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Conditions and limitations of will transfers. 1. Partial, but not complete restraints on marriage are permissible. (Shapira v. Union National Bank) The right to receive property is a creature of the law and not a constitutionally guaranteed right.
1. Devise applies to real property
2. Legacy applies to money
3. Bequest applies to non-money personal property.
1. May be made to establish invalidity, absence of testamentary capacity, undue influence, defective execution, revocation, lack of intent, fraud and mistake.
2. Standing is limited to beneficiaries. Trustees named or presumed cannot bring a will contest, but can request interpretation by the court. (Trustee can participate when benefits of his beneficiaries are threatened.)
1. Per stirpes distribution- Grandchildren take only by representation. That is, all children take equally, and grandchildren take only if their parent (the child above) predeceased the testator.
2. Per capita with representation (Majority rule)- The stocks are drawn at the first generational level with a living taker. Heirs below that first level take only by representation. Hence A dies, had children B, C and D. B has children W,X; C has child Y, and D has no children. B,C and D all predecease A. hence, W,X,Y and Z all get 1/4 shares. In strict per stirpes distribution, W and X each get 1/6, Y gets 1/3 and 1/3 escheats (D's share.) Adopted children- All states treat adopted children as natural for the purposes of inheritance rights. Adopted children may not take as heirs of their natural parents. Children born out of wedlock- In all states, a child born out of wedlock inherits from his natural mother, and the mother's kind, and they inherit from the child. Most states require paternity to be established by subsequent marriage, adjudication before father's death or clear and convincing proof after his death in order to inherit from a father. Half-bloods- treated the same as relatives of whole blood.
Rules of succession
1. When there are descendants, parents and collaterals do not take at all. When there are no descendants, the property is usually distributed to the parents after a spouse's share if applicable. Collaterals take only if there are no parents left t take.
2. Surviving spouse (474.010 R.S.Mo.) Spouse takes entire intestate estate if no descendants or parents of the deceased, or the first $20,000 + half the estate if no descendants but there are parents, the first $20,000 + half the estate if there are descendants, all of whom are issue of the surviving spouse, or one half the estate if there are descendants, some of which are not issue of the surviving spouse.
3. Remainder (same statute) Children, or their descendants in equal parts, if no children, to parents and collaterals in equal parts.
4. Advancements- count only against the intestate share if declared to be so in a contemporaneous writing.(474.090 R.S.Mo.)
5. Misconduct of spouse. Spouse loses statutory intestate share if he leaves and lives apart for one-year with no intent of reentering the marital relationship.(474.140 R.S.Mo.)
6. Conveyances in fraud of marital rights (474.150 R.S.Mo.) Gifts made by a person dying testate or intestate without adequate consideration in fraud of marital rights may be treated as a testamentary disposition and recovered from the donee to the extent necessary to compensate the spouse. Conveyances of real property without signatures of both spouses are presumed to be in fraud of marital rights.
7. Killing the decedent. Slayers get their usual inheritance rights, but property passed thereby is held in constructive trust for the decedent's other heirs.
Mental aspects of will creation.
1. Mental capacity test: The decedent must know (1) The nature and extent of his property; (2) The persons who are the natural objects of his bounty; (3) The disposition he is making; and (4) how these elements relate to form an orderly plan for the disposition of his property.
2. Insane delusions. A false conception of reality which the testator adheres to against all evidence and reason to the contrary, and affects the testamentary disposition of his property will be sufficient to demonstrate lack of mental capacity as regards that situtation. A will is invalid where its dispository provisions might have been caused or affected by the delusion. 3. Undue influence, test: A gift in a will, or an entire will may be set aside if it was the result of undue influence-mental coersion that destroyed the testators free agency and forced him to embody someone else's intentions in place of his own. The evidence must establish, (1) that undue influence was exerted on the testator; (2) that the effect of the influence must have been to overpower the mind and will of the testator; and (3) that the influence must have produced a will or gift in the will that expresses the intent not of the testator, but of the one exerting the influence, and that would not have been made but for the influence.
4. Presumptions of undue influence. Such can be presumed from a sexual relationship between an attorney and a client, even when a third party draws up the will. It will also be presumed when the testator is a person easily swayed, and the will in indicative of such swaying.
5. Fraud. Two types: (1) fraud in the execution, where the testator was tricked into signing a will he didn't know was a will, or where one will was substituted for another; (2) Fraud in the inducement occurs where a testator makes a disposition in exchange for a false promise. Fraud also occurs where a testator is physically prevented from signing a will or revoking one. In such cases a constructive trust is applied in favor of the intestate heirs or the persons who can demonstrate they would've collected but for the interference with the decedent.
