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California Will Drafting

Draft wills with confidence—for every type of client and every type of estate.

Draft wills with confidence—for every type of client and every type of estate.

  • Complete will forms for single and married persons (trust and nontrust)
  • Client intake questionnaire (foreign spouse? digital assets? IRA?)
  • Testamentary trusts: trusts for children; QTIP/QDOT; bypass trusts; disclaimer trusts; SNTs
  • Trust distributions: clauses and taxation
  • Planning for generation-skipping transfer tax
  • Charitable gifts: outright or split-interest trusts
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3d edition, 3 looseleaf volumes, updated 11/18

 

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Draft wills with confidence—for every type of client and every type of estate.

  • Complete will forms for single and married persons (trust and nontrust)
  • Client intake questionnaire (foreign spouse? digital assets? IRA?)
  • Testamentary trusts: trusts for children; QTIP/QDOT; bypass trusts; disclaimer trusts; SNTs
  • Trust distributions: clauses and taxation
  • Planning for generation-skipping transfer tax
  • Charitable gifts: outright or split-interest trusts

1

Professional Responsibility

Thomas R. Bennett

Frayda L. Bruton

Marshal A. Oldman

  • I.  WILL DRAFTER AS ESTATE PLANNER  1.1
  • II.  AVOIDING MALPRACTICE
    • A.  Standard of Professional Skill and Care  1.2
      • 1.  Duty to Do Research  1.3
      • 2.  Duty to Consult or Refer Client to Specialist  1.4
      • 3.  Division of Attorney Fees With Specialist  1.4A
      • 4.  Statute of Limitations for Malpractice Claims  1.4B
      • 5.  Recoverable Damages  1.4C
      • 6.  Professional Discipline  1.4D
    • B.  Preparing for Inevitable Threat of Malpractice  1.5
      • 1.  File Memoranda and Letters to Clients  1.6
        • a.  When Estate Plan Is Not Completed  1.6A
        • b.  Duty to Prospective Beneficiaries?  1.6B
      • 2.  Colleague Review of Finished Estate Plan  1.7
    • C.  Will Contracts  1.8
      • 1.  Types of Will Contracts  1.9
      • 2.  Reasons to Discourage Will Contracts
        • a.  Enforcement Problems With Will Contracts  1.10
          • (1)  Survivorship and Personal Service Contracts  1.10A
          • (2)  Third Party Disposition Contracts  1.10B
        • b.  Tax Problems With Will Contracts
          • (1)  Estate Tax Consequences  1.11
          • (2)  Gift Tax Consequences  1.12
          • (3)  Income Tax Consequences  1.13
          • (4)  Generation-Skipping Transfer (GST) Tax Consequences  1.14
        • c.  Drafting Problems With Will Contracts  1.15
      • 3.  Alternatives to Will Contracts  1.16
        • a.  Reciprocal Wills Creating Testamentary Trust  1.16A
        • b.  Reciprocal Funded Revocable Trusts  1.16B
    • D.  Avoiding Joint Wills
      • 1.  Definition and Use of Joint Will  1.17
      • 2.  Reasons Not to Create Joint Will  1.18
    • E.  Duty to Notify Client of Defective Will  1.19
    • F.  Duty to Notify Former Client of New Law?  1.20
    • G.  No Duty to Determine Client Competence  1.20A
    • H.  Tax Practice Standards: Circular 230  1.20B
      • 1.  Tax Return Preparer  1.20C
      • 2.  Written Advice on Federal Tax Matters  1.20D
  • III.  CONFLICTS OF INTEREST
    • A.  Conflicts of Interest in Will Drafting  1.21
    • B.  Conflicts of Interest in Representing Couples  1.22
      • 1.  Duty of Confidentiality  1.22A
      • 2.  Actual and Potentially Adverse Interests Between Clients  1.22B
    • C.  Examples of Conflicts of Interest
      • 1.  Spouses or Domestic Partners as Clients  1.23
      • 2.  Other Couples as Clients  1.24
      • 3.  Conflicts Involving Individual Clients  1.25
    • D.  Future Conflict Caused by Joint Estate Planning  1.26
    • E.  Taking Conflicts of Interest Seriously  1.27
    • F.  Dealing With Conflicts of Interest
      • 1.  Identifying Conflicts  1.28
      • 2.  Obtaining Informed Written Consent  1.29
        • a.  Obtaining Consents When Issue Is Confidentiality  1.30
        • b.  Obtaining Consents When Issue Is Representation of Potentially Adverse Interests  1.31
        • c.  Form: Consent to Dual Representation  1.31A
      • 3.  Treating Each Party as Client  1.32
    • G.  Attorney as Interested Party
      • 1.  Drafting Attorney as Executor  1.33
      • 2.  Drafting Attorney as Attorney for Estate  1.34
      • 3.  Drafting Attorney and Other Fiduciaries as Beneficiaries  1.35
        • a.  Presumption of Fraud or Undue Influence  1.35A
        • b.  Exceptions to Presumption  1.35B
        • c.  Statute of Limitations on Presumption  1.35C
        • d.  Form: Certificate of Independent Review  1.36
  • IV.  PLANNING FOR SOLE PRACTITIONER’S DEATH OR DISABILITY  1.37
    • A.  Nomination of Practice Administrator  1.38
      • 1.  Practical Consideration When Nominating Practice Administrator  1.39
      • 2.  State Bar Model Surrogacy Agreement  1.40
      • 3.  Form: Nomination of Practice Administrator  1.41
    • B.  Petition for Appointment of Practice Administrator
      • 1.  Who May Bring Petition  1.42
      • 2.  Notice of Petition  1.43
      • 3.  Contents of Petition  1.44
      • 4.  Powers and Duties of Practice Administrator  1.45
      • 5.  Form: Petition for Appointment of Practice Administrator  1.46
      • 6.  Form: Order Appointing Practice Administrator  1.47
    • C.  Acting as Practice Administrator  1.48
      • 1.  Disposition of Client Files  1.49
      • 2.  Fee Allocation Problems  1.50
      • 3.  Accounting and Petition for Approval; Discharge  1.51
    • D.  Closing a Practice Under State Bar Act  1.52

