Mastering Trusts and Estates

by Gail Levin Richmond and Don Castleman

Table of Contents — DRAFT VERSION

Table of Statutes Table of Regulations and Administrative Authorities Table of Restatements and Uniform Acts Table of Cases Series Editor’s Foreword Preface

Chapter 1 • Introduction to Trusts and Estates Roadmap A. Selecting the Time and Manner of Transmission B. Relevant Questions Checkpoints

Chapter 2 • Sources of Roadmap A. Chapter Overview B. Uniform Acts 1. Acts Related to Trusts and Estates 2. Organization of Uniform Code and Uniform Trust Code a. b. Uniform Trust Code 3. Focus of Book C. Restatements D. Federal Statutes E. State Statutes F. Judicial Decisions G. Multiple States’ Involvement Checkpoints

Chapter 3 • Terminology and Abbreviations Roadmap A. Chapter Overview B. Terminology and Potential Areas of Confusion

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1. by Extinction; Ademption by Satisfaction; Advancement 2. Augmented ; Elective Estate; Gross Estate; Probate Estate; Trust Estate 3. ; Devisee; Heir; ; Qualified Beneficiary 4. 5. Child; Descendant; Heir; Issue 6. ; Incorporation by Reference; Separate Writing 7. ; ; In Trust for Account; 8. Corpus; Principal; Res 9. Cy Pres; Interpretation; Modification; Reformation 10. Execution; Expression; Inducement 11. 12. Governing Instrument; Instrument 13. Grantor; Grantor Trust; 14. Representation 15. Revocation; Termination 16. Valid; Void; Voidable C. Abbreviations Checkpoints

Chapter 4 • Probate and Options for Avoiding It Roadmap A. Chapter Overview B. Probate C. Avoiding Probate 1. Pay on Death Accounts; In Trust for Accounts a. Terminology b. Single-Party and Multiple-Party Accounts c. Relationship of Parties in Multiple-Party Accounts d. Rights of Beneficiaries in Pay on Death Accounts e. Liability of Beneficiaries for Claims Against the Estate 2. Transfer on Death Accounts 3. Survivorship Tenancies a. Joint Tenancy with Right of Survivorship b. Tenancy by the Entirety 4. Life Insurance Beneficiary Designations 5. Annuities and Payments from Retirement Plans a. Annuities b. Retirement Plans c. Social Security Benefits 6. Inter Vivos Gifts 7. Inter Vivos Trusts Checkpoints

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Chapter 5 • Intestate Succession Roadmap A. Chapter Overview B. Terminology C. Property Distributed by Intestate Succession 1. In General 2. Rights of Creditors 3. Family Protection Statutes D. Statutes 1. Features 2. Limitations a. Division of Property b. Characteristics of Eligible Heirs c. Family Dynamics 3. Other Relevant Statutes E. Marital Relationships 1. Marriages 2. Domestic Partnerships 3. Spouse of Decedent’s Relative F. Lineal and Collateral Relationships 1. Lineal Relationships in General 2. Parent-Child Lineal Relationship a. Birth b. Adoption c. Assisted Reproduction or Gestational Surrogacy d. Nonmarital Birth e. Posthumous Birth 3. Remote Lineal Relationships 4. Collateral Relationships a. In General b. Half-Blood Statutes (1) Relationships Covered (2) Statutes (3) Limitations (4) Relevance of Relationships to Decedent’s Ancestor G. Ordering of Heirs and Share of Surviving Spouse 1. UPC a. Ordering Rules b. Surviving Spouse (1) Surviving Spouse Takes 100% (2) Surviving Spouse Takes Less Than 100% (3) Surviving Spouse Takes Nothing c. Other Heirs 2. State Variations H. Avoiding Escheat 1. Survival Requirement