Execution of wills
1. Witnesses. R.S.Mo. 474.320 requires at least two. A will may be self proved if signed by two witnesses and acknowledged by a notary. (474.337) 474.330 provides that the witnesses must be disinterested. A will witnessed by an interested witness does not fail, but the witness forfeits any bequest to the extent it exceeds that person's intestate share. Creditors of the estate, named executors and others are not interested witnesses unless the will gives that person some personal and beneficial interest. Witnesses which observed the testator affix his signature may themselves sign later, even after testator's death if the time period is not unreasonable (18-months is unreasonable) Witnesses must witness testator sign the will in their presence and the presence of each other. (Groffman.)
2. Signature of testator. Testator must sign the will. Accidently signing a will not his will invalidate the wills, even if the will signed was for the spouse, and the spouse signed his.
3. Holographic wills (not Missouri). A will is valid under the U.P.C. and in most states if the material provisions are written entirely in the handwriting of the testator and signed by him.
4. Nuncupative wills (R.S.Mo. 474.340). A will may be made orally to two witnesses in contemplation of death provided a written memorial is made within thirty days. Such a will may only dispose of personal property worth no more than five hundred dollars.
5. Revocation. (R.S.Mo 474.400) Revocation of a will may be made by a subsequent will in writing, or by burning or otherwise destroying the document by the testator or at his direction in his presence. A revocation does not revive a prior will unless there is a clear contemporaneous declaration to the contrary. (474.410) Such a declaration may be made subsequently, so long as it manifests clear intent. Writing upon a will that it is void is not sufficient to cancel or revoke that will, unless wholly in the handwriting of the testator (not MO) or unless witness in the fashion required of wills. The theory of dependent relative revocation and revival states that if a second will is revoked in the mistaken belief that the first be reinstated, the second will remains valid. (Probably not relevant in MO.)
Republication by Codicil: The above may be avoided by a new codicil to the first will, which, if holographic or properly witnessed has the effect of republishing the first will as of the date of the new codicil. In U.P.C. states, a holographic codicil may even revive a will not properly executed (no witnesses, etc...) under the doctrine of republication by codicil. 6. Changes of condition. In Missouri (474.420), divorce serves to invalidate gifts to the spouse, who is treated as having predeceased the testator. Other changes in condition do not affect the validity of the will. Some states invalidate wills upon marriage, or other conditions specified by statute. 7. Integration and incorporation. Matters not incorporated into a will may not be added as a seperate writing. A will which does so state, may incorporate any extrinsic writing which can be clearly identified, even though the extrinsic writing was not properly executed. (i.e. property distribution lists) The extrinsic writing must be in existence at the time of the will, or if made later, validated by codicil republishing the original will to bring it's date contemporaneous with the extrinsic writing.
Contracts relative to wills
1. Contracts to make a will. A testator may enter into a contract to make a will, or die intestate provided that (1) provisions of a will state the material provisions of the contract; (2) an express inference in a will confirming the contract and extrinsic evidence thereof; (3) a signed writing by the decedent confirming the contract. Construction of joint or mutual wills without more, does not rise to the level of a will contract. Joint wills may be made irrevocable when the provisions indicate that the survivor agrees to be bound by the terms thereof.
2. Life insurance. A person may not make a contract to designate a successor beneficiary of a life insurance policy. That is entirely within the province of the terms of the policy. Similarly, a testator cannot change the beneficiary in a life insurance contract by will.
Bank accounts/joint tenancies. Multiple party accounts may be held as joint and survivor accounts, POD agreements, agency accounts and savings account trusts. Evidence of lack of donative intent will sever a joint tenancy but not in stocks.
1. Gifts of real property where the testator retains a life estate with power to revoke are invalid as a testementary disposition.
2. Gifts of personal property must be delivered actually or constructively, and the donor must have intended to make a present gift A gift causa mortis requires that the gift be made in comtemplation of death and may be revoked and the property recovered if the donor survives.
Extrinsic evidence. Extrinsic parol evidence may be admitted to correct a latent ambiguity in a will which makes the will open to more than one meaning, only one of which is correct. The trend is to also allow such evidence in construing wills with a defect on its face (patent ambiguity). Extrinsic evidence is not admissible to contend that the writer made a mistake in transcription, etc. Exception exists if the intent of the testator can be inferred from other provisions of the will which bear out the mistake.
Missouri Anti-Lapse Statute: (474.460) When any estate is devised to any relative of the testator who predeceases the testator, that share is given to the lineal descendants of the beneficiary. If no lineal descendants, the devise fails and enters the residuary estate. (474.465).
Missouri anti-ademption rule for stocks. A devise of stocks does not adeem if there is a simple exchange for other stocks, bonds, notes, etc. of the same corporation. If there is a stock split, the devise shall convey the same proportional representation as conveyed by the will at the time of its writing. (474.463).
