Wills and Trusts - Chp. 53 of the textbook
from West's Business Law, 7th Edition
A will is the final declaration of how a person desires to have his or her property disposed of after death. One who makes a will is known as a testator (from the Latin testari,to make a will). A will is referred to as a testamentary disposition of property, and one who mdies after having made a valid will is said to have died testate.
A will can serve other purposes besides the distribution of property. It can appoint a guardian for minor children or incapacitated adults. It can also appoint a personal representative to settle the affairs of the deceased. An executor is the personal representative named in the will. An administrator is the personal representative appointed by the court for a decedent who dies without a will, who fails to name an executor in the will, who names an executor lacking the capacity to serve, or who writes a will that the court refuses to admit to probate. Exhibit 531 presents a copy of one of the many wills purportedly written by Howard Hughes, the reclusive American film producer and manufacturer.
LAWS GOVERNING WILLS
Laws governing wills come into play when a will is probated. To probate (prove) a will means to establish its validity and carry the administration of the estate through a process supervised by a probate court. Probate laws vary from state to state. In 1969, however, the American Bar Association and the National Conference of Commissioners on Uniform State Laws approved the Uniform Probate Code (UPC).
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Profile: Uniform Probate Code
The UPC, which was significantly revised in 1990, codifies general principles and procedures for the resolution of conflicts in settling estates and relaxes some of the requirements for a valid will contained in earlier state laws. Nearly all of the states have enacted some part of the UPC and incorporated it into their own probate codes. For this reason, references to its provisions will be included in this chapter. Nonetheless, succession and inheritance laws vary widely among states, one should always check the particular laws of the state involved.(2)
GIFTS BY WILL
A gift of real estate by will is generally called a devise, and a gift of personal property under a will is called a bequest, or legacy. The recipient of a gift by will is a devisee or a legatee, depending on whether the gift was a devise or a legacy.
TYPES OF GIFTS Gifts by will can be specific, general, or residuary.
A specific devise or bequest (legacy) describes particular property
(such as Eastwood Estate or my gold pocket watch) that can be
distinguished from all the rest of the testators property. A general
devise or bequest (legacy) uses less restrictive terminology.
For example, I devise all my lands is a general devise. A general
bequest often specifies a sum of money instead of a particular
item of property, such as a watch or an automobile. For example,
I give to my nephew, Carleton, $30,000 is a general bequest.
Sometimes a will provides that any assets remaining after specific gifts have been made and debts are paidcalled the residuary (or residuum) of the estateare to be given to the testators spouse, distributed to the testators descendants, or disposed of in some other way. If the testator has not indicated what party or parties should receive the residuary of the estate, the residuary passes according to state laws of intestacy.
In the following case, the court had to decide whether the residuary of an estate should go to the only named beneficiary in the testators will or should be distributed under intestacy laws to all of the legal heirs of the deceased.
ESTATE OF CANCIK
Appellate Court of Illinois, First District, Fifth Division, 1984.
121 Ill.App.3d 113, 459 N.E.2d 296, 76 Ill.Dec. 659.
BACKGROUND AND FACTS Edward Cancik, the testator, died with a net estate valued at more than $200,000. Edward had intentionally omitted all his relatives from his will except his cousin Charles Cancik. Edward specifically willed to Charles all his personal and household goods and placed the residuum in a testamentary trust for the maintenance of the Cancik family mausoleum (trusts are discussed later in the chapter). After Edwards death, Charles filed a complaint alleging that the value of the trust corpus (that is, the capital or principal, as distinguished from the interest) vastly exceeded the amount necessary to accomplish its purpose (to maintain the mausoleum), and he asked that the residuum be distributed to him as the only heir under the testators will. Thomas, another relative of Edward, acting for any unknown heirs as guardian ad litem (a person appointed to protect the interests of parties unable to represent themselves), filed a petition to have the residuum distributed to all the testators heirs by intestacy. (Twelve heirs were later found to be living in Czechoslovakia.) The trial court held that the residuum passed to all the heirs by the laws of intestacy. Charles appealed.