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2. Fallback Rules I. Taking by Representation 1. Representation Rules 2. Applying Representation Rules a. Children and Their Descendants b. Collateral Relatives and Their Descendants c. Remote Relatives J. Degrees of Relationship K. Aliens L. Advancements 1. Application to Donee 2. Application to Deceased Donee 3. Application to Heirs in Different Priority Groups M. Loans to Heirs Checkpoints

Chapter 6 • Requirements for a Valid Will Roadmap A. Chapter Overview B. 1. Age 2. Mental Capacity a. Potential Challenges to Capacity b. Documents Establishing Capacity c. Witnesses Establishing Capacity d. No-Contest Provisions C. Validating an Invalid Will D. Testamentary Formalities 1. Written Will 2. 3. Signatures and Attestation a. Signatures b. The Presence Requirement 4. Placement of Signatures 5. Number and Qualification of Witnesses 6. Integration and Harmless Error E. Components of a Will 1. Format of a Will 2. Commonly Appearing Terms a. Introductory Language b. Statement of Residence c. Devises and Administrative Provisions d. Signature, Attestation, and Date e. Self-Proof

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3. Formalities and Admission to Probate Checkpoints

Chapter 7 • Categorizing Devises Roadmap A. Chapter Overview B. Language Used to Describe Devises C. Precatory Language D. Types of Devises 1. Specific 2. General 3. Demonstrative 4. Residuary Checkpoints

Chapter 8 • Amending, Revoking, and Reviving a Will Roadmap A. Chapter Overview B. Amending a Will 1. Codicil 2. Revocable Inter Vivos Trust 3. Acts of Independent Significance 4. Incorporation by Reference 5. Separate Writing 6. Distinguishing Between Incorporation by Reference and Separate Writing 7. Using Incorporation by Reference to Re-Establish a Revoked Trust C. Revoking a Will or Codicil 1. By a Writing a. In General b. Complete Disposition c. Inconsistency 2. By Act 3. By Change of Circumstances D. Reviving a Revoked Will or Codicil 1. By Revoking the Revocatory Document 2. Dependent Relative Revocation E. Timing Versus Importance of Inconsistent Documents F. Effect of Succession Agreements Checkpoints

Chapter 9 • Family Protection Statutes Roadmap A. Chapter Overview

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B. Homestead 1. UPC Homestead Allowance 2. UPC Constitutional Homestead Provision 3. State Provisions C. Exempt Property D. Family Allowance E. Pretermission 1. Pretermitted Spouse a. Qualifying as Pretermitted b. Computing and Satisfying the Spouse’s Share 2. Pretermitted Child a. Qualifying as Pretermitted b. Computing and Satisfying the Child’s Share F. 1. Computing the Augmented Estate a. Decedent’s Net Probate Estate b. Transfers the Decedent Made to Third Parties (1) Property Owned or Owned in Substance (2) Property the Decedent Transferred During Marriage (3) Property the Decedent Transferred Within Two Years of Death c. Transfers the Decedent Made to His Spouse d. Property the Surviving Spouse Owned or Transferred to Third Parties e. Exclusions, Overlaps, and Valuation 2. Computing the Elective Share 3. Funding the Elective Share 4. Elective Share and Other Spousal Rights G. H. I. Waiver of Spousal Rights 1. Overview 2. UPC Provisions Checkpoints

Chapter 10 • Introduction to Trusts Roadmap A. Chapter Overview B. Sources of Modern C. Terminology D. Types of Trusts 1. Express Trusts 2. Resulting Trusts 3. Constructive Trusts 4. Other Types of Trusts Checkpoints

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Chapter 11 • Creating an Express Trust Roadmap A. Chapter Overview B. Settlor Capacity C. Settlor Intent 1. Precatory Language 2. 3. Custodial Arrangement D. Beneficiary 1. Definite Beneficiary 2. Exceptions for Charitable Trusts and Certain Honorary Trusts E. with Duties F. Merger of Legal and Beneficial Interests Checkpoints

