Wills Trusts and Estates Law

I Introduction
A. Probate and Non-probate Transfer of Property at Death a. Will - a testamentary transfer of property both personal and real at death. (i) right to transmit property at death is a statutory right subject to limitations by the government. (not a constitutional right) (a) fundamentally, testator may legally entirely disinherit any of his children (b) testator may impose reasonable or unreasonable conditions to inheritance a will or a trust provision is generally invalid if it tends to encourage disruption of a family relationship unless conditions are against public policy, illegal, unconstitutional or a mistake, it is enforceable [Shapiro] if condition is stricken, transforms the will into an absolute gift (ii) (iii) (iv) complete obliteration of the right to transmit constitutes taking of property without compensation, in violation of V Amendment [Hodel] property passing under a will or intestacy is known as probate property a will creates a duty to a third-party beneficiary; an attorney may be liable for failure to effectuate testators intent. [Calivas] cause of action in tort and contract are available approximately 45 states recognize these causes of action (Not NY) when will is offered for probate (1st step in administration), all ambiguities will be resolved at a construction proceeding

b.

Intestacy - a default distribution of decedents property at death. (i) Every state has an intestacy statute which, in case of decedents death without a will or a complete will, nominates distributees (ii) if a will is so poorly drafted that it disposes of only part of probate estate, the result is partial intestacy. (iii) UPC 2-101: any part of a decedents estate not effectively disposed of by will passes intestate succession to the decedents heirs as prescribed by UPC (except as modified by the will. a will may expressly exclude or limit the right of individual or class to succeed to property passing under intestate succession Non-probate Transfer property that passes under an instrument other than a will(also known as will substitute). Such transfers include but not limited to: (i) interests in trust (revocable or irrevocable) property transferred in trust, trustee holds the property for the benefit of the named beneficiary. upon death of the settler, assets distributed to beneficiaries without probate proceedings (ii) life insurance proceeds from a policy are paid to a named beneficiary named in a contract policy acts like a will; a testamentary transfer is made only at death no present transfer; beneficiarys interest is ambulatory policyholder may disinherit by changing the name of the beneficiary 1

c.

(iii)

joint-tenancy in both real and personal property (securities) decedents interest vanishes upon death.

II

Intestacy: An Estate Plan by Default

A. The Basic Scheme a. Decedents intent is the driving force behind the intestacy statute. (i) statute designates statutory distributees as a premise that no decedent would prefer escheat of property as opposed to distribution to surviving relatives (ii) there are several situations where an intestacy statute takes effect decedent dies without a will decedents will is defective in whole or in part (a) where a will contains a defective residual clause, intestacy law governs disposition of property not distributed under the will (b) in cases of testamentary trust, where a trust lacks a contingency for failure clause, principle reverts to testators estate and disposed of in accordance to intestate law will is successfully challenged will presents a negative disinheritance in NY (a) NY EPTL 1-2.19: a decedent may leave a will directing how not to dispose of his property (b) the remainder of the family takes according to the intestate statutory distributee schedule (c) disinherited person is treated as predeceased and does not take (d) disinherited persons issue may take (as per anti-lapse statute) outside of NY negative disinheritance is generally not permitted (a) a negative disinheritance clause is only effective as against a will (b) if will is not probated the disinherited person takes under intestacy NY EPTL 4-1: Intestate Succession a. Where property is disposed of by intestacy, all debts, administration expenses and reasonable funeral expenses shall be deducted. b. If decedent is survived by: (i) a spouse and issue = $50.000 and of residue to spouse and balance to issue by representation NY and UPC states adopt the by representation scheme of distribution (a) EPTL 1-2.10 Issue Defined: (1) descendants in any degree from a common ancestor, including adopted children a contrary intention to include/exclude descendants may be indicated (2) adopted children governed by common law complete cut-off from natural parents complete assimilation into adoptive family Best Case rule: unless expressly named in a will; or a gift is otherwise made expressly to an adopted out child child is completely cut off from inheriting through natural parent. 2

B.

(3)

(4)

NYDRL 117 [adopted children and cross-adoption] post 1986 rule where the decedent is the adoptive childs i. natural grandparent; or ii. descendant of such natural grandparent AND one of the adoptive parents is i. married to the childs natural parent (remarriage situation); or ii. childs natural grandparent (grandparents adoption situation); or iii. descendants of childs natural grandparents (aunt/uncle adoption situation) the adoptive childs right to inherit from and through either of natural parents does not terminate adopted child has three line of inheritance (natural father, natural mother and adoptive parent) when a child is related to decedent through adoption and through natural relationship the childi. inherits under the natural relationship; unless, ii. the decedent is also childs adoptive parent (then the kid inherits as a child) [if the grandparent did the adopting and later died the child is treated as a son. If someone else did the adoption, the child preserves its natural status towards the decedent] adult adoption statutorily acceptable not allowed in NY (homosexual or heterosexual) if a sexual involvement is present between the parties Non-maritals NY Rulemarriage at any time, even subsequent to birth, child is deemed to be legitimate; even if marriage is subsequently voided. however, if a woman marries another man or several men, presumption will not attach EPTL 4-1.2: Proof of Lineage i. a non-marital is a legitimate child of his mother. such child and his issue will always inherit from his mother and her kin ii. a non-marital is a legitimate child of his father and may inherit from him and his kin only if: 1. paternity has been established by an order of filiation/ or both parents executed an acknowledgement of paternity 2. father has signed an instrument acknowledging paternity 3. paternity is established by clear and convincing evidence AND the father 3

4.

has openly and notoriously acknowledged the child as his own blood genetic marker /DNA test administered to the father (some other evidence is needed to establish paternity) DNA alone will only suffice if unchallenged an agreement obligating the father to pay support will not suffice

(b)

(c)

(d)

(e)

EPTL 1-2.16 Representation: effective when a descendant predeceased the decedent only applicable in cases of class gifts (to my issue/children) disposition or distribution by means of sharing, where property is divided into as many shares as there are surviving issue closest to the decedent (which contains one or more living takers). The issue of predeceased heirs/distributees take equally from the combined shares of the predeceased ancestors. EPTL 1-2.14 Per Sterpes: only effective where two or more descendants in the same generation predeceased the decedent only applicable in cases of class gifts (to my issue/children) disposition or distribution by means of dividing property into equal shares amongst the issue closest to the decedent, whether living or if predeceased those with surviving issue. The surviving issue of predeceased descendant each take a share allocated to its ancestor. EPTL 1-2.11 Per Capita: disposition or distribution of property where each surviving issue takes equally in his own right only applicable in cases of class gifts (to my issue) disregard for the exam Application: (1) Intestate i. Representation is used for all people who die intestate post 1992 ii. Per-Sterpes applies to intestate distribution prior to 1992 (2) Wills i. If a will is silent as to distribution scheme of a class gift and was executed prior to 1992 Per Sterpes applies ii. If a will is silent as to distribution scheme of a class gift and was executed after 1992 Representation applies iii. A will may explicitly indicate the scheme of distribution 4

(ii)

a spouse and no issue = all to spouse even if parents and siblings are in the picture they get nothing parents are excluded only if decedent died after 1992 under UPC interest of parents is preserved issue and no spouse = all to issue via representation scheme one or both parents and no spouse or issue = all to surviving parents issue of parents and no spouse, issue or parents = all to issue of parents by representation. this includes siblings of decedent and their issue (i.e. nephews and nieces) grandparents or issue of grandparents (1) to maternal grandparents and their issue by representation, (2) to paternal grandparents and their issue by representation; OR (3) if only one side has surviving issue, all to the side with surviving issue great-grandchildren of grandparents = to paternal side and to maternal side per capita half-bloods are treated as whole-bloods distributees conceived before death and born after the decedents death, take as if they were born prior to death

(iii) (iv) (v) (vi)

(vii) (viii)

C.

NY EPTL 2-1.6: Simultaneous Death Doctrine a. Where disposition (whether testate or intestate) depends on priority of death; and there is no sufficient evidence to determine the order of death, the property of each person is to be distributed as if he had survived the other if wills are involved, the beneficiary is deemed to have predeceased the decedent if both died simultaneously under UPC for intestacy purposes one must survive for 120 hours to be deemed a survivor NY only requires sufficient evidence of survival, no specific temporal requirement b. The survivorship statute applies to intestacy and to testamentary instruments unless provided otherwise in the instrument decedents do not need to be husband and wife and could be any other relative who is a statutory beneficiary for purposes of intestate law c. Exceptions - the survivorship statute does no apply to: (i) EPTL 2-1.6 (d) Insurance Contracts where the insured and a beneficiary die together, the beneficiary is deemed to have predecease the insured and the proceeds pass down to secondary beneficiary or a subsequent valid beneficiary; or if no beneficiary is named as an alternative, proceeds pass to the policy holder decedents estate (ii) EPTL 2-16 (c) Joint Tenancy where two or more joint tenants die in a common accident, the property is divided as if the decedents were tenants in common (equally divided) Bars to Succession: a. Both intestacy and testate succession may be barred. the barred beneficiary is treated as is he had pre-deceased the decedent the issue of a barred person may nonetheless take under the anti-lapse statute anti-lapse statute imposes a constructive trust (passing of property by operation of law trust is held for meritorious beneficiary) 5

D.

b.

