Wills – Opening Paragraphs
Choice of Law
Under California law, where a domicillary dies in California, but executed a will in another state, that will can be admitted into probate in California only if (1) the will complies with California’s formalities of execution or (2) the will complies with the formalities of the place where the will was executed, or (3) the will complies with the formalities of the place where the Testator was domiciled at the time of execution.
Execution of Wills
Under California law, a formal will must be (1) in writing, (2) signed by the Testator, and (3) witnessed by two persons who are present when the Testator signs the will or the Testator must acknowledge his signature to the two witnesses.
At common law, a witness who was also an interested beneficiary in the will was deemed incompetent, and the will held invalid. Under California law, if one of two witnesses is an interested beneficiary, the will is valid, but the devise to the witness creates a rebuttable presumption that the witness procured the devise by improper means. If the interested witness rebuts the presumption he takes the gift. If unable to rebut the presumption, he takes the amount he would have received via intestacy.
Under California law, a holographic, or handwritten, will must be (1) signed by the Testator, and (2) the material provisions of the will must be in the testator’s own handwriting. Material provisions include the gifts to be made and the beneficiaries’ names.
Extrinsic evidence is admissible to determine the Testator’s intent.
A holographic will need not be in writing to be valid. However, where an undated holograph is inconsistent with the provisions of another will, the undated holograph is invalid to the extent of the inconsistency unless it can be established that the undated will came after the other will.
If a holographic will is undated and it is established that the Testator lacked capacity during any point when the undated will could have been executed, the undated holograph is invalid unless it can be established that the Testator had capacity when she executed the will.
Defenses to Enforcement of Wills
Lack of Capacity
At the time of execution the testator must (1) be at least 18 years old, (2) understand the extent of her property, (3) know the natural objects of her bounty, and (4) know the nature of her act. Where she does not meet any of these requirements, the entire will is deemed invalid for lack of capacity. Property will pass by intestate succession.
If at the time the Testator executed the will, (1) she had a false belief, (2) the false belief was the product of a sick mind, (2) there is no evidence to support the false belief, (3) the false delusion affect the Testator’s will, only the portion of the will that is affected by the delusion is invalid. As to that part, it will go to the residuary devisee, or if none, or if the residue itself was affected by the delusion, by intestate succession.
Where someone forges the Testator’s signature to a will, or the Testator signs a will based on the misrepresentation that it is something other than a will, there is fraud in the execution, and the entire will is invalid.
Where a wrongdoer makes misrepresentations of material fact, known to be false, for the purpose of inducing action, which does in fact affect the content’s of the Testator’s will, there is fraud in the inducement, and the portion of the will which is affected by the fraud is invalid. That portion passes to the residuary devises, if any or by intestate succession.
Where a wrongdoer uses fraud to prevent the testator from revoking a will, the will is invalid. The property will pass by instate succession. In the alternative, where the intended beneficiary is known, the court will declare the heirs constructive trustees who must convey the property to the intended beneficiary.
There are three ways of establishing undue influence.
At common law, to make a prima facie case for undue influence, the claimant must show (1) the testator has a weakness that made him susceptible, (2) the wrongdoer had access to the testator, (3) it is the wrongful act that got the gift, and (4) an unnatural result. Where the plaintiff prevails, only that portion of the will affected by undue influence is invalid. That part goes to the residuary, the heirs by intestate succession, or by constructive trust.
In the alternative, a claimant may establish undue influence by the use of a presumption. Under California law, a presumption of undue influence arises when (1) a confidential relationship exists between the testator and the wrongdoer, (2) the wrongful act got the give, and (3) an unnatural result. The consequences here are the same as the common law test.
Finally, a claimant may rely on statutory undue influence. California generally invalidates a donative transfer from the testator to (1) a person who drafted the instrument, (2) a person in a close relationship with the drafter, or (3) a person who is in a fiduciary relationship with the testator. However, these rules do not apply if the testator is related to, married to, or co-habitats with the drafter or if the instrument is reviewed by an independent attorney who counsels the testator. Upon a finding of statutory undue influence, the devisee does not take the gift, but only to the extent that the gift exceeds that person’s intestate share.
