which donor intended to govern such disposition • (C) if donor = donee of general power exercisable by will alone – jurisdiction in which donor was domiciled at death (6) Choice of Law in the Will • (a) Whenever the testator. Can the will be admitted to probate in New York? • • • 37 . he tore up the will with the intention to revoke it.• • • (i) in writing. either at time of execution or death. Although only one witness attested to T’s signature. at time of execution • (C) the jurisdiction in which testator was domiciled. What law governs? • NY law governs for personal property. PA law governs for real property. the will was formally valid in Alabama when she executed it. had valuable furniture in his home in Pennsylvania. Later. • How Does This Statute Work? • Hypo 1: D. and (iii) otherwise executed and attested in accordance with the law of: • (A) NY • (B) the jurisdiction in which the will was executed. S. • (b) provides in his will that he elects to have disposition of property situated in this state governed by laws of NY. not domiciled in this state at time of death. • (c) then all issues of law are determined by laws of NY.

What law governs the issue of whether non-marital children can share in the bequest? • Interpretation – Georgia law applies. he executed a will disposing of his personal property. or • (ii) 1/3 of the net estate • (b) The net estate does not include debts. • Spousal Right of Election • Overview • The spouse is the only relative favored by protection against intentional disinheritances. and one of the very few limits that we have on freedom of disposition. or funeral expenses. • (3) Net Elective Share • (a) The net elective share is: • the spouse’s elective share MINUS (a) The capital value of any interest that passes absolutely (i) by intestacy (ii) by testamentary substitute (iii) by will (b) Or is renounced. Later he moved to Hawaii and revoked his prior will by writing a new one.1A: Right of Election by Surviving Spouse • (1) The spouse has a right of election to take a share of the decedent spouse’s estate. 38 . • (2) Elective Share • (a) Elective share is the pecuniary amount equal to the greater of • (i) 50k or if its less than that. He finally died domiciled in New York. Hypo 6: When T was an Alaskan domiciliary. He died a New York domiciliary. Would his will be given effect here? • Yes. • Policy – marriage is an economic partnership. What law governs the revocation? • Hawaii law governs. the capital value of the estate. • Hypo 4: Would your answer be the same if his will disposed of real property located in Nevada? • No – real property is always governed by the laws in which the land is situated. • Hypo 5: D made a bequest of personal property to his "issue" in a will executed while he was a Georgia domiciliary. administration expenses.• • • Yes. Hypo 7: T left personal property to an organization which fosters an activity legal in the jurisdiction where he was domiciled when he made his will. with each spouse entitled to a near equal share of the marital property EPTL § 5-1. He then moved to New York where such an activity is illegal.

• (ii) as tenants by the entirety. remaining on deposit at decedent’s death.  If spouse is other person. • This section means that the spouse forfeits her non-absolute interests when she chooses to elect against a will. • (ii) any interest in a trust or trust equivalent created by decedent. life estate etc. and shall be included in the net estate subject to the spouse’s right of election. • (E) Jointly Held Property • Any property held • (i) as joint tenants with a right of survivorship. E. or • (iii) by decedent payable upon his death to another. • (b) Unless decedent provides otherwise. as though the spouse predeceased the decedent. (4) Inter Vivos Gifts Treated as Testamentary Substitutes: The following will be treated as testamentary substitutes.• Interest that Does Not Pass Absolutely: an interest that so passing from decedent to spouse consists of • (i) less than the decedent’ entire interest in the property. within 1 year of death. or ο Think about whether there is any chance the spouse can lose her gift. to or for the benefit of any person.. • (F) Revocable Trusts 39 . the election shall have same effect with respect to any interest which passes or would have passed to spouse. remaining on deposit at decedent’s death. • (A) Gifts Causa Mortis • A gift made in fear and contemplation of impending death that is automatically revoked if the donor survives the apprehended peril • (B) Gifts w/in 1 Year of Death • The aggregate transfer of property as a gift or partial gift. fee simple. • Therefore. it will accelerate a remainder interest. in a Totten trust savings account. • Transactions described in (D) and (E) above shall be treated as testamentary substitutes in the proportion that the funds on deposit were the property of the decedent immediately before the deposit/consideration was furnished by the decedent. whether benefiting the spouse or any other person. held jointly with another with a right of survivorship. • Includes US savings bonds. • (C) Totten Trust Accounts • Money deposited plus interest. • (D) Joint Bank Accounts • Money deposited plus interest.  Spouse has burden of proving proportion.g. other than absolutely. condition. to the extent that they • (i) exceed the 12k per donee annual tax exclusion or • (ii) are uncapped education or medical payments for kids. then proportion shall conclusively be one-half.

they are allowed to pay out to the beneficiaries the amount that is due to them. A spouse may cancel election.• • • Any lifetime transfer made by decedent. ratable contribution to the spouse’s elected share shall be made by the beneficiaries/distributees/recipients of testamentary substitutes either by cash or specific property. • (5) Right of election is not available to spouse of decedent who was not domiciled in this state at death. If the plan is qualified. at their discretion. than only half of the money. • (ii) but no later than 2 years from date of decedent’s death. or • (ii) retained either alone or with another that does not have a substantial adverse interest. to the extent that decedent • (i) retained a possessory or income interest. • (c) and a filing in the appropriate Surrogate’s court. unless provided for property in NY to be governed by laws of NY in his will. provided there won’t be prejudice. in trust or otherwise. • (3) The right of election may be made by • (i) spouse • (ii) guardian of spouse. and terms of the will shall remain otherwise effective as far as possible (abolishes illusory transfer doctrine). • the property subject to the power of appointment is a testamentary substitute. • (H) Power of Appointment • If the decedent • (i) held at death a presently exercisable general power of appointment or • (ii) exercised or released such a power within one year before death. • (2) Except as otherwise provided. upon application to court and notice to interested parties. or dispose by express provision • (G) Pension Plans • Any money or other property payable under a benefit/retirement plan. the will is valid as to the residue after the elected share has been deducted. Otherwise. (7) Procedure for Right of Election • (a) An election must be made • (i) within 6 months of date of issuance of letters testamentary/ administration. • 40 . consume. Brokerage accounts and banks are covered from liability. • (b) with written notice to the decedent’s personal rep. • (6) Decedent’s estate shall include all property of decedent wherever situated. the power to revoke. • (I) A Transfer of a Security to a Beneficiary (5) Tell Banks ASAP • Spouse has to get to the banks quickly and let them know that there is a right of election. except to the extent that it was in exchange for consideration. (6) General Provisions Regarding Right of Election • (1) When the spouse elects against the will. when authorized by the court • (4) Any question arising as to right of election shall be determined by court on notice to all interested parties. invade.

instead of the car.000. and software used by such family.• (d) Extensions may be granted by order of court for 6 months per application on reasonable cause and notice to interested persons. Thus. except that where assets are insufficient to pay the reasonable funeral expenses. reduced by all outstanding security interest or other encumbrances. in writing. the payment to the estate of the amount by which the value of the motor vehicle exceeds $15. and books. • (ii) Spouse can elect to receive the value of the car.000. the 500K received by the spouse does NOT affect either her entitlement to or the amount of her elective share. • Life Insurance Proceeds • Life insurance is not a testamentary substitute. the personal rep must apply such money/property to defray any deficiency. • (iii) If any motor vehicle was a specific disposition in decedent’s will. during the decedent’s lifetime. • (d) One motor vehicle not exceeding in value $15. • (3) As used in this section.000 shall vest in the specific beneficiary. the following items are not probated (creditors cant reach them) but vest in. • • Set-Off or Exempt Property • EPTL § 5-3.000. the spouse can pick any one he wants but must repay the estate the difference.000. discs. farm machinery and tractors not exceeding in aggregate value $15. the term “value” shall refer to the fair market value of each item.1: Exemption for Benefit of Family • (1) If person dies and leaves spouse or children under 21. 41 . • (e) A spouse may waive the right of election. A Close Up on Testamentary Substitutes • The list of testamentary substitutes encompasses most (but not all) non-probate transfers. tapes. and acknowledged or proved in manner required by property laws. • (b) The family bible. not exceeding 15k. • Irrevocable dispositions made more than one year before death (or made before marriage) and life insurance are virtually the only non-probate transfers that are not testamentary substitutes. family pictures. subscribed. and shall be set off to such surviving spouse (or children if there is no spouse). • (i) If the decedent owned more than one car. • (c) Domestic animals with their necessary food for sixty days. • (e) Money or other personal property not exceeding in value $15. not exceeding in value $1. • This statute trumps even contrary provisions and dispositions in the will. even if one is more than 15k. not exceeding in aggregate value $10. even if the decedent named his spouse as beneficiary of a 500K life insurance policy. • (a) All housekeeping items. • (2) No allowance shall be made in money or other property if the items of property described above are not in existence when the decedent dies.000.

but don't include gifts given w/in one year) + lifetime gifts that you made). every married American can give 100% of her estate (no matter how large) to her spouse without taxes. not about each other or their children. (2) Unified Credits  Instead of having a separate deduction for gifts…turned it into a credit and unified it with the estate stuff.600. • A deduction comes out right off the top and then you tax the remainder. and have to pay taxes at every generation. and (3) enacted a generation skipping tax. Would you advise W to put in her will a clause relating to the order of their deaths? If so. supplemented by Sim’s notes) • Overview Of Estate.000 and then die owning a taxable estate of 1.600.500. what might it say? Would you advise H to say something in his will about the order of their deaths? If so.000 THEN the estate tax is going to be calculated at 2.000 and W has forty cents. SO under this. can no longer skip taxes at one generation. • (3) Cumulative System of Taxation • This would treat the children’s death as a taxable event. • Hypo: Every American can pass $2 million to her loved ones free of estate taxes. Gift. So now the whole system…both the gift and estate taxes are CUMULATIVE! • Hypo: If you made taxable gifts in the amount of 1.000. (1) Unified Tax Rates  Rates apply to BOTH the estate and gift taxes. assume husband has survived. you compute tentative tax (it goes from 18% to 55%) then you subtract out the lifetime gifts & subtract any available credits (life unified credit worth $2 million). what?  Husband should give wife 1 million right now.TAX: OVERVIEW (from Justin Marino’s Outline.000. • Taxes are calculated as follows: Compute the gross estate (decedent's probate assets + lifetime transfers (which are similar to testamentary substitutes. Assume also that all they care about are the tax consequences. • This credit is 2 million! • Difference Between A Deduction & Credit • A credit comes out after you have calculated everything – comes out at the bottom and you take out an amount that exempts X from taxes (you calculate at a higher tax bracket). A deduction would be worth MORE for a rich person (takes them out of a higher tax bracket). & Generation Skipping Taxes • • Defects in the old law necessitated changes that lead to the current law. On this gross estate. Congress changed three basic things: (1 and 2) Congress unified BOTH the estate and gift taxes. Make provision that in case die simultaneously. • Three Sets of Taxes Make Up the Unified System 42 . In addition. Assume that you have married clients whose estates are lopsided – say H has $3.