IN THE LANGUAGE OF THE COURT
* * * *
[Edward Cancik (testator)] executed a will in which he bequeathed, in clause IV, all of his personal and household effects to Charles; and then, in clause V, placed the residue of his estate into a testamentary trust, the income of which was to be used for the perpetual maintenance of the mausoleum. * * * In the final clause of the will (clause VII), testator stated:
I have intentionally omitted the names of my relatives
from this my Last Will and Testament for reasons I
deem good and sufficient with the exception of my
aforesaid cousin, CHARLES E. CANCIK.
* * * *
The object of testamentary construction is to ascertain the intention of the testator and, in so doing, the intention which must be given effect is that expressed in the language of the will, not one which the testator may have had in his mind but failed to express. * * *
In our view, a reading of the will in its entirety, and of the language of clause VII in particular, does not give rise to an implication * * * that the testator intended Charles to inherit the entire excess residuum of his estate. It appears that his major concern was for the care and maintenance of the family mausoleum, and it was to this purpose that he directed, through clause V, the overwhelming bulk of his assets; and although he referred to Charles with a certain degree of affection, as his beloved cousin, the bequest to Charles in clause IV of the will consisted of only personal property of minimal value when compared to the total estate. In the light of this vastly disproportionate division of property between the trust and Charles, we cannot conclude, as Charles suggests, that he (Charles) was so favored by the overall scheme of the will as to raise an inference that clause VII evidenced testators intention to disinherit all other heirs; or, more importantly, that it created an alternate residuary bequest to him upon the termination or failure of the trust.
DECISION AND REMEDY The court held that the residue of Edwards
estate must go to his heirs rather than to Charles, who was merely
the beneficiary of Edwards personal belongings.
Full text of case
ABATEMENT If the assets of an estate are insufficient to pay in full all general bequests provided for in the will, an abatement takes place, meaning that the legatees receive reduced benefits. For example, Chaos will leaves $15,000 each to my children, Tomika and Lin. Upon Chaos death, only $10,000 is available to honor these bequests. By abatement, each child will receive $5,000. If bequests are more complicated, abatement may be more complicated. The testators intent, as expressed in the will, controls.
LAPSED LEGACIES If a legatee dies prior to the death of the testator or before the legacy is payable, a lapsed legacy results. At common law, the legacy failed. Today, the legacy may not lapse if the legatee is in a certain blood relationship to the testator (such as a child, grandchild, brother, or sister) and has left a child or other surviving descendant.
REQUIREMENTS FOR A VALID WILL
A will must comply with statutory formalities designed to ensure that the testator understood his or her actions at the time the will was made. These formalities are intended to help prevent fraud. Unless they are followed, the will is declared void, and the decedents property is distributed according to the laws of intestacy of that state. The requirements are not uniform among the jurisdictions. Most states, however, uphold certain basic requirements for executing a will. We now look at these requirements.
TESTAMENTARY CAPACITY AND INTENT For a will to be valid, the
testator must have testamentary capacitythat is, the testator
must be of legal age and sound mind at the time the will is made.
The legal age for executing a will varies, but in most states
and under the UPC the minimum age is eighteen years [UPC 2501].
Thus, the will of a twenty-one-year-old decedent written when
the person was sixteen is invalid if, under state law, the legal
age for executing a will is eighteen.
The concept of being of sound mind refers to the testators ability to formulate and to comprehend a personal plan for the disposition of property. Generally, a testator must (1) intend the document to be his or her last will and testament, (2) comprehend the kind and character of the property being distributed, and (3) comprehend and remember the natural objects of his or her bounty (usually, family members and persons for whom the testator has affection).
