PROBATE CODE SECTION 6110-6113 6110. (a) Except as provided in this part, a will shall be in writing and satisfy the requirements of this section. (b) The will shall be signed by one of the following: (1) By the testator. (2) In the testator's name by some other person in the testator's presence and by the testator's direction. (3) By a conservator pursuant to a court order to make a will under Section 2580. (c) (1) Except as provided in paragraph (2), the will shall be witnessed by being signed, during the testator's lifetime, by at least two persons each of whom (A) being present at the same time, witnessed either the signing of the will or the testator's acknowledgment of the signature or of the will and (B) understand that the instrument they sign is the testator's will. (2) If a will was not executed in compliance with paragraph (1), the will shall be treated as if it was executed in compliance with that paragraph if the proponent of the will establishes by clear and convincing evidence that, at the time the testator signed the will, the testator intended the will to constitute the testator's will. 6111. (a) A will that does not comply with Section 6110 is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator. (b) If a holographic will does not contain a statement as to the date of its execution and: (1) If the omission results in doubt as to whether its provisions or the inconsistent provisions of another will are controlling, the holographic will is invalid to the extent of the inconsistency unless the time of its execution is established to be after the date of execution of the other will. (2) If it is established that the testator lacked testamentary capacity at any time during which the will might have been executed, the will is invalid unless it is established that it was executed at a time when the testator had testamentary capacity. (c) Any statement of testamentary intent contained in a holographic will may be set forth either in the testator's own handwriting or as part of a commercially printed form will. 6111.5. Extrinsic evidence is admissible to determine whether a document constitutes a will pursuant to Section 6110 or 6111, or to determine the meaning of a will or a portion of a will if the meaning is unclear. 6112. (a) Any person generally competent to be a witness may act as a witness to a will. (b) A will or any provision thereof is not invalid because the will is signed by an interested witness. (c) Unless there are at least two other subscribing witnesses to the will who are disinterested witnesses, the fact that the will makes a devise to a subscribing witness creates a presumption that the witness procured the devise by duress, menace, fraud, or undue influence. This presumption is a presumption affecting the burden of proof. This presumption does not apply where the witness is a person to whom the devise is made solely in a fiduciary capacity. (d) If a devise made by the will to an interested witness fails because the presumption established by subdivision (c) applies to the devise and the witness fails to rebut the presumption, the interested witness shall take such proportion of the devise made to the witness in the will as does not exceed the share of the estate which would be distributed to the witness if the will were not established. Nothing in this subdivision affects the law that applies where it is established that the witness procured a devise by duress, menace, fraud, or undue influence. 6113. A written will is validly executed if its execution complies with any of the following: (a) The will is executed in compliance with Section 6110 or 6111 or Chapter 6 (commencing with Section 6200) (California statutory will) or Chapter 11 (commencing with Section 6380) (Uniform International Wills Act). (b) The execution of the will complies with the law at the time of execution of the place where the will is executed. (c) The execution of the will complies with the law of the place where at the time of execution or at the time of death the testator is domiciled, has a place of abode, or is a national.

PROBATE CODE 
SECTION 6110-6113 

6110.  (a) Except as provided in this part, a will shall be in
writing and satisfy the requirements of this section.
   (b) The will shall be signed by one of the following:
   (1) By the testator.
   (2) In the testator's name by some other person in the testator's
presence and by the testator's direction.
   (3) By a conservator pursuant to a court order to make a will
under Section 2580.
   (c) (1) Except as provided in paragraph (2), the will shall be
witnessed by being signed, during the testator's lifetime, by at
least two persons each of whom (A) being present at the same time,
witnessed either the signing of the will or the testator's
acknowledgment of the signature or of the will and (B) understand
that the instrument they sign is the testator's will.
   (2) If a will was not executed in compliance with paragraph (1),
the will shall be treated as if it was executed in compliance with
that paragraph if the proponent of the will establishes by clear and
convincing evidence that, at the time the testator signed the will,
the testator intended the will to constitute the testator's will.



