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B. STEPCHILDREN, ADOPTED CHILDREN, AND ILLEGITIMATE CHILDREN
Legally adopted children are heirs; stepchildren are not. In most stares, any child born of a union that has the
characteristics of a formal marriage is legitimate. An illegitimate child’s Inheritance rights may differ from those of
a legitimate child).
C. DISTRIBUTION TO GRANDCHILDREN
The text explains per stirpes and per capita distribution in the context of children surviving their parents and
grandparents, with a grandparent as testator. Per capita is the preferred method.
III. Trusts
A trust involves any arrangement by which legal title to property is transferred from one person to be administered by
a trustee for another person’s benefit.
A. ESSENTIAL ELEMENTS OF A TRUST
The elements of a valid trust are—
• A designated beneficiary.
• A designated trustee.
• A fund identified to enable title to pass to the trustee.
• Delivery by the settlor or grantor to the trustee with the intent of passing title.
B. EXPRESS TRUSTS
1. Living Trusts
A grantor executes a living trust during his or her lifetime.
2. Testamentary Trusts
A testamentary trust is created by will on the settlor’s death.
3. Charitable Trusts
4. Spendthrift Trusts
A spendthrift trust prevents a beneficiary’s using trust funds improvidentially by limiting the beneficiary’s
draw on trust funds and transfer of the right to future payments.
5. Totten Trusts
This trust is created when a person deposits money in his or her name in trust for another. It is revocable at
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1. Constructive Trusts
A constructive trust is an equitable remedy that enables plaintiffs to recover property (and sometimes
damages) from defendants who would otherwise be unjustly enriched. The text provides examples.
CASE SYNOPSIS—
Case 52.3: Garrigus v. Viarengo
Stella Jankowski added her niece Genevieve Viarengo as a joint owner on several savings and checking accounts,
certificates of deposit, and savings bonds. In executing a will, Jankowski told her attorney John Wabiszczewicz that she
wanted her estate divided equally among her ten nieces, nephews, and cousins. She named Viarengo and Richard
Golebiewski as co-executors. Wabiszczewicz was not aware of the jointly held accounts, and neither Jankowski nor
Viarengo mentioned them. Jankowski died in 2001. Within days, Viarengo emptied Jankowski’s safe and removed her
financial records. Despite requests from Golebiewski and Wabiszczewicz, Viarengo did not reveal the contents of the
safe or the records. Jankowski’s estate—jewelry, a home in Connecticut, and the jointly held accounts—totaled about
$600,000. The jointly owned assets were valued at about $500,000. Viarengo claimed that those accounts were hers.
Diane Garrigus and other relatives filed a suit in a Connecticut state court against Viarengo. The court imposed a
constructive trust. Viarengo appealed.
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Notes and Questions
In the wake of the corporate collapses, the mortgage crisis, and other financial catastrophes of the 2000s, it was
discovered that a few individuals had engaged in wrongdoing to enrich themselves at the expense of their companies,
their customers, their communities, and others. It was observed at the time that among any ten persons, in
circumstances in which actions are driven by character, the conduct of eight persons will be influenced by the ethical
tone of the workplace or other location in which the actions are to be taken, the behavior of one person will always
represent the ethical or “right” choice, and the conduct of one person will always be “wrong”—unethical, illegal, or
both.
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ANSWER TO “THE LEGAL ENVIRONMENT DIMENSION”
QUESTION IN CASE 52.3
What are the elements of fraud? Which facts in this case support the court’s finding of fraud? The elements of
fraud are a misrepresentation of a material fact with knowledge of its falsity, intent to induce another’s reliance on the
misrepresentation, the other’s justifiable reliance, a causal connection between the misrepresentation and an injury,
and damages. Here, Viarengo knew that Jankowski wanted her estate divided equally among her ten relatives.
ANSWER TO “WHAT IF THE FACTS WERE DIFFERENT?” IN CASE 52.3
Suppose that by the time the court imposed a constructive trust on the joint accounts in this case, their value had
decreased by $100,000. Should the defendant have been liable for the loss? Why or why not? Yes, on grounds of
“equity and good conscience” the defendant should be held liable for the value of the joint accounts at the time of
Jankowski’s death. At least this amount should be distributed among Jankowski’s intended heirs. Interest might also be
assessed, so that the defendant would not be “unjustly enriched” by her fraud.
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Recent cases in which a constructive trust was imposed include the following.
• Cassidy v. Cassidy, 982 A.2d 326 (Me. 2009) (a constructive trust existed for the benefit of former in-laws when
they invested the proceeds from the sale of their residence in the property of their son and daughter-in-law who
promised to build an apartment on the property where the in-laws could live for the rest of their lives, but the son and
daughter-in-law divorced, she was awarded the property, and she ordered the in-laws to vacate the apartment).
