WILLS, TRUSTS, & ESTATES Professor Michael P. Panebianco Spring 2016

Transcription

1 DIRECTIONS: Please read carefully! 1. This is a closed-book exam. 2. This exam will last three hours. It consists of 2 essay questions, one is a fact pattern that has specific questions to answer (30% of exam) and the other has a more general question to answer, requiring you to identify and address the various issues in the fact pattern (70% of exam). 3. Unless specifically stated otherwise, the Uniform Probate Code, Uniform Trust Code, and other Uniform statutes covered in the text and in class apply to all questions. If a non-uniform statute or common law is applicable for your response, please specify. 4. In writing your answers to the essay questions, please clearly indicate the question and sub-question to which you are responding. 5. All of your answers should be in essay format and demonstrate that you understand the issues and applicable law and are able to analyze and apply the facts to reach the correct conclusion. Providing only a conclusion/answer, even if correct, will not generate full credit. 6. Good Luck and Congratulations! Page 1 of 5

2 Essay Question I (30%) In 2009, Claudia established an irrevocable trust (the Trust ) during her life, to which she transferred $2 million. The trust agreement named Robert, her friend, as trustee. The Trust provided, in part: The trustee shall distribute income to Claudia s daughter, Maria, at least annually, for her life. During Maria s life, the trustee may distribute any, or all, of the principal to Maria as the trustee, in the trustee s sole and absolute discretion, may determine is necessary for Maria s health, maintenance, and support. At Maria s death, Maria shall have the power to appoint any, or all, of the principal to such person or persons, other than herself, her creditors, her estate, or her estate s creditors, as she may direct the trustee in her last will and testament. Upon Maria s death, to the extent Maria has not appointed all of the trust assets, the trustee shall hold the trust assets not so appointed for the benefit of Maria s children, and may distribute income and principal to or for the benefit of Maria s children, for whatever purpose, in the trustee s sole discretion. The trust also contains a spendthrift provision. Claudia died in 2014, survived by her daughter, Maria (age 48), and Maria s children, Greg (age 21) and Alice (age 17) and Robert is still the trustee. The value of the assets in the trust at the time of Claudia s death was $3 million. Questions: Note: if additional facts or assumptions are necessary to answer any of the questions, please provide them in your answer. A. Assume that, in 2013, Claudia incurred $400,000 of debt. Could Claudia s creditors reach the assets in the Trust to satisfy the debt? Why or why not? B. Assume that in 2016, a creditor obtained a judgment against Alice for $50,000. Maria, Greg and Alice are still alive. i. Can Alice assign some or all of her interest as a beneficiary of the trust to the creditor to satisfy her debt? Why or why not? Page 2 of 5

3 ii. Can the trustee make a discretionary distribution from the trust to benefit Alice by paying for Alice s rent or groceries while Alice has the creditor problem? Why or why not? C. Identify and explain the various fiduciary duties Robert has to Maria, Greg, and Alice while all three are alive. In answering this question, be sure to explain the rights, if any, Maria, Greg, and Alice have to information and reports concerning the trust. D. Assume that, after Claudia created the irrevocable trust and while Maria is still alive, Greg developed a substance abuse and gambling problem and Maria is concerned that, after Maria s death, all of the trust s assets would be used to care for Greg with little or nothing being used for Alice. What, if anything, can Maria do to prevent this from happening while still providing for both Greg and Alice? Explain. Page 3 of 5

4 Essay Question II (70%) In 2005, Jon Snow validly executed a will, which provided: I hereby make the following gifts upon my death: My Rolex watch to my friend, Sam. $25,000 to my uncle, Ned. My house to my son, Ben. My tangible personal property to such persons as I may direct in a memorandum signed by me. The remainder of my estate to my wife, Samantha. In 2006, Jon validly executed a durable power of attorney for financial matters and named his daughter, Katherine, as agent. In 2009, Jon crossed out $25,000 and handwrote $20,000 above it for the gift to Ned, but did not sign it. In 2010, Jon gave his Rolex watch to his friend, Sam. In 2011, Jon and Samantha divorced. In 2012, Jon married Lucy. In 2013, Jon writes and signs a memorandum directing that upon his death all of his tangible personal property is to be given to his friend, Steve, and his house to his business manager, Thomas. Ben and Katherine are Jon and Samantha s only 2 children. Jon did not have any children with Lucy. In early 2015, Jon was declared incompetent and Katherine, as agent under the power of attorney for Jon, sold the house (net proceeds were $300,000) and used $100,000 of Jon s assets to pay for Jon s living and medical expenses, and also made gifts of $25,000 to herself and to her brother, Ben. Other than what s stated above, Jon did not make any changes to his will or otherwise sign a new will or codicil. When Jon died at the end of 2015, he owned the following assets in his name alone: a Movado watch ($1,500), other tangible personal property ($50,000), a bank account Page 4 of 5

5 ($200,000), and an investment account ($1 million). Jon had no debt or creditors at the time of his death. Jon is survived by Sam, Katherine, Ben, Samantha, Lucy, Thomas, and Steve. Ned predeceased Jon, but Ned s son, Henry, survived Jon. Question: Who gets what from Jon s estate and why? Be sure to identify and address all issues in answering the question. If any formulas or computations are needed to calculate a beneficiary s share, you do not need to do the actual calculation, but you do need to identify and explain the process to be able to arrive at the beneficiary s share. Page 5 of 5