Chapter 50
TRUSTS AND DECEDENTS’ ESTATES
I. Trusts
A. Types of Trusts
1. Express Trusts
a. Testamentary Trusts
b. Inter Vivos Trusts
c. Charitable Trusts
d. Spendthrift Trusts
e. Totten Trusts
2. Implied Trusts
a. Constructive Trusts
b. Resulting Trusts
B. Creation of Trusts
1. Settlor
2. Trust Corpus or Property
3. Trustee
a. Duties of the Trustee
b. Powers of the Trustee
c. Allocation of Principal and Income
4. Beneficiary
C. Termination of a Trust
II. Decedents’ Estates
A. Wills
1. Mental Capacity
a. Testamentary Capacity and Power
b. Conduct Invalidating a Will
2. Formal Requirements of a Will
a. Writing
b. Signature
c. Attestation
3. Revocation of a Will
a. Destruction or Alteration
b. Subsequent Will
c. Codicils
d. Operation of Law
4. Effectiveness of Testamentary Provisions
a a. Renunciation by the Surviving Spouse
b. Abatement and Ademption of a Bequest
5. Special Types of Wills
a. Nuncupative Wills
b. Holographic Wills
c. Soldiers’ and Sailors’ Wills
d. Conditional Wills
b e. Joint and Mutual or Reciprocal Wills
f. Living Wills
B. Intestate Succession
C. Administration of Estates
Cases in This Chapter
Kenney v. Keeney
In the Matter of the Estate of Rowe
Prine v. Blanton
Golini v Bolton
Chapter Outcomes
After reading and studying this chapter, the student should be able to:
Describe and explain the following types of trusts: (1) express, (2)
testamentary, (3) inter vivos, (4) charitable, (5) spendthrift, (6) totten,
(7) implied, (8) constructive, and (9) resulting.
Describe the powers and duties of a trustee.
TEACHING NOTES
I. TRUSTS
• A trust is a *duciary relationship in which one or more persons hold
legal title to property while its use, enjoyment, and benefit (known as
equitable title) belong to another.
• A trust may be created by agreement of the parties, by a grant in a
will, or by a court decree.
• The party creating the trust is the settlor, the party holding the legal
title to the property is the trustee, and the person who receives the
benefit of the trust is the bene*ciary.
• A trust may be created for any purpose that is not against the law or
public policy.
NOTE: See Figure 50-1: Trusts.
*** Chapter Outcome ***
Describe and explain the following types of trusts: (1) express, (2) testamentary, (3)
inter vivos,
(4) charitable, (5) spendthrift, (6) totten, (7) implied, (8) constructive, and (9) resulting.
A. TYPES OF TRUSTS
The many kinds of trusts fall into two groups: express and implied. Implied
trusts, imposed upon property by court order, are categorized as either
constructive or resulting trusts.
Express Trusts
Voluntary action by a person to establish a trust; generally will be in writing.
No particular words are necessary to create a trust, if the settlor’s intent to
establish a trust is unmistakable. Words such as “hope” or “rely” are wishful
and many courts have taken the view that without additional evidence, they
of the bene*ciary cannot attach the fund or the income. Such a trust is
called a spendthrift trust.
Totten Trusts — A totten trust is a tentative trust consisting of a joint bank
account opened by the settlor. For example, Sally deposits a sum of money
into a savings account in the name of “Sally, in trust for Justin.” This trust is
tentative because the settlor may revoke it by withdrawing the funds or by
changing the form of the account. Usually the transfer of ownership becomes
complete only on the depositor’s death.
Implied Trusts
The courts sometimes, in the absence of any expressed intent to create a
trust, will impose a trust on property because the parties’ acts appear to
warrant such a construction. An implied trust owes its existence to the law.