NY does not recognize constructive trusts EPTL 4-1.4 Parental Abandonment: i. No portion of any estate shall pass to any parent who had, before the child has reached the age of 21(a) failed or refuse to provide for the child; or (b) abandoned the child regardless of whether the child died prior to reaching 21st b-day ii. UNLESS: (c) the parent resumes her duties prior to death and continues the relationship until childs death or his 21st b-day; the parent is treated as if she has pre-deceased the child the parental abandonment does not apply where the child writes a will leaving property to the parent Slayer Doctrine: i. NY Rule [Riggs v. Palmer] a slayer can not take in a will or in intestacy. NY prohibits wrongdoer from benefiting from any wrongful act, including: murder; manslaughter; criminally negligent homicide any killing even unintentional (a) recovery is allowed where the death occurred under exculpating circumstances (duress/self-defense, etc.) and the beneficiary is absolved of criminal liability. (b) killers devisees are innocent of the crime and may take from decedents estate. (c) no statute in NY; governed by common law [Riggs] ii. EPTL 4-1.6 Disqualification of a Joint Tenant (a) a joint tenant convicted of murder in first or second degrees of another joint tenant shall not be entitled to distribution of any monies contributed by the deceased joint tenant. (b) the convicted joint tenant is entitled to the monies he contributed. technically an exception to a slayer doctrine, where the killer takes something; albeit his own contribution iii. UPC 2-803 Slayer Statute: (a) a killer is barred from succeeding to non-probate as well as probate property. killer is treated as if he had disclaimed his share of inheritance UPC 2-1106 Disclaimer Statute: a person who disclaimed his property is treated as if had predeceased criminal conviction of felonious and intentional killing is conclusive acquittal is not dispositive (question of heightened burden of proof) (b) UPC courts are split as to whether killers issue may take. [Primerica (Mo.)] vs. [Estate of Mueller (Ill)] p. 130

d.

e.

Renunciation/ Disclaimer of Property i. In general, a beneficiary under a will or intestate statute may disclaim a gift in full or in part. The donee must accept the gift for it to be valid. However, one should not be compelled to accept a gift against their will. disclaiming beneficiary is treated as if he had predeceased the decedent 6

ii.

disclaimer theory is applicable to life insurance proceeds, employee benefits, trusts, and other non-testamentary transfers transfer occurs without the gift ever vesting once disclaimed, the property passes to alternative or supplemental beneficiaries disclaiming party has no control over the property and can not direct it Exceptions to Disclaimer (a) Tax Liens if the IRS has a tax lien on disclaiming party, the government will reach the assets and satisfy the lien against the property disclaimed. [Drye] (b) Medicaid Eligibility a party disclaiming a gift may not qualify for subsidized medical assistance, since the disclaimed property is considered to be part of the partys assets Statutory Requirements for Disclaimer (a) must be in writing, signed and acknowledged before a notary (b) must be accompanied be a separate sworn affidavit attesting to the fact that no consideration was received in exchange for disclaimer unless consideration is authorized (c) disclaimer must be irrevocable to be filed with Surrogate within 9 months of decedents death EPTL 2-1.11 (d): Limitations on Disclaimer (a) where a disclaimer by one party effects distribution of property to another, the disclaiming party is treated as if she did not pre-decease the decedent but died on the same day but subsequent to the decedent. (b) Example: I dies leaving two children A and B. A has four kids (C,D,E,F), while B, who predeceased I had only one child (G) [I] A [B] C, D, E, F G in a distribution according to representation scheme, the shares are to be divided at the nearest level with surviving issue (on the facts: A gets and G gets Bs ) if A disclaims, shares would be made at the lower level of grand children. Thus Is assets are now equally divided into 5 shares. whereas, prior to As disclaimer G would have been entitled to , post disclaimer G walks away with a mere 1/5. EPTL 2-1.11 (d) requires distribution per sterpes; since, As disclaimer effects Gs inheritance. consequently, C,D,E,F will only succeed to As and G retains Bs

iii.

iv.

III

Wills: Capacity and Contests

A. a. Mental Capacity Mental capacity requirement by the law of wills is minimal. To be competent to make a will, the testator must be: i. 18 years of age or older ii. and must be capable of knowing and understanding in general way: 1. the nature and extent of his or her property 2. the natural objects of his bounty, and 7

b.

c.

the disposition that he or she is making of that property, and also be able to relate these elements to one another and form an orderly desire regarding disposition of the property. [Restatement of Property] the tests refer to capability and not actual knowledge average intelligence is not required, testator must have mind and memory relevant to the four matters mentioned NY Rule for mental capacity requires Sound Mind and Memory regarding four abovementioned elements [Restatement of Property] one can not draft a will for another without being confident of mental capacity to make a testamentary transfer two witnesses are needed to attest to the capacity the proponent of the will carries the burden of proving capacity, usually it is easily proved by due execution. mental capacity is often challenged on grounds of drug use or mental illness prejudice towards men would not be interpreted as a sign or symptom of incapacity [Strittmater was a product of its time] [Estate of Wright] -testamentary capacity can not be destroyed by showing a few isolated acts, foibles, idiosyncrasies, moral or mental irregularities or departures from the normal unless they directly bear upon and have influenced the testamentary act. mental incapacity must effect testamentary distribution Insane Delusions a person may have a sufficient mental capacity generally to execute a will but may be suffering from an insane delusion so as to cause a particular provision in a will or perhaps the entire will to fail for lack of testamentary capacity. only part of the will caused by an insane delusion fails insane delusion is a legal not a psychiatric concept courts will often find that the testamentary disposition took place in a lucid period delusion is a false conception of reality (a belief notwithstanding evidence to the contrary) Split: (i) Minority: -if there are any factual basis at all for testators delusion; it is not deemed insane. (ii) Majority: -a delusion is insane, despite some factual bases for it, if a rational person in the testators situation could not have drawn the conclusion reached by the testator. Undue Influence Influence is not undue unless the free agency of the testator was destroyed and a Will is produced that expresses a Will, not of the testator but of the one exerting the influence coercion is an essential element of the influence the contestant has the burden of proving: 1. existence and exertion of influence 2. the effect of such influence was to overpower the mind and will of the testator 3. the product is a will or a gift which would not have been conveyed but for the exertion of influence The following situations alone will not suffice: i. existence of confidential relationship ii. physical and/or mental susceptibility to undue influence, iii. extent to which the wrongdoer participated in preparation/procurement of the will or will substitute; 8

3. 4.

d.

B. a.

b.

iv.

c.

whether the donor received an independent advice from an attorney or other competent disinterested advisor; v. will or substitute were prepared in secrecy or in haste; vi. whether donors attitude towards others has changed due to association with the wrongdoer; vii. whether there is a material discrepancy between old instrument and the new one viii. disposition of property would be regarded as unnatural, unjust or unfair by a normal observer contestants have the burden of proving undue influence; to trigger the presumption it must be shown that a confidential relationship existed + something more. Presumption shift the burden back to the proponent proponent has the burden of proving validity of the will by preponderance of evidence Confidential Relationship triggers a presumption of undue influence in conjunction with above-mentioned factors. i. bequests to attorney-drafters a concern of impropriety compelled many jurisdictions to view such bequests to attorney-drafters with a legal presumption of undue influence presumption can be rebutted by clear and convincing evidence by the attorney attorney solicited to draft a will in which he is named as a beneficiary must advise his client to seek an independent counsel on this matter ii. NY Rule if the gift is bequeathed to an attorney-drafter, NY law requires the lawyer to come forth with a satisfactory explanation of the gift (automatic Putnam Scrutiny). the drafter-attorney will be required to submit a Putnam Affidavit with an explanation where the affidavit is deemed insufficient, a Putnam Hearing will be held the process will take place regardless of whether the will is challenged, and if challenged burden remains on the contestant (the prong of confidential relationship has been satisfied) courts may act sua sponte

C.

Undue Influence in Naming an Executor a. Executors although not entitled to any corpus of the inheritance, executors receive fees for their services and have authority to appoint an attorney. attorney-drafter should not exert undue influence upon a testator compelling him to appoint the attorney to serve as an executor prior to statutory enactment, some instances involved up to three executors thus doubling or trebling the costs of estate execution [M/O Weinstock] b. SCPA 2307 (a) Commission of Attorney Executor: i. attorney-drafter has a duty to inform the client of: (a) the fact that executor need not be a lawyer; and (b) executor is entitled to fees deducted from the estate prior to any of the beneficiary; and (c) if attorney-drafter is selected to serve as the executor can subsequently appoint himself as an attorney for the estate and additional reasonable attorney fees will be levied ii. testator must then: 9

(a) (b)

iii.

execute a written statement attesting to attorneys disclosure the statement must be witnessed by at least one witness, but not the attorney-drafter (c) writing may be prepared after the will was already drafted, but the disclosure must take place prior to execution. any non-compliance, if proved, will decrease the executors fees by half, but attorney fees will be paid in full no absolute restriction on attorney-drafter-executor role an ordinary disclosure statute statute applies to wills of decedents who died after 12/31/1996, regardless of when the will was executed; however, Wills executed prior to 12/31/1996, if they name the attorney-drafter as an executor must be re-executed. a good-faith reason may waive the requirement (i.e. testators incapacity) a mere fact that attorney could not trace the will would not suffice

c.

SCPA 2313 in wills executed after 1993, no more then two executors (non-attorneys) are allowed, unless the decedent provided that the executorial commissions to be shared or some other arrangement.

Fraud a. A disposition based on misrepresentation is void. A three-prong test applies to invalidate a will on the grounds of fraud: i. a known misrepresentation must exist, ii. testator was deceived by the misrepresentation, and iii. the deception touched (or affected) the disposition. b. Fraud is an intentional tort; thus, the element of intent must be present (i.e. known misrepresentation). A mere mistake or negligent misrepresentation will not suffice. i. lawyer who made the misrepresentation: in NY: only the client, who stands in privity with attorney has a cause of action sounding in contract or tort. [Dead people dont sue] other jurisdictions allow tort action (tortuous interference with expectancy) or contract action (malpractice suit) to third party beneficiary. [Father Divine: constructive trust formed] Challenge based on fraud is hard to prove; the extent to which it affected the disposition is primarily dependant on circumstantial evidence, which is often unavailable at probate.

c. E.