Chapter 12 • Trust Purpose, Formalities, and Funding Roadmap A. Chapter Overview B. Purpose C. Formalities 1. Inter Vivos Trust 2. 3. Secret or Semi-Secret Testamentary Trust D. Funding 1. Trust Principal 2. Trust in Futuro 3. Delivery Checkpoints

Chapter 13 • Trust Distribution Provisions Roadmap A. Chapter Overview B. Distributions by the Trustee 1. Mandatory Distributions of Income 2. Discretionary Distributions of Income 3. Distributions of Principal C. Third-Party Powers over Trust Principal D. Actions by the Settlor of a Revocable Trust 1. Power to Amend or Revoke 2. Requirements for Validly Exercising Power a. Capacity b. Formalities c. Trust with More Than One Settlor

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3. Effect of Power of Withdrawal Checkpoints

Chapter 14 • Specific Uses for Trusts Roadmap A. Chapter Overview B. Reasons for Creating a Trust 1. Privacy 2. Control Until Death or Incapacity 3. Flexibility 4. Professional Management 5. Avoiding Successive 6. Protecting Family Wealth 7. Avoiding 8. Beneficiary with Special Needs C. Trusts for the Care of Animals D. Trusts for a Noncharitable Purpose E. Trusts for Spouses 1. Trusts Qualifying for the Marital Deduction 2. Trusts Used in Satisfying the Elective Share F. Trusts Holding Life Insurance Policies G. Charitable Trusts 1. Beneficiary 2. Purpose 3. Cy Pres Checkpoints

Chapter 15 • Creditor Access to Trust Assets Roadmap A. Chapter Overview B. Creditors of the Settlor 1. Insolvent Settlor 2. Retained Power or Interest in Trust 3. Creditors of Settlor’s Estate 4. Asset Protection Trusts C. Creditors of a Beneficiary 1. Spendthrift Provisions a. Requirements for Spendthrift Provision b. Effect on Creditors and Beneficiaries c. Creditors with Access 2. Support Trusts 3. Discretionary Trusts 4. Forfeiture Provisions 5. Beneficiary with General Power of Appointment

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a. Power of Withdrawal b. Lapsing Power of Withdrawal D. Creditors of the Trustee Checkpoints

Chapter 16 • Modification, Reformation, and Termination Roadmap A. Chapter Overview B. Uniform Trust Code Provisions 1. Modification or Termination: Proceedings for Approval or Disapproval 2. Modification or Termination by Consent 3. Unanticipated Circumstances or Inability to Administer the Trust Effectively 4. Cy Pres 5. Uneconomic Trust 6. Reformation to Correct Mistakes 7. Modification to Achieve Settlor’s Tax Objectives 8. Combination and Division of Trusts C. Trust Decanting 1. Trusts for Which Decanting Is Permitted, Prohibited, or Restricted 2. Notice to Beneficiaries and Other Persons 3. Extent of the Fiduciary’s Power a. Expanded Distributive Discretion b. Limited Distributive Discretion Checkpoints

Chapter 17 • Interpreting Instruments and Rules of Construction Roadmap A. Chapter Overview B. Ambiguities and Other Interpretation Issues 1. Ambiguity 2. Devises or Trust Interests Based on Identity 3. Devises or Trust Interests Based on Class Characteristics 4. Devises or Trust Interests Based on Activity 5. Devises or Trust Interests Based on Indefinite Terminology 6. Devises or Trust Interests Administered in a Different State C. Class and Individual Gifts 1. Transfer to an Individual or to a Class 2. Qualifying for Class Membership 3. Share of Each Class Member 4. Transfers Using Both Individual and Class Terminology D. Rules of Construction Checkpoints