Constructive Trusts — A constructive trust results when a court imposes a
CASE 50-1
KEENEY v. KEENEY
Court of Appeals of Kentucky, 2007
223 S.W.3d 843
http//scholar.google.com/scholar_case?case=17154555324430393535&q=223+S.W.3d+843&hl=en&as_sdt=2,22
Acree, J.
This appeal from a judgment entered by the Pulaski Circuit Court began as Barbara Joanne
Keeney’s petition for dissolution of her marriage to Milton Keeney. Barbara [joined] * * * as
additional defendants Milton’s parents, Winfred (now deceased) and Ruth Keeney, and to
establish her rights to 6.6629 acres near Nancy, Kentucky, titled in Winfred’s and Ruth’s
names. The parties and trial court refer to this property as the “Nancy property” or, more
frequently, the “Barlowproperty.” * * *
Essential to Barbara’s claims is the premise that Milton, aided by Winfred and Ruth,
intentionally avoided direct ownership of real and/or personal property in his name. The
On June 22, 1982, a decade or so after Milton’s accident, Barbara and Milton were
married. Before and during their marriage, Milton was self-employed. He had begun and
continued establishing a business known as K-Bar Trailer Manufacturing Company. He built
cattle, horse, and flat bed trailers. Additionally, Milton started a pig farm, but that venture
eventually failed.
Barbara worked with her husband on many of his K-Bar ventures. * * *
Not long after their marriage, in February of 1983, and without Barbara’s knowledge,
Milton and his father attended a real estate auction where they were the successful bidders to
purchase the Barlow property. Their winning bid was $61,700. * * *
* * *
* * *
The [trial] court concluded Barbara was unaware that the Barlow property was placed in
the name of Winfred and Ruth. To the contrary, the court found that Barbara “was
informed … that Milton had bought the Barlow property at Nancy” and that the property was
paid for with funds from the K-Bar checking account controlled by Milton. The trial court
ruled “as a matter of law that clear and convincing evidence [was] presented warranting the
imposition of a constructive trust on the ‘Nancy or Barlow Property.”’ The court also
ordered the property to be sold and the proceeds divided equally between Barbara and
Milton. * * *
* * *
In summary, the Appellants * * * assert the trial court erred because “a constructive trust
must result from an act of fraud, or, in the absence of fraud, must grow out of a fiduciary
relationship.” [Citation.] We reiterate what our predecessor court said in response to that
argument.
* * *
The rule perhaps is best stated in [citation], wherein, after citing authorities, the Court
said:
When legal title to property has been acquired or held under such circumstances that the
holder of that legal title may not in good conscience retain the beneficial interest, equity
converts him into a trustee. [Citation.] Constructive trusts are created by the courts “in
respect of property which has been acquired by fraud, or where, though acquired originally
without fraud, it is against equity that it should be retained by him who holds it.” [Citations.]
“The fraud may occur in any form of unconscionable conduct; taking advantage of one’s
weaknesses or necessities, or in any way violating equity in good conscience.” [Citations.]
In fact, a court exercising its equitable power may impress a constructive trust upon one who
obtains legal title, “not only by fraud or by violation of confidence or of fiduciary
A careful review of this matter indicates there is no reason to believe that the circuit
court was clearly erroneous in any of its findings of fact. The collaboration of Milton and his
parents to avoid execution of the Smith judgment unquestionably falls in that category of
behavior described variously in our case law as “unconscientious,” “unconscionable,” and
“violating equity in good conscience.” * * * Winfred’s and Ruth’s efforts to hide Milton’s
beneficial ownership of property from Mary Smith had an obvious and even greater
dispossessory effect on Barbara than it had on its target.
Even if defrauding Barbara of her beneficial interest was not Winfred’s and Ruth’s
original intention, it became so when she decided to divorce their son. Their retention of the
property thus deprived Barbara of her beneficial ownership of the marital residence.
[Citation.]