No Contest Clauses a. A no contest clause is valid. i. despite the existence of a probable cause for contest (NY Rule) usually provides a beneficiary with a gift which is contingent on beneficiary refraining form contesting the will the clause must be sufficiently baited to deter contest in other jurisdiction, contestant will not forfeit the gift if the will containing the no-contest clause was contested based on probable cause ii. NY exceptions to no-contest clause wills (possible to contest a will without consequential forfeiture) (a) Forgery 10

(b)

(c)

if forgery or revocation by subsequent will is shown, no-contest clause will not trigger forfeiture Infant/ Incompetent guardians of infants and incompetent beneficiaries owe a fiduciary duty to their clients and may contest the will to serve the clients interests. Such contests will not trigger forfeiture Procedural steps initiating discovery, prior to actual challenge objection to jurisdiction of probate court disclosure of documents to probate court refusal to join a petition to probate a will, to execute consent or waiver of notice to probate proceeding, etc. instituting or joining an action to construct a will

IV

Due Execution and Formalities

A.

Execution a. EPTL 3-2.1 Execution and Attestation of Wills: Will must be in writing (unless an exception: holographic will) Typewritten (videotaping would not suffice) numbered pages stapled advisable to initial each page all errors must be eliminated, or must have the testator and witness initial the changes and must refer to the error in the attestation clause allow language to carry over onto next page to demonstrate continuity one original and very few copies to be produced dating although not required is preferred, thus to establish sequence in cases of multiple wills Will must be signed at the end physical end may be signed in testators name (whatever that may be, so long as he may be identified), or with an X to be signed by the testator, or in the name of the testator, by another person in testators presence and at his direction (signor must sign own name and address (only name is vital) (a) anything following the signature will not invalidate the will, unless this matter is necessary to probate the will (b) matter following the signature shall not be given any effect iii. Testator must sign in the presence of each attesting witness, OR the signature shall be acknowledged by the testator to each of witnesses to have been affixed by him. at least two attesting disinterested witnesses are required witnesses need not sign in the presence of the testator, so long as they were present at the time of his signing or acknowledgment the signature or acknowledgement need not be simultaneous with both witnesses present acknowledgment requires physical presence of testator and the witness if signing or acknowledgement to take place at different time for each witness, must be done within 30 days of each other 11

iv. Publication testator must at some time during the execution declare to each witness that the instrument with his signature is his last will and testament. no need to publish or read aloud the contents of the will Two attesting witnesses must be physically present testator must ask the witnesses to serve this purpose both witnesses must attest to testators signature (affixed or acknowledged) within 30 days lawyer may sign, since he can be called to testify SCPA 1404 (below) both must affix own signatures and addresses vi. Precise order is not necessary b. Proving the will: SCPA 1404 Examination of Attesting Witnesses: i. Prior to probate, two attesting witnesses must be produced if: (a) could be located; and (b) competent to testify if witnesses are unavailable, must show that searched with due diligence; they are dead or incompetent may need to depose witnesses even if located in different jurisdiction ii. Attorney-drafter may be called to testify (a) a self-proving affidavit will absolve the attorney of the need to produce attesting witnesses iii. SCPA 1406 Self-proving Affidavit (a) instrument executed at the same time as the will in which the witnesses swear as to all relevant facts (mental capacity, procedure) not required by statute (but absence is prima facie negligence) a precaution in case witnesses will be unavailable may be used to impeach a witness testifying against the will (b) affidavit carries an evidentiary purpose constitutes a deposition of witnesses expedites the process of probate less costly then search for witnesses (c) affidavit is not dispositive evidence witnesses may be called if contestants rebut the presumption of impropriety surrogate may simply disregard the affidavit

c.

B.

Safeguarding the Will i. only one will should be execute, few copies may be produced discourage duplication ii. the custody of the will is within the testators discretion attorney should not persuade or induce the testator to surrender the custody Joint and Mutual Wills a. Joint Wills a single document intended as the will of two (usually spouses), or more persons. When one testator dies the instrument is probated as one testators will, when the other dies, the same instrument is probated as the will of the other. i. most courts hold that the mere execution of a joint or mutual will does not give rise to presumption of contract not to revoke ii. UPC 2-514: a contract to make a will or devise, or not to revoke a will or devise, or to die intestate, if executed after 1990 may only be established by: (a) provisions of a will stating material provisions of the contract, 12

(b) (c)

an express reference in a will to a contract and extrinsic evidence proving term of the terms of the contract. or a writing signed by the decedent evidencing the contract. the execution of join or mutual wills does not create a presumption of a contract not to revoke

b. c. C.

Mutual Wills separate instruments of two or more persons that contain similar or reciprocal (mirror-image) provisions. Join and Mutual Will a single instrument for two or more persons with the reciprocal provisions

Components of Wills a. Doctrine of Integration all papers present at the time of execution, intended to be the part of the will, are integrated into the will. all pages must be physically connected and should never be disassembled the language should carry over onto the other pages, thus to evidence continuity may even ask the testator to sign and initial each page of the will for identification b. Republication by Codicil a will is treated as re-executed (republished) as of the date of the codicil. a will is treated as if it were executed when its most recent codicil was executed, whether or not the codicil expressly republishes the prior will, unless the effect so treating it would be inconsistent with the testators intent applies only to a prior validly executed will Doctrine of Acts of Independent Significance an act by testator that has some purpose other then to alter or augment a testamentary conveyance. These acts that occur after the will is executed should be given full effect when distribution is made. the will states John should take my car at the time of execution testator owns a beat-up Buick. At death, testator owns a Class S Mercedes. John, the lucky bastard takes the Mercedes. Incorporation by Reference any writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification. unlike republication by codicil, this doctrine may apply to incorporate into a will any language or instrument that have never been validly executed (i) NY Rule -NY does not in general permit incorporation of unattested documents in to a will; any extrinsic instrument must be attested and comply with testamentary formalities in order to be incorporated Exception: a pour-over wills that refer to trust and its terms of disposition (ii) UPC 2-513: A will may refer to a written statement or a list to dispose of items not otherwise specifically disposed of by the will, other then money. To be admissible the writing: (1) must be signed by testator; (2) describe the items and the devisees with reasonable certainty writing must be in existence before execution will must show intent to incorporate 13

c.

d.

D.

must be clearly identified by the will

Miscellaneous a. Holographic Wills i. EPTL 3-2.2 Soldiers and Sailors Will (a) an holographic will, if made wholly in the handwriting of the testator (but not attested), or even an attested oral will is valid if made by a member of armed forces during a declared war or undeclared armed conflict; and (b) the following factors are present: two witnesses are required if the will is oral actual military service in the war zone (includes war-zone reporters and merchant marines) support personnel included (clergy, advisors and medics) (c) the will loses its effect not when the conflict is over; but one year after discharge for soldiers; unless lack of capacity three years for marines; unless lack of capacity b. Conflict of Laws Governing Wills i. Generally, the will is probated according to laws of the jurisdiction where the decedent is a domiciliary or where he deceased (personal jurisdiction issues) real property is distributed according the laws of a jurisdiction where the property is located ii. In NY, a will may also be probated under the laws of a jurisdiction where it was executed regardless of the testators domicile allows NY courts to probate an out-of-state holographic wills iii. A will may be probated according to the laws of the state where there was personal jurisdiction over the testator at the time of execution or at the time of death. EPTL 2-1.7 -Presumption of Death: ii. A person is presumed dead if he is absent for a continuous period of three years and (a) after diligent search has not been located; and (b) no satisfactory explanation is offered as to his disappearance iii. Presumption of death is effective on the date three years after the unexplained disappearance, and is operative in: (a) any action or proceeding involving any property; (b) contractual or property rights contingent upon persons death; or (c) administration of persons estate iv. A death may be presumed at any time prior to three years margin if facts suggest that the person as been exposed to perils consistent with likely death very relevant post 9/11 d. Reformation of Wills (also discussed later) v. General rule is no reformation of wills unless no objections (consensual) tax advantages allowed by law In re Snyde Exception vi. Snyde Exception: an error on the face of the mirror-image wills (wrong signatures), the court carved out an exception exclusively on these facts to avoid injustice 14

c.

e.

Order of Abatement of Legacies for purpose of creditor claim satisfaction i. Abatement takes effect if the estate has undergone some transformation from the time of execution until the probate; thus, it is impossible to satisfy all the gifts: assets shrunk prior to death outstanding debts ii. All the intestate property (undistributed by the will) abates first, unless a good all-inclusive residuary clause is present iii. If no intestate property exists or assets were insufficient, the order of abatement is as follows: (a) all residuary disposition all gifts that dispose of the rest/ the residue of property (b) general disposition pecuniary (monetary)gifts satisfied out of the general estate legacies that require sale of any portion of estate property for satisfaction i.e. I give $10,000 to James (c) demonstrative disposition monetary gift from a specifically identified source i.e. I give $10,000 to James from the sale of a Blackacre a hybrid disposition: it is specific only to the extent that the source exists, if the source does not exist it is a general gift demonstrative gifts do not adeem like a specific disposition if the source does not exist it is treated as a general gift (d) specific disposition any gift specifically identified in the will specific dispositions are subject to a doctrine of ademption ( if the gift exists at the time of death, the donee gets it; if not, there is nothing to give) abates pro rata NY Rule: physical identity doctrine (a) if the gift described in the will is not identical to one present at probate, the NY law allows transfer if the description matches physical identity of the gift. I give my Mercedes M class to Johnny; Johnny discovers that decedents Mercedes is an S class, he will take.

iv.

f.

Contracts to Make Wills vii. An agreement, promise or undertaking is unenforceable unless it is in writing and subscribed by the party to be charged therewith if such agreement, promise or undertaking is a contract to make a testamentary provision of any kind a contract to make a will or not to revoke a will can be established by an express statement in the will. The provision must manifest a contract between the parties. NY cases that founds a contract merely from the use of possessive pronouns; we, us, our in a joint will are no longer good law

Revocation of Wills
15

A.