• Cooper v. Gilder, __ So.3d __ (Miss.App. 2009) (a constructive trust could be imposed on the income that a
2. Resulting Trusts
A resulting trust arises from the conduct of the parties.
D. THE TRUSTEE
Anyone legally capable of holding title to, and dealing in, property can be a trustee. If a settlor fails to name a
trustee, or if a named trustee cannot or will not serve, a court can appoint a trustee.
1. Trustee’s Duties
A trustee must act with honesty, good faith, and prudence, and exercise loyalty toward the beneficiary. A
2. Trustee’s Powers
A settlor may prescribe the trustee’s powers and performance. State law applies only in the absence of such
3. Allocations between Principal and Income
A settlor may provide one beneficiary with a life estate and another beneficiary with the remainder interest
in a trust. Questions may arise concerning the apportionment of receipts and expenses between income
and principal. Absent terms in the trust to the contrary, state law provides that ordinary receipts and
expenses are chargeable to an income beneficiary, and extraordinary receipts and expenses are allocated to
a principal beneficiary.
E. TRUST TERMINATION
A trust terminates when it says it does, when its terms have been fulfilled, or when it is impossible to continue.
ADDITIONAL BACKGROUND—
The Trustee’s Discretion
A difficult question concerns the extent to which a trustee has the discretion to “invade” the principal and
distribute it to an income beneficiary—if the income is found to be insufficient to provide for the beneficiary in an
appropriate manner. A similar question concerns the extent of a trustee’s discretion to retain trust income and add it
to the principal, if the income is found to be more than sufficient to provide for the beneficiary in an appropriate
manner.
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Generally, the income beneficiary should be provided with a somewhat predictable annual income, but with a view
to preserving the principal. A trustee may therefore make individualized adjustments in annual distributions.
IV. Other Estate-Planning Issues
In anticipation of becoming incapacitated or otherwise unable to act, persons sometimes plan for others to manage
their affairs.
A. POWER OF ATTORNEY
A power of attorney authorizes a person to act on another’s behalf, sometimes for limited purposes (see Chapter
32).
1. Durable Power of Attorney
2. Health-Care Power of Attorney
A health-care power of attorney designates a person to choose medical treatment for a person who is
unable to make such a choice.
B. LIVING WILL
A living will is an advance health directive that designates whether or not a person wants certain life-saving
procedures to be taken if they will not result in a reasonable quality of life.
TEACHING SUGGESTIONS
1. Ask students if they have ever made a will. What were some of the concerns that prompted them to make a will?
Do single persons without children need a will?
2. Ask students to discuss why the requirements for executing valid wills are so strict in most states. Are these
standards prompted by fears of fraud? Should these standards be relaxed so that those who fail, for one reason or
another, to comply with a particular statutory requirement, will not have their wills invalidated?
3. Ask students to discuss the various techniques for estate planning—which are most advantageous in what types of
situations—and to put together estate plans of their own. This could help underscore that estate plans must be
continually reviewed and revised to be sure they meet the needs of those for whom they are designed. What
circumstances, other than divorce, could affect who takes what under a will, or by some other estate planning
technique? Are taxes the only consideration?
4. Bring to class various will forms, trust forms, and forms for the documents discussed in the elder law section, and
discuss their provisions and effects, particularly in your jurisdiction.
Cyberlaw Link
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What effect might the Web have on the uniformity of wills and other estate planning documents discussed in this
chapter? How might the existence of the Internet affect the management of a trust?
DISCUSSION QUESTIONS
1. What is a will? A will is the final declaration of the disposition that a person desires to have made of his or her property
2. How does a specific devise or bequest differ from a general devise or bequest? A specific devise describes particular
3. What is the purpose of a residuary clause? A will may provide that any assets remaining after specific gifts are made
4. What are the three requirements that must be satisfied in order for a testator to demonstrate his or her testamentary
capacity? The testator must (1) comprehend and remember the “natural objects of his or her bounty” (usually family members
and persons for whom the testator has affection); (2) comprehend the kind and character of the property being distributed; and
5. What are the four basic requirements for a valid will? A will (1) must be in writing; (2) signed by the testator; (3)
6. What is a codicil? A codicil is a written instrument separate from the will that amends or revokes provisions in the will.
7. What four elements must be present to create a valid trust? A valid trust must include (1) a designated beneficiary; (2)
8. How does a living trust differ from a testamentary trust? A living trust is a trust executed by a grantor during his or her
9. What is a constructive trust? A constructive trust arises by operation of law as an equitable remedy that enables
plaintiffs to recover property (and sometimes damages) from defendants who would otherwise be unjustly enriched. The legal
owner of the property is declared to be a trustee for the parties who, in equity, are actually entitled to the beneficial enjoyment
that flows from the trust.