can opt to value estate property SIX months after death (if value decreased).They are all excise taxes – taxes that are imposed when there is a transfer. thrust is to get into highest bracket. money that anyone owes you. are allowed to pay tuition and medical expenses and they are not counted as gifts. • Estate Tax – G dies owning $130 that she devises to B. When it comes back into your gross estate…it puts you at a higher tax bracket for tax purposes! • Annual Exclusions  This is one of the TWO advantages remaining for people who make gifts during their lifetime. significantly unified credit. Because of big variations in the market. and exercise of a power of appointment in favor of someone. due to charitably. 43 . Then subtract available credits. • Note: If something is taxed as a gift during your lifetime…BUT if you retain control over it so that it comes back into your estate…then you will get a credit for the gift tax you paid. it includes money that you gratuitously give other people. • Gifts made by a donor during a calendar year to the same donee are deductible up to 12K. For example. • Inclusive versus Exclusive Tax Base  This is the SECOND advantage remaining for people who make lifetime gifts. • Gift Tax – G makes a gift to A of $100. This can cause the property to be included in the gross estate. The gift tax rate is 30%. This has to be paid directly to the school or doctor. 2) Estate Taxes • This is the tax assessed on the amount of money that the decedent owns and is measured on the death time value of the property. If he does. etc. Again. SO can then make a 24K gift to as many donees as the hub and wife want EVERY year! • Tuition and Medical Expense Exclusion – In addition to the 12K exclusion. 1) Gift Taxes This is the tax assessed on the amount of money that is given to the donee. • Retention of Power Over Property  A donor cannot retain the power over the property. transfers for inadequate consideration. 12K. • Gift taxes are EXCLUSIVE whereas estate taxes are INCLUSIVE. then add in prior taxable gifts and compute the taxes using the tax rate table. spouse. Would pay the government a gift tax of $20 and receives the $100. then determine what part is deductable. not to double tax you. G’s estate pays the government an estate tax of $39 AND B receives the remaining $91. Then subtract gift taxes that you have paid on prior gifts. Can make an 12K gift to as MANY donees as the T wants EVERY year! • Gift Splitting – Can double the 12K if you get your spouse to consent. it is NOT a gift. • How to Compute – identify the current year’s gift. • What is a Gift? • The gift tax is imposed on direct gifts AND indirect gifts. The estate tax rate is 30%.

then it is included in the gross estate. and the retention of a right to revoke in a revocable trust. compute your tentative tax. right to cash in on the policy. and someone else receives the remainder after they die…then it is included in the gross estate. Then subtract every available credit. If you give your house away and retain the right to live in it…. the right to pledge the policy as a collateral for a loan. retention of a reversionary interest. • Hypo: If a person exercises a general power of appointment in favor of X. including the current $2m credit and unified credit.. except for the debts and costs – that is for reality purposes.. add back ‘adjusted taxable gifts’ (definition . Then subtract gift taxes paid on post-1976 gifts (a little oversimplified).e. • (4) Powers of Appointment – A general power of appointment is included in the gross estate if you are allowed to use it in your own favor. life insurance policy). If the beneficiary is the estate. • This can be drastic. then it is also going to be included in the gross estate. OR in a creditor of the estate’s favor. if he fails to exercise the power of appointment and it passes by default to Z. etc). If the other joint owner is someone else.. he has made a gift to Z. in the estate’s favor. • (7) Annuities – If testator is receiving the payments during their lifetime.• • • To calculate estate tax – First figure out the gross estate. • (b) Trusts where you have retained something that causes it to be included in the gross estate (i. on the total. and then subtract all deductions (charitable. then it is included in the gross estate. • (3) Retained Property Interest – The following are included in a gross estate: the retention of an income interest.the WHOLE value of the house would be included in your gross estate when you die. b) Marital Deduction • This is UNLIMITED! Can give 100% of your estate to your spouse and there will be ZERO taxes. • Exception: Terminable Interests 44 . debts. marital. he has made a gift to X. income interest). Then. and expenses. the portion that the decedent paid for will be included in the gross estate. right to change the beneficiary. to know what the estate will be). in a creditor’s favor.taxable gifts [beyond 12K stuff…] during the decedent’s lifetime not included in gross estate). a) Property Included In Gross Estate • (1) Probate Property – Property that decedent owned in his individual name that can pass to another person • (2) Lifetime Gifts Made Within THREE Years of Death – ALL gifts are included in the gross estate if they are transferred in the last three years of life.e. • (6) Life Insurance – If the insured owns the policy on their own life. • Exceptions: • (a) Small transfers made in the last couple of years that are going to blossom into something larger later on (i.e. Then. If the insured has incidents of ownership (i. (also applies to pension plans). and funeral costs – all these deductions are due to policy considerations. • (5) Jointly Owned Property – If the other joint owner is your spouse…ONLY half will be included in the gross estate. However.

and if fails to survive me.• The marital deduction is NOT available for terminable interests. and at her death to distribute the principal to my children. When the wife later dies. SO if you give your spouse something less than the entire estate…would not be eligible for the marital deduction (i. In reality. survived by his wife and three adult children. • (2) Life Estate & General Powers of Appointment Trust – If a trust gives spouse ALL the income. What would be the result?  The children get it in equal shares. it qualifies for the marital deduction. Q-Tip trust pays taxes at the highest rate after considering the spouse’s other assets. She could disclaim half of it. and when spouse dies. And she can use her 12. Bad idea – gets taxed at 50%. H’s estate is then tax free. Gross would be 4M. unrestricted. taxable 2M (which is wiped out by unified credit).000 per year per donee gifting program to reduce her estate. Hypo 2: If the will says “I give my estate to my H. that trust is added on to her gross estate. we are taxing the second spouse for property that she only had an income interest in. • Hypo 1: H died with a net estate of $4. Who gets property?  we just presume that W did survive H. marital deduction 2M. Exceptions to the Exception: • (1) Q-Tip Trust – The idea behind this is that the property should only be taxed once in the two spouse’s estates.” and then H and W both die simultaneously in a car crash.  Good plan. • Hypo: Husband puts the money in a trust and directs that all of the income be paid to the spouse. the kids get. unrestricted for the rest of their lives AND allows them to appoint the remainder by will to anyone in the world. When the husband dies. What if (back to original questions. he has a 100% marital deduction for the property. any property that had been Qtipped in the first estate is going to be taxed in the second estate. to their children in equal shares. to my children. 45 .e.) HOWEVER…there are some exceptions to this terminable interest rule. where H has left everything W). Even if it boosts her into a higher bracket. including their estate. the taxes are taken out of the trust BUT are calculated as though they were added on as part of her estate. Wife is treated as predeceased.. Does it matter what the wife’s estate is worth?  Still avoiding the tax. I give my estate to my husband… but if he remarries. So. deferring taxes is almost always a good thing. goes to kids.000. or if she predeceased him. • NOTE: Here. Wastes 2m unified credit.000. and then her property goes to her kids. He had a simple will leaving everything to his wife. So. you put a clause in their will: to invade principal for her in the trustee’s discretion (and you name her sister trustee). The wife wants to renounce her share.

Pre-1977 – NO tax at the daughter’s generation. So. Both estates then have no tax.. • So how do we create a fund that is going to be large enough for taxes BUT won’t cause that fund to become part of the estate and incur more taxes? – Have to create an irrevocable life insurance trust. Decedent would let the trustee of the trust purchase life insurance in the amount he assumes the taxes will be. H gets ½ the estate and its not taxed because of the marital deduction and then the other ½ can be used by the wife’s unified credit to give to her kids. there will be a 50% tax on the principal of the trust. 1977 – generation skipping transfer tax was enacted. • c) Life Insurance • This may be created as a way of paying estate taxes. If you anticipate that you will have total taxes of 2 million. so that H gets ½ of W’s estate. The beneficiary of the life insurance would also be the trustee! After the decedent dies. c) Direct Skip  A gift from the grandmother directly to the grandson would be a taxable event at a tax rate of 50%.e. the fund would NOT be included in the gross estate because the decedent has no incidents of ownership (not payable to the estate). There are THREE triggering events: a) Taxable Termination  When income beneficiary dies (i. 46 • • • . • If there is enough liquidity in the estate…the executor would just use that to pay taxes and the trust would replace the liquidity. That way. HOWEVER. like H is poor and W has a lot of $$. b) Taxable Distribution  When the trustee has the authority to distribute to other generations. But if you have a situation where H and W have lopsided estates. 3) Generation Skipping Transfer Tax • Hypo: A grandmother sets up a trust to her daughter…giving her income for the rest of her life and remainder to her grandchildren. this is a taxable event at a tax rate of 50%. you really should write in the wife’s will that the husband is deemed to have survived her in the event of simultaneous deaths. the downside is that life insurance goes back to the estate to calculate the rate. When trustee gives to grandkids. when daughter dies. daughter). This kicks in at the top rates for estate and gift. and H can use his share to pass to kids with unified tax credit. could buy a 2 million dollar insurance policy.

• •

BUT the gift tax is also 50%. So the grandmother would be making a taxable gift AND invoking the 50% generation skipping tax. Would that use the whole thing up? – There is a generation skipping tax exemption of 1 million dollars. So both grandmother and grandfather could give a total of 2 million. Over and above that, the whole asset could possibly be wiped out.

• Powers of Appointment
• Possessing a general power of appointment can have BOTH estate and gift tax consequences. A general power will be included in the gross taxable estate. If you exercise the power of appointment in favor of someone else or just give it to someone else, you are making a gift. • Exception Hypo: Give a trustee a power of appointment over a 1 million dollar trust. Direct that the income be paid to hub for the rest of his life (50K). Also, give hub the right to take out 5% or 5K, whichever is greater…EXCEPT…he can only do this in a year or else it will lapse and remain in the trust. • This trust will NOT be included in the gross estate. By doing it this way, have succeeded in capturing the wife’s one million dollar deduction AND the husband’s one million dollar deduction. SUMMARY: If you want to give your spouse maximum benefits, you should give them income for life AND a 5 or 5 power. In addition, you can make the trustee someone friendly and give them the right to invade the principal for the spouse…can take out more money and give it to them.

• Stepped Up v. Carry-Over Basis
• • • Basis – The cost at which the property was acquired. The rest is “appreciation/gain” – We need basis in estate taxes. Gains are treated as income for estate purposes once the property is sold. On the other hand, any property included in her gross estate has its basis increased to the date of death value. When you sell property, the amount selling price exceeds basis results in income taxes. When you die, the property included in gross estate has its basis increased to the date of death value • Hypo: So if X buys a house for 5k, and when he dies house is worth 500K, the basis is 500K. If X’s wife sells the house for 500K, it is NOT taxed. If she sells it for 600K, then 100K is taxed.

TAX: APPORTIONMENT

EPTL § 2-1.8: Apportionment of Federal & State Estate Taxes
• Basic Rule • (1) Whenever there appears that a fiduciary may be required to pay an estate tax, • (2) under the laws of any state, • (3) with respect to any property required to be included in the gross tax estate, • (4) except if the • (a) testator otherwise specifically directs in the will, or 47

(b) he does so by any instrument other than will, which only affects the taxes for the funds in disposed of in at instrument • (5) the taxes shall be equitably apportioned among the persons benefited. • (6) The taxable property shall be valued at FMV at time of death or 6 months later. Temporary Interests • (1) Unless otherwise provided, • (2) when a disposition is made by which the person is given • (a) an interest in income • (b) an interest in an estate for years or life, or • (c) any other temporary interest, • (3) the tax apportionable against such temporary interest and remainder • (4) is chargeable against and payable out of the principal, • (5) without apportionment between such temporary rights and the remainder. Apportionment, Exemptions, and Deductions • (1) Unless otherwise provided, • (2) the tax shall be apportioned at the ratio of value of property :: total value of property received by all persons benefited. • (3) But, any exemption or deduction allowed by law (marital, annual, charitable) shall inure to the benefit of all persons benefited, • (4) and any deduction for property previously taxed/credited shall inure to the benefit of all persons benefited and the tax to be apportioned shall be the tax after allowance of such deduction or credit. Multiple Instruments • (1) Any direction as to apportionment, • (2) whether contained in a will or non-testamentary instrument, • (3) relates only to the property passing thereunder, • (4) unless such will or instrument provides otherwise. • (5) If it is later in time and contains a contrary direction, it shall govern provided that the later specifically refers to the direction in the prior. • (6) Non-Testamentary Instruments • (a) Any such direction provided in a non-testamentary instrument • (b) only relates to payment of tax from the property passing thereunder, and • (c) such direction shall not serve to exonerate such non-testamentary property, • (d) from the payment of its proportionate share of the tax, • (e) even if otherwise directed in that non-testamentary instrument. The Fiduciary’s Rights and Responsibilities • (1) Fiduciary is authorized to and shall recover from, persons benefited by any property that is not in the fiduciary’s possession, their ratable portion of the taxes. • Procedure: Fiduciary can write a letter and ask for that person’s share of taxes. If they don’t do this, there is a Surrogate Court proceeding. The Surrogate has broad discretion for getting this back. If fiduciary has possession of the fund… will just take the taxes out before distributing it. • (2) Fiduciary doesn’t have to distribute the estate until after taxes are paid or adequate security for such payment is furnished. 48