Revocation of Wills a. In general, it is in the nature of wills to be revocable. revocability allows for the freedom of testation some statutory limits to revocation apply revocation must be expressed and be executed with appropriate formalities; or, must be expressed by an unequivocal act of revocation (burning, tearing, cutting, canceling, obliteration or other act of mutilation) b. EPTL 3-4.1 Revocation of Wills; effects of codicils: i. a revocation or alteration intended by the testator, may be effected in the following manner only: (a) a will or any part thereof may be revoked or altered by: (1) another will. (2) a writing clearly expressing the intent to revoke or alter, executed with the formalities prescribed for the execution and attestation of a will (codicil) (b) a will may be revoked (wholly) by: (1) an act of burning, tearing, cutting, cancellation, obliteration or other mutilation or destruction thereof performed by: the testator another person in testators presence and at his direction (with two witnesses testifying to the process) revocation by proxy any marking of the will must touch the writing crossing off a signature may suffice (c) revocation of a will revokes all codicils thereto here codicils are treated as part of the will revocation of a codicil does not revive altered will (d) revocation of the original will, revokes all duplicates if executed in duplicates and one is destroyed, presumption is the testator intended to revoke all the duplicates Implied Revocation i. if a will does not expressly revoke the preceding will, but a subsequent will is wholly inconsistent with the preceding one, the initial will is deemed to be impliedly revoked. use of the implied revocation doctrine is very rare, since all boiler plate wills contain the revocation provision invalidating preexisting wills ii. if subsequent writing is not wholly inconsistent with the preexisting will, it is a codicil. a codicil (assuming its aptly executed) will supplement the will but will not revoke the will in its entirety revocation of a codicil will not result in nullification of the will or any part thereof (here the codicil is treated as a separate instrument) iii. if both preexisting and subsequent wills are consistent with each other and the second will does not expressly revoke the first one; both wills will be enforced Revocation by Codicil i. Revocation of the will revokes all codicils thereto 16

c.

d.

ii.

iii. e.

codicil and will treated as the same instrument Revocation of a codicil does not revoke the will to which it relates; unless, (a) the codicil revokes the second will and republishes the pre-existing will (the will revoked by the second will); thus revocation of the codicil will revive the first will (which did not exist prior to execution of the codicil) Revocation of a codicil does not reinstate the gift it revoked; unless, (a) the revocation of the codicil in itself republishes the will purporting the gift.

Partial Revocation i. A will or any part thereof may be revoked only by writing of equal solemnity ii. NY does not allow for partial revocation by act can not literally cut someone out of a will SCPA 1407 Probate of Lost Wills: i. Lost or destroyed will may be probated if it: (a) was duly executed, and (b) has been established that the will was not revoked (c) all provisions must be clearly and distinctly proved by the attesting witnesses; or a copy of the will ; or a complete memo or attorney notes produced ii. If a will is last seen in testators possession and was not found after his death, there is a rebuttable presumption of intentional revocation by physical act. extrinsic evidence will be allowed to enter to rebut the presumption presumption does not attach if the will was last seen with an attorney or an adversely affected party EPTL 5-1.4 Revocatory Effect of Divorce: i. If after executing a will, testator is divorced or the marriage is annulled or nullified and dissolved, unless the will expressly provides otherwise: (a) any disposition or appointment made to the former spouse is revoked former spouse is treated as predeceased appointment of guardianship over children is not revoked (b) the revocation may be revived by remarriage to the former spouse (c) this provision does not apply to (i) inter vivos trusts; or (ii) will substitutes Revocation by Operation of Law i. Divorce any disposition to a spouse is extinguished upon the final decree of divorce (See above) ii. EPTL 5-3.2 Birth after the Execution (a) Where a child born (or adopted) after the execution of the will and was not mentioned or provided for in the will; either by testamentary disposition (in a testamentary substitute); or inter vivos settlement (nominating as insurance policy beneficiary) (b) If other children are provided for, the after-born (adopted) child is treated equally, and may share proportionally with the rest of the class. (c) If testator died without other children after-born is entitled to his intestate share 17

f.

f.

g.

(d) (e) (f) B.

If testator provided for some children to the exclusion of the other, the afterborn is treated as a member of the class for whom testator had provided. If the intention of the testator to make exclusion limited in application, the after-born takes in intestacy [post Ashby exception] the rest of the will is probated In none of the testators children is provided for the after-born takes nothing

Revival a. Revival revocation of a revoking instrument automatically revives the revoked instrument. i. EPTL 3-4.6 NY No Revival Statute: (a) a later will which revokes or alters the prior one, the revocation of the later will does not, of itself, revive the prior will or any provision thereof. (b) a revival (in whole or in part) is only effective by: (1) aptly executed codicil which in terms references to a prior (revoked will) (2) republication of the prior will in writing must declare revival must be aptly executed (3) re-execution and re-attestation of the prior will must go through the whole process again b. Dependant Relative Revocation not a revival but a common law equitable doctrine. DRR disregards revocation by act for the lack of necessary intent, where the revocation was intended to be contingent on the validity of a pre-existing instrument. usually applies to revocation by act with intent to revive a revoked instrument revocation must occur due to a mistake of law revival does not occur (second will was not properly executed, but the properly executed first will was already destroyed/ or the properly executed second will is destroyed hoping to revive the first in jurisdiction with no revival) purpose is to effectuate the intent of the decedent and to avoid intestacy i. NY common law recognizes DRR, but so far all application comes from Appellate Division and not from Court of Appeals. must argue both applicability and inapplicability

VI

Will Substitutes
A Types of Will Substitutes non-probative transfers by which, one may transfer property after death, while avoiding probate. For a transfer to be non-probative it must be a present but a revocable transfer; or a transfer of title triggered upon death, or contracts payable on death a. Life Insurance the beneficiary designation in a life insurance policy serves precisely the function of the designation of a devisee in a will. Similar to a will: (i) the interest of a beneficiary is ambulatory non-existent until death (ii) policy is revocable until the death of the policy-holder Pensions Accounts all pension accounts contain will substitutes 18

b.

(i)

beneficiary designation that passes the owners interest to the person of his choice in the event of death prior to exhausting the accounts in its retirement payout phase

c.

Bank, Brokerage, and Mutual Fund Accounts in its pure form a bank-operated will substitutes are accounts over which the depositor retains explicit lifetime dominion while designating beneficiaries to take on his death. (POD) (i) joint bank accounts an impure will substitute because looks like a gift. If the account is joint it supposedly creates a present interest in donee (no longer an ambulatory interest) In NY it is a prima facie case that the creator made a gift of of the amount on deposit the burden is on the estate to establish that no gift existed and the account was open for convenience (ii) treasury bonds/securities POD/Totten trusts- testamentary in nature, these transfers crate ambulatory interest revocable interest Revocable Inter Vivos Trust the owner who retains both the equitable life interest and the power to alter and revoke the beneficiary designation may use the trust to achieve testation under either trust or the will the interest of the beneficiary is both revocable and ambulatory settlor may be the beneficiary of the life estate, trustee, and retain the power of revocation (to avoid merger another beneficiary must be present) unlike a will, the creation of a trust involves a present transfer of property interests in the trust corpus (or res) the trust may be comprised of any property (real or personal, or securities) (i) Pour-over Wills a devise where a will devises the residue of his estate to the trustee of his inter vivos trust. allows to merge assets upon death (the testamentary estate, insurance proceeds, and other substitutes) Gifts Causa Mortis gifts made in apprehension of imminent death revocable if the donor revokes prior to death, or revoked if the donor survives Imperfect Will Substitutes ordinarily effect lifetime transfers, but where the title is taken jointly and upon acquisition the interest of the beneficiary is neither revocable nor ambulatory (but present) (i) joint tenancy (or tenancy by entirety) although the title vests immediately and the interest may not be unilaterally extinguished, the right of survivorship entitles the survivor to the whole interest in property

d.

e.

f.

VII

Interpretation of Wills

Mistaken or Ambiguous Language in Wills a. Traditional Rule the majority of jurisdictions still follow two traditional rules (i) the plain meaning rule also known as no extrinsic evidence rule. Extrinsic evidence may be admitted to resolve some ambiguities, but the plain meaning of the 19

(ii)

words in the will cannot be disturbed by evidence that another meaning was intended. the plain meaning attaches to the words of the will some court will look for devices to escape the plain meaning rule, some exceptions include: (a) personal usage an extrinsic evidence may be permitted to prove testator attached a different, personal meaning to the term used in the will (b) patent vs. latent ambiguity some court will distinguish between patent and latent ambiguity and allow extrinsic evidence in instances of latent ambiguities wills where two beneficiaries would qualify for a disposition where two properties fit the description of a gift devised in the will historically no extrinsic evidence was allowed for facial (patent) ambiguities NY court will allow extrinsic evidence regardless of whether ambiguity is latent or patent (c) misdescription a mistake in the detailed description of a gift (technically a latent ambiguity), where a mistake can be stricken or disregarded and he gift remains identifiable the gift stands disposition of a 23 Blackacre in NY will stand even if testator owns 32 Blackacre in NY; assuming thats the only property she owes in NY, the gift is identifiable if the mistaken description can be ignored. NY recognizes misdescription theory (physical identity) (d) gifts by implication where the dispositive provision does not provide for a contingency (that actually occurs), some courts reserve to the doctrine of probable intent. the court will study the extrinsic evidence (family circumstances) and the testamentary disposition. Then, the court steps into testators shoes and makes a decision the testator would most likely have made very limited in application in NY, must be compelled by the contents of the will no reformation rule traditionally reformation of wills was not allowed. Reformation is not interpretation but an actual change of the will to conform to the intent; the will is then enforced as corrected an equitable remedy of legal instruments. NY allows reformation in very limited circumstances: (a) Tax purposes as authorized by IRS charitable remainder trusts are subject to taxation without the requisite statutory language; thus, language will be supplied (b) Upon mutual consent of the parties (c) In re Snyde: wrong signatures on mutual wills where the mistake is patent and the intent of the parties is facially evident

B. Death of a Beneficiary Prior to Testator if a devisee does not survive the testator, the devise lapses (it fails). The general rule is no transfer may be made to a deceased person. Unless specified in the will all devices are conditional upon survival a. Effects of a Lapse under Common Law Default Rule 20

(i) (ii) (iii)

(v)

any pre-residuary gift will lapse into the residuary includes specific, demonstrative or general devise if the devise of the entire residue lapses, because the sole residuary devisee or all residuary devisees predecease the testator the heirs of the testator take in intestacy (quite often it would be the same people). class gifts if the devise is to a class of persons, and one member of the class predeceases the testator, the surviving members of the class divide the gift if the class is identified by name, in NY the member who predeceased (his estate) nonetheless takes. (To my children: John Jack and Jen) void devise where the devisee is dead at the time of the will is executed, or the devisee is a dog or cat or some other ineligible taker, the devise is void. the transfer to pets may be achieved through a trust

b.