6111.  (a) A will that does not comply with Section 6110 is valid as
a holographic will, whether or not witnessed, if the signature and
the material provisions are in the handwriting of the testator.
   (b) If a holographic will does not contain a statement as to the
date of its execution and:
   (1) If the omission results in doubt as to whether its provisions
or the inconsistent provisions of another will are controlling, the
holographic will is invalid to the extent of the inconsistency unless
the time of its execution is established to be after the date of
execution of the other will.
   (2) If it is established that the testator lacked testamentary
capacity at any time during which the will might have been executed,
the will is invalid unless it is established that it was executed at
a time when the testator had testamentary capacity.
   (c) Any statement of testamentary intent contained in a
holographic will may be set forth either in the testator's own
handwriting or as part of a commercially printed form will.



6111.5.  Extrinsic evidence is admissible to determine whether a
document constitutes a will pursuant to Section 6110 or 6111, or to
determine the meaning of a will or a portion of a will if the meaning
is unclear.


6112.  (a) Any person generally competent to be a witness may act as
a witness to a will.
   (b) A will or any provision thereof is not invalid because the
will is signed by an interested witness.
   (c) Unless there are at least two other subscribing witnesses to
the will who are disinterested witnesses, the fact that the will
makes a devise to a subscribing witness creates a presumption that
the witness procured the devise by duress, menace, fraud, or undue
influence. This presumption is a presumption affecting the burden of
proof. This presumption does not apply where the witness is a person
to whom the devise is made solely in a fiduciary capacity.
   (d) If a devise made by the will to an interested witness fails
because the presumption established by subdivision (c) applies to the
devise and the witness fails to rebut the presumption, the
interested witness shall take such proportion of the devise made to
the witness in the will as does not exceed the share of the estate
which would be distributed to the witness if the will were not
established. Nothing in this subdivision affects the law that applies
where it is established that the witness procured a devise by
duress, menace, fraud, or undue influence.



6113.  A written will is validly executed if its execution complies
with any of the following:
   (a) The will is executed in compliance with Section 6110 or 6111
or Chapter 6 (commencing with Section 6200) (California statutory
will) or Chapter 11 (commencing with Section 6380) (Uniform
International Wills Act).
   (b) The execution of the will complies with the law at the time of
execution of the place where the will is executed.
   (c) The execution of the will complies with the law of the place
where at the time of execution or at the time of death the testator
is domiciled, has a place of abode, or is a national.