2

Initial Client Conference

Thomas R. Bennett

  • I.  PREPARATION FOR INITIAL CLIENT CONFERENCE
    • A.  Preparation by Attorney
      • 1.  Checklist for Client Conference  2.1
      • 2.  Checklist: Client Interview  2.2
      • 3.  Client File Review  2.3
    • B.  Preparation by Client
      • 1.  Preconference Questionnaires  2.4
      • 2.  Form: Client Questionnaire  2.5
  • II.  INITIAL CLIENT CONFERENCE
    • A.  Conducting Client Conference  2.6
    • B.  Eliciting Testamentary Wishes  2.7
    • C.  Anticipating Issues of Incapacity, Fraud, and Undue Influence  2.8
      • 1.  Testamentary Capacity
        • a.  The Due Process in Competence Determinations Act and Other Legal Standards of Capacity  2.9
          • (1)  Criteria of Testamentary Capacity  2.9A
          • (2)  Ability to Communicate  2.9B
        • b.  “Natural” Objects of Testator’s Bounty  2.10
        • c.  Delusions Affecting Devises  2.11
        • d.  Testator’s Incapacity Must Be Shown at Time of Execution of Will  2.12
        • e.  Admissibility of Opinion Evidence  2.13
        • f.  Unnatural Will as Evidence of Incapacity  2.14
        • g.  Protecting Against Claim of Incapacity  2.15
      • 2.  Undue Influence
        • a.  Duress and Undue Influence Are Synonyms  2.16
        • b.  Undue Influence Defined as “Excessive Persuasion”  2.16A
        • c.  Elements of Presumption of Undue Influence  2.17
        • d.  Active Participation in Procurement of Will  2.18
          • (1)  Presence of Beneficiary  2.18A
          • (2)  Absence of Beneficiary  2.18B
        • e.  Confidential Relationship  2.19
        • f.  Unnatural Will; Undue Benefit  2.20
        • g.  Discovering Undue Influence  2.21
      • 3.  Fraud
        • a.  What Constitutes Fraud  2.22
        • b.  Discovering Fraud  2.23
    • D.  Explaining Types of Wills  2.24
      • 1.  Witnessed Will  2.24A
      • 2.  Holographic Will  2.25
      • 3.  Statutory Will  2.26
        • a.  Persons Entitled to Use Statutory Will  2.27
        • b.  Limitations of Statutory Will  2.28
        • c.  Effect of Dissolution on Statutory Will  2.29
        • d.  Execution of Statutory Will  2.29A
      • 4.  Uniform International Will  2.30
    • E.  Discovering Delinquent Gift Tax Returns  2.31
    • F.  Dealing With Conflicts of Interest  2.32
    • G.  Discussing and Executing Fee Agreements
      • 1.  Requirement of Written Contract  2.33
        • a.  Contents of Fee Agreement  2.33A
        • b.  Failure of Obtain Fee Agreement  2.33B
      • 2.  Deductibility of Attorney Fees  2.34
      • 3.  Time Records and Billing  2.35
        • a.  Form: Estate Planning Time Sheet  2.36
        • b.  Form: Estate Planning Bill  2.37
  • III.  SPECIAL PROBLEMS
    • A.  Deathbed Wills  2.38
    • B.  Wills for Non-English-Speaking or Illiterate Clients  2.39

3

Planning for Incapacity

Thomas R. Bennett

  • I.  LEGAL DEVICES IN PLANNING FOR CLIENT’S INCAPACITY  3.1
  • II.  PLANNING FOR MANAGEMENT OF FINANCIAL AFFAIRS ON INCAPACITY  3.2
    • A.  Conservatorships  3.3
      • 1.  Role of Conservator of Estate; Rights of Conservatee  3.4
      • 2.  Appointment of Conservator  3.5
      • 3.  Nomination of Conservator
        • a.  Formal Requirements for Nomination  3.6
        • b.  Other Possible Provisions of Nomination  3.7
      • 4.  Selection of Nominee
        • a.  Spouse or Domestic Partner  3.8
        • b.  Adult Child  3.8A
        • c.  Friend as Conservator  3.8B
        • d.  Attorney as Conservator  3.9
        • e.  Other Individuals  3.10
        • f.  Trust Company  3.11
        • g.  Private Professional Conservators  3.11A
        • h.  Co-Conservators  3.12
      • 5.  Conservator Need Not Be California Resident  3.13
      • 6.  Need to Keep Nomination Current  3.14
    • B.  Durable Power of Attorney (DPOA)
      • 1.  Definition of DPOA  3.15
      • 2.  Types of DPOA
        • a.  General Versus Limited Powers of Attorney  3.16
        • b.  Immediately Effective Versus Springing DPOA
          • (1)  Immediately Effective DPOA  3.17
          • (2)  Springing DPOA  3.18
          • (3)  Incapacity Determination Mechanisms for Springing DPOA  3.18A
          • (4)  Alternatives to Springing DPOA  3.18B
      • 3.  Selection of Agent for DPOA for Financial Management  3.19
      • 4.  Successor Agents for DPOA  3.20
      • 5.  Special Drafting Concerns for DPOA  3.21
        • a.  Tax-Related Issues  3.22
        • b.  Qualification for Public Medical Benefits  3.23
        • c.  Business Affairs  3.24
        • d.  Multistate Considerations  3.25
        • e.  Principal as Fiduciary  3.26
        • f.  Dealing With Troublesome Family Members and Others  3.27
        • g.  Agent’s Duty and Standard of Care  3.28
        • h.  Compensation of Agent  3.29
        • i.  Aids to Acceptance by Third Parties  3.30
      • 6.  Forms of DPOA  3.31
    • C.  Revocable Trust
      • 1.  Definition of Revocable Trust  3.32
      • 2.  Selection of Trustee  3.33
    • D.  Joint Ownership
      • 1.  Features of Joint Ownership  3.34
      • 2.  Transfer to Joint Tenancy “Solely” for Property Management Purposes Not Possible  3.35
    • E.  Community Property Management by Spouse or Domestic Partner
      • 1.  Features of Community Property Management  3.36
      • 2.  Transmuting Separate Property to Community Property Solely for Property Management Purposes  3.37
    • F.  Nonownership Transfer Vehicles
      • 1.  Totten Trusts and Pay-on-Death (POD) Accounts  3.37A
      • 2.  Transfer on Death (TOD) Security Registration  3.37B
      • 3.  Revocable TOD Deed  3.37C
    • G.  Selecting Appropriate Legal Device for Property Management on Incapacity
      • 1.  Factors to Consider About Client  3.38
      • 2.  Primary Legal Devices: Characteristics and Comparisons  3.39
        • a.  Features of Conservator of Estate  3.40
        • b.  Features of DPOA  3.41
        • c.  Features of Revocable Trust  3.42
      • 3.  Legal Devices for Property Management Not Mutually Exclusive
        • a.  Potential Conflicts to Anticipate  3.43
        • b.  More Than One Legal Device May Be Desirable  3.44
  • III.  PLANNING FOR MANAGEMENT OF PERSONAL MATTERS ON INCAPACITY  3.45
    • A.  Conservatorship of Person
      • 1.  Role of Conservator of Person; Conservatee’s Rights  3.46
      • 2.  Selection, Nomination, and Appointment of Conservator of Person  3.47
      • 3.  Is Conservatorship of Person Necessary?  3.48
    • B.  Advance Health Care Directives
      • 1.  Power of Attorney for Health Care (PAHC) and Individual Heath Care Instructions  3.49
      • 2.  What Agent Under PAHC Can and Cannot Do  3.49A
      • 3.  Selection of Agent for PAHC  3.50
      • 4.  Alternative Agents for PAHC  3.50A
      • 5.  Special Drafting Concerns for PAHC
        • a.  Defining Client’s Wishes Concerning Health Care Issues  3.51
        • b.  Specifying Client’s Wishes Concerning Life-Sustaining Treatment; Do Not Resuscitate (DNR) Issues  3.52
        • c.  Limiting Power to Petition  3.53
        • d.  Hospital Visitation Rights  3.54
        • e.  Funeral Arrangements  3.55
        • f.  Anatomical Gifts  3.56
      • 6.  Forms of PAHC  3.57
      • 7.  Coordination With Agent for PAHC  3.58
    • C.  Selecting Appropriate Legal Device for Management of Personal Affairs on Incapacity
      • 1.  Features of Conservatorship of Person  3.59
      • 2.  Features of PAHC  3.60
      • 3.  Coordination of Conservatorship With PAHC  3.61
      • 4.  Coordination of PAHC With DPOA  3.61A
    • D.  Declaration for Attending Physician Under Former Health & S C §7186.5(b)
      • 1.  California Natural Death Act [Repealed]  3.62
      • 2.  Legal Effect of Declaration for Attending Physician  3.63
      • 3.  Coordination Between Declaration for Attending Physician and PAHC  3.64
    • E.  Form: Statutory Form Advance Health Care Directive (Prob C §4701)  3.65
  • IV.  ETHICAL CONSIDERATIONS IN PLANNING FOR INCAPACITY  3.66