Fees • (1) The fiduciary can apportion an equitable share of expense in connection with the determination of apportionment in specific circumstances. • (2) Whenever an attorney renders services to do with litigation, the surrogate may assess against the property an equitable share of compensation for legal services. Q-Tip Trust • Although Q-tips to the spouse are not absolute interests, she may choose for the Q-tip to be eligible for the marital deduction. But, if she does this, the trust is treated as though it is part of her estate when she dies, and estate taxes will be deducted then. • So this statute says that the taxes due from Q tip trusts are to be paid from the Q tip trust itself. [CONFIRM] Placing Out of EPTL 2-1.8 • You can say that you want the taxes paid out of residuary instead. • Hypo 1: you give daughter a piece of raw property worth 5M & you give 5M residuary to son. If you say you want taxes paid from residuary, son probably wont get anything because taxes would eat up the residuary. • But, if you say “I want executor to pay all taxes, debts, and expenses as soon as possible,” that does not place you out of § 2-1.8. • Non-probate assets are generally taxable even though decedent did not really own them at death • Hypo 2: so if you say “I direct all taxes out of my residuary estate” that will NOT include the insurance because insurance does not pass through the will. So, whoever gets insurance still has to pay their fair share of taxes! • So, you have to say “I direct all taxes on property passing under the will OR otherwise to be taken out of residuary” and then even non-probate assets taxes will be included. • Be careful when directing taxes to be paid from residuary. • Hypo 3: I give my engagement ring to my daughter. I give my residuary estate to my husband. I direct that my estate taxes be paid out of the residuary. • You are allowed to say that husband pays estate tax, but you’re going to get marital deduction for husband, but you don’t know how much going to get because has to take estate taxes. Circular problem. The IRS gives a formula for this.

49

How Does This Statute Work? • Hypo 1: In his will, T gives his artwork, valued at $100m, to A, his books, valued at $400m, to B, $100m to the Nature Conservancy, and his residuary estate ($500m) to C. His estate taxes total $350m. How should the executor apportion them? • 100m to Conservancy is not taxable, so it is taken out. Total gross estate then 1B. 1:4:5 ratio. T – 1/10, A – 4/10, C – 5/10. • Hypo 2: In his will, T gives $100k to A, $200k to B, and residuary estate ($3m) to C. In 2004 T made a $300k revocable lifetime trust to pay income to himself for life, remainder to D and E in equal shares. In 2005, he deposited $400k in a bank account in his name in trust for E. Both lifetime transfers are includible in the gross estate. His estate taxes total $1m. How should the executor apportion them? • Ratio is 100:200:3000:150:550. 4m gross estate. A – 1/40, B – 2/40, C – 30/40, D – 1.5/40, E – 5.5/40. • Hypo 3: Read above as originally written, and assume that in the lifetime trust, T included an instruction that he wanted any estate taxes incurred by the trust to be paid out of his residuary estate. Is that effective? • No, not effective. The will can apportion taxes but the trust can only apportion taxes within the trust itself. • Hypo 4: In 1980, T made a lifetime trust (corpus $1m) to pay income to himself for life, remainder to A and B, and he directed that all estate taxes incurred by the trust be paid equally by A and B. In his 2007 will disposing of his $3m probate estate, he directed that all estate taxes be paid out his residuary estate. Do A and B have to bear the burden of the taxes incurred by the trust? • Yes – its not specific enough in the later instrument.

TRUSTS: EXPRESS PRIVATE TRUSTS
• Introduction
• Why Create a Trust? • Extremely flexible and impartial for property management • Convenient way to avoid probate • Taxes – irrevocable inter vivos trusts are taxed at the time you give the property away, not at time of death Restatement Definition: A trust is • (1) a fiduciary relationship with respect to property, • (2) arising as a result of a manifestation of an intention to create that relationship, and • (3) subjecting the person who holds title to the property to duties to deal with it, • (4) for the benefit of one or more persons, • (5) at least one of whom is not the sole trustee. • A trust may be a testamentary trust or a lifetime (inter vivos) trust • A trust may be revocable or irrevocable. • A trust that says nothing is irrevocable. Three Parties to the Trust 50

etc. that the IRA allows to be included in the marital deduction. fraud.• • The creator (grantor. • The trustee holds legal title but not beneficial title. the marital deduction is only for absolute gifts. this really isn’t a trust at all—it is a property interest analogous to the reversion retained by a grantor who conveys a legal interest in property for life without creating a remainder interest thereafter—it creates an equitable beneficial interest. • A trust won’t fail for lack of a trustee. X substituted another document. however. (3) The Q-Tip Trust • A trust created while one spouse is still alive. But court would then impress a constructive trust on the property and direct that it be paid to the intestate distributees. • Generally. a court will appoint one if there isn’t one • The beneficiaries – have an equitable interest in the trust property • At least one of the beneficiaries cannot be the trustee. • Court has given for remedy a constructive trust for failed joint will contracts. can admit it. is the exception to the rule. which carries with it the fiduciary duties with respect to property • The beneficiaries hold equitable title. but a remedy – the court’s answer to unjust enrichment in equity. (4) The Pour-Over Trust (Revocable Living Trust) • EPTL §3-3. which D tore into little pieces. Can D’s will be admitted to probate? • Yes. murderous heirs. which confers rights in personam to enforce those duties. A trust will fail for lack of a beneficiary. with the sole beneficiary being the other spouse. It gets taxed when the 2nd spouse dies. • Hypo 1: D validly executed a will and later directed X (a beneficiary under it) to bring the will to her so she could destroy it. Since testator didn’t revoke it. an income interest in a Q-tip trust. • Different Types of Express Trusts and “Trusts” • (1) The Constructive Trust • This is not a trust at all. testator (for testamentary trusts)) • The creator may name herself or somebody else as trustee • The creator may name himself as beneficiary • The trustee – the legal owner of the property. • Like the constructive trust. Division of Ownership • This division of ownership is at the very heart of trusts. (2) The Resulting Trust • This trust arises when an express trust fails or does not completely dispose of the trust property.7: Pour-Over Trusts • • • 51 . holds title to it. settler. Unbeknownst to D.

• (b) the trust instrument or any amendment thereto was not executed with the formalities of a will (under §3-2. • (2) the terms of which are evidenced by • (a) a written instrument • (b) executed by testator • (c) in manner provided for under §7-1. • You don’t want to fund the trust with more than the unified credit because then it will be taxed in your wife’s estate • 52 . • But. • “I give everything I own at the time of my death to my trustee for my revocable living trust” or something like that in the will. unless the creator is the sole trustee. • (d) prior to or contemporaneously with the execution of the will and • (3) such trust instrument is identified in such will. (7) The “Credit Shelter” Trust • Trust gives the trustee amount equal to unified credit and prevents that amount from being included in wife’s estate when she died.17 • 7-1. • Benefits to Pour Over Trusts • (1) At point of death. irrevocable is the default when making an inter vivos trust – you have to expressly state that the trust is revocable to make it so! (6) The Testamentary Trust • A trust established in a will. only those amendments up until the testators death will be given effect unless the testator expressly states that she wants postdeath amendments to take effect. or executed in the presence of 2 witnesses and signed by them. and its tax free in testator’s estate because he is also using the credit. can add amendments to trust after trust was enacted (and even can have post-death amendments) and still be a valid trust.• • • (1) A testator may dispose of or appoint all or any part of his estate to a trustee of a trust. because probate proceedings very extensive and may not even know who relatives are. no stopping of probate. executed and acknowledged by initial creator and.1) • (5) A revocation or termination of the trust before the death of the testator shall cause the disposition or appointment to fail.17: in writing. unless the testator has made an alternative disposition. and only upon the death of the testator. (5) The Irrevocable Living Trust • Remember in NY. by at least 1 trustee. in the manner required for a real property sale. • (4) The testamentary disposition or appointment is valid even though: • (a) the trust instrument is amendable or revocable or both • So. immediately becomes effective • Good housekeeping function • (2) Avoid filing fee • (3) Very valuable when closest relative are cousins back in the old country.

a charitable trust is principally enforced by the state attorney general. or • (c) To the extent it is or becomes wasteful to apply all the property to the designated purpose. and intent to create a trust. however. the trust must have a purpose that is beneficial to the community. • NY Requirements • (1) Restatement above. • Charities get special tax emeptions. where property is place in trust to be applied to a charitable purpose and it is or becomes • (a) Unlawful. • Generally. 53 . • Lacking definite beneficiaries. no need even for a trustee. • It does not require. or subject to legal process. the court will substitute itself as trustee.5: The proceeds of a life insurance policy. • (2) the charitable trust will not fail but the court will direct application of the property or appropriate portion thereof to a charitable purpose that reasonably approximates the designated purpose. may not be transferred. • Allows a trust instrument to be incorporated by reference in a will • [we only had to skim this statute] • The Cy-Pres Doctrine • Restatement § 67: Failure of Designated Charitable Purpose • (1) Unless the terms of the trust provide otherwise. In NY. a trust corpus. • EPTL § 8-1. • (b) Impossible or impracticable to carry out that purpose. upon the insured’s death. • Trustee has legal title to corpus. in order to be a charitable trust. (9) Charitable Trusts • Introduction • A charitable trust requires a fiduciary relationship with respect to the property.• • (8) The Life Insurance Trust • The trustee becomes the beneficiary of the life insurance • Now its not included in the gross tax estate • EPTL § 7-1. definite beneficiaries or compliance with the rule of perpetuities. plus • (2) T’s Intent: • (a) Specific charitable intent  NO Cy Pres • (b) General charitable intent  YES apply Cy Pres • Elements of a Trust • (1) Trust Res/Corpus/Principal • The property put into trust. subject to encumbrance.1: Disposition of property for charitable purposes • Same requirements as above. under trust or other agreement.

• (2) the trust estate does not pass to his rep/distributees/devisees. • (a) including but not limited to the creator of the trust.1: When trust interests not to merge • (1) A trust is not merged/invalid because 1 person. subject to following: • (a) successor trustee hall give security as court may direct • (b) a successor trustee shall be subject to the same duties as imposed by law on trustees. • (4) if the trust has finished. • (2) is or may become the sole trustee and the sole holder of the present beneficial interest therein. • (6) and the trust executed by a person appointed by court. • (3) but. etc.• Beneficiaries have various equitable interests in the trust • Examples: life estate interest. • (a) whether such interest be • vested or contingent. • Unless: • Unfit because of drunkenness or improvidence. in absence of contrary direction by creator. • (3) provided that 1+ other persons hold a beneficial interest therein. income interest. • EPTL § 7-1. • EPTL § 7-2. • Notice for continuation • (1) Upon notice to beneficiaries • (2) the court may direct • (3) upon application for successor trustee. or • Clueless as to what it means to be a fiduciary. • (5) the court may appoint a successive trustee • (6) whenever in the court’s opinion • (7) such appointment is necessary for effective administration and distribution of the trust estate. • present or future. • The only property that is considered in trust is that which is transferred to the trust. and • (c) gets reasonable administration expenses plus such commissions as may be fixed by court not exceedable by law. • (5) the trust estate vests in the court. (2) Trustee • In General • A trustee must be an honest adult. as the case may be. • 54 . • (b) and whether created • by express provision of the instrument or • as a result of reversion to the creator’s estate. but not a non-domiciliary alien. • (4) unless creator has directed otherwise.3: Trust estate not to descend on death of trustee • Vests in the court • (1) On the death of the sole surviving trustee of an express trust. remainder interest.