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6 Concepts of Private Express Trust (1) Trust Property (2) Beneficiaries (3) Trustee (4) Intent (5) Creation (6) Purpose What property can be part of the trust corpus? Any presently existing interest in property that is transferable. NOT: Future profits Debt Expectancy Who can be a B of a private express trust? (1) Any ascertainable person or limited group of people. (2) Any corporation (3) Modernly any unincorporated association NOTE: Unlimited groups or unascertainable beneficiaries may be the B of a charitable trust. Will a trust fail if there is no trustee? NO, the court will appoint one NOTE: An honorary trust will fail if the trustee refuses to be the trustee Present Manifestation of Trust Intent (1) There are no magic words (2) Precatory words (wish, hope, or desire) alone will not suffice (3) Precatory words + parol evidence may suffice Private Express Trust: Elements (1) Trust Corpus (2) Ascertainable Beneficiaries (3) Trustee (ct may appoint) (4) Present Manifestation of Intent (5) Legal Purpose Does a trust have to be in writing? ONLY if the trust contains real property. The SOF does not apply to trust of personal property. When can a trust take effect? (1) At settlor's death -Via will -Must comply with will formalities -If will formalities are not met, trust fails (2) During settlor's life -Either: (i) Transfer or (ii) Declaration, in trust -Declaration: S is also trustee (living trust) -Transfer: delivery of assets to trustee required Is there ever an issue of delivery for a Declaration in Trust? NO, delivery is NOT required because Settlor is also Trustee. Issues that arise regarding "Illegal Purpose" for a private express trust? (1) Fixable illegality at creation -Court will excise illicit condition (2) Unfixable Illegality at creation -Invalidate trust at its inception -Settlor remains the owner (3) Illegality after creation -Resulting trust -Trustee must return property to S's estate 4 Concepts of Charitable Trusts (1) Creation (2) Beneficiaries (3) RAP (4) Cy Pres What is a Charitable Trust? Any trusts that confers a SUBSTANTIAL BENEFIT upon society: REPS (1) Religion (2) Education (3) Poor (4) Sick Beneficiaries of a Charitable Trust Society -There may be NO ascertainable -Incidental benefit allowed -Split jdx whether a small group of B allowed Does RAP apply to trusts? Charitable: NO Private: YES What is Cy Pres (1) Court power (2) Petitioned by Trustee (3) Used to modify CHARITABLE trust (only) (4) IF settlor had GENERAL charitable purpose (5) Try to get "as near as possible" to that purpose Why is it important to classify between general and specific charitable purpose? Cy Pres can ONLY be used to modify a trust that has a GENERAL charitable purpose. Honorary Trust (1) No ascertainable B (2) No charitable purpose (3) CT will not appoint a trustee (4) If named trustee refuses to act as trustee, trust fails (5) Almost always a RAP issue Totten Trust (1) Bank Account: "M a trustee for J" (2) No true trustee or beneficiaries (3) No fiduciary duties NOTE: Watch for words that create present manifestation of trust intent, if these are present, this may be a private express trust. 3 Concerns of Restraints on Alienation (1) Spend Thrift Trust (2) Support Trust (3) Discretionary Trust Alienation: General Rule (1) B can freely sell or transfer any property interest (2) Creditors can freely attach to any property interest of B Effects on Alienation: Spendthrift Trust (1) Voluntary -B cannot sell -Court may allow assignment of payments (2) Creditors -Creditors cannot attach -Exception: (i) Preferred creditors (gov, necessaries, child/spousal support, tort judgment) (ii) Any creditor to surplus over "station of live" (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow Effects on Alienation: Support Trust (1) Voluntary -B cannot sell EVER (2) Creditors -Creditors cannot attach -Exception: (i) Preferred creditors (gov, necessaries, child/spousal support, tort judgment) (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow Effects on Alienation: Discretionary Trust (1) Voluntary -Not really, what can B assign? -However, if trustee has notice of assignment then yes (2) Creditors -Not really, what are they attaching to? -However, if the trustee has notice of debt then yes. (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow What is the difference between: (1) Spendthrift Trust (2) Support Trust (3) Discretionary Trust (1) Spendthrift Trust -The beneficiary cannot transfer his right to future payments of income or principal, and creditors cannot attach to the beneficiary's right to future payments of income or principal. (2) Support Trust -Trustee is required to use only so much of the income or principal as is necessary for the beneficiary's health, support, maintenance, or education. (3) Discretionary Trust -Trustee is given sole and absolute discretion in determining how much to pay B, if anything, and when to pay B, if ever. Resulting Trust -Failed Trust -Trustee's duties are to return property to the settlor's estate -Estate will dispose of the property accordingly (i.e., residue or intestate succession) 7 Ways a Resulting Trust Arises (1) Express trust naturally ends (2) Private express trust has no beneficiary (3) Charitable trust ends due to impossibility of impracticability (4) Private express trust becomes illegal (5) Private express trust has excess funds to accomplish its purpose (6) "Purchase Money Resulting Trust" -A pays B to transfer to title to C, and A and C are NOT related -Presumption that C is holding title for A -If Related, presumption that it is a gift to C (7) Semi-Secret Trust -NOT a secret trust Secret v. Semi-Secret Trust (1) Secret -A WILL that makes an outright gift -BUT, oral promise to hold as trustee for B -NO beneficiaries are named or Trust Intent -PAROL Evidence establishes Trust Intent and B -REMEDY: Constructive trust; disgorge ill-gotten gain (property given to B) (2) Semi-Secret -A