4

Review of Existing Wills and Estate Plans

CEB Staff

  • I.  REVIEWING WILLS AND ESTATE PLANS PREPARED BY ANOTHER
    • A.  Importance of Being Thorough  4.1
    • B.  Checklist: Will and Estate Plan Review  4.2
    • C.  Review of Foreign Wills  4.3
  • II.  ADVISING CLIENTS TO HAVE WILLS REVIEWED
    • A.  Need for Periodic Review  4.4
    • B.  Changes That Necessitate Review  4.5
    • C.  Checklist: Changes That Necessitate Review of Will and Estate Plan  4.6
  • III.  ORGANIZING WILL AND ESTATE PLAN FILES FOR EASY RETRIEVAL  4.7

5

Reference to Matters Outside Will

Susan York Janin

  • I.  EXTRINSIC FACTS AND OTHER DOCUMENTS  5.1
  • II.  DOCTRINE OF FACTS OF INDEPENDENT SIGNIFICANCE  5.2
  • III.  DOCTRINE OF INCORPORATION BY REFERENCE  5.3
    • A.  Letters of Instruction  5.4
    • B.  Form: Reference to Letter of Instruction  5.5
  • IV.  DISPOSITION OF TANGIBLE PERSONAL PROPERTY BY WRITING  5.6

6

Codicils

Susan York Janin

  • I.  NATURE OF CODICIL  6.1
  • II.  USE AND PREPARATION OF CODICIL  6.2
  • III.  FORM: CODICIL  6.3

7

Overview of Testamentary Trusts

Susan York Janin

  • I.  WILLS CREATING TRUSTS
    • A.  Essential Elements of Testamentary Trusts  7.1
    • B.  Uses of Testamentary Trusts  7.2
    • C.  California Trust Law  7.3
  • II.  TRUST INTENT
    • A.  Testator’s Intent Should Be Unambiguous  7.4
    • B.  Intentionally Precatory Devises  7.5
    • C.  Secret Trusts  7.6
  • III.  TRUST PROPERTY  7.7
    • A.  Interests That Can Be Held in Trust  7.8
    • B.  Inadvisability of Putting Particular Assets in Trust  7.9
  • IV.  TRUST BENEFICIARY
    • A.  Trust Must Have Definite Beneficiary  7.10
    • B.  Permissible Beneficiaries  7.11
    • C.  Charitable Beneficiaries  7.12
  • V.  TRUST PURPOSES
    • A.  Purpose Cannot Be Illegal or Against Public Policy  7.13
    • B.  Purpose Cannot Be Too Indefinite or General  7.14
    • C.  Erection of Tombstones, Care of Graves, Support of Pets
      • 1.  Honorary Trusts  7.15
        • a.  Perpetual Cemetery Care  7.15A
        • b.  Trust for Lawful Noncharitable Purpose  7.15B
        • c.  Pet Trusts  7.15C
      • 2.  Alternative Arrangements for Care of Pets  7.16
    • D.  Reforming Charitable Trusts: Cy Pres Doctrine  7.17
  • VI.  SINGLE VERSUS MULTIPLE TRUSTS  7.18
  • VII.  TRUST PRINCIPAL AND INCOME
    • A.  Principal and Income Defined; Uniform Principal and Income Act (UPAIA)  7.19
    • B.  Income Taxation of Trusts; Concept of Distributable Net Income (DNI)  7.20
    • C.  Accumulations of Income  7.21
    • D.  Distributions of Principal  7.22

8

Pourover Wills

Susan York Janin

  • I.  DEFINITION OF POUROVER WILL  8.1
  • II.  PURPOSES OF POUROVER WILL  8.2
  • III.  UNIFORM TESTAMENTARY ADDITIONS TO TRUSTS ACT  8.3
  • IV.  AUTHORIZING ACCEPTANCE OF ADDITIONS TO TRUST  8.4
  • V.  GENERATION-SKIPPING TRANSFER (GST) TAX CONSEQUENCES OF ADDITIONS TO TRUST  8.5
  • VI.  POUROVER AND POUROVER SAVINGS TRUST PROVISIONS  8.6
  • VII.  FORM: POUROVER AND POUROVER SAVINGS PROVISIONS  8.7