• Inquiry  imposing legally enforceable duties or requiring a moral obligation? • Factors • (1) specific terms and overall tenor of words used • Colton (SC) – a request to widow legatee with no implied alternative = command • (2) (in)definiteness of property involved • (3) ease/difficulty of ascertaining possible beneficiaries and interests • (4) interests/motives and nature/degree of concerns that reasonably influenced transferor • (5) financial situation and expectations of parties • (6) transferor’s prior conduct/statements/relationships • (7) personal/fiduciary relationship between transferor and transferee (4) Identifiable Beneficiaries • Must be Ascertainable • A trust is not created. • Must be Intentional • A person is a beneficiary of a trust if the settler manifests an intention to give the person a beneficial interest • A person who merely benefits incidentally from the performance of the trust is not a beneficiary 55 .• • • EPTL § 7-2. see below in formalities) • In General • A trust is created only if the settler properly manifests an intention to create a trust relationship: • (1) property arrangement • (2) requiring a corpus • (3) with ownership divided into its legal and equitable portions • Intention can manifest itself through actual transfer or language of transfer. the supreme court has the power • (a) on application of a trustee. unless the terms of the trust provide a beneficiary who is ascertainable at the time or who may later become ascertainable within the period and terms of the rule against perpetuities. • A valid trust can be created that includes unborn children or issue.6: Resignation of Trustee • (1) Subject to the relevant provisions of law. or if created will not continue. • A trust can be created without notice to or acceptance by any beneficiary or trustee. the intention to create a trust is lacking and no trust is created. • Precatory Language • Unless the testator or other transferor manifests an intention to impose enforceable duties on the transferee. to accept his resignation and to discharge him on such terms as it deems proper (3) Specific Trust Intent (for NY.

• How Does This Work? • Hypo 1: Income to A for life. • Hypo 2: Income to A for life. In this case. • EPTL § 7-1. (B) Funding of a Trust • EPTL § 7-1. • (a) A transfer is not accomplished by recital of assignment. (C) Execution of a Trust • EPTL § 7-1.17: Execution . transfer shall mean • (i) For assets capable of registration  the recording of the deed or completion of registration in name of trust or trustee. .18: Funding of a Lifetime Trust • (1) A lifetime trust shall be valid as to any assets therein to the extent the assets have been transferred to the trust. • Formalities of a Trust • (A) In General • EPTL § 1-2. and • (b) by at least 1 trustee (unless creator is sole trustee) • (3) and either 56 • • . or receipt in the trust instrument. • Discretionary powers of appointment are almost always valid.15: What Property May be Disposed of by Lifetime Trust • Any estate in property. holding. • Mandatory power of appointment are not usually valid and the test for validity here is much more stringent than in discretionary. • (ii) For other assets  a written assignment describing the asset with particularity. as long as they are 18 years or older.14: Who May Make a Lifetime Trust • Any person may by lifetime trust dispose of real and personal property. • EPTL § 7-1. • (2) executed and acknowledged by • (a) the initial creator. the trustee’s power is too indefinite. . • Hypo 3: Income to A for life. • This is invalid. remainder in corpus to my (G’s) friends. remainder in corpus to such of my (G’s) friends as A shall select. and • (b) in case of a trust where creator is the sole trustee. remainder in corpus to such of my (G’s) friends as the trustee shall select.20: Lifetime Trust • Lifetime trust means an express trust and all amendments thereto created by other than a will. It is valid unless the group of permissible appointees (G’s friends) is so indefinite that it is impossible to identify any person who the donor intended should be permissible appointees of power. of Lifetime Trusts • (1) Every lifetime trust shall be in writing.

9: Revocation of [Irrevocable] Trusts • (1) Upon written consent.• • (a) in manner required by laws of state for recording a real estate sale.7: Amendment/Revocation of Lifetime Trusts • (1) Any amendment/revocation • (2) authorized by the trust • (3) shall be in writing and executed by the authorized person. • (8) For the purposes of this section. 57 . and her grandchildren are 20 and 22. • (7) If the trust instrument was recorded. 14 and 16 considered minors who cannot consent. • EPTL §7-1.” or “distributees” of the creator does not create a beneficial interest. remainder to her children. • (8) No trustee shall be liable for any act reasonably taken in reliance of the old trust instrument prior to notice of amendment/revocation. • (2) acknowledged/proved in a manner required for recording a real estate sale.” “next of kin. remainder to her grandchildren. which specifically refers to such lifetime trust or a particular provision thereof. • EPTL § 7-1. • (2) In addition to the method set forth below. the revocation/amendment and consents must also be recorded. • How Does This Statute Work? • Hypo 1: Grantor made a trust to pay income to herself for life. or • (b) executed in presence of and signed by 2 witnesses (D) Amendment/Revocation • EPTL § 7-1. • In accordance with laws of state for recording of conveyance of real property.16: Revocation of Lifetime Trust by Will • (1) A lifetime trust shall be irrevocable unless it expressly provides that it is revocable. Her children are 14 and 16. • (5) shall be witnessed and acknowledged same as required in execution. a disposition to “heirs. a revocable lifetime trust can be revoked or amended by express direction in the creator’s will. • Hypo 2: Grantor made a trust to pay income to her children for life. • Excludes possible unborn beneficiaries • (4) the creator of such trust may revoke or amend the whole or any part • (5) by an instrument in writing acknowledged or proved in a like manner • (6) thereupon the estate of the trustees ceases. Her children are 60 and 62. • (7) Written notice must be delivered to at least 1 other trustee within a reasonable time • (a) Failure to do so won’t effect the validity of the amendment/revocation. and • (4) except as provided in the government instrument. and • (6) shall take effect on the date of execution. • (3) of all the persons (present and future) beneficially interested in the trust property.

remainder to her grandchildren. no need to get consent from aunt or any other intestate distributees. income to her husband for life. • In a charitable situation. and her only other relative is her sister. we look at the cy pres doctrine (see above) 58 . to such beneficiaries in the proportions that their respective interests in such principal bear to the aggregate. remainder half to her sister S and half to the New York City Opera. S survived her but predeceased the husband. •How Does This Work? • Hypo 1: D died yesterday. • (b) if there are 2+ beneficiaries. Her will left her residuary estate in trust. • (2) whether • (a) outright. • Get consent from children and grandchildren. • (3) to 2+ designated beneficiaries. and the Remainderman Gets Paid • (3) When the Purpose of the Trust Has Been Fulfilled • Note: if the T had not said what occurs after the purpose has been fulfilled. • (2) When the Income Beneficiary Dies. and • (4) such a remainder is ineffective in part and • (5) no alternative disposition has been made in the governing instrument. the issue split S’s share equally because the remainder interest vested in the sister. Hypo 3: Grantor made a trust to pay income to her children for life. • Hypo 2: D died yesterday. S was survived by issue. and NY City Opera get the full remainder. income to her husband for life. Her will left her residuary estate in trust. • (E) Ineffective Dispositions in Trusts • EPTL § 2-1. and if none survived. then it would go back to the T's estate. S was survived by issue.14: Consequences of Partly Ineffective Dispositions of Trust • (1) Whenever the remainder of a lifetime or testamentary trust passes.• • Need all their consent. remainder half to her sister S if she were alive at the death of the husband. • S’s share was ineffective because of the condition. remainder to her intestate distributees. • (6) such ineffective part shall pass • (a) to the other designated beneficiary or. • Now. • (F) Potential Ways to Terminate a Trust • (1) When the Trust Money Runs Out • The trust ceases to exist when the corpus is depleted to nothing. Her children are 60 and 62. S survived her but predeceased the husband. Husband maintains his income for life. or • (b) in further trust. and half to the New York City Opera. her grandchildren are 22 and 24.

• The question is one of distribution of power. and conflict arises in the context of the three types of trusts listed below. and any attempted attachment of a beneficiary’s interest by the beneficiary’s creditors.• • • • (4) When the Purpose of the Trust is Frustrated • T makes a trust to pay her son's rent in his apartment for the rest of his life.17 on revocation via trust instrument. The trust terminates.9 on revocation with beneficiaries’ consent. The son buys a house and moves out of the apartment. • In the absence of a valid restraint on alienation. • American Rule: A beneficiary of a trust cannot compel premature modification or termination unless: • (a) All beneficiaries consent. in whole or part. • Restraining Alienability of Beneficial Interests • Overview • Once a trust has been properly formed. (6) According to the Trust Instrument • See above for NY rule § 7-1. (5) When All Beneficiaries Consent • See above for NY rule § 7-1. • NY– most trusts are automatically made into spendthrift trusts (see below) • (2) Discretionary Trusts • A trust that contains a provision giving the trustee discretion to pay to or apply for the benefit of the beneficiary only so much of the income or principal or either as the trustee sees fit 59 • . (7) According to the Testator’s Will • See above for NY rule § 7-1. and • (b) Premature termination will not defeat a material purpose of the trust • (i) Postpone enjoyment (Clafin) • (ii) Spendthrift. • Disabling restraint: one that purposes to nullify any attempted assignment/transfer by a beneficiary of his/her equitable interest. should the law ensure that it will continue. • Don’t forget the rule against alienation in an analysis here. or should the law enable the beneficiaries to undo the trust against the wises of the grantor? • Balance 2 competing interests: • (1) The freedom to dispose property into a trust as he wishes. and • (2) The rights of the beneficiaries and their creditors. Overview on the Types of Trusts • (1) Spendthrift Trusts • A trust that contains a provision imposing a disabling restrain of the alienation of the beneficiaries’ equitable interests.16 on revocation via will. the trust is freely transferable and alienable. and support trusts • (iii) Allow trustee to sprinkle income among beneficiaries • (iv) Etc. discretionary. It is very easy to find a material purpose.

• When the transferee dies. except that: • (1) The right of a beneficiary in an express trust to receive the income from property and apply it to the use or pay it to any person • (2) may not be transferred by assignment or otherwise • (3) unless a power to transfer such right. or any part thereof. • Exception 1 • (1) The right of a beneficiary in an express trust to receive the income from property and apply it to the use or pay it to any person • (2) may. etc • (4) if such transfer is evidenced by • (a) a written instrument signed and acknowledged by the beneficiary • (b) delivered to trustee. • So all trusts are alienable except income trusts. • (5) Any such transfer shall be effective in any year only. HELD: The court held that the T’s intent in keeping the property inalienable prevails. unless otherwise stated in the trust instrument. exceptions • The interest of the beneficiary of any trust may be assigned or otherwise transferred. transferees shall be preferred in delivery order. • (7) A beneficiary is not precluded from anything in this section from transferring or assigning his interest to or for the benefit of persons whom the beneficiary is legally obligated to support. • (c) with an affidavit stating that transfer is not for consideration.1: Disposition in trust for creator void as against creditors 60 .5: When trust interest inalienable. Thus. • (6) A transferee may further transfer his interest without consideration to any of the permissible beneficiaries listed above. issue. • EPTL § 7-3. any income not so transferred by him shall be an asset in his estate. guardian. Son assigned his interest in a series of transactions. • (3) transfer any amount in excess of 10k of the annual income to • (a) spouse. • (b) a trustee. and the total amount exceeds the yearly income from the trust. the creditors to whom the son had assigned his interest could not get the money.• • (3) Support Trusts • A trust that contains a provision directing the trustee to pay to or apply for the benefit of the beneficiary so much of the income and principal or either as is necessary for the beneficiary’s education and support NY Alienability and Creditors’ Rights Statutes • EPTL § 7-1. and if there is more than one such transfer. or 1st degree relatives. is conferred upon such beneficiary in the trust instrument. • Exception 2 • Matter of Vought – There was an express provision in the trust NOT allowing the alienability of the remainder interest.