Lapse of class gifts: When a devise is made to a class of persons, the fact that one or more members of that class predecease the testator does not create a devise in favor of that person's descendants, but passes equally to the surviving members of the class. If a gift is made to a class and a named individual, that individual is treated as a member of the class and if he predeceases the testator, his descendants do not take his share, but it is proportionally divided among the surviving members of the class.
Gifts of encumbered property. (R.S.Mo. 474.450) A gift of property secured by mortgage or other security interest is conveyed subject to that encumbrance unless the encumbrance was acquired after the decedent's death, in which case the property passes free of the encumbrance unless the will specifically provides that the note is to be paid out of the encumbered property. In similar fashion, a will may direct the note on encumbered property be paid out of the general estate prior to transfer to the devisee.
Rights of the surviving spouse.
1. Election to take against will (474.160). When a married person dies testate as to any part of his estate, a right of election is given to the surviving spouse as follows: The spouse receives, upon election, all exempt property under 474.260, and one half the remaining estate, subject to claims, if there are no descendants, if there are, the spouse takes exempt property plus one-third of the remaining estate. ***Any homestead allowance taken pursuant to 474.290 is deducted from the share taken under this section.
2. How estate valued. (474.163) The estate consists of all money and property owned by the decedent at death, reduced by funeral expenses and administration costs, exempt property, family allowances and enforcable claims against the estate, increased by the value of all money and property taken by the survivor by non- probate transfer. These offsets are subtracted from the elective share.
3. Exempt property (474.250). The surviving spouse or unmarried minor children get, the family bible and other books, one automobile, all wearing apparel of the family, all household appliances, all musical instruments and amusement devices, all household furninshings and supplies.
4. Family allowance (474.260). In addition to the above the surviving spouse or unmarried minor chidren get money or equivalent property in the amount necessary to maintain the standard of living of the family for one year. This amount may not be reached by creditors of the estate.
5. Homestead allowance (474.290). The parties above also get one half the residual estate exclusive of exempt property or $7500, whichever is greater. This amount is not reachable by creditors of the estate.
Trust creation and types.
1. Intent. The settlor must have the intent to create a trust, although no specific language is required.
2. Present property. The trust cannot exist without trust property. Any type of property will suffice. A writing promising to make a trust in the future is not effective. A gift made of property not in existence, at the time the gift is made may be valid if gift is of a right which could be established by gift: ex: A gives B 5% of royalties of product not yet produced.
3. Constructive trusts are established to prevent unjust enrichment. The beneficiaries of a gift are considered trustees to convey the property to the persons rightfully entitled to it. General requirements are (1) confidential relationship; (2) a promise, express or implied; (3) a transfer of property in reliance on that promise; (4) resultant unjust enrichment of the transferee. Courts may also establish constructive trusts in other situations to correct manifest injustice and unjust enrichment.
4. Identification of trust beneficiaries. If at the time the trust becomes effective, the beneficiaries are indefinite and impossible to ascertain, the trust fails and reverts to the settlor. Unborn persons may be made beneficiaries, or a class may contain such members provided that they are ascertainable at the time the trust becomes effective. Ex: a trust may not provide for the trustee to pay the income to such of settlor's friends as he believes appropriate.
5. Trusts in favor of animals. Honorary trusts can be created, but bind only the conscious of the trustee, since there is no beneficiary capable of enforcing the trust.
6. Conveyances by oral trust. An oral trust in real estate may be created, but most courts require a writing if the transferee was not in a confidential relationship with the transferor. In such cases (of confidential relationship) a court may impose a constructive trust in favor of a transferor where a transferee renigs on his promise to reconvey the property. Oral trusts recognized in a will may be accepted by some courts if they can be adequately proven.
6. Powers in revocable trusts. The settlor may retain significant controls, but if too many, the trust may be ruled illusory, or an invalid testamentary disposition.
7. Reach of creditors. Creditors may reach a trust in which the settlor retains powers of revocation or amendment, or in which he may direct the disposition of the principal and income thereof. Assets which pour over into the trust, over which the settlor did not have control during his life may not be reached by creditors. Creditors may not reach a support trust except to the extent a provider of a necessity may be paid directly by the trustee. A beneficiary's interest in a discretionary trust are not reachable while under the discretion of the trustee. Once released to the beneficiary, they vest in him and are then reachable.
7. Duties of trustee. The trustee in a discretionary or mandatory trust must act for the purposes of the trust. The interests of remaindermen are not an appropriate reason for a trustee to deny allocations or amounts to a life beneficiary.
8. Spendthrift trusts. May not be alienated or be reached by creditors. Statutes may proscribe this general rule for child support and spousal obligations.
9. Modification may be ordered by the court in response to unforseen circumstances which make it impossible for the trust as created to effectively carry out the wishes of the testator.
10. Termination may be had by consent of the settlor and all beneficiaries privided that the material purpose of the trust is not defeated by so doing.