9

Revocation

Susan York Janin

  • I.  METHODS OF TOTAL REVOCATION
    • A.  Statutory Revocation Provisions  9.1
    • B.  Revocation by Subsequent Instrument  9.2
    • C.  Form: Revocation of Prior Will  9.3
    • D.  Revocation by Mutilation or Destruction
      • 1.  Requirement of Both Intent and Act  9.4
      • 2.  Presumption of Revocation by Destruction  9.5
  • II.  METHODS OF PARTIAL REVOCATION  9.6
  • III.  DEPENDENT RELATIVE REVOCATION  9.7
  • IV.  PREFERENCE FOR EXPRESS REVOCATION  9.8
  • V.  RETENTION OF REVOKED WILLS  9.9
  • VI.  REVIVAL OF REVOKED WILLS  9.10

10

Getting Started: Introductory Clauses

Clare H. Springs

  • I.  WILL DRAFTING SYSTEMS  10.1
  • II.  HEADING TO THE WILL  10.2
  • III.  NAME, RESIDENCE, AND TESTAMENTARY INTENT
    • A.  Testator’s Name  10.3
    • B.  Testator’s Residence  10.4
    • C.  Testamentary Intent  10.5
    • D.  Form: Introductory Clause  10.6
  • IV.  DECLARATIONS CONCERNING FAMILY
    • A.  Marital or Partnership Status  10.7
      • 1.  Omitted Spouse or Partner  10.7A
      • 2.  Former Spouse or Partner  10.7B
      • 3.  Deceased Spouse or Partner  10.7C
    • B.  Form: Declaration of Marital or Partnership Status  10.8
    • C.  Declaration Concerning Children  10.9
      • 1.  Omitted Child  10.9A
      • 2.  Effect of Uniform Parentage Act  10.9B
        • a.  “Conclusive” Marital Presumption  10.9C
        • b.  Conflicting UPA Presumptions  10.9D
    • D.  Form: Declaration Concerning Children  10.10
  • V.  PROPERTY CHARACTERIZATION  10.11
    • A.  Strategies for Addressing Property Characterization in Estate Plan  10.11A
    • B.  Common Problem: Community Property Residence Held in Joint Tenancy
      • 1.  Residence of Married Couple  10.11B
      • 2.  Residence of Registered Domestic Partners (RDPs)  10.11C
    • C.  Property Held by Co-owners Who Are Not Spouses  10.11D
    • D.  Effect of Testamentary Declaration  10.11E
    • E.  Using Transmutation Agreement (Property Ownership Agreement)  10.11F
      • 1.  Transmutation Requirements  10.11G
      • 2.  Transmutation Agreement Between Registered Domestic Partners (RDPs)  10.11H
      • 3.  Transmutation Does Not Trigger Reappraisal  10.11I
      • 4.  Form: Marital or Domestic Partnership Property Agreement  10.11J
    • F.  Statement of Intention Concerning Forced Election  10.11K
      • 1.  Form: Confirmation of Marital Property Rights  10.11L
      • 2.  Form: Confirmation of Domestic Partnership Property Rights  10.11M
  • VI.  “NO-CONTRACT” CLAUSE
    • A.  Will Contracts  10.12
    • B.  Form: No Contract to Make Wills  10.13
  • VII.  RULE OF CONSTRUCTION FAVORING TESTATOR’S RELATIVES
    • A.  Dealing With Possible Impact of Rule Favoring Relatives  10.14
    • B.  Form: Rule Preferring Relatives Inapplicable  10.15
  • VIII.  FUNERAL AND BURIAL INSTRUCTIONS
    • A.  Written Instructions Strongly Recommended  10.16
    • B.  Form: Funeral and Burial Instructions  10.17
    • C.  Devises for Care of Monument or Burial Plot  10.18
  • IX.  DIRECTIONS FOR PAYMENT OF DEBTS  10.19

11

Exercising Powers of Appointment

CEB Staff

  • I.  POWERS NOT CREATED BY TESTATOR  11.1
  • II.  HOW POWER MAY BE EXERCISED
    • A.  Instrument Creating Power Controls Its Exercise  11.2
    • B.  Exercise by Specific Reference to Power  11.3
    • C.  Manifestation of Powerholder’s Intent to Exercise Power  11.4
  • III.  TYPES OF APPOINTMENT
    • A.  Exercise of General Power  11.5
    • B.  Exercise of Limited or Special Power  11.6
  • IV.  INCORRECT OR INCOMPLETE EXERCISE OF POWER
    • A.  Exercise Beyond Scope of Power  11.7
      • 1.  Imperative Power  11.8
      • 2.  Discretionary Power  11.9
      • 3.  Selective Allocation of Owned and Appointive Property in Same Disposition  11.9A
      • 4.  Antilapse of Appointment  11.10
      • 5.  Appointment to Issue of Permissible Appointee  11.11
      • 6.  Partial Appointment to Taker in Default  11.11A
    • B.  Inadvertent Exercise of Power  11.12
  • V.  CAPACITY OF POWERHOLDER TO EXERCISE POWER; LIMITATIONS ON EXERCISE
    • A.  When Powerholder Has Capacity to Exercise Power  11.13
    • B.  When Consent to Exercise Power Required  11.14
    • C.  Exercise of Power by Powerholder’s Will Executed Before Creation of Power  11.15
    • D.  Contracts to Appoint Property  11.16
    • E.  Exercise of Power Cannot Violate Rule Against Perpetuities  11.17
  • VI.  RELEASE OF DISCRETIONARY POWER
    • A.  When Power May Be Released  11.18
    • B.  Release and Lapse of Power Compared  11.19
    • C.  Release of Power by Guardian of Estate  11.20
  • VII.  REVOCATION OF POWER OF APPOINTMENT
    • A.  Exercise of Power of Appointment Revocable Unless Expressly Made Irrevocable  11.21
    • B.  Release of Power of Appointment Irrevocable Unless Revocation Reserved  11.22
  • VIII.  ESTATE AND GIFT TAX EFFECTS OF EXERCISE OR RELEASE OF POWER
    • A.  Lifetime Exercise or Release of General Power  11.23
    • B.  Exercise or Release of Special Power  11.24
    • C.  Existence of Power at Powerholder’s Death Controls Inclusion in Powerholder’s Estate  11.25
      • 1.  Contingent Powers  11.25A
      • 2.  Incapacity to Exercise Power  11.25B
      • 3.  Nonexercise of Power  11.25C
    • D.  Generation-Skipping Transfer (GST) Tax Consequences  11.26
  • IX.  POWER EXERCISE FORMS
    • A.  Form: Exercise of Testamentary Special Power of Appointment  11.27
    • B.  Form: Nonexercise of Testamentary Power of Appointment  11.28