A valid will is one that represents the makers intention to transfer and distribute his or her property. When it can be shown that the decedents plan of distribution was the result of fraud or of undue influence, the will is declared invalid. Undue influence may be inferred by the court if the testator ignored blood relatives and named as beneficiary a nonrelative who was in constant close contact and in a position to influence the making of the will. For example, if a nurse or friend caring for the deceased at the time of death was named as beneficiary to the exclusion of all family members, the validity of the will might well be challenged on the basis of undue influence.
In the following case, the question before the court was whether the testator had the required testamentary capacity. As the court notes, testamentary capacity will be presumed unless sufficient evidence exists to call such capacity into question.
BOLAN v. BOLAN
Supreme Court of Alabama, 1993.
611 So.2d 1051.
HISTORICAL AND CULTURAL SETTING In cases involving contested wills, English courts did not allow trial by jury. In actions of ejectment (in which a plaintiff seeks the removal of the defendant from land), English courts did allow trial by jury, even when one of the issues in the case was title to land that had been part of a testamentary disposition. When wills involving title to land came to be probated in the United States, it was believed that if those wills were contested, trial by jury should be allowed. Thus, trial by jury in will-contest cases came to be allowed in many states, including Alabama. Juries answer questions of fact. Incapacity is a question of fact. Because appellate courts do not generally consider questions of fact, an appellate court will normally not overturn the finding of a jury on the issue of incapacity as long as there is evidence to support the finding.
BACKGROUND AND FACTS On Charley Bolans death, he was survived by six children. His will left one dollar to each of three of his children and to each child of his deceased son (the contestants) and the remainder of his estate to the other three children (the proponents). The contestants claimed that the will was invalid, alleging, among other things, that Charley lacked testamentary capacity at the time he made the will. The evidence before the court was conflicting. Witnesses present at the time the will was executed testified that Charley was in sound mental condition on that occasion, and other family members testified to the same effect. Other testimony, including statements made by the contestants, indicated that Charley was in poor health before the date of execution; that he repeatedly held conversations with his dead wife; that he refused to bathe, change his clothes, or otherwise take care of himself; and that he had rigged up a dangerous spring-gun to protect himself from intruders when no real threat existed. The case was transferred from a probate court to an Alabama state trial court, and the trial jury held for the contestants. The proponents appealed.
IN THE LANGUAGE OF THE COURT
* * * *
* * * Every testator is presumed to have the capacity to make a will, * * * and the burden is on the contestant to prove the lack of testamentary capacity. The contestant need not show that the testator suffered from permanent insanity; the contestants burden may be carried by demonstrating that the testator lacked testamentary capacity at the time the will was executed.
* * * *
Here, the witnesses to the September 9 will all testified that Charley was in sound mental condition on the date of the execution. There was testimony to the same effect from other family members. However, there was also testimony from Betty that Charley was in poor health before the date of execution; that he repeatedly held conversations with his dead wife; that he refused to bathe, change his clothes, or otherwise take care of himself; and that he had rigged up a dangerous spring-gun to protect himself from intruders when no real threat existed. * * *
Although the evidence was conflicting, the contestants presented sufficient evidence of a lack of testamentary capacity to support the submission of the contest to the jury on this ground.
DECISION AND REMEDY The trial courts judgment was affirmed.
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WRITING REQUIREMENTS Generally, a will must be in writing. The writing itself can be informal as long as it substantially complies with the statutory requirements. In some states, a will can be handwritten in crayon or ink. It can be written on a sheet or scrap of paper, on a paper bag, or on a piece of cloth. A will that is completely in the handwriting of the testator is called a holographic will (sometimes referred to as an olographic will).
In some cases, oral wills are found valid. A nuncupative will is an oral will made before witnesses. It is not permitted in most states. Where authorized by statute, such wills are generally valid only if made during the last illness of the testator and are therefore sometimes referred to as deathbed wills. Normally, only personal property can be transferred by a nuncupative will. Statutes frequently permit soldiers and sailors to make nuncupative wills when on active duty.