Revocation of Wills
A valid will or codicil may be revoked in full or in part by (1) the explicit or implicit terms of a later will or codicil (including a holographic will), (2) physical act by the testator coupled with the intent to revoke, or (3) operation of law (omitted child/spouse or divorce/annulment).
Under the doctrine of dependent relative revocation, where a testator revokes a will by a subsequent will or codicil in the mistaken belief that the subsequent will effectuates the testator’s intent, the revocation of the first will is cancelled.
Revocation of a codicil does not revoke the will, even if the testator so intended.
At common law, revocation of a codicil revoking a former will, revived that will. However, under California law, the revival of the devise depends on the testator’s intent.
Components of a Will
A codicil is a testamentary instrument executed subsequent to the execution of the will, intended to modify, alter, or expand the will. To be valid, the codicil must be executed with the same formalities required for the execution of a will.
The doctrine of integration permits the court to include in a will papers which were (1) physically present at the execution of the will, and (2) the testator intended to be included in the will.
The doctrine of acts of independent significance permits the court to fill in gaps in a will by reference to acts or documents effectuated during the testator’s lifetime for a primarily non-testamentary motive.
The doctrine of incorporation by reference allows the court to include non-testamentary documents in a will if (1) they existed at the time the will was executed, (2) the will manifests an intent to incorporate them into the will, and (3) the will sufficiently describes the documents to allow for identification.
Interpretation of the Will
Under the common law lapse rule, if a devisee died before the testator, his gift was said to have lapsed – or failed.
California, like most states, has enacted an anti-lapse statute to avoid the harsh affects of the lapse rule. Under California’s anti-lapse statute, where the pre-deceased devisee was a blood relative of the testator, the gift does not automatically fail. Rather, the issue of the pre-deceased devisee may step into the shoes of the devisee, and thus take by representation.
A specific devise is a gift of a particular item of property distinct from all other objects in the testator’s estate, while a general devise is a gift of a general economic benefit, payable out of the general assets of the estate.
Under the common law doctrine of ademption, where the testator makes a gift of specific property, and that property is not held by the testator at his death, the gift is deemed revoked, and the devisee will take nothing. However, California has modified the ademption doctrine, so that ademption is dependent on the testator’s intent to adeem at the time that he disposes of the specific property.
A residuary gift is a gift of what remains on the testator’s property after paying debts, expenses and taxes, and satisfying the specific, general and demonstrative gifts.
Generally, a surviving spouse takes the deceased’s share of the couple’s community property, and his share of the couple’s quasi community property. In addition, the surviving spouse is entitled to a share of the deceased’s separate property depending on whether he has any other survivors (all, ½, or ⅓).
According to California probate law, for the share not passing to the surviving spouse, if the issue are all of equal degree in kinship to the decedent, each take equally in their own right. But, issue of more remote degree take per capita with rights of representation.
Note, if there is a will that calls for distribution per stirpe, or by representation, there is a distribution at the first level, even if everyone is dead so long as they left issue. The issue step into the shoes of their predecessor ancestor, and take by representation.
Rights of surviving spouse and children.
Where the deceased executed a will prior to marriage, which does not provide for a surving spouse, the will is invalid as to that spouse, and she is entitled to take her intestate share of the estate unless (1) the omission was intentional as evidenced in the will, (2) the deceased provided for the spouse by some other conveyance, or (3) the surviving spouse waived her right to her share in the estate.
Where the deceased executed a will prior to the birth or adoption of a child, and the will does not provide for that the child, the will is invalid as to that child, and she is entitled to take her instate share of the estate unless (1) the omission was intentional as evidenced in the will, (2) the deceased provided for the child by some other conveyance, or (3) the deceased evidences a plan whereby the surviving spouse would take financial care of all the couple’s children.