Anti-lapse Statute the statute does not prevent lapse of the devise, it merely substitutes other beneficiaries (usually issue) for the dead beneficiary if requirements are met. (i) In general, a typical anti-lapse statute provides that if devisee is of a special relationship to the testator and is survived by issue who survive the testator, the issue is substituted for predeceased devisee. an anti-lapse statute applies to a lapsed devise only if devisee bears a particular relationship to the testator specified in the statute anti-lapse statute, supersedes the common law where applicable, is also a default; it applies unless the testator specifies its inapplicability if a testator states that the anti-lapse statute does not apply and does not provide an alternative, the common law default rules govern. (ii) NY EPTL 3-3.3: Anti-lapse Statute unless the will provides otherwise, (a) Wills Prior to 9/1/1992: Whenever the disposition is made to testators issue or brother or sister and such beneficiary dies during the lifetime of the testator leaving issue surviving such testator - the disposition will not lapse and will vest in surviving issue per sterpes (b) Wills Post 9/1/1992: Whenever the disposition is made to testators issue or brother or sister and such beneficiary dies during the lifetime of the testator leaving issue surviving such testator - the disposition will not lapse and will vest in surviving issue by representation. dispositions made in (a) and (b) if made to issue, brothers, sisters as a class are treated as if they were made to devisees by their individual names no benefit is conferred to surviving issue of a devisee who died before execution of the will if disposition is to a class. if the gift is made to brothers/issue as a class the issue of the devisee takes only if the devisee had survived the execution NY EPTL 3-3.4: Anti-lapse statute is a default rule. If the residuary disposition is ineffective in part and the anti-lapse statute is not applicable (due to testators indication), and no alternative disposition is provided, such disposition will vest in the remaining residuary beneficiaries. requirement of survivorship: the majority of cases hold that an express requirement of survivorship (if she survives me) states an intent that the anti-lapse statute not apply (gift will not vest in devisees issue) NY: language if she survives me is insufficient to overrule the anti-lapse statute. Testator must expressly state that the gift shall lapse if she does not survive me 21

(iii)

Witness-Beneficiary a. EPTL 3-3.2 Competence of Attesting Witnesses-Beneficiaries: (i) An attesting witness to a will who benefits under the same will by disposition or appointment of property is a competent witness and compellable to testify as to the execution as if no disposition or appointment has been made. (a) any such disposition or appointment to the witness is void unless: at the time of execution there are at least two other attesting witnesses to the will not benefiting from the will. if one of the two other witnesses is benefiting from the will, he can not renounce for purposes of competence (b) subject to (a) any such disposition or appointment to the witness is effective unless: at the time of probate the will can not be probated without the testimony of the witness-beneficiary (c) where a witness-beneficiary is also an intestate distributee, the intestate share may not exceed the deposition to the witness in the will. most states abolished the witness-beneficiary statutes as ineffective and too technical. NY still has the statute Ademption a. ademption by extinction where a specific devise in a will does not exist at probate, the property is deemed to adeem if not owed by the testator at death (a) specific devises the doctrine of ademption applies only to specific gifts. I give my NY apartment, if apartment is not owned by the testator it has adeemed by extinction stock in closely held family corporations is deemed specific legacy any disposition of publicly-traded securities that is identified as my stock in is a specific gift (b) general devises a gift of a general benefit and not a particular benefit, it never adeems. I give $100.000 this gift without more is payable out of general proceeds NY Rule: a gift of a publicly traded security without identifying is treated as a general gift and is satisfied out of general proceeds if it does not exist in estate I give 1000 IBM shares, if it is not in the estate, the value of the securities is assessed at the time of death (c) demonstrative devise a hybrid devise: general gift from a specified source; demonstrative gifts do not adeem. If the testator does not owe the source from which to receive the general gift, the executor must sell other assets to satisfy the devise. I give $100.000 from the sale of my GM stock if no/not enough GM stock exists, the executor must sell other assets to produce $100,000 the source is identified.

VIII

Rights of a Surviving Spouse

A. Introduction a. Title Theory all but eight states have title theory; a common law theory where husband and wife own separately all property each acquires 22

b.

items one spouse has agreed to put into joint ownership with the other are owned jointly the title theory states impose a duty of support during lifetime (maintenance in cases of divorce) or at death (equitable distribution of marital property (not 50/50)) elective share is a mechanism of support NY is a title or separate property jurisdiction Community Property husband an wife own all acquisitions from earnings after marriage in equal undivided shares death of one spouse dissolves the community; deceased spouse owns and has testamentary power over only his or her one-half community share only items purchased with the earnings of one spouse would belong to both, this would not include inheritance by one spouse. property purchased prior to the marriage is not community property neither spouse may unilaterally transfer community property to a third party

B.

Elective Share a. Property Subject to Elective Share the spouse is entitled to one-third of decedents probate estate. The assessment of the probate includes all but one (life insurance) will substitutes. i. EPTL 5-3.1: personal property- New York statute sets side the personal property for the benefit of surviving souse and issue under 21, such property is not counted towards the net probate estate. (a) all housekeeping utensils, musical instruments, furniture, appliances not exceeding in aggregate value of $10,000 (b) family bible, pictures, video tapes, books, etc. not exceeding the value of $1,000 (c) domestic animals and food for 60 days not exceeding $15,000 (d) one motor vehicle not exceeding $15,000 (e) money or other personal property not exceeding $15,000 the amount set aside by the statute may amount to approximately $56,000 (not calculated for purposes of the elective share) set-aside property is completely exempt from creditors ii. EPTL 5-1.1 (A) - a personal right is given to a surviving spouse to elect against the will if the share under the instrument is less then the statutory minimum allotted to a surviving spouse. the right is personal and can not be exercised by the surviving spouses representative the surviving spouses guardian or executor may elect against a will due to spouses incapacity the spouse electing against the will is treated as predeceased for purposes of the subsequent will probate; she forfeits her testamentary disposition. (a) EPTL 5-1.1(a) applies to decedents who died after 1992 the pecuniary amount equal to or greater then: (1) $50,000; or (2) if capital value of net estate is less then $50,000, then such capital value; or (3) 1/3 of the net estate most likely the election will always be in favor of the one-third of the estate (b) Death prior to 1992 the surviving spouse is entitled to: 23

(1)

(2) b.

1/3 of elective share estate if survived by issue the net estate is calculated differently than EPTL 51.1 contemplates life insurance, government bonds and pension funds were not calculated for purposes of elective share if no surviving issue

Elective Share Estate the estate is calculated to include: (1) probate property (everything disposed of by the will) (2) intestate property (property not within the scope of the will) (3) the testamentary substitutes (EPTL 5-1.1-A (b)) decedents property is calculated regardless of where it is located Testamentary Substitutes included in the Elective Share Estate under EPTL 5-1.1-A (b) any interest passing absolutely to a third party (and to the spouse, for purposes of credit) i. ii. Gifts Causa Mortis Irrevocable Gifts made within a year of death (a) Exception: gifts made prior to marriage gifts made under IRS Code 2053: annual exclusion to as many person as desired of approximately $12,000 annually (b) Exception: unlimited transfer to medical or educational facility untaxable in any amount must be paid to the provider directly (c) gifts to charities are included in elective share estate Totten Trusts and Joint Bank Accounts and Tenancies by the Entirety (a) amount actually contributed by the decedent; or (b) of the whole amount if created after the marriage if a post-marriage joint tenancy existed between a decedent and a third party a surviving spouse must prove the amount contributed by the decedent (consideration furnished test) if a joint tenancy between the decedent and a third party existed prior to the marriage, the consideration furnished test still applies, but the surviving spouse is entitled to half of the interest in that joint tenancy. all property with the right of survivorship are included government bond or jointly registered securities (c) if the surviving spouse is the sole beneficiary, she takes the whole amount and only half is credited against her share initial burden is on the estate to prove the decedents intent was not joint ownership but mere convenience burden is then shifted on the spouse to prove greater contribution to the account Any disposition in contractual arrangements (a) revocable lifetime trust where the power to revoke/consume/invade/dispose of a principal is retained by the decedent; 24

c.

iii. v.

vi.

vii.

revocable trusts may be created prior to marriage (b) irrevocable trusts only included if created after the marriage only if created after 1992 decedent retains income for life (c) actual contractual arrangement some question as to whether decedents interest in a contract is calculated in the elective share estate Pension Funds (a) Exception: if the pension fund is qualified (i.e. 401K) it is treated as a joint bank account and only 50% - if surviving spouse is the beneficiary under the policy if the surviving spouse is not a beneficiary under the policy, the whole amount is included in the elective share estate

viii.

d.

General Power Presently Exercisable (a) a general power presently exercisable over property makes the possessor the absolute owner and is calculated for purposes of the elective share estate as a testamentary substitute either held at death by the decedent; or conveyed within a year of death ix. Securities Registered T/O/D or P/O/D US Savings Bonds are included where the federal law preempts the parts of EPTL, and the payments are made to beneficiaries under the bonds, the surviving spouse has remedial action against the beneficiaries ratable contribution will be made by all who have an interest in decedents estate Notice a spouse seeking to elect against the will must give notice i. within six months of issuance of letters to the beneficiaries by the executor; but ii. not later than two years after the decedents death

C.