Resulting Trusts — A resulting trust e?ects the presumed intent of parties
who have inadequately expressed their actual wishes. Since a resulting trust
is created by implication and operation of law, it need not be evidenced in
writing. The essence of a resulting trust is the presumption made by the law
that the holder of legal title does not hold the property personally but as a
trustee for another party.
B. CREATION OF TRUSTS
Each trust has:
(1) a creator or settlor,
(2) a “corpus” or trust subject matter,
(3) a trustee and
(4) a bene*ciary.
No particular words are necessary to create the trust, provided the settlor’s
intent to establish a trust is unmistakable. Consideration is not essential to
an enforceable trust; thus, a trust is more like a conveyance than a contract.
Settlor
Creator of the trust. Anyone with legal capacity to enter into a binding
contract can create a trust.
Trust Corpus or Property
The trust corpus or res must be de*nite and in existence when the trust is
created. The res may be any type of property that exists and is assignable.
Trustee
A third party who holds legal title to the trust corpus for the benefit of the
bene*ciary.
*** Chapter Outcome ***
Describe the powers and duties of a trustee.
Duties of the Trustee —The trustee’s 3 primary duties are:
(1) to carry out the purposes of the trust,
(2) to administer the trust prudently and carefully, and
(3) to exercise a high degree of loyalty toward the bene*ciary.
No special skills are required of a trustee. He or she is simply required to act
CASE 50-2
IN THE MATTER OF THE ESTATE OF ROWE
Supreme Court, Appellate Division, Third Department, New York, 2000
274 A.D.2d 87, 712 N.Y.S.2d 662, appeal denied, 96 N.Y.2d 707, 749 N.E.2d 206, 725 N.Y.S.2d 637 (2001)
http://scholar.google.com/scholar_case?case=7935201553540489298&q=712+N.YS.2d+662&hl=en&as_sdt=2,34
Mercure, J. P.
Petitioner [Wilbur National Bank] was appointedtrustee of a charitable lead trust created
under the will of Frances E. Rowe, deceased (hereinafter decedent). The trust was funded
solely by 30,000 shares of International Business Machines (hereinafter IBM) common
stock, which was trading for approximately $113 per share at the time of decedent’s death in
April 1989 and approximately $117 per share when the trust was funded in September 1989.
Under the terms of the trust instrument, petitioner was required to make annual distributions
In August 1994, respondents made a demand pursuant * * * that petitioner file an
intermediate accounting, claiming that petitioner’s failure to diversify the trust assets had
resulted in a decline in yield and forced sales of trust principal, thereby threatening the
depletion of the trust corpus by the end of the trust term. In December 1994, Surrogate’s
Court required petitioner to prepare an intermediate accounting for the period from
September 8, 1989 to December 31, 1994 (hereinafter the accounting period). Petitioner
filed its accounting and then commenced this proceeding for a judicial settlement thereof.
Respondents objected to the accounting upon the grounds (among others) that petitioner’s
failure to diversify the trust was imprudent in that it violated petitioner’s own policy
requiring diversification, the policy of the Comptroller of Currency, and regulations of the
Federal Reserve Bank.
The evidence adduced at the July 1996 trial of the proceeding to settle petitioner’s
intermediate account showed that petitioner’s own written policy required diversification of
the trust assets. At the time of the original funding of the trust in 1989, petitioner’s Trust
to these principles must be brought to the Committee’s attention with supporting data as to
the reason for these exceptions. Exceptions to diversification may be made when an agency
customer or the trust instrument specifically permits, or where large capital gains would be
As for the actual investment activity engaged in by petitioner, the evidence showed that
the Committee reviewed the trust in October 1989. Because the value of the stock had
dropped from the time the trust was funded, the Committee felt that it would be imprudent to
diversify immediately, but gave its approval to a plan of diversifying at a later time when the
stock had reached a higher price. In the meantime, petitioner generated some income by
selling various call options, and several small sales and in-kind distributions were made of
IBM stock in order to fulfill the annual payout requirements. The first move toward
diversification came in February 1991, when petitioner sold 5,000 shares of IBM stock at
$125 per share and an additional 2,959 shares at $136 per share. As of the close of the
accounting period on December 31, 1994, petitioner still held 19,398 shares of IBM stock
valued at $74 per share. Over the course of the accounting period, the market value of the
trust assets had dropped from $3,521,250 to $1,853,937.