SIGNATURE REQUIREMENTS A fundamental requirement for a valid will is that the testators signature appear on the will, generally at the end of the document. Each jurisdiction dictates by statute and court decision what constitutes a signature. Initials, an X or other mark, and words like Mom have all been upheld as valid when it was shown that the testators intended them to be signatures.
WITNESS REQUIREMENTS A will must be attested (sworn to) by
two, and sometimes three, witnesses. The number of witnesses,
their qualifications, and the manner in which the witnessing must
be done are generally set out in a statute. A witness can be required
to be disinterestedthat is, not a beneficiary under the will.
The UPC, however, provides that a will is valid even if it is
attested by an interested witness [UPC 2505]. There are no age
requirements for witnesses, but witnesses must be mentally competent.
The purpose of witnesses is to verify that the testator actually executed (signed) the will and had the requisite intent and capacity at the time. A witness does not have to read the contents of the will. Usually, the testator and all witnesses must sign in the sight or the presence of one another, but the UPC deems it sufficient if the testator acknowledges his or her signature to the witnesses [UPC 2502]. The UPC does not require all parties to sign in the presence of one another.
PUBLICATION REQUIREMENTS A will is published by an oral declaration by the maker to the witnesses that the document they are about to sign is his or her last will and testament. Publication is becoming an unnecessary formality in most states, and it is not required under the UPC.
REVOCATION OF WILLS
An executed will is revocable by the maker at any time during the makers lifetime. The maker may revoke a will by a physical act, such as tearing up the will, or by a subsequent writing. Wills can also be revoked by operation of law. Revocation can be partial or complete, and it must follow certain strict formalities.
REVOCATION BY A PHYSICAL ACT OF THE MAKER The testator may
revoke a will by intentionally burning, tearing, canceling, obliterating,
or destroying it or by having someone else do so in the presence
of the maker and at the makers direction.(3) In some states, partial
revocation by physical act of the maker is recognized. Thus, those
portions of a will lined out or torn away are dropped, and the
remaining parts of the will are valid. In no case, however, can
a provision be crossed out and an additional or substitute provision
written in. Such altered portions require reexecution (re-signing)
and reattestation (rewitnessing).
To revoke a will by physical act, it is necessary to follow the mandates of a state statute exactly. When a state statute prescribes the exact methods for revoking a will by physical act, those are the only methods that will revoke the will.
REVOCATION BY A SUBSEQUENT WRITING A will may also be wholly
or partially revoked by a codicil, a written instrument separate
from the will that amends or revokes provisions in the will. A
codicil eliminates the necessity of redrafting an entire will
merely to add to it or amend it. It can also be used to revoke
an entire will. The codicil must be executed with the same formalities
required for a will, and it must refer expressly to the will.
In effect, it updates a will, because the will is incorporated
by reference into the codicil.
A new will (second will) can be executed that may or may not revoke the first or a prior will, depending on the language used. To revoke a prior will, the second will must use language specifically revoking other wills, such as, This will hereby revokes all prior wills. If the second will is otherwise valid and properly executed, it will revoke all prior wills. If the express declaration of revocation is missing, then both wills are read together. If any of the dispositions made in the second will are inconsistent with the prior will, the second will controls.
REVOCATION BY OPERATION OF LAW Revocation by operation of law
occurs when marriage, divorce or annulment, or the birth of a
child takes place after a will has been executed. In most states,
when a testator marries after executing a will that does not include
the new spouse, on the testators death the spouse can still receive
the amount he or she would have taken had the testator died intestate
(how an intestates property is distributed under state laws will
be discussed shortly). In effect, this revokes the will to the
point of providing the spouse with an intestate share. The rest
of the estate is passed under the will [UPC 2301, 2508]. If, however,
the new spouse is otherwise provided for in the will (or by transfer
of property outside the will), the new spouse will not be given
an intestate amount.