12

Outright Noncharitable Gifts

Martin A. Neumann

Sussan H. Shore

  • I.  PLANNING OUTRIGHT GIFTS
    • A.  Role of Outright Gifts in Will Drafting  12.1
    • B.  Definitions and Classifications of Gifts  12.2
  • II.  PROBLEMS AFFECTING DISPOSITIONS
    • A.  Abatement of Gifts
      • 1.  The Abatement Problem  12.3
      • 2.  Statutory Abatement Solution  12.4
      • 3.  Personalized Abatement Solution
        • a.  When Preferable to Statutory Solution  12.5
        • b.  Form: Abatement of Gifts  12.6
    • B.  Ademption of Gifts
      • 1.  General Rule: Testator’s Intent Controls  12.7
      • 2.  Statutory Provisions Concerning Ademption  12.8
        • a.  Gift of Securities  12.9
        • b.  Devisee’s Right to Other Specifically Devised Property  12.10
        • c.   Effect of Certain Actions by Testator on Specifically Devised Property After Execution of Will  12.11
      • 3.  Effect of Testator’s Lack of Capacity on Ademption  12.12
      • 4.  Handling Potential Ademption Problems  12.13
    • C.  Ademption by Satisfaction
      • 1.  When Devise Satisfied by Lifetime Gift  12.14
      • 2.  Form: Ademption by Satisfaction  12.15
    • D.  Lapse and Antilapse
      • 1.  Disposition of Devise if Initial Beneficiary Predeceases Testator  12.16
      • 2.  Antilapse Statute  12.17
      • 3.  Form: Gifts Lapse  12.18
    • E.  Disclaimers
      • 1.  Tax Planning for Qualified Disclaimers  12.19
      • 2.  Form: Disposition of Any Disclaimed Gift  12.20
  • III.  CONDITIONAL GIFTS  12.21
    • A.  Gifts Conditioned on Survivorship  12.22
    • B.  Form: Survivorship Conditions  12.23
    • C.  Simultaneous Death  12.24
    • D.  Gifts Conditioned on Employment  12.25
    • E.  Form: Gift to Employee  12.26
  • IV.  CLASS GIFTS
    • A.  Drafting Considerations for Class Gifts  12.27
    • B.  Need to Specify Identity of Class
      • 1.  Class Gift Versus Gift to Named Individuals  12.28
      • 2.  Gifts to Children and Issue  12.29
        • a.  Posthumously Conceived Children  12.29A
        • b.  Foster Children and Stepchildren  12.29B
        • c.  Adopted Children  12.29C
      • 3.  Gifts to Heirs  12.30
    • C.  Time for Ascertaining Class Membership  12.31
    • D.  Proportions to Be Taken by Class Members  12.32
    • E.  Class Gifts and Residuary Gifts to Named Class Members
      • 1.  Form: Lapsing Class Gift to Children  12.33
      • 2.  Form: Class Gift of Residue to Issue  12.34
      • 3.  Form: Class Gift to Named Persons and Their Issue—Equal Shares  12.34A
      • 4.  Form: Class Gift to Named Persons and Their Issue—Unequal Shares  12.34B
  • V.  SPECIFIC GIFTS
    • A.  Definition and Usage of Specific Gift  12.35
    • B.  Specific Gifts of Tangible Personal Property
      • 1.  Factors to Consider When Deciding on Specific Gifts of Tangible Personal Property  12.36
      • 2.  Problems of Ownership of Personal Articles  12.37
      • 3.  Specific Gift Drafting Considerations  12.38
      • 4.  Gifts of Tangible Personal Property to Children and Other Groups of Beneficiaries  12.39
      • 5.  Intangible Rights Related to Tangible Personal Property  12.40
      • 6.  Gifts of Property Subject to Encumbrances  12.41
      • 7.  Administrative Expenses Related to Tangible Personal Property  12.42
      • 8.  Disposition of Tangible Personal Property Informally, by Holographic Codicil, or by Writing  12.43
      • 9.  Specific Gift Planning Problems  12.44
      • 10.  Forms of Specific Gifts
        • a.  Form: Specific Gifts of Items of Personal Property  12.45
        • b.  Form: Gift of Tangible Personal Property to Individual  12.46
        • c.  Form: Gift of Tangible Personal Property to Children  12.47
    • C.  Specific Gifts of Real Property
      • 1.  Testator’s Residence  12.48
        • a.  Form: Gift of Residence to Spouse or Domestic Partner  12.49
        • b.  Form: Gift of Residence to Other Beneficiary With No Probate Homestead  12.50
      • 2.  Exoneration of Encumbrances
        • a.  Expression of Testator’s Wishes  12.51
        • b.  Form: Exoneration of Encumbrances on Real Property  12.52
      • 3.  Income and Expenses Attributable to Specifically Devised Real Property
        • a.  General Rules  12.53
        • b.  Form: Payment of Expenses Relating to Real Property  12.54
      • 4.  Substitutional Gifts
        • a.  Providing for Beneficiary of Real Property That Has Been Sold  12.55
        • b.  Form: Substitution for Gift of Real Property That Has Been Sold  12.56
      • 5.  Form: Gift of Condominium Unit or Cooperative Apartment  12.57
      • 6.  Form: Gift of Income-Producing Property  12.58
      • 7.  Form: Gift of Farm or Ranch  12.59
      • 8.  Option to Purchase Real Property  12.60
    • D.  Specific Gifts of Corporate Stock
      • 1.  Drafting Considerations  12.61
      • 2.  Form: Specific Gift of Publicly Traded Stock  12.62
      • 3.  Form: Specific Gift of Closely Held Stock  12.63
    • E.  Specific Gift of Partnership Interest
      • 1.  Drafting Considerations  12.64
      • 2.  Form: Specific Gift of General Partnership Interest  12.65
      • 3.  Form: Specific Gift of Limited Partnership Interests  12.66
    • F.  Specific Gift of Sole Proprietorship
      • 1.  Drafting Considerations  12.67
      • 2.  Form: Specific Gift of Sole Proprietorship  12.68
    • G.  Specific Gift of Cemetery Property  12.69
  • VI.  GENERAL, DEMONSTRATIVE, ANNUITY, AND RESIDUARY GIFTS
    • A.  General Gifts  12.70
      • 1.  Form: General Pecuniary Gifts  12.71
      • 2.  Form: General Pecuniary Gift From Couple  12.72
      • 3.  Form: General Gift of Stock  12.73
      • 4.  Form: Forgiveness of Indebtedness  12.74
    • B.  Demonstrative Gifts
      • 1.  Satisfaction of Demonstrative Gifts  12.75
      • 2.  Form: Demonstrative Gift  12.76
    • C.  Annuity Gifts
      • 1.  Definition of Annuity; Drafting Considerations  12.77
      • 2.  Form: Gift of Commercial Annuity  12.78
    • D.  Residuary Gifts
      • 1.  Definition of Residue; Drafting Considerations  12.79
      • 2.  Form: Residuary Gifts  12.80
      • 3.  Form: Retention of Gift in Trust  12.81