Waiver a. A spouse may waive her right to elect against any or particular will (or not to treat a particular trust a testamentary substitute), at any time during the lifetime. b. To be effective the waiver or release must be: (1) in writing; and (2) subscribed by the maker thereof; and (3) and acknowledged in the manner required for conveyance of property notarized witnessed c. A waiver is valid even if executed: (i) before (prenuptial) or after marriage (postnuptial) (ii) at any time (iii) unilateral (by maker) or bilateral (by both spouses (iv) with or without consideration (vi) absolute or conditional d. A waiver may be challenged on the grounds of: (i) fraud per se where one party affirmatively and intentionally mislead the other 25

(ii) (iii) (iv) D.

failure to disclose all assets lack of independent legal counsel NY Rule [Grief]: if a spouse can show a specific fact-based inequality the burden is shifted to the estate to demonstrate no overreaching

Disqualification of a Spouse a. EPTL 5-1.2: A spouse is deemed disqualified for purposes of intestacy, elective share, and family exemption if: (i) a final decree of a divorce/annulment/dissolution on the grounds of absence is issued and recognized by the jurisdiction of the state at the time of decedents death (ii) marriage was void because incestuous/bigamous/ or prohibited (iii) the spouse had procured outside the state a final decree or judgment of divorce/annulment/nullification/dissolution of marriage that is deemed invalid in the state of NY disqualification by estoppel (iv) spouse abandoned the deceased spouse and such abandonment continued until death (v) spouse who had a duty and the means to support the spouse and has not done so until the death unless the duty was resumed and continued until death Revocatory Effect of Divorce/Annulment/Nullity of Marriage a. EPTL 5-1.4: if will is not changed after the divorce, any disposition or appointment of property made by the will to the former spouse and any provision naming the spouse as executor/trustee/ is revoked by operation of law; unless, the will expressly provides otherwise if not stated otherwise, divorced spouse is treated as predeceased only applicable to immediate divorce of the testator and not to a divorce of a family member to whom a disposition is made b. a provision revoked by divorce, should be revived by remarriage to the former spouse the EPTL 5-1.4 applies to wills only and does not apply to will substitutes No Forced Share for Children a. In NY, a decedent is not required by law to provide for his children in the will, even if they are dependant. b. Revocatory Effect of an After-born see above on pages 16-17 the exclusion of a newly-born child is treated as a mistake (child is allowed to take in intestacy)

E.

F.

IX.

Trusts
A. Introduction a. Trust a fiduciary relationship in which a trustee holds legal title to specific property to manage, invest and safeguard the assets for the benefit of designated beneficiaries who hold equitable title. b. Types of Trusts the trusts are usually classified into three categories: (i) express trusts arise through property owners expressed intentions to create a trust relationship with respect to property (ii) resulting trust usually arises from presumed intention of the property owner 26

(iii) B.

constructive trust not really a trust, since these trusts do not integrate an element of intent, but a useful equitable remedy in cases involving fraud and unjust enrichment

Express Trusts a. An express trust formally requires a settlor who delivers legal title to the trustee with intention to create a trust to be held for the benefit of designated beneficiaries. a trust will stand so long as the purpose is legal no consideration is required to form a trust express trust may be an inter vivos or testamentary (if testamentary express trust, the requirement of property is satisfied at death (Parella: advisable to use some property, a $20 for formality purposes) (i) express trusts are further classified as: (1) private trusts - trust that has one or more definite and ascertainable persons as beneficiaries where the income is paid to specifically identified individual or class EPTL 7-1.16: lifetime trusts are irrevocable unless expressly provide that are revocable (revocation/amendment may be accomplished via a will) (2) charitable trusts a trust for a purpose that is considered to benefit the public at large and can not be for the benefit of identifiable individuals upon whom the settlor wishes to confer a private benefit. motive of the settlor is irrelevant, what matters is the objective purpose of the trust (relief of poverty, advancement of education or religion, health or governmental administrative purposes) charitable trusts are exempt from the rule of perpetuities cy pres powers are applicable to charitable trusts ( where the purpose of a charitable trust becomes impossible or impracticable to fulfill it literally, the court will examine the trust for settlors general purpose and enforce it accordingly) cy pres powers will not apply if court finds no general purpose or the gift is specific (ii) discriminatory trusts discriminatory trusts will be stricken. Although private discriminatory action is not per se illegal, courts will deny probate in order to avoid the requisite state action for purposes of 14th Amendment claim.

b.

Delivery without delivery of legal title in the trust assets to the trustee, a mere expression of intent to create a trust has no legal consequence (i) lifetime trusts only valid upon transfer of assets into the trust (must be funded). titled assets must be formally transferred to the trustee (deeds, stock certificates and documents evidencing ownership) settlor/trustee must register title in the name of the trust (the deed need not mention the trust) all other assets may be transferred by a valid assignment and detailed description of property a mere recital of assignment, without more is ineffective for purposes of delivery 27

(ii)

delivery of real property must be accompanied by writing satisfactory to the statute of frauds EPTL 7-1.15: Every estate property may be disposed of by lifetime trust testamentary trusts delivery occurs upon the will taking effect (upon death), however it is nonetheless wise to make a nominal delivery of a $20. a trust always requires to have property subject to equitable duties

c.

Trustee any designated individual may serve as a trustee if is of legal age and is not incapacitated. A trust will not fail for the want of a trustee. (i) Trustees Legal Title unless the trust also names the trustee as a beneficiary, the trustee only holds a legal title to the property therein. Upon trustees death or resignation, or if no trustee has been named, the Surrogate Court will appoint one. upon termination of the trust, the legal title to the assets vests in the beneficiaries (no need to re-convey) if two or more trustees are named, they hold legal title in joint tenancy (ii) The Merger Doctrine - equitable and legal titles will merge where the trust only designates a sole trustee who is also a sole beneficiary. Thus, no trust occurs but the conveyance is an outright gift. (iii) Anti-Merger Statute EPTL 7-1.1: A trust is not merged or invalided because a person (including the settlor) is the sole trustee and sole current beneficiary, as long as at least one other person who holds a beneficial interest in the property, such as vested or contingent remainder interest Intention to Create a Trust for a trust to stand the language must clearly express settlors intention to create an equitable duty in respect to the property. (i) Precatory Language language evidencing a mere desire or an aspiration creates a gift to the beneficiary and is not a transfer of a legal title to a trustee. [Ex: The property to A, I would like him to give it to B] no black letter law dealing with precatory language ( assessed on ad hock basis) trust requires a fiduciary duty to be mandatory, not merely desirable (a) Ambivalent Language another form of precatory language but a bit uncertain it is my wish and desire does not create a mandatory obligation some courts found language such as I desire, I request meant to be an enforceable obligation (b) Motive the settlor must impose an enforceable obligation on the transferee. An expression of a motive for the transfer will not suffice to create such obligation to my sister so she will have sufficient funds to (ii) Expressed Intent expression of intent must be sufficiently definite that a court can enforce it, particularly the description of the trust property, the beneficiaries, and their interest. (a) Term Trust use of the term will not necessarily create a trust, and its omission will not necessarily preclude its finding (b) Trust Terms where the trust lacks terms such as duration, disposition of property or does not give trustee any active duties to perform, the trust is known as passive or dry trust and property passes directly to the designated beneficiary as an outright gift

d.

C.

Formalities of Creation and Revocation of Trusts 28

a.

Writing Requirement EPTL 7-1.17: All lifetime trusts must be in writing, signed by the settlor and at least one trustee (unless the settlor is the sole trustee), and either (i) acknowledged before notary public; or (ii) executed in the presence of two witnesses who also must affix their signatures contracts to create a trust in the future, whether of real or personal property, must be in writing and signed by the creator a lifetime trust is irrevocable by the settlor unless the power to amend or revoke the trust is expressly reserved in the instrument Amendment or Revocation EPTL 7-1.16: Any amendment or revocation authorized by the revocable trust must be in writing and signed, and unless otherwise provided by the trust instrument, must be acknowledged or witnessed in the manner required for creation of trust. written notice of amendment and revocation must be delivered to the trustee within a reasonable time failure to give notice does not affect either the validity or effective date of the amendment or revocation

b.

D.

Transferability of Beneficiarys Interests a. Spendthrift Trust a trust in which, by statue or more often by virtue of the terms of the trust, the beneficiary is unable voluntarily or involuntarily to transfer his or her interest in the trust. the beneficiary can not sell, assign or give away his right to future income or capital the beneficiarys creditors are unable to collect or attach such rights created to provide a fund for maintenance of the beneficiary which will be secure against his own improvidence (i) Statutory Spendthrift Rule EPTL7-1.5(a): In NY, all trust income interests are given spendthrift protection by statute, in absence of express provision to the contrary. once the income is distributed to the beneficiary, he may do with it what he wishes (and only then is reachable by creditors) but creditors in NY may not attach or garnish the trust income in most other states the settlor must expressly indicated that the spendthrift protection is integrated into the trust (ii) Express Authorization of Transferability EPTL7-1.5(a) 1: a settlor may chose to override the statutory spendthrift rule by expressly authorizing the transfer of a trust income. if authorized, the income is subject to voluntary and involuntary transfer (may be reached by creditors) (iii) Trust Corpus and Interest the statutory spendthrift rule applies only to trust income, not to interest or principal. Remainder interests in corpus can be transferred unless provision is inserted expressly prohibiting such transfer.

b.

Exceptions to Spendthrift Trusts (i) Provider of Necessities a creditor who furnishes necessities (food, clothing, shelter, medical care etc.) can reach the beneficiarys income interest in a trust by appropriate judicial process

29

(ii)

NY Excess Income Rule EPTL7-3.4: the income in excess of the sum necessary for the education and support of the beneficiary is subject to claim of creditor. the beneficiarys station in life and income from other sources are to be considered in making the determination of reasonable need 7-3.4 is the last resort remedy and the creditor must have exhausted all legal remedies to no avail creditors can not invoke 7-3.4 without first going after the CPLR 10% levy providers of necessity and claimants of alimony and child support need not prove excess income (they have general standing) Child Support and Alimony EPTL 7-1.5 (d): a beneficiarys income interest can be reached in a suit to enforce a child support or alimony obligation. a trust income may be assigned as part of alimony or child support Federal Tax Liens the federal government may assert a tax lien against a trust beneficiarys income interests Judgment Creditors In NY judgment creditors are entitled to levy upon 10% of the in come due a debtor-beneficiary under the spendthrift trust. a creditor must first resort to the 10% levy and only then can proceed under 7-3.4

(iii)

(iv) (v)

E.