EPTL § 7-1. • Hypo: For example. • Remainder interest is alienable UNLESS you make it inalienable. G’s creditor’s can reach the income interest and principal. remainder to X. If future creditors. • CPLR § 5205  A creditor can levy against 10% of the trust income even if it is needed for the beneficiary’s support and education. • Sum: All interests are alienable except for income interest beneficiaries and except if T provides otherwise. • (b) Supplemental needs trust – a discretionary trust established for the benefit of a person described above. than can only attack the income? • EPTL § 7-3. gov’t benefits for which the beneficiary may otherwise be eligible/receiving • 61 . which conforms to the following: • (A) The trust document clearly evinces the creator’s intent to supplement. • An interest under a discretionary trust is inalienable. developmental disability. and who may need to rely on gov’t services. The Merger of the Discretionary and Support Trusts at Common Law • There is now a single standard for discretionary and support trusts in the Restatement the support trust is a discretionary trust with a support standard • Restatement § 50 • A discretionary power of a trustee to determine the benefits to be paid to a beneficiary is subject to judicial control only to prevent • (1) misinterpretation or • (2) abuse of discretion • What may constitute abuse depends on the terms of the discretion and the grantor’s purposes in granting the power and creating the trust. since the beneficiary’s interest is viewed as mere expectancy. and • (2) no valid direction for accumulation is given. • (3) the income in excess of the sum necessary for the education and support of the beneficiary • (4) is subject to the claims of his creditors in the same manner as other property which cannot be reached by execution.4: Excess income from trust property subject to creditor’s claims • (1) Where a trust is created to receive the income from property. • Income interest is inalienable UNLESS you make it alienable. or other physical or mental impairment whose disability will or does give rise to a long-term need for specialized services.• • (a) A disposition in trust for the use of the creator is void as against existing or subsequent creditors of the creator. G creates an irrevocable trust.12: Supplemental needs trusts established for persons with severe and chronic or persistent disabilities • (1) Definitions • (a) Person with severe and chronic or persistent disability – a person with mental illness. not supplant/diminish. income to G for life.

. on the beneficiary’s gov’t benefits. if any. • Restatement §66: Unanticipated Circumstances 62 • . shelter. grandparent. • (E) The beneficiary may be the creator if meets the requirements of Social Services Law 366(b)(2): • (i) disabled person must be under 65 • (ii) the trust created by parent. or court. • (iii) upon the disabled person’s death. • (C) The beneficiary cannot alienate the trust property • (D) If inter vivos trust. the term is void. • (c) If trust provides trustee authority referenced above in (1)(b)(B). • Equitable deviation doctrine • The court still might modify or terminate the trust because of circumstances not foreseen by grantor (not in the trust instrument). and its mere existence would result in gov’t benefit disqualification. they also have a right to compel modification of the trust’s provisions. guardian. • In addition. and he has no time to get court approval before deviating. the trustee may deviate from the trust terms without prior court approval if he reasonably believes there is an emergency. by invading the principal.” • • Modification of Trusts • Overview • If trust beneficiaries have right to compel termination. giving money outright to the beneficiary would disqualify them. In addition. provided that the trustee may be authorized to make such distributions as necessary for food. or • (B) the trust will no longer be treated as a supplemental needs trust (3) Actual Language: “the grantor’s intent to create a supplemental needs trust . or health care but only if the trustee determines: • (i) that the beneficiary’s basic needs will be better met with distribution and • (ii) that it is in the beneficiary’s best interest to suffer the consequential effect. then • (A) if trust instrument provides.• • (B) The trust document prohibits the trustee from giving out the trust assets in any way which might supplant/diminish gov’t benefits. clothing. the creator is someone other than the beneficiary or the beneficiary’s spouse. the gov’t is repaid for the amount that the disabled received as benefits (2) Presumptions and Guidelines • (a) It shall be presumed that creator intended that neither principal or income be used to pay for any expense paid by gov’t benefits • (b) Neither principal nor income shall be deemed available for the beneficiary. Distributive Deviations • In General • A beneficiary may seek to accelerate or increase his right to income or principal beyond what is granted by the terms of the trust. .

• The court may modify an administrative or distributive provision of a trust. Shares of the stock fell so low that the trust beneficiaries wanted to sell the stock even though the trust said “never to sell. administrative deviations occur when circumstances that the grantor did not anticipate produce an exigency or emergency. which would defeat or substantially impair the trust purposes. • (2) unless otherwise provided in the disposing instrument. is satisfied that • (a) the original purpose of the creator cannot be carried out. • (7) If such income beneficiary is becomes entitled to a share of the principal. • (8) This section does not apply of its application or possibility of its application would reduce or eliminate any charitable deduction otherwise available. Administrative Deviations • Overview • The most common court-approved administrative deviations usually involve the power of trustees to sell or invest trust assets. • Trusts: Fiduciaries • Fiduciary Duties of Trustees • Overview • Why Hold Trustee as a Fiduciary? • Because the trustee will not bear the direct consesquences of its decisions concerning how to manage the trust estate. or direct the trustee to deviate from such a provision.” • Held: The court allowed the emergency sale to protect the beneficiaries from serious loss or destruction of the substantial assets in the corpus (the stock). • EPTL § 7-1. and • (b) such allowance effectuates the intention of the creator. • (6) provided that the court. • Again. such allowance as given above will be charged against the income beneficiary’s share of the principal. after a hearing on notice to all beneficially interested. has no immediate incentive to exercise its managerial authority carefully and in the best interests of the beneficiaries. • (5) whether or not such person is entitled to the principal or any part.6: Application of Principal to Income Beneficiary (post 1996) • (1) If express trust is an income beneficiary trust. • Matter of Pulitzer (NY) A trust was funded with shares of stock in a newspaper company. the modification or deviation with further the purposes of the trust • If trustee knows or should know of circumstances that justify judicial action above. 63 . then the trustee has duty to petition court. if because of circumstances not anticipated by grantor. • (3) the court may in its discretion make an allowance from principal to income beneficiary • (4) whose support or education is not sufficiently provided for.

but the punctilio of an honor the most sensitive is then the standard of behavior. . 64 . • (3) Administer the trust or estate • Trustees: Make the property productive with due regard to income beneficiary and remaindermen. • (3) conferred upon 3+ fiduciaries. or • (b) a dissenting fiduciary who joins in carrying out majority’s decision as long as dissent is expressed promptly in writing • (2) shall not be liable for consequences of majority decision • (3) provided that liability for failure to join in administering estate/trust to prevent breach of trust may not this be avoided. Keep a log. unbending and inveterate.“A trustee is held to something stricter than the morals of the marketplace. Uncompromising rigidity has been the attitudes of courts of equity when petitioned to undermine the rule of undivided loyalty .” • The fiduciary must act solely in the interest of the beneficiary. You must repay any profits you made. . . • Self Dealing (NY) • There is no further inquiry once the court finds that the person has self-dealt.• • • Most important duties  loyalty and prudence Multiple Fiduciaries • EPTL § 10-10. . • (b) a majority of surviving fiduciaries. • (3) unless contrary to express terms of instrument. or • (c) the sole surviving fiduciary • 2 Fiduciaries • (1) Such a power conferred on 2 appointed/surviving fiduciaries • (2) may be exercised jointly. • Executors: Marshal and protect assets. • Failure to Act and Dissent • (1) A fiduciary • (a) who fails to act through absence/disability. • (4) Keep accounts. • (2) a joint power other than power of appointment. • (4) may be exercised by • (a) a majority of such fiduciaries. Not honesty alone. render accounts • Must keep accounts of what money comes in and goes out. Duties of the Fiduciary • (1) Maintain a high standard of loyalty toward the beneficiaries • Meinhart . . A conflict of interest is potentially harmful to beneficiary but is allowed in certain circumstances. As to this there has developed a tradition that is .7: Exercise of powers by multiple fiduciaries (trustees) • 3+ Fiduciaries • (1) Unless contrary to express provisions of instrument. make distributions.

allocation. and prudence • (b) The power to make a binding and conclusive fixation of the value of any asset for purposes of distribution.3: The Prudence Investor Rule • Prudent Investor Rule • (1) A trustee has a duty to invest and manage property held in a fiduciary capacity • (2) in accordance with a prudent investor standard. not elimination • Modification can occur through an exculpatory clause. [doesn’t apply to lifetime trusts] • (2) of any of the following powers or immunities. or otherwise. or intentional or willful neglect • EPTL § 11-1.• • Also must render accounts – a formal document of an accounting – what you received and paid out. as far as possible): • (a) The exoneration of such fiduciary from liability for failure to exercise reasonable care. and beneficiaries have a chance to look it over and bring objections. skill.7: Limitations on Powers & Immunities of Executors & Trustees • (1) The attempted grant to an executor (will) or testamentary trustee. which are generally not permitted to immunize the trustee from bad faith. • (5) Hold trust or estate property earmarked (no commingling) • (6) Perform (don’t delegate) duties • (7) Exercise reasonable care and skill • (8) Enforce claims Attempted Exculpation of Duties • Although the fiduciary duties are mostly by default. will be excised rendering the remaining terms effective. Trustee may be surcharged for what they did wrong. • (3) except as otherwise provided by the express terms of instrument • Prudent Investor Standard Generally • (1) The rule requires a standard of conduct. or successor of either. • (a) taking into account purposes. reckless indifference. • (3) is against public policy and void (and in a will. • (4) Any interested person may contest the validity of any purported grant of power of immunity without affecting adversely his interest in the estate or trust (unless otherwise stated in the instrument). and provisions of instrument • Prudent Investor Standard Requires Trustee to: 65 • . and caution to make and implement investment/management decisions as a prudent investor would for entire portfolio. the grantor cannot be allowed to waive all of the duties  duties such as loyalty and prudence may be subject to grantor modification. terms. not outcome or performance • (a) Compliance is determined in light of all facts and circumstances • (2) Trustee is not liable to the extent that trustee acted • (a) in substantial compliance with prudent investor standard or • (b) in reasonable reliance on express terms if instrument • (3) Trustee shall exercise reasonable care. EPTL § 11-2. diligence.

extent to which an asset is used by beneficiary. and • (a) But. and • (c) terms of trust in relation to principal invasion. general economic conditions. in accordance with risk and return objectives reasonably suited to entire portfolio. the assets. • (2) to consider size of portfolio. Trustee’s Power to Adjust • (1) Where the rules of the Principal and Income Act apply and • (2) the terms of the trust describe the amount that may or must be distributed to beneficiary by referring to trust’s income. and an asset’s special value to beneficiaries. income and resources of any beneficiaries. • (3) delegate investment and management functions. • (3) the prudent investor standard also authorizes the trustee to adjust between principal and income • (4) to extent advisable to make appropriate present and future distributions • (5) if trustee determines that such adjustment would be fair and reasonable to all beneficiaries. whether asset purchased by trustee or received from grantor. etc. duration of fiduciary relationship. needs of beneficiaries. • (b) net amount allocated to income under Principal and Income Act and the increase or decrease in value of principal assets. and controlling the overall cost by reason of delegation. tax consequences. • (3) to diversify assets. skill. • (b) And. and how often the trustee has done it before • (8) A trustee may not make adjustment: [summary] • (a) that diminishes income interest in a trust that requires all income to be paid at least annually to spouse and for which marital deduction is claimed • (b) reduces actuarial value of income interest in trust to which person transfers property with intent to qualify for gift tax exclusion • 66 . whether to retain/dispose of initial assets. expected total return. Prudent Investor Standard Authorizes Trustee to: • (1) to invest in any type of investment. if reasonable. trustee must exercise care. and trustee’s skills. a trustee may consider the following extra factors: • (a) grantor’s intent. assets of the trust. delegee has duty to trustee and trust • (4) to incur appropriate and reasonable costs. liquidity and distribution needs of instrument. • (2) to consider related trusts. • (7) Factors: In deciding whether to exercise above and to what extent. and caution in picking the delegee.. • (4) within reasonable time after creation of fiduciary relationship. establishing the scope if his delegation. periodically reviewing him. as measured against instrument’s terms. • (6) so that current beneficiaries may be given such use of trust property as consistent with preservation of its value.• • (1) pursue overall investment strategy to enable hi to make appropriate distributions.