WILL that makes a gift to a person to hold as trustee (trust intent) -BUT NO beneficiaries are named -REMEDY: Resulting trust (property back to S's estate) Constructive Trust v. Resulting Trust (1) Constructive Trust -Trust implied in LAW -Remedy to prevent fraud or UJE -Constructive trustee must transfer property to intended B (determined by the court) (2) Resulting Trust -Trust implied in FACT -Remedy to effectuate the intent of the parties -Resulting trustee must transfer property to S's estate Constructive Trust -Trust implied in LAW -Remedy to prevent Fraud or Unjust Enrichment -Disgorgement of ill-gotten gains -Constructive trustee must transfer property to intended B -Intended B are determined by the court 4 Ways a Constructive Trust Arises (1) Profits of Trustee's Self Dealing (2) Fraud in the Inducement (Wills) (3) Secret Trust (4) Oral Real Estate Trust 3 Concepts of Trustees (1) Trustee Powers (2) Trustee Duties to B (3) Trustee Duties to 3rd Trustee Powers ALL: (1) Express (enumerated in the trust) AND (2) Implied (necessary to carry out trust purpose) -Sell -Incur Expenses -Lease -Borrow (modernly) Trustee Duties to B "I C DEALS" "I C DEALS" (1) Invest (2) Care (3) Don't Delegate (4) Earmark (5) Account (6) Loyalty (7) Segregate Duty of Loyalty (1) No Self-Dealing (2) Remedy for Losses: -Surcharge (3) Remedy for Gains: -Constructive Trust Duty to Invest Three Alternative Rules (1) State Approved Investment Lists -Scrutinize EACH investment -Never new businesses/IPO -Never 2nd deeds of trust in real estate (2) CL Prudent Person Test -Scrutinize EACH investment -Never new businesses/IPO (3) Uniform Prudent Investor Act -Scrutinize ENTIRE PORTFOLIO as a whole *Trustee MUST ALWAYS DIVERSIFY REMEDY: Surcharge for losses Duty to Earmark Trustee must LABEL trust property as trust property CL REMEDY: -Surcharge -w/ or w/o casual connection Modern REMEDY: -Surcharge -ONLY IF casual connection -e.g., trustee's creditors attached to trust asset bc trustee failed to properly label it as trust property and not his Duty to Segregate No Commingling -Personal and Trust assets -Trust A and Trust B assets REMEDY -Surcharge for Loss -Removal as trustee Duty Not to Delegate Trustee may bot delegate decision making duties Exception: (1) Professional opinion (2) Modernly only- Money Manager Allowed Duty to Account Statements of Income and Expenses to B Remedy: Action for Accounting Duty of Care Must Act as a Reasonably Prudent Person Dealing with Personal Affairs NOTE: ALWAYS discuss this duty Remedies for Breach of Trustee Duty/Duties (1) Damages (surcharge) (2) Constructive Trust (3) Equitable Lien (w/ tracing) (4) Ratify (if good for B) (5) Removal of Trustee CONTRACT Liability of Trustee to 3rd Parties Trustee enters into K with 3rd party for benefit of trust CL: -Sued in personal capacity -BUT may seek indemnification -However, sued in representative capacity IF K so stipulates Modern: -3rd party's knowledge controls -If 3rd knows that trustee is entering into K in his representative capacity then ONLY trust assets are at stake Trustee's Personal Capacity v. Representative Capacity Trustee can be sued EITHER in his: (1) personal capacity -personal assets at stake OR (2)Representative capacity -trust assets at stake TORT Liability of Trustee to 3rd Parties CL: -Sued in personal capacity -BUT may seek indemnification if trustee is w/o personal fault (e.g., an agent committed the tort, or strict liability) Modern: -Sued in personal capacity ONLY if trustee is w/o personal fault (e.g., an agent committed the tort, or strict liability) 4 Concepts of Trust Modification and Termination (1) Modification by Settlor (2) Modification by the court (3) Termination of revocable trust (4) Termination of irrevocable trust Modification by Settlor S ONLY has the power to modify a trust if he: (1) Expressly reserved the power to modify OR (2) Has the power to revoke -power to modify is implied -E.g., revocable trust Modification by the Court (1) Cy Pres -Charitable Trust ONLY -General Charitable Intent ONLY (2) Deviation Power: Doctrine of Changed Circumstances -Charitable or Private Trust -Court is ONLY modifying management provisions (e.g., T may invest in stock) -2 Elements: (i) Unforeseen circumstances on S's part (ii) Necessity What is the Doctrine of Changed Circumstances? It allows a court to modify the management provisions of a trust to allow a trustee more leniency IF: (i) Unforeseen circumstances on S's part; AND (ii) Necessity Ex: T must not invest in stock; T created this provision after the stock market crash (unforeseen that market would rebound); trust will not create enough income without investing in stock (necessity). When can S terminate a Revocable Trust? (1) Majority: -S must expressly reserve the power in the trust instrument (2) Minority: -S has the power unless the trust instrument expressly states otherwise 3 ways an irrevocable trust can be prematurely terminated (1) S and ALL Bs agree (2) ALL Bs agree and NO material purpose exist (3) By operation of law -Statue of uses: trust real property is idle NOTE: Guardian Ad Litem must be appointed to to represent B's who are incapable of representing themselves. 3 Concepts of Uniform Principal and Income Act (1) Income and Expenses allocated to life tenant (2) Income and Expenses allocated to the remainderman (3) Adjustment power of trustee Income and Expenses allocated to Life Tenant INCOME: (1) Cash Dividends (2) Interest Income (3) Net Business Income EXPENSES: (1) Interest on loan indebtedness (2) Taxes (3) Minor repairs (painting) NOTE: These are default rules Income and Expenses allocated to the Remainderman INCOME: (1) Stock Dividends (2) Stock Splits (3) Net Proceeds on Sale of Trust Assets EXPENSES: (1) Principal of loan indebtedness (2) Major Repairs/Improvements (new wing on building) NOTE: These are default rules Adjustment Power of Trustee Trustee may allocate INCOME in whatever manner necessary to administer the trust fairly.