Settlor as Beneficiary No Spendthrift Protection (i) EPTL7-3.1 a disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator property owner cannot use a spendthrift trust to insulate his assets from the reach of the present or future creditors if the self-settled trust contains a spendthrift clause, the settlors interest may nonetheless be assigned and reached by creditors (ii) Revocable Trusts if the settlor reserves the power to revoke a trust under which he is also a beneficiary, the settlor is treated as the owner of the trust property as far as his creditors and a spouse electing against the will are concerned creditors may reach the income and assets in its totality (iii) Irrevocable Trusts if the trust is irrevocable and the settlor retains some but not all of the beneficial interest in the trust, his creditors can reach the full amount of the interest retained by the settlor, but no more. where the settlor only receives a lifetime income, the whole lifetime income may be reached if the conveyance (in form of an irrevocable trust) was fraudulent, the creditors may reach the entire trust property that was transferred with an intent to defraud creditors (iv) Remainder Interests there is no statute or other rule prohibiting a remainderman from transferring or assigning his interest in the trust principal, the creditors are not prohibited from reaching the remainder interest. remainder interests are freely transferable, unless the trust contains a spendthrift clause applicable to such interests Discretionary Trusts a. Discretionary Trust distributions of income are at the trustees discretion. The trustee may in his discretion distribute so much of the trust of the trust income to the beneficiaries as he deems appropriate. 30

c.

b.

under a mandatory trust the trustee must distribute all trust income to the beneficiary according to a set schedule Creditors Rights under Discretionary Trust a creditor can not reach a beneficiarys interest in discretionary trust unless and until the trustee decides to exercise his discretion to distribute income to the beneficiary. once a trustee exercises his discretion and makes a distribution, the beneficiary becomes entitled to income; creditors may levy under above exceptions. if the trustee decides to distribute income, a judgment against the beneficiary must be satisfied at least at 10% rate

F.

Supplemental Needs Trust a. Supplemental Needs Trust EPTL7-1.12: a discretionary trust established for the benefit of a person with sever and chronic or persistent disability. The trustee may NOT expend or distribute trust assets in any way that may supplant, impair, or diminish government benefits or assistance for which the beneficiary is eligible. the trust will not disqualify person for Medicaid eligibility the trust may not be claimed by the governmental agency for service provided the purpose of the trust is to supplement the needs of a disabled beneficiary with services not provided by the state

X.

Termination Revocation and Administration of Trusts

A. Termination a. Means of Termination there are few possible ways a trust may terminate. (i) termination according to trusts terms (ii) termination of trust by settlor (iii) termination of trust by beneficiaries b. Termination According to Trusts Terms a trust will terminate automatically at the expiration of the time specified in the instrument. If there is no direction that the corpus to be paid out to designated persons, the trustee holds on a resulting trust for settlor or her successors in title. Termination of Trust by Settlor (i) Revocable Trusts a revocable trust may be terminated at anytime. all trusts (except for Totten Trusts and bank accounts) are irrevocable by the settlor unless the power to revoke is expressly reserved (ii) Irrevocable Trusts EPTL7-1.9: if the settlor and all beneficiaries consent, a trust can be revoked or amended even though it is a discretionary trust or spendthrift trust. revocation or amendment must be acknowledged before a notary public the statutory right to revoke the trust with the beneficiaries consent exists even if the trust states that it is irrevocable (a) All Beneficiaries Must Be Sui Juris consent of all beneficiaries is required. If any beneficiary (whether of a vested or contingent interest is incompetent or a minor, the trust can not be revoked the settlor can terminate the trust with the consent of all persons beneficially interested in the trust. 31

c.

for purposes of termination, the class of interest holders identified as my heirs do not have a beneficial interest and the settlor can terminate the trust (assuming all adult beneficiaries in being consent to termination)

B.

Administration of Trusts a. NY Fiduciary Powers Act lists all the powers a trustee has and may exercise without a court order and without express authorization in trust terms i. Trustee has a power to: 1. Sell real or personal property at public or private auction specific testamentary legacies can not be sold for purposes of investment 2. Mortgage property 3. Lease property for up to 10 years 4. Make ordinary repairs 5. Contest, compromise and settle claims 6. Distribute up to $10,000 to minor via his parent or guardian ii. Unless other wise authorized, trustee can not: 1. Borrow money 2. Continue a business 3. Make extraordinary repairs or improvements 4. Abandon or demolish real property 5. Keep funds uninvested 6. Pay debts barred by statute of limitation or suspended by bankruptcy 7. Commingle funds

b.

Personal Liability a trustee may be personally liable for the losses suffered by the trust if the conduct was not authorized by either trust terms or NYFPA i. Exculpatory Clauses a clause that removes or limits liability for ordinary negligence or a clause that modifies the trustees duty to file accounting 1. testamentary trusts such exculpatory causes are invalid by NY statute 2. lifetime trusts exculpatory clauses are perfectly valid in lifetime trusts ii. Self-Dealing prohibition against trustee entering into transaction with trust property that benefit the trustee in some way. trustee can not buy or sell assets for himself trustee can not borrow trust funds trustee can not loan funds o the trust, any interest earned on such loan belongs to the trust. Any security interest received in connection with the trust funds is invalid trustee can not profit from serving as a trustee except from compensation trustee has a duty to segregate trust assets from personal funds

c.

Beneficiarys Remedies if trustee breaches any fiduciary duty by self-dealing or exercising a power not given to the trustee in addition to bringing action to remove the trustee, beneficiary has option to: i. ratify the transaction and waive the breach of trust if assets appreciated in value; or ii. sue for resulting loss in a surcharge action. No Further Inquiry Rule - in the event of self-dealing, the courts will implement a no further inquiry rule (the breach of fiduciary duty is an 32

automatic wrong; good faith, reasonableness or fairness of terms is no defense d. Effects of Self-dealing Bona Fide Purchasers and creditors who relied on the trustees apparent ownership of the trust property are protected. Therefore, a BFP or a creditor who buys trust assets from the trust without knowing that she was dealing with a trust will retain title. even if the BFP had knowledge of the trustees status, she is protected if knew nothing of self-dealing indirect self-dealing: the self-dealing rules also apply to sales or loans to trustees relatives and business partners or associate, or entities with which has professional affiliation

C.

Trustees Investment Powers a. Uniform Prudent Investor Act trustee may make investments as would be required by prudent men of discretion and intelligence seeking reasonable income and preservation of capital i. Portfolio Theory - the Act is based on modern portfolio theory of investing and prudence is measured by the conduct of when the investment decision was made, no on the outcome or performance. ii. Custom-tailored Investment Strategy trustee is prudent so long as he operates off of the following considerations: general economic conditions possible effect of inflation or deflation the expected tax consequences of investment decisions or strategies role of each investment within overall trust portfolio the expected total return from income and capital gain need for liquidity any differing interest of income beneficiaries and remainderman b. Uniform Principal and Income Act under the UPIA (above) a trustee has a duty to diversify the trust portfolio. He is allowed to invest for total return without breaching his duty of fairness to income beneficiary vis--vis remainderman. The Uniform Principal and Income Act gives trustee an adjustment power. i. adjustment power a power to adjust total return between income and principal, and allocate capital gain to income. Trustee must consider following factors in exercising the adjustment power: purpose and expected duration of the trust intent of the settlor as to respective interests of the beneficiary the net amount of ordinary income and capital gain available for allocation circumstances of the beneficiaries the need for liquidity, regularity of income, and preservation and appreciation of capital any increase or decrease in value of the trust assets whether the trust gives the trustee the right/power to distribute principal effects of economic conditions and effect of inflation ad deflation, and anticipated tax consequences of an adjustment

XI.

Future Interests
33

A.

Future Interest Capable of Creation in O the Grantor: a. Three Categories: i. The possibility of reverter 1. accompanies only fee simple determinable 2. Ex: fee simple determinable depends on the language (Frank Sinatra conveys to Orwell so long as popcorn never conveyed on premises: F has possibility of reverter, while Orwell has fee simple determinable ii. The right of entry (the power of termination) 1. accompanies only fee simple subject to condition subsequent 2. Ex: R conveys to Rachel, but if coffee is ever consumed on premises, R has a right to reenter iii. The reversion 1. future interest that arises in O the grantor, who transfers less then what he has other then a defeasable fee (leftover) 2. Ex. O may carve out a term of lesser quantum (a life estate (to A for life) or a term of years (to B for 90 years)) Future Interest in Transferees if held by someone other then the grantor must fall into one of three categories a. A Vested Remainder (three species) i. the indefeasibly vested remainder ii. the vested remainder subject to total divestment (complete defeasance) iii. the vested remainder subject to open b. The Contingent Remainder (see infra) c. Executory Interests (two species) i. the shifting executory interest ii. the springing executory interest Distinguish Vested Remainders vs. Contingent Reminders a. What is a remainder? a future interest created in the grantee, that becomes possessory at the natural conclusion of the preceding life estate or a term of years. [Ex: Forest Gump is the proverbial remainderman remainderman is sociable, patient and polite (patiently waits for his term) i. remainderman never travels alone, will always accompany an estate of known fixed duration (usually a life estate or a term of years) 1. [Ex: To A for life, then to B: B is the remainderman, while the A has the life estate of a known fixed duration] ii. remainderman is patient and polite never follows a defeasable fee; if the interest is defeasable, the beneficiary of this misfortune is never a remainderman (usually an executory interest holder who takes in instances of a divestment) b. A remainder is vested if it is both created in ascertained person and is not subject to any condition precedent. c. A remainder is contingent if it is created in unascertained persons or is subject to a condition precedent, or both. i. Remainder is contingent if created in unborn or unascertained persons. [Ex: to A for life then to Bs first child: A is a live, B does not have any children, thus the remainder is contingent because the taker is yet to be born/identified] ii. Remainder is contingent if it is subject to condition precedent a condition is a condition precedent if it is a prerequisite to remaindermans taking. [Ex: condition precedent = 34

B.