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Chapter 18 • Rules of Construction for Wills Roadmap A. Chapter Overview B. Property Owned at Death and After-Acquired Property C. Antilapse; Deceased Devisee; Class Gifts 1. Common Law and Statutes 2. Relevant Relationships 3. Devises to Individuals and to Classes 4. Substitute Takers 5. Effect of Survivorship Language 6. Language Naming an Alternate Taker 7. Residuary Devise D. Failure of Testamentary Provision E. Increase in Securities; Accessions 1. Definition of Securities 2. UPC Provisions a. Stock Splits, Stock Dividends, and Single-Entity Reorganizations b. Securities of Another Entity c. Securities Acquired Through a Plan of Investment d. Cash Dividends e. Other Situations 3. State Statutes F. Nonademption of Specific Devises 1. Language Used in Devise 2. UPC Provisions a. UPC §2-606(a) b.UPC §2-606(b) G. Nonexoneration H. Exercise of Power of Appointment I. Ademption by Satisfaction 1. Requirements 2. Application 3. Computing Partial Satisfaction 4. Comparing Ademption by Satisfaction and Ademption by Extinction 5. Comparing Ademption by Satisfaction and Advancement Checkpoints

Chapter 19 • Rules of Construction for Wills, Trusts, and Other Governing Instruments Roadmap A. Chapter Overview B. Survival by 120 Hours 1. Language of the Instrument 2. UPC Default Provisions a. 120-Hour Survival Requirement b. Exceptions to the 120-Hour Survival Requirement

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3. Provisions in the Governing Instrument 4. Deemed Failure to Survive 5. Alternative Taker C. D. Power of Appointment Specific Reference Requirement E. Construing Class Gifts 1. Terms of Relationship 2. Relatives by Marriage 3. Half-Blood Relationships 4. Class-Closing Rules F. Deceased Beneficiary G. Survivorship with Respect to Future Interests in Trust H. Class Gifts to Descendants and Similar Categories I. Representation J. Worthier-Title Doctrine Abolished K. Future Interests in Heirs L. Other Statutes 1. Survival 2. Relationships 3. Other Differences Checkpoints

Chapter 20 • Disqualifying Acts Roadmap A. Chapter Overview B. Marital Dissolution 1. Effect on Treatment as Surviving Spouse 2. Effect on Devises and Other Transfers to Former Spouse or Former Spouse’s Family a. Revocable Instrument b. Former Spouse c. Family of Former Spouse d. Effect of Remarriage C. Killer D. Disclaimers 1. Terminology 2. Interests and Powers That Can Be Disclaimed a. Fee Simple Ownership b. Interests in a Survivorship Tenancy c. Beneficial Interest in an Express Trust d. Ownership as a Beneficiary e. Parties to a Power of Appointment f. Power as a Fiduciary 3. Requirements for Disclaiming a. Eligibility b. Formalities

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c. Time Period for Disclaiming d. Disclaimer Valid for Federal Tax Purposes 4. Effective Date of Disclaimer 5. Taker of Disclaimed Property a. General Rules b. Acceleration of Future Interests c. Survivorship Tenancies E. F. Duress G. or Mistake H. Challenging Revocation I. Relationship to Lack of Capacity J. Spoliation or Alteration K. Remedies Checkpoints

Chapter 21 • Powers of Appointment Roadmap A. Chapter Overview B. Relevant Uniform Acts C. Terminology 1. Parties 2. General and Nongeneral Powers 3. Powers of Invasion and Ascertainable Standards 4. Powers of Invasion and Powers of Withdrawal 5. Power to Revoke and Powers of Appointment 6. Exclusionary and Nonexclusionary Powers 7. Presently Exercisable and Testamentary Powers D. Exercising the Power 1. Purpose 2. Manner of Appointee’s Enjoyment 3. Method of Exercise 4. Exercise in Favor of a Deceased Appointee 5. Disclaimer of Power or Property Subject to Power E. Elective Share 1. Computing the Power Holder’s Elective Estate 2. Valuing the Spouse’s Elective Share F. Creditor Access 1. Settlor’s Interest 2. Trust Beneficiary as Settlor 3. Trustee as Settlor G. Miscellaneous Powers of Appointment Issues 1. Rule Against Perpetuities 2. Federal Estate and Gift Taxes a. General and Nongeneral Powers