At common law and under the UPC, divorce does not necessarily revoke the entire will. A divorce or an annulment occurring after a will has been executed will revoke those dispositions of property made under the will to the former spouse [UPC 2508].
If a child is born after a will has been executed and if it appears that the deceased parent would have made a provision for the child, then the child is entitled to receive whatever portion of the estate he or she is allowed under state laws providing for the distribution of an intestates property. Most state laws allow a child to receive some portion of a parents estate if no provision is made in the parents will, unless it appears from the terms of the will that the testator intended to disinherit the child. Under the UPC, the rule is the same.
RIGHTS UNDER A WILL
The law imposes certain limitations on the way a person can dispose of property in a will. For example, a married person who makes a will generally cannot avoid leaving a certain portion of the estate to the surviving spouse. In most states this is called an elective share, a forced share, or a widows (or widowers) share, and it is often one-third of the estate or an amount equal to a spouses share under intestacy laws.
Beneficiaries under a will have rights as well. A beneficiary can renounce (disclaim) his or her share of the property given under a will. Further, a surviving spouse can renounce the amount given under a will and elect to take the forced share when the forced share is larger than the amount of the giftthis is the widows (or widowers) election, or right of election. State statutes provide the methods by which a surviving spouse accomplishes renunciation. The purpose of these statutes is to allow the spouse to obtain whichever distribution would be most advantageous. The revised UPC gives the surviving spouse an elective right to take a percentage of the total estate determined by the length of time that the spouse and the decedent were married to each other [UPC 2201].
Typically, probate procedures vary, depending on the size of the decedents estate.
INFORMAL PROBATE PROCEEDINGS For smaller estates, most state statutes provide for the distribution of assets without formal probate proceedings. Faster and less expensive methods are then used. For example, property can be transferred by affidavit (a written statement taken in the presence of a person who has authority to affirm it), and problems or questions can be handled during an administrative hearing. In addition, some state statutes provide that title to cars, savings and checking accounts, and certain other property can be passed merely by filling out forms.
A majority of states also provide for family settlement agreements, which are private agreements among the beneficiaries. Once a will is admitted to probate, the family members can agree to settle among themselves the distribution of the decedents assets. Although a family settlement agreement speeds the settlement process, a court order is still needed to protect the estate from future creditors and to clear title to the assets involved. The use of these and other types of summary procedures in estate administration can save time and money.
FORMAL PROBATE PROCEEDINGS For larger estates, normally formal probate proceedings are undertaken, and the probate court supervises every aspect of the settlement of the decedents estate. Additionally, in some situationssuch as when a guardian for minor children or for an incompetent person must be appointed, and a trust has been created to protect the minor or the incompetent personmore formal probate procedures cannot be avoided. Formal probate proceedings may take several months to complete, and as a result, a sizable portion of the decedents assets (up to perhaps 10 percent) may have to go toward payment of fees charged by attorneys and personal representatives and court costs.
Concept Summary 53-1
PROPERTY TRANSFERS OUTSIDE THE PROBATE PROCESS
Commonly, beneficiaries under a will must wait until the probate process is completewhich can take several months if formal probate proceedings are undertakento have access to money or other assets received under the will. For this and other reasons, some persons arrange to have property transferred in ways other than by will and outside the probate process.
One method of accomplishing this is by establishing a living trust, as will be discussed later in this chapter. Another method is through the joint ownership of property. For example, a person can arrange to hold title to certain real or personal property as a joint tenant with a spouse or other person. Recall from Chapter 48 that in a joint tenancy, when one joint tenant dies, the other joint tenant or tenants automatically inherit the deceased tenants share of the property, even if the deceased tenant provided otherwise in his or her will. Yet another way of transferring property outside the probate process is by making gifts to children or others while one is still living. Finally, to make sure that a spouse, children, or some other dependent is provided for, many people take out life insurance policies. On the death of the policyholder, the proceeds of the policy go directly to the beneficiary and are not involved in the probate process.