• Don’t have the division between what is income and what is principal and is allowed whether the trust assets earned 4% or not. he can treat the trust as a unitrust under a new EPTL § 112.• • (c) changes amount payable to beneficiary as a fixed annuity of trust’s value (d) from any amount that is permanently set aside for charitable purposes (e) if benefits the trustee • (9) Terms of trust that limit power to adjust are not contrary to this section unless its clear that terms are intended to deny trustee power of adjustment • Special Investment Skills • Standard changes to “exercise such diligence .1: Powers of Trustees • As usual. . It is like you are creating a fake income stream. as would customarily be exercised by prudent investor of discretion and intelligence having special investment skills. he can make equitable adjustments between income and principal. • Accept additions to an estate • Acquire an remaining interest in jointly held property • • • 67 .4 and pay out 4% of its value annually to the income beneficiary (regardless of the actual income earned by the trust assets). This statute is for when the powers are not conferred.” Principal and Income • Ways to Think about Income • (1) taxable income • (2) Income as compared with remainder – actuarial division of the trust between or among classes of beneficiaries. EPTL § 11-1. • (3) Income as compared with principal – what the trust earns – trust accounting income – this is our topic • Principal and Income Act (EPTL 11-A) • Defines • Income as money or property that a fiduciary receives as current return from a principal asset.3-A: Judicial control with respect to fiduciary’s power to adjust • A court will not overrule a trustee’s decision to exercise or not to exercise an adjustment power unless it finds that he has abused his discretion. • (2) Alternatively. go to the instrument first to see what powers are conferred. • To the extent that the abuse of discretion results in no distribution (or too small a one). the court will order a distribution from the trust. • EPTL § 11-2. and • Principal as property held in trust for distribution to a remainder beneficiary when the trust terminates • But it gives the fiduciary two options: • (1) If the trustee opts to administer the trust under the Principal and Income Act. • This solves problem of how to engage in risky investments with the assets but still give the income beneficiaries what they need/deserve. .

Overview of Types of Future Interests • In the Grantor • (1) Reversion • (2) Possibility of Reverter • (3) Right of Reentry/Reacquisition • In Someone Else • (1) Vested Remainder • (2) Contingent Remainder • (3) Executory Interest • This is subsumed in NY into contingent remainder Estates in Favor of the Grantor • (1) EPTL § 6-4. • (2) either • (a) without the intervention of a precedent estate. One thing an executor CANNOT do is borrow money.• Keep or acquire insurance Invest Take possession or sell property (they do have legal title) Can lease property (executor can lease for 3 yrs. trustee can lease for 10 yrs) Can mortgage property if it needs liquidity Make repairs Grant options for the sale of property Foreclose on properties Can deal with stocks and assets through accounts instead of certificates To contest or compromise or settle claims in favor of estate or in favor of third party claims against estate – so you don’t have to go to ct unless a child is involved • To make distributions in cash or in kind. 68 • • . or • (b) on the determination.4: Reversion • (1) A future estate.3: Definition of Remainder • Same as above but created in favor of a person other than the creator. by lapse of time or otherwise. of a precedent estate created at the same time. • • • • • • • • • • Rule Against Perpetuities • Future Interests • EPTL § 6-4.2: Definition of a Future Estate • (1) A future estate limited to commence in possession at a future time. • EPTL § 6-4. • (3) left in the creator • (4) upon the simultaneous creation of one or more lesser estates than the creator originally owned. • (2) other than possibility of reverter and a right of reacquisition.

or • (2) An estate created in favor of 1+ presently ascertainable persons upon occurrence of an uncertain event. • (2) which would become an estate in possession upon the expiration of the preceding estates. • The grantor needs to exercise this right.10: Subject to a Condition Precedent (Non-Vested Interest) • (1) An estate created in favor of 1+ unborn or unascertained persons.” Estates in Favor of Someone Else (Remainders) • (1) EPTL § 6-4. before. • Most common: survivorship or age contingency 69 .” “until. • (3) EPTL § 6-4. “for as long as. or after the expiration of such preceding estates.” “while. and • (3) which can in no way be defeated or abridged.• • (2) EPTL § 6-4. • Types of Present Interests [CONFIRM] • (1) With a condition subsequent • (2) With a limitation • (4) EPTL § 6-4. • (2) which is certain when created to become an estate in possession whenever and however the preceding estates end.” It is words that denote time. but • (3) may end or be terminated • (a) as provided by the creator • (b) at. • (2) 1+ of whom are ascertained and in being. • (3) EPTL § 6-4. • (3) which is certain when created to become an estate in possession whenever and however the preceding estates end. • For example.7: Indefeasibly Vested • (1) An estate created in favor of 1+ ascertained persons in being.5: Possibility of Reverter • (1) A future estate left in the creator • (2) upon the simultaneous creation of an estate • (3) that will terminate automatically • (4) within a period of time defined by the occurrence of a specified event.8: Vested Subject to Open • (1) An estate created in favor of a class of persons.6: Right of Reacquisition • (1) A future estate left in the creator • (2) upon the simultaneous creation of an estate • (3) on a condition subsequent. Key language: “but if. • (2) EPTL § 6-4.9: Vested Subject to Complete Defeasance • (1) An estate created in favor of 1+ ascertained persons in being.” “during such time as. and • (4) is subject to diminution by reason of another person becoming entitled to share therein.

•A has life estate. •Hypo 4: G gives property to A for life. income to A. •Hypo 3: G gives property to A for life. 2nd – must reach the age of 30. A has no children who have reached 30. G has reversion if NONE of the conditions are met. If Z returns to town. • A has life estate. • Children – Vested remainder interest subject to open. remainder to T’s son-in-law. T’s son in law has vested remainder subject to complete defeasance. remainder to A’s children. A has no children at the time of transfer. remainder to A’s children. • Y has vested remainder subject to complete defeasance. Born children have vested remainder interest subject to open. •A has a life estate. A’s children: contingent remainder interests subject to TWO conditions precedent: 1st – must be born. •A has life or present interest that is inalienable. his estate gets it. B has contingent remainder interest subject to a condition precedent. •G has life estate. remainder to A’s children who reach the age of 30. • Hypo 9: In his will. remainder to T’s daughter. remainder to Y.•How Does This Work? •Hypo 1: G puts property in trust. then remainder to B. A's unborn children have a contingent remainder interest subject to a condition precedent (that is. Z has contingent remainder subject to a condition precedent – this is the classic common law executory interest. G has right to reverter. then what is left is the reversion. • Hypo 8: Same as above but A had children who have reached 30. G has reversion. 70 . remainder to Z. • W has life estate. Y will lose the property. • Hypo 10: Same as above but now assume that T’s daughter predeceased T and that she was still married at her death. •A has life estate. • Hypo 7: G gives property to A for life. •Hypo 6: G gives property to A for life. This is always valid under the rule of perpetuities. B has indefeasibly vested remainder. but if Z should return to town. If you haven’t given away 100% of the estate. G has a reversion. •A has life estate. Unborn children have contingent remainder interest subject to a condition precedent. If B’s dead. then at A’s death corpus back to G. then to B if B survives A. but if the son-in-law has divorced T’s daughter. There could be more kids who reach 30.” T’s daughter has contingent remainder interest subject to a condition precedent. A has children. • Hypo 11: G gives property to X for life. •Hypo 5: G gives property to A for life. There is a condition subsequent because of the “but if. Reversion doesn't have to be articulated. •Hypo 2: G gives property to A for life. G has a reversionary interest. • T’s son in law gets indefeasibly vested remainder. a condition of being born). T gives property to W for life.

• Interests that are Exempt from the Rule • Charitable Trusts – May last forever. Hypo 13: G gives his property to Z and his issue for so long as they do not serve alcohol there. that interest is invalid from the start  there’s no way to save it. • Rule Against Perpetuities • In General • Summary • An interest is VOID right from the start if there is any possibility. Hypo 14: G deeds his property to his daughter. rd • Future 3 Person Interests 71 • • .1(b) • (1) No estate in property shall be valid unless it must vest. • (2) In no case shall lives measuring the permissible period of vesting be so designated or so numerous as to make proof of their end unreasonably difficult. City has fee on limitation. if at all. that the interest may vest more than 21 years after some life in being at the creation of the interest. or • It becomes a vested remainder subject to total divestment. The Common Law Rule: EPTL §9-1. • G has possibility of reverter because of the language of duration of time. An interest becomes “vested” when: • (1) It becomes a present possessory estate. • Exception: vested remainders in a class are subject to the rule so long as the class remains open. however. and rights of entry are all vested in interest and are not subject to the RAP. the interest is void! • If it is possible that the interest COULD vest more than 21 years after all the lives in being have died. so long as it is used for a park. • (a) not later than 21 years • (b) after 1 or more lives in being at the creation of the estate and any period of gestation involved. but if she fails out of law school he gets it back. • G has possibility of reverter. G has a fee on condition.• • • Hypo 12: G gives his property to the city. • Vested Interests – A vested remainder in a person is NOT subject to the rule. • (2) A vested future interest • It becomes an indefeasibly vested remainder. Z has a fee on limitation. • Grantor has right to reacquisition. possibilities of reverter. • Reversionary Interests – Reversions. The Interest “Must Vest” • It must be certain that the interest becomes an estate in possession at some point. • If a situation can be imagined in which the interest might not vest within the perpetuities period. remote. • You don’t need actual possession.

and • (3) vested remainders subject to open. • When the Perpetuities Period Begins to Run • The validity of the interests under the rule is determined at the time the interests are created. taking into account the facts then existing. that the interest may vest in more than 21 years. unborns have to be born.” Lives in Being • Measuring Life • A person in being when the future interest is created who enables you to prove the interest will vest or fail during that person’s life. You only need to do a perpetuities analysis if the interest is: • (1) contingent remainders. after all. • The interest must be certain before the end of the perpetuities period to: • (1) vest or • (2) fail to vest “No Later Than 21 Years” • Main Rule: An interest is void if there is any possibility. • For example. many contingent remainders never vest because the condition precedent to their taking is not satisfied. The Interest Must Vest. they have to meet that condition as well. • (a) Be born/Survivorship/Reaching a Certain Age ο Remember. “If At All” • This means that the interest does not have to vest within the perpetuities period in order to be valid. • The measuring lives need not be given a beneficial interest in the property. or within 21 years after that person’s death. and then if there is a further condition (like reaching age 21). “to all descendants born within 21 years of my death” or “such children of A if they reach the age of 21. or at that person’s death. • Main Question: Is it possible that the interest court vest (that is. • Some life in being that is related to or somehow affects vesting. • Wills – date of death • Revocable trusts – date the trust becomes irrevocable (at creator’s death) • Irrevocable trusts – date the trust is created • The Beneficiary • • 72 . • (b) Living but unascertained • (c) Conditioned not certain to happen • (2) executory interests. and they need not even be expressly referred to in the instrument.• • • The rule is ONLY applicable to future interests created in 3rd persons. however remote. • The person must be alive when the interest is created. more than 21 years after the death of “lives of being” • The 21-year period may be valid in gross or connected to the minority age of any beneficiary. the contingency could occur).