In August 1997, Surrogate’s Court rendered its decision that, from the period September
8, 1989 to December 31, 1994, petitioner was negligent, that it had violated its own policy
concentration of a particular stock in an estate’s portfolio violates the prudent person
standard [citation]. Further, each individual investment decision should be examined in
relation to the entire portfolio as an entity [citation], and a trustee can be found to have been
imprudent for losses resulting from negligent inattentiveness, inaction or indifference
[citation].
At trial, the generalized testimony of Herbert Simmerly, who was petitioner’s
vice-president and trust officer and a supervisor of the trust, Benjamin Nesbitt, petitioner’s
senior vice-president and senior trust officer, and investment officers Lynda Peet and Erica
Decker was directly contradicted by the testimony of respondent’s expert, Loren Ross.
Significantly, Ross expressed the strong opinion that petitioner had acted imprudently in
failing to diversify the trust’s assets immediately upon receipt of the IBM stock, in
furtherance of its initial goal of creating a diversified portfolio of fixed income oriented
assets and equity or growth assets. According to Ross, both the 15-year duration of the trust
and the 8% annual payout requirement made the investment in IBM stock particularly
inappropriate. First, IBM’s dividends of less than $5 per share fell far short of satisfying the
“extremely heavy burden” of having to pay out “an unvarying $270,300 a year” to charities,
thereby requiring that capital be depleted to supplement the shortfall. Second, the extreme
Powers of the Trustee — A trustee’s power will be determined by state
statutes which indicate what type of investments are deemed prudent, and
by express authority granted by the trust instrument.
Allocation of Principal and Income — Trusts sometimes give a life estate
to one bene*ciary and a remainder to another. Ordinary receipts and
expenses are billed to the income bene*ciary while extraordinary income
and expenses are charged to the remainderman.
The Uniform Principal and Income Act. was amended and updated in 2008 to
implement technical changes related to developments and interpretations
relating to tax matters. At least thirty-four States have adopted the 2008
amendments.
NOTE: See Figure 50-2: Allocation of Principal and Income.
Beneficiary
There are very few restrictions on who or what can be a bene*ciary of a
trust, and the trust may have virtually any legal purpose for its existence.
The bene*ciary may accept or reject the trust.
C. TERMINATION OF A TRUST
Unless the settlor reserves the power to revoke the trust, the general rule is
that a trust, once validly created, is irrevocable. If the settlor does reserve
the power of revocation, she may terminate the trust at her discretion.
Normally, the instrument creating a trust establishes the date on which the
II. DECEDENTS’ ESTATES
A testator is a person who dies having left a will. Intestate means dying
without a will. In the absence of a will a person who dies has his property
distributed by intestate succession. If a person dies without relatives his
property reverts (escheat) to the state.
A. WILLS
A will is a written instrument, executed according to statutorily dictated
formalities, whereby a person makes a disposition of his property which is to
take e?ect after his death.
A key characteristic of a will, in contrast to a deed or a contract, is that it is
revocable at any time during life. There is no such thing as an irrevocable
will. A will takes e?ect only on the death of the testator.
In 1969, the Uniform Law Commission and the American Bar Association
approved the Uniform Probate Code (UPC), an attempt to encourage
throughout the United States the adoption of a uniform, Iexible, speedy,
eJcient, and, in most cases, less expensive system of settling a decedent’s
estate. Approximately twenty States have adopted the UPC.
Mental Capacity
To make a valid will, the testator must have both the “power” and the
“capacity” to do so. The required testamentary intent must also be present.