Trusts and Wills Question Analysis
In 2001, Wilma, an elderly widow with full mental capacity (Mental capacity satisfied), put $1,000,000 into a trust (Trust). (This is a trust question. Intent, delivery, and res all satisfied here.) The Trust instrument named Wilma’s church (Church) as the beneficiary. (The beneficiary is ascertainable.) Although the Trust instrument did not name a trustee, (No trustee but the court would appoint one.) its terms recited that the trustee has broad powers of administration for the benefit of the beneficiary. (Powers of trustee)
In 2002, Wilma’s sister, Sis, began paying a great deal of attention to Wilma, preventing any other friends or relatives from visiting Wilma. (undue influence and fraud in the inducement) In 2003, Wilma reluctantly executed a properly witnessed will leaving her entire estate to Sis. (Now it is also a Will question. Sis is the natural object of her bounty. W probably knew she was creating a will.) Following the execution of the will, Wilma and Sis began to develop a genuine fondness for each other, engaging in social events frequently and becoming close friends. In 2005 Wilma wrote a note to herself: “Am glad Sis will benefit from my estate.”
In 2007, Wilma named Sis as trustee of the Trust, (Lack of trustee is cured here.) which was when Sis found out for the first time about the $1,000,000 in the Trust. Without telling Wilma, Sis wrote across the Trust instrument, “This Trust is revoked,” (Trust cannot be revoked by trustee) signing her name as trustee. (Trustee's duty is breached.)
Shortly thereafter, Wilma died, survived by her daughter, Dora, who had not spoken to Wilma for twenty years, (Omitted child issue) and by Sis. Church claims that the Trust is valid and remains in effect. Sis and Dora each claim that each is entitled to Wilma’s entire estate.
1. What arguments should Church make in support of its claim, and what is the likely result? Discuss. (#1)
2. What arguments should Sis and Dora make in support of their respective claims, and what is the likely result? Discuss. (#2)
Answer question number 2 according to California law.
Outline
1. Church's Claim
(1) Trust Creation
1) Intent
2) Beneficiary
3) Trustee
4) Res
5) Purpose
6) Delivery
(2) Trust Termination
2. Sis's Claim
(1) Will Execution
1) Capacity
2) Undue influence
- Confidential relationship
- Susceptibility
- Act toward creation of will
- Unnatural result
3) Fraud in the inducement
3. Dora's Claim
(1) Omitted child
Answers
1. What arguments should Church make in support of its claim?
A. Attempted creation of the trust
A private express trust is created when the following elements are met: (1) a settlor with capacity, (2) intent on the part of the settlor to create a trust, (3) a trust res, (4) delivery of the trust res into the trust, (5) a trustee, (6) an ascertainable beneficiary, and (7) a legal trust purpose. In this case, each of these elements have been met, and Wilma successfully created a valid inter vivos express trust.
(1) The facts state that Wilma had full mental capacity.
(2) The facts indicate that a trust instrument was created, which is evidence thatWilma intended to create a trust, and not some other type of instrument or conveyance.
(3) The res here is the $1m that Wilma put in the trust.
(4) According to the facts, Wilma put the $1m into the trust, so the deliveryelement is satisfied.
(5) The trust instrument here did not name a trustee. However, courts will not allow an otherwise valid trust to fail for want of a trustee. Rather, courts will appoint a trustee. So, notwithstanding the lack of a trustee, the trust was validly created. In this case, the lack of a trustee was cured later by Wilma, when she named Sis as the trustee in 2007. So, at the time of Church’s assertion that the trust is valid and in effect, there is a trustee and the court need not appoint one.
(However, given Sis’s conduct in attempting to revoke the trust, which is likely a violation of her fiduciary duty as trustee, the Church should consider moving the court to dismiss Sis as trustee and appoint a new trustee.)
(6) The beneficiary in this case is Church. Beneficiaries can be natural persons,corporations, or other organizations. So, Church is a valid beneficiary. Becausethe beneficiary is Church, it can argue that the trust set up by Wilma is acharitable trust. Charitable trusts have as their purpose the specific or generalcharitable intent to benefit some social cause. Religion is considered a legitimate purpose of a charitable trust. Thus, this trust can be considered a valid trust.
(7) There is no illegal or otherwise improper purpose for Wilma’s trust, so thiselement is satisfied.
B. Attempted revocation of the trust
Inter vivos trusts are revocable unless otherwise provided. The facts do not statewhether the trust instrument had a provision making it irrevocable, so it isassumed that the trust is revocable.
A trust cannot unilaterally be revoked by the trustee. Typically, only the settlor (ifshe is alive and has mental capacity) can revoke an inter vivos trust. In somecircumstances, a trustee and the beneficiaries may petition the court to terminate(or modify) a trust, but no such circumstances exist here. Thus, Sis’s attempt torevoke the trust unilaterally, without telling Wilma and without involving the court,by writing across the instrument “This Trust is revoked,” was ineffective. Thetrust therefore remains in effect.