1. Must be public in nature (as opposed to ascertainable class standard of private trusts.)
2. Must be for the relief of poverty, advancement of education, religion, health, or other charitible purpose.
3. Cy Pres. The court may modify a public trust when the bequest becomes impractible, in order to properly carry out the intent of the testator. Ineffective philanthropy, inefficiency of the expenditures in the manner provided by the testator do not provide adequate grounds for cy pres. The object must have become illegal impossible or impractible of performance.
4. Gender/sex based trusts, which if made by a state actor would violate the equal protection clause are not invalidated simply because of administration by a court (i.e. state actor.)
Powers of Appointment. Created by a donor, to a donee, for the
benefit of objects.
1. General and Special Powers. General powers may be exercisable for any reason, including the benefit of the holder.
Special powers are for the benefit of specified objects. 2. Contracts to exercise appointment powers which are not presently exercisable are not valid.
3. Special powers exclusive or not exclusive. Exclusive powers permit the donee to select and exclude certain members of the class. If no such power to select or exclude exists, the power is non-exclusive.
4. Failure to exercise power. The gift then passes to the default beneficiary if named, and if not, to the donor's estate or the objects if they are an ascertainable limited class.
5. Release. The donee of a testamentary power of appointment may release it, which has the effect of removing the uncertainty behind who the objects will be, since the release acts to give the default objects an indefeasibly vested remainder.
6. Allocation and Capture. If an invalid disposition is made, and there are other assets which have been comingled with the property covered by the power, allocation will work to amend the dispositions to conform to the intent of the donor of the power, by reshuffling assets to make sure non-objects get non-power property, and objects get property subject to the power. Capture allows the property to be given to the donee's estate if an invalid disposition was made but the donee's clear intent was to maintain dominion and control over the property for his benefit.
Gift Taxes. Post 1976 gifts are cumulative. A gives B 20,000 in
1988, he pays tax on $10,000 ($10,000 exemption). In 1989, he
gives B $20,000. He then pays tax on $20,000 subtracted by the
previously paid tax.
1. Trusts. If the power is revocable, exercisable wholly in favor of the settlor, there is no present taxable gift. If, however, the settlor retains none of the incidents of ownership, it is a taxable gift.
2. Annual exclusion s. 2503(b) permits a $10,000 exemption per person per year. There is a total exemption for gifts made as payment of tuition or medical expenses paid directly to the provider.
3. Unified estate and gift tax. There is one $192,800 credit against the unified tax. A portion is used each time a gift tax is required. It amounts to a lifetime exclusion of $600,000
4. Transfers to minors considered a completed gift even if held up in a trustee, guardian or custodian until the child reaches majority, or if the money may be expended for his benefit before then.
5. Gifts of present interests (not life estates) are not taxable under the gift tax.
The Estate Tax.
2033 Property owned at death
2035 Transfers of insurance and other interests within three years of death
2036 Transfers with retained life estate or controls
2037 Transfers taking effect at death
2038 Revocable transfers
2039 Annuities and employee benefits
2040 Property passing by ROS/Tenancy by Entirety
2041 General powers of appointment
2042 Life insurance
2043 Transfers for only partial consideration
2044 Property for which previous marital deduction applied. = GROSS ESTATE
- 2053 Administrative expenses, debts, funeral
2054 Deduction for casualty losses during admin.
2055 Charitable deduction
2056 Marital deduction
= TAXABLE ESTATE
+ ADJUSTED TAXABLE GIFTS (OTHER THAN ACCOUNTED FOR ABOVE)
= TENTATIVE ESTATE TAX BASE
- Gift taxes on gifts made after 1976
- 2010 Unified estate tax credit
2011 Credit for state death taxes
2012 Credit for pre-1977 gift taxes on property included in gross estate.
2013 Credit for taxes on prior transfers
2014 Credit for foreign death taxes
=FEDERAL ESTATE TAX
2035, Transfers within three years of death
1. Includes tax paid on gifts
2. Includes value of life insurance policies given away within three years of death.
2036 Marital deduction: must be a non-terminable interest
That is, it cannot be a life estate. There are four exceptions to that rule:
1. Limited survivorship requirement (not >6mo.)
2. Life Estate + General Power of Appointment
Qualifications: (1) must be entitled to all income for life; (2) payable at least annually; (3) General power in favor of spouse or estate; (4) exercisable in all events (although may besolely testamentary); (5) cannot divert property to third parties.
3. Estate trust. A to husband B for life, then to his estate.
4. Qualified Terminable Interest Property (QTIP) Trust. Qualifications: (1) Spouse entitled to income for life; (2) Income payable to spouse at least annually; (3) No third party can get at it. Children take as remaindermen, although spouse may exercise general or special powers to detertime the distribution thereto.
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