C.

prerequisite; to A for life and if B had reached the age of 21 then to B (the age contingency is the prerequisite to Bs taking) B has a contingent remainder] D. Limitation on Contingent Remainders a. Rule of Destructibility of Contingent Remainders i. At common law, a contingent remainder would be destroyed if: 1. still contingent when the preceding estate has ended a. [Ex: to A for life, and if B had reached the age of 21 then to B. If A is dead and B is 19 years old the state of the title: i. historically at common law Bs contingent remainder would be destroyed. It was still contingent at the time the preceding estate had run its natural course. O or Os heir would take in fee simple absolute. ii. today the destructibility rule has been abolished. Today, if Bs interest is still contingent, Os heirs take subject to Bs springing executory interest. Once B reaches 21 he takes as Os interest is divested b. The Rule in Shellys Case i. At common law, the rule would apply in one setting only; O conveys to A for life, and on As death to As heirs take (A is still alive) 1. historically, at common law the fee simple would merge and A would take the fee simple absolute (the purpose of such disposition was to prevent A from freely alienating the land) 2. today the rule in Shellys case has been virtually abolished. a. Today when O conveys to A for life and then to his heirs: A has a life estate, As heirs have a contingent remainders, O has a reversion.

c. The Doctrine of Worthier Title (still viable in most states) i. O, who is alive tries to create a future interest in his own heirs. 1. [Ex: O (alive) conveys to A for life then to Os heirs: because of the doctrine of worthier title the contingent remainder in Os heirs is void because living dont have heirs. A has a life estate and O who is alive, has a reversion] 2. the doctrine of worthier title is a rule of construction and no longer a rule of law it is a rule of construction and grantors intent controls (unlike Shelly). If grantor states clearly to avoid Shelly, it will be successful. E. Distinguish Three Kinds of Vested Remainders from Each Other a. The Indefeasibly Vested Remainder i. The holder of an indefeasibly vested remainder is certain to acquire a fee simple absolute in the future with no conditions attached 1. [Ex: to A for life, remainder to B: Both A and B are alive, A has a life estate while B has an indefeasibly vested remainder. B is an identified taker and no strings attached to his taking. B or Bs estate will take upon natural termination of As life estate] b. The vested remainder subject to complete defeasance (subject to total divestment)

35

i. The remainderman exists his taking is not subject to any condition precedent (or a prerequisite); However, his right to possession could be cut short because of a condition subsequent. 1. The comma rule tells you that the condition is a condition subsequent. If it follows the language that is taken alone and is set off by commas or some other punctuation creates the vested remainder in the first place 2. [Ex: O conveys to A for life, remainder to B, provided however if B dies under the age of 25 then to C. (A is alive and B is 20: A has a life estate, B has a vested remainder subject to complete divestment because of the condition subsequent, C has a shifting executory interest) If B is under 25 at the time of As death, B still takes (age contingence is not a condition precedent. B must live to the age of 25 to retain the interest; otherwise, if B dies before reaching the age of 25, Bs heirs lose it all and Cs heirs will take)] O has a reversion. It is possible that neither C nor his heirs will exist when the condition subsequent is breached. c. The vested remainder subject to open. i. Reminder is vested in a group of takers (a class), if at least one of whom is qualified to take possession; however, each class members share is subject to partial diminution. Since additional takers not yet ascertained, may still qualify as class members. 1. [Ex: to A for life then to Bs children: (A is alive, B has two kids) A has a life estate, while Bs children have a vested remainder subject to open, may be decreased as B has more kids.] ii. A class is either open or it is closed. 1. Class is open if it is possible for others to enter 2. Class is closed if the maximum membership was reached and person born after are excluded iii. When is the class is closed? 1. Common Law Rule of Convenience class closes whenever any member can demand possession. a. [Ex: in example above, the class will close at Bs death, or at As death even if Bs alive. On As death, Bs children already alive may demand possession] 2. Exception to Rule of Convenience The Womb Rule: The child of B in the womb at As death will get a chance to share with Bs living children F. Distinguish All Remainders vs. Executory Interests a. Remainder vs. Executory Interest i. Executory Interest is a future interest created in a transferee, which is not a remainder and which takes effect by either: 1. cutting short some interest in another person shifting executory interest 2. cutting short the grantors interest springing executory interest a. Shifting Executory Interest always follows a defeasable fee and cuts short someone other then the grantor. [Ex: to A and his heirs, but if B returns from Canada sometime next year then to B and her heirs: B is the executioner, who descends on As otherwise potentially limitless interest. B has a shifting executory interest.]. B does not have a remainder, because remainder will never follow the defeasable fee (the fee must run its natural course) A has a fee simple subject to Bs shifting executory interest. 3. the conveyance does not violate the Rule against Perpetuities because there is a 1 year limit on As power.

36

a. [Ex: to A, but if A uses the land for non-residential purposes at any time during next twenty years, then to B: Bs interest is shifting executory interest. A has a fee simple, subject to Bs shifting executory interest] b. the RAP is not violated because there is a 20-year limit on Bs potential power. The interest will either vest or fail within the life in being of A. ii. Springing Executory Interest cuts off the grantors interest. 1. [Ex: to A when he marries. O-the-grantor has a fee simple subject to As springing executory interest which has the power to divest Os fee simple absolute at the time of marriage] a. Does not violate the RAP, because during As life well know whether the condition is met or not. 2. [Ex: to A if and when he becomes a lawyer; A is in high school. A has a springing executory interest, O has a fee simple subject to As springing executory interest] a. Does not violate RAP because by the end of As life it will be apparent whether the condition was met or not. G. The Rule Against of Perpetuities Certain kinds of future interests are void, if there is any possibility, however remote that a given interest may vest more then 21 years after the measuring life. a. Four Step Test: i. Determine Which Future Interest Had Been Created By Your Conveyance? 1. The RAP potentially applies only to: a. Contingent remainders b. Executory interests, and c. Certain kinds of vested remainders subject to open The RAP does not apply to any future interest created in O the grantor (possibility of reverter/ right of entry/ reversion) The RAP will not apply to indefeasibly vested remainders or vested remainder subject to complete defeasance (because they are vested, but determine whether alienation had been impermissibly suspended) [Ex: to A for life, then to As children: (A is alive but has no children) the yet unborn kids have a contingent remainder RAP may apply (see step Two) ii. Identify Condition Precedent to the vesting of that interest (What has to happen before the future interest holder can take? iii. Find a measuring life. (Look for a person alive at the moment of the conveyance and ask whether that persons life or death is relevant to the conditions occurrence) 2. [Ex: in the above example A must bear and die for kids to take] iv. Will we know with certainty within 21 years of the measuring life if our future interest holder can or can not take? 3. Yes conveyance is good 4. No future interest is void a. [Ex: example above, at As death we will know if she leaves a child and the interest will vest] b. [Ex: to A for life, then to first of her children to reach the age of 30: (A is 70, the only child is B and is 29 year old] i. Four Steps: 1. ID the Remainder Contingent remainder in unknown taker (no one has reached the age of 30) 37

2. What are the conditions precedent for the interest to vest? (A must die and her child must reach 30) 3. Find measuring life: A is the measuring life. She must die for any of her child to reach 30 (the conveyance is not B specific. The grant did not say to A for life, then to B.) 4. Will we know for sure within 21 years after the death of our measuring life, if the future interest holder can take? NO (What if B 29-year-old dies at 29. Thereafter, A at 70 has another child (Fertile Octogenarian Rule) and A could die in labor. Today, we dont know whether the condition precedent will be satisfied within 21 years after As death. ii. The Result Contingent remainder is VOID. A has a life estate and O has a reversion. 1. Many shifting executory interests will violate the RAP an executory interest with no limit on the time within which it must vest will violate the RAP. 2. [Ex: to A and his heirs, so long as the land is used for farm purposes, and if the land seizes to be so used as a farm, then to B and his heirs.] Apply the Four Step Test: a. Classify the Future Interest B has a shifting executory interest. B becomes the beneficiary in event of As divestment b. What must happen for B to take? the land must be seized to be used for farm purposes. c. Find a measuring life - As life or death is relevant to vesting. A is the measuring life. d. Will we know with certainty that within 21 years after the death of the measuring life the interest will vest? NO, the condition may be breached hundreds of years after creation. 3. The Result - the future interest it void. Once the offensive and infirm future interest in B is invalidated, the result is to A and his heirs so long as the farm is used for farm purposes. A has a fee simple determinable, while O has the possibility of reverter. 4. NO RAP problem - the rule does not apply to future interests created in O-the grantor. b. The Two Principle Reform Efforts i. The Second Look Doctrine (the majority reform effort) the validity of any suspect future interest is determined on the basis of the facts as they now exist, at the conclusion of the measuring life. 1. The What If reasoning is eliminated do not ask what might happen to invalidate the suspect future interest. Today, you will wait and see the circumstances at the death of the measuring life. Then take a second look if the interest is definite to vest within 21 years. ii. Uniform Statutory Rule against Perpetuities- codified the common law doctrine, but also adds a 90 years of vesting period. 1. Both the Second Look and USRAP embrace cy pres if a given disposition violates the RAP, a court may reform it in a way that most closely matches the grantors intent while still complying with the RAP. 38

a. Court may redraft or recast an otherwise infirm conveyance, in a way that most closely enforces the intent. 2. Both Second Look Doctrine and USRAP any age contingency will automatically be reduced to 21 years (no more must live to the age of 30; will automatically be reduced to if she survives until 21)

39