ACTIVITY AND RESEARCH ASSIGNMENTS
1. Ask each student to draft a will for himself or herself disposing of any property he or she may own. What sorts of
problems does drafting a will present in terms of deciding who should receive what property?
2. Ask students to draft their own durable powers of attorney, health-care powers of attorney, or living wills. What terms
would they want to include? You might pass out standard versions of these forms and ask students what they would change.
ANSWERS TO ESSAY QUESTIONS IN
STUDY GUIDE TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
BY HOLLOWELL & MILLER
1. What requirements must be satisfied to create 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 decedent’s property is distributed according to the
laws of intestacy of the state. Writing. A written document is generally required, although nuncupative wills are sometimes
considered to be valid. The writing itself can be informal as long as it substantially complies with the statutory requirements. A
will that is completely in the handwriting of the testator is called a holographic (or olographic) will. A will can also refer to a
written memorandum that itself is not a will but that contains information necessary to carry out the will. This information—
such as a list of charitable beneficiaries—will be “incorporated by reference” into the will only if it was in existence when the
will was executed (signed) and if it is sufficiently described so that it can be identified. Signature of the Testator. Almost all
jurisdictions require that the testator’s signature be made with the requisite intent to validate the will. The testator’s signature
does not need to be at the end of the will so long as the signature is in the body of the will. Each jurisdiction dictates by statute
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constitute another exception in some jurisdictions. A holographic will must be signed by the decedent, however, and its
material provisions must be in the testator’s handwriting for the will to be probated.
2. In what ways may a will be revoked? An executed will is revocable by the maker at any time during the maker’s
lifetime. Wills can also be revoked by operation of law. Revocation can be partial or complete, but the revocation itself must
follow certain strict formalities in order to be effective. By the Maker—Destruction. Revocation of an executed will by the
maker can be effected in either of two ways—by physical act or in writing. 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 maker’s direction. In some states, partial revocation by physical act of the maker is recognized. Those portions of a will
marked out or torn away will be omitted, but the remaining parts of the will should still be valid. In no case, however, can a
provision be crossed out and an additional or substitute provision written in its stead. Such alterations require that the will be
reexecuted (re-signed) and reattested (rewitnessed). 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. By the Maker—a Codicil. A codicil is a written instrument
separate from the will that amends or revokes provisions in the will. It eliminates the necessity of redrafting an entire will
merely to add a clause to it or otherwise amend it. A codicil can also be used to revoke an entire will. The codicil must be
executed with the same formalities required for a will and refer expressly to the will. In effect, a codicil updates a will, because
the will is “incorporated by reference” into the codicil. By the Maker—A New Will. A second will can be executed that may or
may not revoke the first will or a prior will, depending upon the language used. The second will must use specific language 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 will be read together. If any of the dispositions made in
REVIEWING—
WILLS AND TRUSTS
In June 2009, Bernard Ramish set up a $48,000 trust fund through West Plains Credit Union to provide tuition for
his nephew Nathan Covacek to attend Tri–State Polytechnic Institute. The trust was established under Ramish’s control
and went into effect that August. In December, Ramish suffered a brain aneurysm that caused frequent, severe
headaches but no other symptoms. In August 2011, Ramish developed heat stroke and collapsed on the golf course at
La Prima Country Club. After recuperating at the clubhouse, Ramish quickly wrote his will on the back of a wine list. It
stated, “My last will and testament: Upon my death, I give all of my personal property to my friend Bernard Eshom and
1. What type of trust did Ramish create for the benefit of Covacek? Was it revocable or irrevocable? Based on the
information it appears to be a revocable living trust or inter vivos trust as it remained under Ramish’s control.
2. Would Ramish’s testament on the back of the wine list meet the requirement for a valid will? Why or why not?
call the will into question—the facts do not establish the relationship among these parties—but Ramish’s failure to
3. What would the order of inheritance have been if Ramish had died intestate? Intestacy laws vary widely from state
4. Was Johansen granted a durable power of attorney or a health-care power of attorney for Ramish? Explain. Had
Ramish created a living will? It appears that Ramish gave a health-care power of attorney, which put Johansen in
charge of choosing his medical treatment should he be incapable of making decisions. A living will sets out specific
medical procedures that will be taken in the event of incapacity.
DEBATE THIS:
Any changes to existing, fully witnessed wills should also have to be witnessed. If a will requires witnesses to be
valid, so, too, should any changes to that will. Otherwise, there are too many chances for fraud by those close to the
testator.
A testator should have power to make changes to her or his will without the benefit of witnesses. Such
unwitnessed changes should not invalidate the will.
granddaughter, Tori Lupin. Ask your students to answer the following questions, using the information presented in the