6 Concepts of Private Express Trust

(1) Trust Property (2) Beneficiaries (3) Trustee (4) Intent (5) Creation (6) Purpose

What property can be part of the trust corpus?

Any presently existing interest in property that is transferable. NOT: Future profits Debt Expectancy

Who can be a B of a private express trust?

(1) Any ascertainable person or limited group of people. (2) Any corporation (3) Modernly any unincorporated association NOTE: Unlimited groups or unascertainable beneficiaries may be the B of a charitable trust.

Will a trust fail if there is no trustee?

NO, the court will appoint one NOTE: An honorary trust will fail if the trustee refuses to be the trustee

Present Manifestation of Trust Intent

(1) There are no magic words (2) Precatory words (wish, hope, or desire) alone will not suffice (3) Precatory words + parol evidence may suffice

Private Express Trust: Elements

(1) Trust Corpus (2) Ascertainable Beneficiaries (3) Trustee (ct may appoint) (4) Present Manifestation of Intent (5) Legal Purpose

Does a trust have to be in writing?

ONLY if the trust contains real property. The SOF does not apply to trust of personal property.

When can a trust take effect?

(1) At settlor's death -Via will -Must comply with will formalities -If will formalities are not met, trust fails (2) During settlor's life -Either: (i) Transfer or (ii) Declaration, in trust -Declaration: S is also trustee (living trust) -Transfer: delivery of assets to trustee required

Is there ever an issue of delivery for a Declaration in Trust?

NO, delivery is NOT required because Settlor is also Trustee.

Issues that arise regarding "Illegal Purpose" for a private express trust?

(1) Fixable illegality at creation -Court will excise illicit condition (2) Unfixable Illegality at creation -Invalidate trust at its inception -Settlor remains the owner (3) Illegality after creation -Resulting trust -Trustee must return property to S's estate

4 Concepts of Charitable Trusts

(1) Creation (2) Beneficiaries (3) RAP (4) Cy Pres

What is a Charitable Trust?

Any trusts that confers a SUBSTANTIAL BENEFIT upon society: REPS (1) Religion (2) Education (3) Poor (4) Sick

Beneficiaries of a Charitable Trust

Society -There may be NO ascertainable -Incidental benefit allowed -Split jdx whether a small group of B allowed

Does RAP apply to trusts?

Charitable: NO Private: YES

What is Cy Pres

(1) Court power (2) Petitioned by Trustee (3) Used to modify CHARITABLE trust (only) (4) IF settlor had GENERAL charitable purpose (5) Try to get "as near as possible" to that purpose

Why is it important to classify between general and specific charitable purpose?

Cy Pres can ONLY be used to modify a trust that has a GENERAL charitable purpose.

Honorary Trust

(1) No ascertainable B (2) No charitable purpose (3) CT will not appoint a trustee (4) If named trustee refuses to act as trustee, trust fails (5) Almost always a RAP issue

Totten Trust

(1) Bank Account: "M a trustee for J" (2) No true trustee or beneficiaries (3) No fiduciary duties NOTE: Watch for words that create present manifestation of trust intent, if these are present, this may be a private express trust.