3: Rules of Construction: Unless a contrary intention appears. • (b) Validity Presumption • (1) It shall be presumed that the creator intended the estate to be valid. • (3) Is it possible that the interest could vest (that is. not an invalidity. • (d) Contingency Presumption • (1) Where the duration or vesting of an estate is contingent upon • (i) the probate of a will. be invalid • (2) because made to depend. • EPTL § 9-1.2: Reduction of Age Contingency • (1) Where an estate would. • (4) the age contingency shall be reduced to 21 years • (4) as to any or all persons subject to such contingency. or • (b) its duration • (3) upon any person attaining or failing to attain an age in excess of 21 years. for • (a) its vesting. [CONFIRM ALL THIS] RAP Checklist • (1) Look to see if there is a contingent interest • (a) Conditioned on survivorship • (b) Conditioned on reaching certain age • (c) Conditioned on the birth of children/grandchildren (an unascertained class) • (d) Conditioned on an uncertain event • (2) Who should you think of when determining lives in being? • It’s often helpful to think about the parents of the class whose interest you’re analyzing. and • (3) such person is referred to in the instrument creating such estate as the spouse of another without other identification.• • The beneficiary of the interest has to be alive/in gestation at time of transfer (either at time of creation or death. If you can find anyone in the class whose interest is going to vest too late. They have to be people who were actually alive. • Look at the people who are actually alive at the creation of the interest… asking whether it is possible if they could die. be invalid • (2) because of the possibility that the person to whom it is given or limited may be a person not in being at the time of the creation of the estate. • (4) it shall be presumed that such reference is to a person in being on the effective date of the instrument. then it’s too remote. the whole thing is invalid. All or nothing rule. except for this section. • (c) Unborn Widow Rule • (1) Where an estate would. see above) or within 21 years after that. except for this ¶. that the contingency could occur) more than 21 years after the death of “lives in being”? • We need initial certainty—if something can vest later than that. • (4) Apply the NY Rules and Rule of Convenience NY Rules (applies to both RAP and suspension of alienation) • EPTL § 9-1. 73 • . and then 21 years could pass before the contingency could attach. • This is only applied to cure an ambiguity.

• (4) within 21 years from the effective date of the instrument creating such estate.• • (ii) the appointment of a fiduciary. • (2) Except: • (i) In the case of a living person. or • (viii) the occurrence of any specified contingency. if at all. It is always applicable. and a female can have a child between 12 and 55. • Hypo: T writes a will in which she create a trust for her children. In 1992 she had another child and in 2004 her eldest child presented her with a grandchild. all her children and her grandchild share her estate. it shall be presumed that a male can have a child at 14 or over. • (3) A determination of validity or invalidity of a disposition under RAP by application of above shall not be affected by the later occurrence of facts in contradiction to the facts presumed above. • (iii) the location of a distributee. Rule of Convenience (AKA the class-closing rule) • This is a real property concept not just a perpetuities issue. prong #2 prevails over prong #1. leaving her estate in to her children and grandchildren in equal shares. and the testator died. • Third prong • When they conflict. Children born after the execution of the will are entitled to share. but after-born children are out (born after the testator’s death) because the money was ready to be paid out—it was a will. • First prong • The use of only a group or class description indicates that all persons who fit the description—whenever born—were intended to share in the gift. • (iv) the payment of debts. • (vi) the settlement of an estate. • (v) the sale of assets. • How This Rule Work? 74 . evidence may be given to establish whether he is able to have a child at the time in question. • Second prong • You can close the class artificially and prematurely at the point when a distribution may be made (when the money is ready to be paid out) • Hypo: T drafted a will in 1990. • (e) The Fertile Octogenarian Rule • (1) Where the validity of a disposition depends on the ability of a person to have a child at some future time. • (vii) the determination of questions relating to an estate. • (2) it shall be presumed that the creator of such estate • (3) intended such contingency to occur. When she died yesterday. • (ii) The possibility that a person may have a child by adoption shall be disregarded.

• Perpetuities question – could grandchildren be born more than 21 years after death of grantor’s children who were alive when trust was created. 75 . Grandchildren necessarily must be born within the lives of the children. • Remainder to grantor’s grandkids – contingency is grantor having kids. • Income to grantor’s presently living children vests immediately on creation of trust. Then lives in being could all die. then to B for life. contingency can occur more than 21 years after death of B – they could occur 4 years too late! B could have a baby today and die tomorrow. and the afterborn could give birth to grandchild of grantor more than 21 years later. • Here. Hypo 4: Grantor makes an irrevocable lifetime trust. B’s children – must be born. remainder to his grandchildren. income to grantor's children for their lives. then to B for life. • The contingency for the remaindermen is to be a grandchild of the testator. giving property to his children for life. • The lives in being are T’s children. B’s kids will vest when they reach 21. The grantor could have another child after making trust. It’ll vest in the grandchildren when they’re born. • There is no contingency for B. interest is valid because children’s births have to occur during grantor’s lifetime. • A’s interest for life vests immediately upon its creation. then to such of B's children as reach the age of 21. That means being born to one of the testator’s children. or when creator dies. It’s a closed class because the testator is dead and can’t have more children. the lives in being? YES. vests immediately at their births. • Measure perpetuities period from when make trust. and that’s when you measure validity for perpetuities purposes. Remainder invalid under common law. • The bequest to the children for life is good. • Perpetuities question: Could contingency occur more than 21 years after death of T’s children (the lives in being)? No. then his kids also having kids – grandchildren must be born. but NY age contingency reduction rule would save this gift and reduce age to 21 years old. • Lives in being is B. if at all. because his interest also vests immediately upon its creation. during the children’s lifetimes. so their interest is contingent on being born. so its valid. so its ok. and must reach age of 21.• • • • Hypo 1: T makes a will. Closed class. Hypo 2: Creator makes a trust (lifetime or testamentary) to A for life. which can happen only within 21 years of B’s death. But. • Income to grantor’s afterborn children. Hypo 3: Creator makes a trust (lifetime or testamentary) to A for life. • Contingency for remaindermen. • Perpetuities question: Could contingency occur more than 21 years after death of B (the lives in being)? No. then to such of B's children as reach 24. and his baby would reach 24 almost 24 years after his death. remainder to grantor's grandchildren. It vests in them upon creation of the trust. • The trust is created when the testator dies.

• What lives in being are useful to consider? The testator’s brothers and sisters who were • 76 . • Contingency – A’s children need to be born. Could that reversion violate the rule? No. But. • Contingencies for A’s children are that they are born and reach 30. Hypo 10: The testator makes a testamentary trust. here the class cannot close because distribution isnt read to be paid. A is the life in being. then to such of A’s children as reach 25. • Income to B for life is valid. Hypo 7: The testator makes a testamentary trust. during their own lifetimes. because of the possibility that A could have more children. remainder to the testator's nieces who reach the age of 21. However. income to B for life. • Contingencies – A’s children need to be born and reach 30. if at all. • Contingency – A’s children have to be born and reach the age of 30. and they’ll reach 30. so it cannot be A. All of A’s children are alive and are themselves the lives in being. • Income to testator’s brother is valid. A is dead at the testator's death. • Ok. it can’t. Can contingency occur after 21 years of death of A? Yes. then revert to the grantor. one of A’s children has reached 30. saved by NY’s contingency reduction rule. • Could contingency occur more than 21 years after death of A? Initially that seems problematic. Hypo 5: The testator makes a bequest to such of A's children as reach the age of 30. • Remainder interest: It depends.• • • • • • The remainder interest is invalid. because B’s dead and 1 child is already 30. The class remains open. The contingencies for nieces are to be born and to reach 21. and therefore the trust will pay income to the children for their lives. But. A is alive and none of A's children has reached 30. because the rule of convenience operates only when the distribution can be made. income to the testator's brother for life. A is alive and A’s eldest child had reached 25 at the creation of the trust. • Remainder to A’s children who reach 30 vests immediately on testator’s death. B is dead at the testator's death and one of A's children has reached 30. Hypo 9: Testamentary trust. but he is dead. At the testator's death. Reversions vest upon creation and never violate the rule. • Perpetuities period starts to run at testator’s death. need to reach age of 30. They are their own lives in being and will reach 30 or not in their own lifetimes. income to A for life. remainder to A's children who reach 30. But saved by NY’s contingency reduction rule. • Could contingencies occur more than 21 years after testator dies? All of A’s children will either reach 30 (or fail to) during their own lifetimes! Hypo 6: The testator makes a bequest to such of A's children as reach the age of 30. • All of A’s children living at T’s death are therefore lives in being. • Who’s the lives in being? A is dead. so the distribution is ready to be made and the class can close under the rule of convenience. • The remainder is invalid in common law. A is alive at the testator's death and one of his children has reached 30. Here. class closes. because A is still alive. Hypo 8: The testator makes a bequest to such of A's children as shall reach 30.

• Second. The testator’s brothers and sisters would be a closed class. the rules on whether trust interests are alienable: • Generally. • The life estate to the grandchildren: The contingency is to be born. then for his grandchildren for life. The grandchildren’s life estate is therefore valid. • Third. Recall § 7-1. it’s valid if the testator’s parents were dead at his death. the class would be biologically closed under the fertile octogenarian rule (EPTL 9-1.3(e)).1(a): Rule Against Perpetuities/Suspension of Alienation • (1) The absolute power of alienation is suspended when there are no persons in being by whom an absolute fee or estate in possession can be conveyed or transferred.• alive when he died. • Lives in being shall include a child conceived before the creation of the estate but born thereafter • In no case shall the lives measuring the permissible period be so designated or so numerous as to make proof of their end unreasonably difficult. then remainder to the grandchildren's surviving issue. • 77 . it vests upon creation of the interest. The remainder is invalid. in New York. • Suspension of Alienation Rule • • Overview • This is a 2nd rule that you also have to satisfy in order for the disposition to be valid. if the rule of convenience would permit closing the class. any after-born nieces would be excluded and could not share. The class of T’s children is closed because the testator has died. if the father were dead and the mother were over 55. EPTL § 9-1. All grandchildren will be born during the lives of their parents. and then all the lives in being died? Then. Hypo 11: The testator devises real property for his children for life. Is it possible that a niece could vest after all their deaths? What if the testator’s parents had a child after the testator’s death. • What could save it? • First.5(a). Just being able to imagine that is fatal. • (2) Every present or future estate shall be void in its creation which shall suspend the absolute power of alienation by any limitation or condition for a longer period than lives in being at the creation of the estate and a term of not more than 21 years. and a niece would reach 21 (or not) within 21 years of their deaths. In that case. That would happen if T’s named brother were dead at testator’s death and one of the nieces had reached 21. the closed class of testator’s children. • The life estate to the children is valid. • The remainder to the more remote issue: the contingency is to be born to a grandchild of T. all trust interests are freely alienable except income interests in trusts are inalienable unless the creator expressly makes them alienable. The useful lives in being are the grandchildren alive at testator’s death. An after-born grandchild could give birth to a great-grandchild more than 21 years after the death of lives in being. It’s not contingent. what if the after-born sibling gave birth to a niece? She might vest (turn 21) more than 21 years after the death of the lives in being. which is not a closed class.

it will be invalid if an after-born could enter the class of income beneficiaries. remainder to his grandchildren. • Hypo 3: Grantor makes an irrevocable lifetime trust. for his whole lifetime. They can alienate their remainder interest as soon as they get it. Even if an income interest vests in time. because he could have an afterborn child. then to such of B's children as reach the age of 24. • Turano’s Commentary • The suspension of alienation rule voids any interest that suspends the absolute power of alienation beyond lives in being plus 21 years.e. at birth. • Hypo 2: Creator makes a trust (lifetime or testamentary) to A for life. even though the person is alive. • Present interests as well as future interests can be invalidated under the suspension of alienation rule • Under § 7-1.either (1) no one is alive to alienate the interest or (2) The interest is inalienable (i. giving property to his children for life. • To A for life and to B for life are both valid because. income interests are inalienable unless expressly made alienable. • The power of alienation is suspended when there are no persons in being who can transfer the fee simple absolute. • Income to Grantor’s children is invalid. Two Ways SOA Can Fail . they can't get rid of the property) • How Does this Rule Work? • Hypo 1: T makes a will. namely the children’s lives. remainder to grantor's grandchildren. 3.. it is invalid under the suspension rule only if the contingency is to be born. which could be more than 21 years after Grantor’s death. • Gift to the children for life is valid because they can immediately alienate it. a remainderman can alienate his interest any time (even if it’s contingent). • Remainder to Grantor’s grandchildren is invalid.5. because there could be a period of time longer than lives in being plus 21 years when no grandchild was yet 78 . 2. That child’s interest would remain inalienable for the child’s whole lifetime. though it’s inalienable. and an income beneficiary never can. which will be within lives in being. it remains so only for their lifetimes (a life in being). • Remainder is valid b/c they can alienate it as soon as they’re born (through guardian). If a remainder interest vests on time. it’s valid under the suspension of alienation rule (b/c you can alienate even a contingent remainder). so a violation occurs when a grantor attempts to create an income interest in persons not alive at the effective date. • To B’s children who reach 24 is valid.• That is. then to B for life. If a remainder interest vests too remotely. income to grantor's children for their lives. Three generalizations for Suspension of Alienation (to Master) 1.