13

Outright Gifts to Charity

Donald J. McCubbin

Mary Pilibos White

  • I.  SCOPE OF CHAPTER LIMITED TO TESTAMENTARY GIFTS  13.1
  • II.  PLANNING CHARITABLE GIFTS
    • A.  Statutory Framework for Estate Tax Charitable Deductions  13.2
    • B.  Organizations Qualifying for Charitable Deduction
      • 1.  Qualified Recipients: IRC §2055   13.3
      • 2.  Verifying Organization’s Charitable Status  13.3A
      • 3.  Cy Pres Gifts to Alternative Charities  13.3B
  • III.  GIFTS EXCLUSIVELY FOR QUALIFIED CHARITY
    • A.  Split-Interest Charitable Gifts Distinguished  13.4
    • B.  Specific Gifts to Charity
      • 1.  For General Use  13.5
      • 2.  Form: Specific Gift to Charity for General Use  13.6
      • 3.  For Specific Purpose  13.7
      • 4.  Form: Specific Gift to Establish Endowment  13.8
    • C.  Lifetime Pledge to Charity
      • 1.  Direction for Payment to Charity  13.9
      • 2.  Form: Direction for Payment of Lifetime Pledge to Charity  13.10
    • D.  Reduction of Gifts by Taxes
      • 1.  When Residual Charitable Gift Is Subject to Taxes  13.11
      • 2.  Form: Gift Not Reduced by Taxes  13.12
    • E.  Gift of Residue to Charity
      • 1.  Gift to Charity as Alternative Disposition  13.13
      • 2.  Form: Residue to Charity if Primary Beneficiary Does Not Survive  13.14
  • IV.  GIFTS NOT EXCLUSIVELY FOR QUALIFIED CHARITY  13.15
    • A.  Undivided Portion of Entire Interest  13.16
    • B.  Qualified Conservation Contribution  13.17
      • 1.  Definition of Conservation Purpose  13.17A
      • 2.  Protected in Perpetuity  13.17B
      • 3.  Estate Tax Deduction for Qualified Conservation Contributions  13.17C
      • 4.  Estate Tax Exclusion for Property Subject to Conservation Easement  13.17D
      • 5.  Postmortem Conservation Easement  13.17E
      • 6.  Façade Easement  13.17F
    • C.  Gift to Charity’s Qualified Pooled Income Fund
      • 1.  Alternative to Establishing Charitable Remainder Trust  13.18
      • 2.  Form: Residue to Pooled Income Fund  13.19
    • D.  Gift of Remainder Interest in Residence or Farm
      • 1.  Charitable Deduction Allowed  13.20
      • 2.  Form: Remainder in Personal Residence to Charity  13.21
    • E.  Pourover to Inter Vivos Charitable Remainder Unitrust
      • 1.  Unitrust Agreement Must Permit Additions  13.22
      • 2.  Form: Pourover Distribution to Inter Vivos Unitrust  13.23
    • F.  Charitable Gift Annuities
      • 1.  Charitable Devise Conditioned on Guaranteed Annuity  13.24
      • 2.  Form: Testamentary Charitable Gift Annuity  13.25
    • G.  Copyrighted Works of Art  13.26