3 Concerns of Restraints on Alienation

(1) Spend Thrift Trust (2) Support Trust (3) Discretionary Trust

Alienation: General Rule

(1) B can freely sell or transfer any property interest (2) Creditors can freely attach to any property interest of B

Effects on Alienation: Spendthrift Trust

(1) Voluntary -B cannot sell -Court may allow assignment of payments (2) Creditors -Creditors cannot attach -Exception: (i) Preferred creditors (gov, necessaries, child/spousal support, tort judgment) (ii) Any creditor to surplus over "station of live" (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow

Effects on Alienation: Support Trust

(1) Voluntary -B cannot sell EVER (2) Creditors -Creditors cannot attach -Exception: (i) Preferred creditors (gov, necessaries, child/spousal support, tort judgment) (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow

Effects on Alienation: Discretionary Trust

(1) Voluntary -Not really, what can B assign? -However, if trustee has notice of assignment then yes (2) Creditors -Not really, what are they attaching to? -However, if the trustee has notice of debt then yes. (3) Settlor as Beneficiary -NO, Violates PP -Few jdx allow

What is the difference between: (1) Spendthrift Trust (2) Support Trust (3) Discretionary Trust

(1) Spendthrift Trust -The beneficiary cannot transfer his right to future payments of income or principal, and creditors cannot attach to the beneficiary's right to future payments of income or principal. (2) Support Trust -Trustee is required to use only so much of the income or principal as is necessary for the beneficiary's health, support, maintenance, or education. (3) Discretionary Trust -Trustee is given sole and absolute discretion in determining how much to pay B, if anything, and when to pay B, if ever.

Resulting Trust

-Failed Trust -Trustee's duties are to return property to the settlor's estate -Estate will dispose of the property accordingly (i.e., residue or intestate succession)

7 Ways a Resulting Trust Arises

(1) Express trust naturally ends (2) Private express trust has no beneficiary (3) Charitable trust ends due to impossibility of impracticability (4) Private express trust becomes illegal (5) Private express trust has excess funds to accomplish its purpose (6) "Purchase Money Resulting Trust" -A pays B to transfer to title to C, and A and C are NOT related -Presumption that C is holding title for A -If Related, presumption that it is a gift to C (7) Semi-Secret Trust -NOT a secret trust

Secret v. Semi-Secret Trust

(1) Secret -A WILL that makes an outright gift -BUT, oral promise to hold as trustee for B -NO beneficiaries are named or Trust Intent -PAROL Evidence establishes Trust Intent and B -REMEDY: Constructive trust; disgorge ill-gotten gain (property given to B) (2) Semi-Secret -A WILL that makes a gift to a person to hold as trustee (trust intent) -BUT NO beneficiaries are named -REMEDY: Resulting trust (property back to S's estate)

Constructive Trust v. Resulting Trust

(1) Constructive Trust -Trust implied in LAW -Remedy to prevent fraud or UJE -Constructive trustee must transfer property to intended B (determined by the court) (2) Resulting Trust -Trust implied in FACT -Remedy to effectuate the intent of the parties -Resulting trustee must transfer property to S's estate

Constructive Trust

-Trust implied in LAW -Remedy to prevent Fraud or Unjust Enrichment -Disgorgement of ill-gotten gains -Constructive trustee must transfer property to intended B -Intended B are determined by the court

4 Ways a Constructive Trust Arises

(1) Profits of Trustee's Self Dealing (2) Fraud in the Inducement (Wills) (3) Secret Trust (4) Oral Real Estate Trust

3 Concepts of Trustees

(1) Trustee Powers (2) Trustee Duties to B (3) Trustee Duties to 3rd

Trustee Powers

ALL: (1) Express (enumerated in the trust) AND (2) Implied (necessary to carry out trust purpose) -Sell -Incur Expenses -Lease -Borrow (modernly)

Trustee Duties to B "I C DEALS"

"I C DEALS" (1) Invest (2) Care (3) Don't Delegate (4) Earmark (5) Account (6) Loyalty (7) Segregate

Duty of Loyalty

(1) No Self-Dealing (2) Remedy for Losses: -Surcharge (3) Remedy for Gains: -Constructive Trust

Duty to Invest

Three Alternative Rules (1) State Approved Investment Lists -Scrutinize EACH investment -Never new businesses/IPO -Never 2nd deeds of trust in real estate (2) CL Prudent Person Test -Scrutinize EACH investment -Never new businesses/IPO (3) Uniform Prudent Investor Act -Scrutinize ENTIRE PORTFOLIO as a whole *Trustee MUST ALWAYS DIVERSIFY REMEDY: Surcharge for losses