• Hypo 5: The testator makes a bequest to such of A’s children as shall reach 30. then income to A's children for their lives. the remainder interest violates the SOA rule. which means that A’s grandchildren can alienate their contingent remainder interests upon their birth. A may have more children. Hypo 8: Irrevocable lifetime trust. but the class is closed by rule of convenience and his children can alienate their interests immediately. • Hypo 4: The testator makes a bequest to such of A’s children as reach the age of 30. • Remainder to X. because it remains inalienable for their whole lives. income to A for life. Unless the testator’s parents are dead. it is invalid because a period could elapse when no niece is in existence to alienate her interest.• • • born. even if under 30. during which time no person would be alive to convey a fee. during that period no one would be able to convey fee simple absolute in the property. or if not. • All interests are valid! Although class doesn’t close. A’s children whether they were living at testator’s death or not. or his mother is over 55 and his father is dead. A is alive at the testator's death and one of his children has reached 30. Y and Z is valid. which has to be within A’s life. Hypo 7: Testator makes a testamentary trust. because they can alienate as soon as the testator dies. • A’s interest valid though inalienable because A is a life in being • A’s children’s income interest is invalid because a child of A’s born after the creation of the trust could outlive A by more than 21 years. • All interests valid. Hypo 6: The testator makes a testamentary trust. • Remainder interests are alienable. then income to A’s children for their lives. then remainder to X. it is only so for a life in being (his life). • Remainder to X. to their issue. and they are not all lives in being (A could have an after-born). because the class would close artificially under the rule of convenience. And note that it could also be saved if the brother is dead and a niece has reached 21. and Z if living. Y and Z’s issue is valid. • Income to A’s children is invalid. income to the testator's brother for life. Income to A for life. Consequently. • However. because they can alienate it as soon as the testator dies. • Income to A is valid (inalienable only for A’s lifetime). Y. can alienate as soon as they’re born. • Remainder interest looks problematic. • Powers of Appointment • EPTL §10-2.2: Definitions • (1) Donor – a person who creates or reserves a power • (2) Donee – a person to whom a power is given or in whose favor a power is reserved 79 . a child of A’s born after the creation of the interest could have a child more than 21 years after lives in being. At the testator's death. remainder to the testator's nieces who reach the age of 21. A is alive and none of A's children has reached 30. even when contingent. remainder to A’s issue alive at the death of A’s children. • Income to testator’s brother is valid because although it is inalienable.

or • (iv) the creditors of his estate • (b) Special – all other powers of appointment • (2) A power of appointment is exclusive or non-exclusive. • (iii) his creditors. 80 . during his lifetime or by his written will.3: Classifications of Powers of Appointment as to Time of Exercise • (1) A power of appointment. • (ii) his estate. • (a) Exclusive – if it may be exercised in favor of 1+ appointees to the exclusion of others • (b) Non-Exclusive – if it must be exercised in favor of all the appointees. as to the time of its exercise. at any time after its creation.2: Classifications of Powers of Appointment • (1) A power of appointment is general or special.• • • (3) Appointee – A person in whose favor a power of appointment is exerciseable • (4) Appointive Property – Property which is the subject of a power of appointment EPTL §10-3. or postponed. and does not include a postponed power • Turano – Have to be exercisable (1) during lifetime or (2) during lifetime or by will – it’s the wording of the power that determines its classification • (b) Testamentary – if it is exercisable only by a written will of donee • (c) Postponed – if it is exercisable by donee only after expiration of a state time or after the occurrence or non-occurrence of a specified event. testamentary. is either presently exercisable. EPTL § 10-3. • (a) General – to the extent that it is exercisable wholly in favor of • (i) the donee. • (a) Presently exercisable – if it may be exercised by donee.

income to daughter. • Special and presently exercisable • Hypo 5: Husband makes a trust. • His power over the remainder is a special testamentary power. income to his wife. income to daughter. 1. remainder as son appoints in his will. and the invasion power is a special presently exercisable power. • Hypo 8: Father makes a trust. income to his wife for life. exclusive. • Son’s power is general. you start from the time of exercise. 2009 she can appoint the remainder among the grandmother’s issue. • Husband’s power is general and presently exercisable because as soon as wife dies (that is. • It’s special. as soon as the trust is created).000 per year from principal. • Hypo 2: Grandfather creates a trust. and on Mar. income to her husband. income to husband for life. remainder as she appoints in her will. • The power over the remainder is a special testamentary power. income to son for life.000 or 5% each year out of principal. because he could exercise it in favor of his estate. and he can withdraw 5% or $5. • Hypo 3: Wife makes a testamentary trust. His power over the principal is a general presently exercisable power. • For all others. • Testamentary and general • Hypo 6: Grandmother makes a trust. and he can take $5. you start from the time of creation of the power. • (2) Identify the kind of power of appointment • EPTL § 10-8. the appointment (the new trust or part of it) may be invalid because it violates perpetuities. the power itself may be invalid because it violates the rule. remainder as the son appoints by will among his issue. remainder as he appoints by will among their children. • On the exam. remainder in any proportions to their issue. • Hypo 4: Husband creates a trust. • Postponed • Hypo 7: Wife makes a trust. his creditors or his estate’s creditors. the power itself will always be valid • Second. 81 .• How Does This Work? • Hypo 1: Grandmother makes a trust. husband can exercise his power. Time at Which Permissible Period Begins • For general powers presently exercisable. • Steps in a Powers of Appointment RAP and SOA Analysis • (1) Powers of appointment require two separate analyses under the rule against perpetuities: • First. presently exercisable. remainder as she appoints among her children.1: Rule Against Perpetuities. income to son. and he can withdraw from principal any time to provide luxuries for his mentally retarded brother.

• • You tack the exercise (the new trust) onto the original trust. where P’s children were born in 1985. to pay income to P’s children for their lives. who could retain an inalienable interest too long. Discuss the validity of all interests. (3) If it is not a general power presently exercisable. then income to her children (good for vesting. remainder as P appointed in her will. Her children were not all alive when D created the trust. to his brother Tom as trustee with directions to pay income to D’s partner P for life. • Part (b): Suppose her children born in 1991 and 1993 tragically predeceased D? • All interests are valid. then income to P’s children for their lives. • This one is not a general power presently exercisable (it’s testamentary). • then remainder to issue (bad for both. Facts to be Considered • (a) If you have to measure the perpetuities period from the creation of the original instrument (because the power is not general and presently exercisable). • Income to P (good). P died yesterday. That is. you’re allowed to take into account that there are no (and will be no) after-born children. and the possibility of P’s having more children). all interests are valid. then remainder to P’s then surviving issue. P executed a will directing that Tom pay the corpus of D’s trust to the North Fork Bank as trustee. • Part (a): Assume that P’s three children were born respectively in 1985. • How Does This Work? • Hypo 1: D made a will in which he gave his residuary estate. because of P’s after-born children. and all interests vest and become alienable in time. • Rule Against Perpetuities and Commercial Interests • Two Starting Thoughts 82 . P’s after-born child could give birth to P’s issue too late. D died in 1990. • Hypo 2: Same facts as above.3: RAP. and for the remainder interest. tack the exercise (the new trust) onto the original trust and apply the Wait and See Rule • EPTL § 10-8. P could have a child born after D’s death. and 1993. • (b) you can consider the facts that exist at the time of P’s exercise of her appointment in determining the validity of interests created by instrument exercising that power. remainder to P’s issue surviving at the death of all her children. but what if D died in 1996? • In part (a).” • Although it looks prima facie problematic—because for the income interest to P’s children. so measure it from the date of D’s death • Tack  “Income to P. 1991. violating vesting and SOA)—it might not. 1991. and that they all survived her. bad for suspension of alienation). • The wait-and-see rule allows you to look at the actual facts when P exercises. and 1993. The one child remaining was a life in being. which amounted to approximately $3 million.

• Rationale: Under the common law. The option lasted 99 years. Under option agreement. claiming the option violated RAP. Two years later. To reduce the price. and purpose. This creates a disincentive for the landowner to develop the property and hinders its alienability • Buffalo Seminary • Facts: The D gave P and his successors an option to buy a 20 foot strip of land between their property The option was binding on the Ds heirs as well.• • • (1) What’s the difference between an option and a right of first refusal (preemptive right)? • (2) What’s at stake in applying the rule against perpetuities to commercial interests voluntarily undertaken by two competent parties? • It burdens the property Options Cases • Symphony Space • Facts: Commercial building but had a pre-existing theater and residential units adjoining. not an option. P kept an option to repurchase through 2003. • Holding: The court held that it was a right of first refusal. But. when P tried to exercise the option the D refused. Bruken • Facts: MTA bought LIRR from Penn RR for 65m. claiming that it violated perpetuities • Holding: It did violated RAP • Rationale: We don’t have a wait and see rule. the Penn RR could acquire the lots if MTA decided to sell it. • Here. Symphony Space is a non-profit D. and that Buffalo Seminary did not contemplate rights of the first refusal in commercial properties. who sold it in 1078 to Symphony Space for 10 grand. Such options are specifically enforceable and give the option holder a contingent equitable interest in the land. the MTA gave Penn RR an “option” to buy 12 lots in the freight yard in Queens. the validity of the preemptive right rests on its reasonableness judged by duration. • Holding: It did violate RAP because by its own term the option could be exercised 25 years after the sale. P is owner of property. Penn RR wanted to buy the lots and the MTA tried to repudiate the “option” on RAP grounds. instead we have initial certainty rule Right of First Refusal (Preemptive Right) Cases • MTA v. Symphony Spaced leased everything except theater back to P for a dollar a year through 2003 (unless terminated sooner). • But What About the Rule Against Alienation? • The common law rule against unreasonable restrictions does apply. P tried to exercise option in 1985 but the not-for-profit refused. • Court held that agreement was reasonable under all three criteria 83 . price. in order to get tax break. options to purchase land are subject to the rule against remote vesting. way below market.

1. • T crosses out a clause and writes “delete” alongside it. Can she seek construction? • Have to make decision. but post-conceived children is not. 84 .1 • Can target of in terrorem examine drafter of prior will? • No – this person was disqualified • Can a post-conceived child share in a gift to “issue”? • A child in gestation is allowed to share. Don’t know the answer to this question. Morrison v. executes it a la 3-2. • Okay because of 3-4. can’t seek construction before probate.1(a)(B). and they meet the other requirements 3-2. Piper • Facts: Aunt conveyed property to nephew and agreed that they (and their heirs) would each have right of first refusal on each other’s property • Holding: the Bruken exception does not apply to private sales of residential property RANDOM • New Practice Commentaries Information • Can notary count as an attesting witness? • Only if the testator requests of them to sign.• • • • Duration – reasonable because Penn RR had to exercise the option within 90 days of MTA’s decision to sell Price – reasonableness because based on market value Purpose – reasonable because the purpose was beneficial (public RRs are good for state). • In terrorem target is disqualified because she contests.

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