14

Charitable Split-Interest Trusts

Donald J. McCubbin

Mary Pilibos White

  • I.  PLANNING CHARITABLE TRUSTS
    • A.  Limited Scope of Chapter  14.1
    • B.  Statutory Framework for Charitable Deductions  14.2
    • C.  Organizations Qualifying for Charitable Deduction  14.3
  • II.  TESTAMENTARY CHARITABLE REMAINDER TRUSTS
    • A.  Charitable Remainder Trusts With Spouse as Noncharitable Beneficiary  14.4
      • 1.  Qualified Terminable Interest Property (QTIP) Trust With Charitable Remainder  14.5
      • 2.  Qualified Charitable Remainder Trust With Spouse as Noncharitable Beneficiary  14.6
    • B.  Charitable Remainder Annuity Trusts and Unitrusts
      • 1.  Similarities Between Annuity Trusts and Unitrusts  14.7
      • 2.  Differences Between Annuity Trusts and Unitrusts  14.8
      • 3.  Five Percent Probability Test and 10 Percent Charitable Interest Test  14.9
      • 4.  Payment of Estate Taxes  14.10
      • 5.  Sample Clauses for Charitable Remainder Trusts  14.11
  • III.  CHARITABLE REMAINDER UNITRUSTS
    • A.  Distribution to Trustee
      • 1.  Identity of Trustee  14.12
      • 2.  Form: Distribution to Trustee  14.13
    • B.  Selection of Unitrust Valuation Date  14.14
    • C.  Selection and Payment of Unitrust Percentage  14.15
      • 1.  Form: Payment of Unitrust Amount to One Recipient  14.16
      • 2.  Form: Payment of Part of Unitrust Amount to Charitable Organization  14.16A
      • 3.  Rule for Sprinkling Unitrust Amount Among Class
        • a.  Independent Trustee Cannot Delay Payment  14.17
        • b.  Form: Payment of Unitrust Amount Sprinkled Among Class of Recipients  14.18
      • 4.  Rules for Joint and Survivor Recipients
        • a.  Payment to Joint and Survivor Recipients Must Total 5 Percent and May Not Exceed 50 Percent  14.19
        • b.  Charitable Remainder Interest Must Be at Least 10 Percent  14.19A
        • c.  Form: Payment of Unitrust Amount to Joint and Survivor Recipients  14.20
    • D.  Payment of Lesser of Income or Fixed Percentage
      • 1.  Alternative to Payment of Stated Percentage  14.21
      • 2.  Form: Payment of Lesser of Income or Fixed Percentage (NIMCRUT or NICRUT)  14.22
      • 3.  Form: Payment of Lesser of Income or Fixed Percentage (“Flip” Unitrust)  14.22A
    • E.  Adjustment for Incorrect Valuation
      • 1.  Mandatory Adjustment Clause  14.23
      • 2.  Form: Adjustment for Incorrect Valuation (Mandatory)  14.24
    • F.  Deferral of Payment of Unitrust Amount During Probate Administration
      • 1.  Mandatory Deferral Clause  14.25
      • 2.  Form: Deferral of Payment of Unitrust Amount During Probate Administration (Mandatory)  14.26
    • G.  Proration of Unitrust Amount
      • 1.  Mandatory Proration in Short and Final Taxable Years  14.27
      • 2.  Form: Proration of Unitrust Amount (Mandatory)  14.28
    • H.  Additional Contributions to Unitrust
      • 1.  Mandatory Formula Clause or Prohibition  14.29
      • 2.  Form: Additional Contributions Prohibited  14.29A
      • 3.  Form: Adjustment Clause if Additional Contributions to Unitrust Permitted (Mandatory)  14.30
    • I.  Termination of Trust  14.31
    • J.  Remainder to Qualified Charity
      • 1.  Required Irrevocable Transfer of Remainder to Charity  14.32
      • 2.  Form: Remainder to Qualified Charity (Mandatory)  14.33
    • K.  Prohibited Transactions
      • 1.  Mandatory Prohibition Governing Private Foundations  14.34
      • 2.  Form: Prohibitions Governing Private Foundations (Mandatory)  14.35
    • L.  Investment Restrictions on Trustee
      • 1.  Trust Cannot Restrict Investment of Trust Assets  14.36
      • 2.  Form: Investment Restrictions on Trustee  14.37
    • M.  Trustee’s Powers
      • 1.  Optional Enumeration of Trustee’s Powers  14.38
      • 2.  Form: Trustee’s Powers (Optional)  14.39
    • N.  Distributions in Kind
      • 1.  Basis of Distributions in Kind Must Be “Fairly Representative”  14.40
      • 2.  Form: Distributions in Kind  14.41
    • O.  Distributions to Charity Before Trust Termination
      • 1.  Optional Distribution Before Termination  14.42
      • 2.  Form: Excess Income to Charity (Optional)  14.43
    • P.  Trustee’s Power to Amend Trust
      • 1.  Limited Power to Amend Trust  14.44
      • 2.  Form: Limited Power of Amendment  14.45
    • Q.  “Spendthrift” Clauses
      • 1.  Optional “Spendthrift” Clause  14.46
      • 2.  Form: “Spendthrift” Clause (Optional)  14.47
    • R.  No-Contest Clause  14.48
  • IV.  CHARITABLE REMAINDER ANNUITY TRUSTS
    • A.  Summary of Requirements  14.49
    • B.  Distribution to Trustee
      • 1.  Identity of Trustee  14.50
      • 2.  Form: Distribution to Trustee  14.51
    • C.  Selection of Annuity Amount
      • 1.  Fixed Dollar Amount or Fixed Percentage  14.52
      • 2.  Form: Payment of Annuity Amount to One Named Recipient (Mandatory)  14.53
      • 3.  Form: Payment of Annuity Amount to One Named Recipient With Contingent Termination  14.53A
    • D.  Rule for Sprinkling Annuity Amount Among Class
      • 1.  Independent Trustee May Be Authorized to Make Payments  14.54
      • 2.  Form: Payment of Annuity Amount Sprinkled Among Class of Recipients (Mandatory)  14.55
    • E.  Rules for Joint and Survivor Recipients
      • 1.  Payment to Joint and Survivor Recipients Must Total 5 Percent and May Not Exceed 50 Percent  14.56
      • 2.  Charitable Remainder Interest Must Be at Least 10 Percent  14.56A
      • 3.  Form: Payment of Annuity Amount to Joint and Survivor Recipients (Mandatory)  14.57
      • 4.  Form: Payment of Annuity Amount to Joint and Survivor Recipients With Contingent Termination  14.57A
    • F.  Form: Deferral of Payment of Annuity Amount During Probate Administration (Mandatory)  14.58
    • G.  Proration of Annuity Amount
      • 1.  Mandatory Proration in Short Taxable and Termination Years  14.59
      • 2.  Form: Proration of Annuity Amount (Mandatory)  14.60
      • 3.  Form: Termination of Annuity Amount  14.60A
    • H.  Additional Contributions to Annuity
      • 1.  Trust Must Prohibit Additional Contributions  14.61
      • 2.  Form: Additional Contributions to Annuity Prohibited (Mandatory)  14.62
    • I.  Termination of Annuity Amount  14.63
    • J.  Remainder to Qualified Charity
      • 1.  Required Irrevocable Transfer of Remainder to Charity  14.64
      • 2.  Form: Remainder to Qualified Charity (Mandatory)  14.65
    • K.  Prohibited Transactions
      • 1.  Mandatory Prohibition Governing Private Foundations  14.66
      • 2.  Form: Prohibitions Governing Private Foundations (Mandatory)  14.67
    • L.  Investment Restrictions on Trustee
      • 1.  Trust Cannot Limit Trustee  14.68
      • 2.  Form: Investment Restrictions on Trustee (Optional)  14.69
    • M.  Governing Law
      • 1.  Optional Provision Specifying Governing Law  14.70
      • 2.  Form: Governing Law (Optional)  14.71
    • N.  Distributions in Kind
      • 1.  Basis of Distributions in Kind Must Be “Fairly Representative”  14.72
      • 2.  Form: Distributions in Kind (Optional)  14.73
    • O.  Distribution to Charity Before Trust Termination
      • 1.  Optional Distribution Before Termination  14.74
      • 2.  Form: Excess Income to Charity (Optional)  14.75
    • P.  Trustee’s Power to Amend Trust
      • 1.  Optional Power to Amend Trust  14.76
      • 2.  Form: Trustee’s Power to Amend Trust (Optional)  14.77
    • Q.  “Spendthrift” Clauses
      • 1.  Optional “Spendthrift” Clause  14.78
      • 2.  Form: “Spendthrift” Clause (Optional)  14.79
    • R.  No-Contest Clause  14.80
  • V.  CHARITABLE LEAD ANNUITY TRUSTS
    • A.  Summary of Requirements  14.81
    • B.  Tax Considerations in Using CLTs
      • 1.  Trust’s Income Tax Deduction  14.82
      • 2.  Generation-Skipping Transfer Tax
        • a.  Normal Inclusion Ratio Calculation  14.83
        • b.  Special CLT Inclusion Ratio Rules  14.84
          • (1)  Example of Annuity Inclusion Rules  14.85
          • (2)  Implications of Annuity Inclusion Rules  14.86
    • C.  When to Use a CLAT
      • 1.  In General  14.87
      • 2.  Example of CLAT  14.88
        • a.  Benefits of Leverage  14.89
        • b.  Benefits of Low Present Value Remainder  14.90
      • 3.  Implicit Assumptions of Favorable Scenarios  14.91
    • D.  CLAT Drafting Requirements
      • 1.  Overview  14.92
      • 2.  Required and Highly Desirable Provisions
        • a.  Guaranteed Annuity Interest  14.93
        • b.  Form: Payment of Guaranteed Annuity  14.94
        • c.  Private Foundation Provisions  14.95
        • d.  Form: Annuity Trust or Unitrust Mandatory Clause (Private Foundation Prohibitions)  14.96
        • e.  Charitable Deduction Saving Clause  14.97
        • f.  Form: Charitable Deduction Saving Clause  14.98
        • g.  Other Provisions  14.99

