Barring Creditors of the decedent – Creditor claims not filed within a statutory period after probate are barred. tax code: chooses this over inheritance tax (on recipient) Gift tax: so that T cannot give all away to avoid estate tax Applies where you give away all incidents of ownerships (thus, not trusts) Unlimited marital deduction (1981) Spouses can transfer unlimited amounts between each other, and will not be taxed until death/gift of last spouse Exempt until value exceeds $600,000 Exemption is increasing each year Generation skipping tax Eliminates use of dynastic trusts, which enable family to pay tax on property continually passed on only once (at settlor’s death) Economic Growth and Tax reconciliation Act of 2001 If passed, no effect until 2010 Wills: executor of will is responsible for paying taxes due; can go to estate to recover; if insufficient, can go to B’s to recover Standard features Title B has equitable title Trustee has legal title Different provisions: Dispositive provisions: who gets what Administrative: to set up trust and impose duties on trustees Variations Third-party trust Self-declared trust (can be done so orally) Resulting trust: when trust fails b/c Occurs when Trust is passive/dry b/c trustee has no duties to perform When the settlor doesn’t provide for the whole Fee simple absolute (FSA) (essentially, the resulting trust would amount to a reversion at the end, back to the settlor). Spendthrift Trusts Features Bs cannot voluntarily alienate their interests Creditors cannot reach Bs’ interests; exceptions Child/spousal support Majority: judgments for spousal and child support can be enforced a/g debtor’s interest in spendthrift trust Shelley v. Shelley (OR, 1960, p. 633): don’t want state to pay child and alimony support B/c trust was discretionary and named B’s children and not spouses as Bs, only child payments could reach corpus of trust Divorced spouses had to wait until B received the money Another benefit of making discretionary trust Substantial Minority: trust can’t even be reached for spousal/child support Self-settled trusts US Majority: spendthrift trust established by settlor for his own benefit cannot shield him from creditors Off-shore Asset Protection Trusts (OAPT), Alaska, DE: people can self-settle to limit liability if irrevocable Settlor can still retain much control Common among lawyers and doctors wanting to limit malpractice claims Caymans: can even self-settle trust a/f lawsuit has been filed Tax liens: can reach Bs’ interests Tort creditors: law in flux Created by Imposing a disabling restraint on Bs and their creditors (“spendthrift clause”) Good b/c There’s no reason why a parent would not want to protect his children by keeping money in the family Current generations keep future ones from squandering family assets Bad b/c Promote an elite class of wealthy families Viability/recognizabilty Recognized in almost all jurisdictions NY: all trusts are spendthrift unless settlor expressly makes the beneficiary’s interest transferable Others: trusts are not spendthrift unless settlor expressly inserts a spendthrift clause Discretionary and Support Trusts Mandatory: trustee must pay out to specified people Rule: Bs of mandatory trust can freely alienate their interests Includes support trusts Definition: Requires the trustee to make payments or income to the beneficiary in an amount necessary for the education or support of the beneficiary in accordance with an ascertainable standard Station-in-life rule (NY): trust can provide whatever is necessary to support the beneficiary “at his current station in life”; even if luxurious Different from mandatory trusts b/c Beneficiary of a support trust may NOT alienate her interest Creditors of the beneficiary cannot reach the beneficiaries interest Exception: suppliers of necessaries may recover through the beneficiary’s right to support Exception: assets in support trust count for purposes of Medicaid Note: If trustee is bound to pay out ascertainable amount annually –- like all the trust income --- this is not a support trust, even if it says “Pay the income to Mary annually for the support of her children.” Discretionary: trustee can be given discretion as to whom to pay (but can’t be too vague a class), how much money to give beneficiaries, and sometimes given power to decide whether to distribute both income + principal or not. 7.

It is a crime for lawyers to advise illegal action to get under this.

Total restraints on 2d marriages are Upheld by ½ the states and Struck Down by the other ½. Provides evidence of transfer of title b. Protects creditors by requiring payment of debt c. Distributes the decedent’s property to those intended after debts paid. Latham v. Father Divine – Father is a charismatic minister, with a considerable following of blacks and whites.

Changing Trustees Rule (Restatement): Court will not change T simply b/c B(s) want to Behavior must be particularly shocking or T must have breached duty Litigation Heirs (w/ unanimous consent to litigate) bear legal fees for both sides Ways around this requirement Settlors/Benefactors should name a co-trustee, who would share investment or distribution authority with the bank.

Blum & Kalven, Progressive Taxation – 10. Contracts to Make a Will (RARE) States vary on the requirements for a contract relating to a will, most required clear & convincing evidence, some require writings.

Lapse) Some argue that since folks use will substitutes to avoid p. Would you like to get a custom essay?

A trust – the superior means if you have doubts at all.

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