Duty to Earmark

Trustee must LABEL trust property as trust property CL REMEDY: -Surcharge -w/ or w/o casual connection Modern REMEDY: -Surcharge -ONLY IF casual connection -e.g., trustee's creditors attached to trust asset bc trustee failed to properly label it as trust property and not his

Duty to Segregate

No Commingling -Personal and Trust assets -Trust A and Trust B assets REMEDY -Surcharge for Loss -Removal as trustee

Duty Not to Delegate

Trustee may bot delegate decision making duties Exception: (1) Professional opinion (2) Modernly only- Money Manager Allowed

Duty to Account

Statements of Income and Expenses to B Remedy: Action for Accounting

Duty of Care

Must Act as a Reasonably Prudent Person Dealing with Personal Affairs NOTE: ALWAYS discuss this duty

Remedies for Breach of Trustee Duty/Duties

(1) Damages (surcharge) (2) Constructive Trust (3) Equitable Lien (w/ tracing) (4) Ratify (if good for B) (5) Removal of Trustee

CONTRACT Liability of Trustee to 3rd Parties

Trustee enters into K with 3rd party for benefit of trust CL: -Sued in personal capacity -BUT may seek indemnification -However, sued in representative capacity IF K so stipulates Modern: -3rd party's knowledge controls -If 3rd knows that trustee is entering into K in his representative capacity then ONLY trust assets are at stake

Trustee's Personal Capacity v. Representative Capacity

Trustee can be sued EITHER in his: (1) personal capacity -personal assets at stake OR (2)Representative capacity -trust assets at stake

TORT Liability of Trustee to 3rd Parties

CL: -Sued in personal capacity -BUT may seek indemnification if trustee is w/o personal fault (e.g., an agent committed the tort, or strict liability) Modern: -Sued in personal capacity ONLY if trustee is w/o personal fault (e.g., an agent committed the tort, or strict liability)

4 Concepts of Trust Modification and Termination

(1) Modification by Settlor (2) Modification by the court (3) Termination of revocable trust (4) Termination of irrevocable trust

Modification by Settlor

S ONLY has the power to modify a trust if he: (1) Expressly reserved the power to modify OR (2) Has the power to revoke -power to modify is implied -E.g., revocable trust

Modification by the Court

(1) Cy Pres -Charitable Trust ONLY -General Charitable Intent ONLY (2) Deviation Power: Doctrine of Changed Circumstances -Charitable or Private Trust -Court is ONLY modifying management provisions (e.g., T may invest in stock) -2 Elements: (i) Unforeseen circumstances on S's part (ii) Necessity

What is the Doctrine of Changed Circumstances?

It allows a court to modify the management provisions of a trust to allow a trustee more leniency IF: (i) Unforeseen circumstances on S's part; AND (ii) Necessity Ex: T must not invest in stock; T created this provision after the stock market crash (unforeseen that market would rebound); trust will not create enough income without investing in stock (necessity).

When can S terminate a Revocable Trust?

(1) Majority: -S must expressly reserve the power in the trust instrument (2) Minority: -S has the power unless the trust instrument expressly states otherwise

3 ways an irrevocable trust can be prematurely terminated

(1) S and ALL Bs agree (2) ALL Bs agree and NO material purpose exist (3) By operation of law -Statue of uses: trust real property is idle NOTE: Guardian Ad Litem must be appointed to to represent B's who are incapable of representing themselves.

3 Concepts of Uniform Principal and Income Act

(1) Income and Expenses allocated to life tenant (2) Income and Expenses allocated to the remainderman (3) Adjustment power of trustee

Income and Expenses allocated to Life Tenant

INCOME: (1) Cash Dividends (2) Interest Income (3) Net Business Income EXPENSES: (1) Interest on loan indebtedness (2) Taxes (3) Minor repairs (painting) NOTE: These are default rules

Income and Expenses allocated to the Remainderman

INCOME: (1) Stock Dividends (2) Stock Splits (3) Net Proceeds on Sale of Trust Assets EXPENSES: (1) Principal of loan indebtedness (2) Major Repairs/Improvements (new wing on building) NOTE: These are default rules

Adjustment Power of Trustee

Trustee may allocate INCOME in whatever manner necessary to administer the trust fairly.