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b. Powers of Invasion c. Powers of Withdrawal d. Marital Deduction Checkpoints

Chapter 22 • Rule Against Perpetuities Roadmap A. Chapter Overview B. Historical Context C. Perceived Benefits of Avoiding Vesting D. Relevant Uniform Probate Code Provisions 1. Statutory Rule Against Perpetuities a. Application to Interests in Property b. Application to Powers of Appointment (1) Nontestamentary General Powers Subject to a Condition Precedent (2) Nontestamentary Limited Powers and Testamentary Powers 2. Nondonative Transfer Exception 3. Charity to Charity Exception 4. Other UPC Exceptions 5. Determining When Interest or Power Is Created 6. Distribution of Trust Property E. State Checkpoints

Chapter 23 • Claims, Expenses, and Distributions to Beneficiaries Roadmap A. Chapter Overview B. Expenses and Claims C. Abatement of Devises 1. Will Clauses 2. Statutory Defaults 3. Claims Against the Estate D. Tax Apportionment 1. Overview 2. Tax Apportionment Provisions 3. Applicable Federal Statutes E. Beneficiary Requests and Private Agreements 1. Beneficiary Requests 2. Private Agreements Checkpoints

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Chapter 24 • and Other Roadmap A. Chapter Overview B. Fiduciaries Other Than Trustees 1. Agent Under Power of Attorney a. Creation and Termination of Power of Attorney b. Agent’s Authority c. Agent’s Duties and Liability 2. Conservator or Guardian 3. Custodian for UTMA Account 4. Health Care Fiduciary 5. a. Powers b. Duties c. Liability C. Trustees 1. Powers 2. Duties 3. Liability a. Liability to Trust Beneficiaries (1) Exculpatory Language in Instrument (2) Consent, Release, or Ratification b. Liability to Third Parties c. Liability to Settlor Checkpoints

Chapter 25 • Income, Expense, and Investment Roadmap A. Chapter Overview B. Relevant Documents C. Overview of Accounting Principles 1. Accounting Period 2. Accounting Method D. Principal and Income: Probate Estate 1. Overview 2. Uniform Act Provisions E. Principal and Income: Property Held in Trust 1. Overview 2. General Uniform Act Provisions 3. Beginning and Ending an Income Interest 4. Allocation When Interest Begins and Ends 5. Trustee’s Power to Adjust 6. Allocation of Receipts During Trust Administration a. Distributions from an Entity Other Than a Trust or Estate b. Distributions from a Trust or Estate

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c. Activities Conducted by a Trustee d. Receipts Not Normally Apportioned e. Receipts Normally Apportioned 7. Allocation of Disbursements During Trust Administration F. Investing Trust Assets Checkpoints

Chapter 26 • Federal Transfer Taxes Roadmap A. Chapter Overview B. Gift Tax 1. Completed Gift 2. Gift Tax Exclusions a. Gifts of a Present Interest b. Transfers to Educational Institutions and Medical Care Providers c. Gift-Splitting d. Effect of Exclusions on Trusts and Estates Concepts 3. Gift Tax Deductions a. Transfers to a Spouse b. Transfers to a Charity C. Estate Tax 1. Gross Estate 2. Estate Tax Deductions a. Expenses, Debts, and Taxes; Losses b. Transfers to a Spouse c. Transfers to a Charity 3. Tax Base, Tentative Tax, and Exemptions D. Generation-Skipping Transfer Tax E. Miscellaneous Transfer Tax Consequences 1. Property Transferred to the Surviving Spouse 2. Tax-Inclusive and Tax-Exclusive Transfers 3. Income Tax Basis Rules Checkpoints

Mastering Trusts and Estates Checklist Index

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