Had Wilma written across the Trust instrument “This Trust is revoked,” it mighthave operated as a valid revocation by physical act. However, such a revocationmust be done by the settlor or by someone at the direction of the settlor and inher presence, which is not what happened here.
C. Survival of the trust after Wilma’s death
Sis might argue that the trust should pass to her under Wilma’s will, which left herthe entire estate. However, there are no facts to suggest that Wilma onlyintended the trust to continue for her lifetime. Rather, the creation of thecharitable trust by Wilma is assumed to be a valid will substitute, which disposesof the settlor’s property outside of probate.
2. What arguments should Sis and Dora make in support of theirrespective claims?
A. Sis’s Arguments
For Sis to succeed in arguing that she is entitled to Wilma’s estate under theterms of her will, she must establish that the will is valid. A valid will requires (1)a testator with capacity, (2) testamentary intent, and (3) valid compliance with theapplicable formalities.
(1) Capacity: To have sufficient capacity to execute a will, a testator must (1)know the nature and extent of her property, (2) understand the natural objects ofher bounty (i.e., her relatives and friends), and (3) understand that she is makinga will. The facts here state that in 2001 Wilma had full mental capacity. In 2003,when Wilma executed the will, it is presumed that she still had such capacity.
(2) Testamentary intent: Here, the facts state that Wilma executed a will,although she did so “reluctantly.” Mere reluctance on the art of a testator isinsufficient to defeat the existence of testamentary intent. However, if thetestator’s intent was the product of undue influence, then true testamentary intentwill not be found, and the will will be set aside to the extent of the undue influence. In this case, Dora will argue that Sis cannot take Wilma’s estate underthe will because she exerted undue influence on Wilma.
Undue Influence:
Undue influence exists when the testator was influenced to such a degree thather free will was subjugated. A prima facie case of undue influence isestablished by showing the following: (1) the testator had some sort of weakness(e.g., physical, mental, or financial) that made her susceptible to influence, (2)the person alleged to have exerted the influence had access to the testator andan opportunity to exert the influence, (3) there was active participation by theinfluencing person in the devise (the act by the person that gets them the gift),and (4) an unnatural result (i.e., a gift in the will that is not expected).
(1) In this case, there is no evidence that Wilma suffered from anyparticular weakness that made her susceptible to Sis’s influence. She hadcapacity. She presumably was in good physical health, as she attended socialevents frequently. And she presumably was of comfortable means, as she wasable to give away $1m to a charitable trust.
(2) Here, Sis did have access and opportunity to influence Wilma. Shebegan “paying a great deal of attention” to her, and she prevented any otherfriends or relatives from visiting her. This element of the prima facie case istherefore established.
(3) It is unclear from the facts whether Sis actively participated in Wilma’sdrafting of her will, or somehow suggested in some other way that Wilma leaveher estate to her. Dora would need to present evidence on this point to succeedin challenging the will on the basis of undue influence.
(4) The result here is not unnatural. Wilma is survived only by Sis andher daughter Dora. However, Wilma had not spoken to Dora for twenty years.
Wilma is a widow, and leaves no surviving spouse or domestic partner. Thefacts do not suggest that Wilma had any close non-relative friends to whom shemight naturally leave part of her estate. Wilma had already provided generouslyfor Church in the trust. Therefore, it is natural that she would leave her estate toher sister. Moreover, Sis can argue that the “naturalness” of the result is furtherproven by the fact that she and Wilma genuinely became close friends in theyears following the execution of the will. This friendship is evidenced by the notethat Wilma wrote in 2005, which stated that she was “glad Sis will benefit frommy estate.”
(3) Formalities: In this case, the facts state that Wilma “executed a properlywitnessed will,” so the last element is satisfied.Because all of the elements of a valid will are present, and because it is not likelythat Dora can prove that the gift to Sis of Wilma’s entire estate was the product ofundue influence, Sis will take Wilma’s entire estate under the will.
B. Dora’s arguments
1. Dora’s rights if undue influence is found
If Dora can prove that the gift to Sis is the product of undue influence, the will willbe set aside to the extent of that undue influence. If there is a residuary clause inthe will, the gift to Sis will pass into it. If there is no residuary clause, then the giftto Sis – which in this case is the entire estate – will pass as if Wilma diedintestate. Because Dora is Wilma’s only other surviving relative, the estate wouldpass to her.
2. Dora’s rights as an omitted child
In California, if a child is pretermitted, she has certain rights to take from herparent’s estate. A pretermitted child is one who is born after a will and all othertestamentary instruments have been executed, and who is not provided for in theinstruments. In this case, however, Dora was already born when Wilmaexecuted her will in 2003 and the Trust in 2001. So, Dora is not pretermitted.(Had she been pretermitted, Dora would have been entitled to claim her statutoryshare of the estate passing through the will, plus a statutory share of anyrevocable inter vivos trusts.)
California does not provide protection for omitted children. An omitted child isone who was born at the time a testamentary instrument is drafted, but notprovided for in the instrument. Therefore, Dora does not have any rights toWilma’s estate by mere virtue of being omitted from Wilma’s will.