Trusts – Opening Paragraphs
Requirements for a Private Express Trust
A trust is a fiduciary relationship with respect to property whereby one person, the trustee, holds legal title to the trust property subject to the enforceable equitable rights of another, the beneficiary.
For valid trust creation, five requirements must be met.
First, the settlor must manifest an intent to create a trust. There must be more than mere prectatory words.
Second, a trustee must be appointed.
Third, there must be trust res, or property.
Fourth, there must be a beneficiary to enforce the trust.
And finally, the trust must have a legal purpose, and cannot be contrary to public policy.
A secret trust results when a gift is made in reliance upon the beneficiary’s promise to hold the gift property in trust for another. To prevent unjust enrichment of the named beneficiary, courts will allow the intended trust beneficiary to offer extrinsic evidence of the agreement. If the agreement can be proven by clear and convincing evidence, a constructive trust will be imposed on the named beneficiary.
A constructive trust is an equitable remedy imposed by the courts when the retention of property by the defendant-wrongdoer would result in unjust enrichment. The wrongdoer serves a “trustee” and must return the property to the intended beneficiary.
Pour Over Trusts
A pour-over trust occurs where a testator devises all or part of his estate to a trustee of an inter-vivos trust. Courts have admitted such a trust instrument into probate – and thus effectuated its terms – under three theories: (1) acts of independent significance, (2) incorporation by reference, and (3) the Uniform Testamentary Additions to Trust Act (UTATA).
Under the UTATA, a pour-over trust may be entered into probate by statute if (1) the trust is valid, and (2) the trust was executed before or contemporaneously with the trust instrument.
Duties of the Trustee
A trustee owes a fiduciary duty to administer the trust solely for the benefit of the trust beneficiaries.
The trustee owes a duty of loyalty to the beneficiaries not to engage in self-dealing. If the trustee engages in self dealing, the court will apply the no further inquiry rule. Meaning that the conduct is a per se breach of the trustee’s fiduciary duty, and the trustee will be personally liable for any losses. The trustee’s good faith and reasonableness of the transaction are irrelevant.
The trustee owes a duty of loyalty to the beneficiaries to not engage in conflicts of interest.
The trustee owes a duty of care to the beneficiaries to act as a reasonably prudent person in dealing with his own affairs.
The trustee owes a duty to make prudent investment decisions. There is a split in authority on how the trustee must abide by his investment duty.
Under the state lists approach, in the absence of specific directions in the trust, the trustee must follow a list of good investments.
Under the common law prudent person test, each individual investment is scrutinized to determine whether the trustee acted as a reasonably prudent person investing his own property, and trying to maximize income while preserving trust res.
Finally, under the Uniform Prudent Investor Act, each individual investment is not scrutinized. Rather, the trustee must invest as a prudent investor measured in the context of the entire trust portfolio.
The trustee owes a duty to the beneficiary to diversify trust investments.
The trustee owes a duty to the beneficiary not to speculate in high risk investments.
The trustee has a duty not to commingle trust funds with the trustee’s personal property. This protects against the trustee’s person creditors attaching trust property. Where there is commingling, the court will presume that personal funds are expended before the trust funds.
The trustee has a duty to earmark assets by keeping them physically separate from the trustee’s personal assets and from other trusts.
The trustee has a duty to properly allocate trust property between principal and income. Generally, trust income is paid to the life tenant, which trust principal is reserved for the remaindermen. Traditionally, cash dividends on corporate stock is treated as income and paid to the life tenant. While stocks dividends and capital gains are allocable to the trust principal. However, under the Uniform Principal & Income Act, the trustee has adjustment power to reallocate investment portfolio return to carry out the trust purposes and the allocation is fair and reasonable to all beneficiaries.
Where the trustee breaches her trust duty, the beneficiaries’ remedies include: (1) damages, (2) constructive trust, (3) tracing and equitable lien on property, (4) ratify the transaction if good to the beneficiary, or (5) remove the trustee.