15

Generation-Skipping Transfer Tax: Law, Regulations, and Planning

Jon J. Gallo

Kim Marois

  • I.  OVERVIEW AND HISTORY OF GENERATION-SKIPPING TRANSFER (GST) TAX
    • A.  Introduction to GST Tax  15.1
    • B.  GST Tax Effective Dates; Grandfathered Trusts  15.2
    • C.  Overview of GST Tax
      • 1.  Estate Plan Options  15.3
      • 2.  Won’t-Be Plans  15.4
      • 3.  Might-Be Plans  15.5
      • 4.  Will-Be Plans  15.6
    • D.  Relationship to Estate and Gift Tax  15.7
  • II.  DEFINITIONS AND STRUCTURE OF GST TAX
    • A.  Basic GST Tax Concepts  15.8
    • B.  Determining the Transferor  15.9
      • 1.  Transfers at Death  15.10
      • 2.  Transfer Subject to Gift Tax  15.11
      • 3.  Special Qualified Terminable Interest Property (QTIP) Election  15.12
      • 4.  Multiple Transferors  15.13
    • C.  Determining the Transferee: Skip Persons and Generation Assignments
      • 1.  Skip Persons and Nonskip Persons  15.14
        • a.  Generation Assignment of Relatives  15.15
        • b.  Generation Assignment of Nonrelatives  15.16
      • 2.  Trusts as Skip Persons  15.17
        • a.  “Trust” Defined  15.18
        • b.  “Interest in Trust” Defined  15.19
        • c.  Nominal Interests Ignored  15.20
        • d.  Support Obligations  15.21
        • e.  Special Rules for Charitable Trusts  15.22
    • D.  Types of Generation-Skipping Transfers (GSTs)  15.23
      • 1.  Direct Skips
        • a.  General Rule  15.24
        • b.  Predeceased Ancestor Exception  15.25
      • 2.  Taxable Terminations  15.26
      • 3.  Taxable Distributions  15.27
      • 4.  Transfers Not Subject to Generation-Skipping Transfer (GST) Tax  15.28
        • a.  Qualified Tuition or Medical Expenses  15.29
        • b.  Estate or Gift Tax Supersedes GST Tax  15.30
        • c.  Certain Gifts Qualifying for Annual Exclusion  15.31
    • E.  Multiple Skips  15.32
    • F.  Nonresident Aliens  15.33
  • III.  CALCULATING THE TAX
    • A.  Historical Background
      • 1.  Problems With 1976 GST Tax  15.34
      • 2.  1986 GST Tax Approach  15.35
    • B.  GST Exemption
      • 1.  Application of GST Exemption  15.36
      • 2.  QTIP Election and Reverse QTIP Election  15.37
    • C.  Integrating GST Exemption and Marital Deduction by Using Formula to Create Exempt and Nonexempt Trusts  15.38
      • 1.  Purpose of Trust Division  15.39
      • 2.  Approach of Regulations to Separate Trusts  15.40
        • a.  Separate Share Rule  15.41
        • b.  Mandatory and Discretionary Trust Divisions  15.42
      • 3.  Form: Division of Marital Trust Into Exempt and Nonexempt Trusts  15.43
    • D.  Allocating GST Exemption
      • 1.  When Exemption May Be Allocated  15.44
      • 2.  Lifetime Transfers  15.45
      • 3.  Effective Date of Allocation to Lifetime Transfers  15.46
        • a.  Timely Filed Gift Tax Return  15.47
        • b.  Late Gift Tax Return  15.48
      • 4.  Estate Tax Inclusion Period (ETIP)  15.49
      • 5.  Transfers at Death  15.50
      • 6.  Effect of Allocation
        • a.  Direct Skips  15.51
        • b.  Transfers in Trust  15.52
    • E.  Determining Applicable Rate
      • 1.  Effective Tax Rate Applied to Transfer  15.53
      • 2.  Inclusion Ratio for Nonexempt Portion  15.54
      • 3.  Applicable Fraction for Exempt Portion  15.55
      • 4.  Inclusion Ratio for Nontaxable Gifts  15.56
      • 5.  Inclusion Ratio for Charitable Lead Annuity Trusts and Unitrusts  15.57
      • 6.  Valuation of Lifetime Transfers  15.58
      • 7.  Valuation of Transfers at Death  15.59
      • 8.  Rules for Pecuniary Bequests  15.60
      • 9.  Finality of Inclusion Ratio  15.61
      • 10.  Redetermination of Applicable Fraction  15.62
        • a.  Property Added to Trust  15.63
        • b.  Consolidation of Existing Trusts  15.64
        • c.  Trust Included in Transferor’s Gross Estate  15.65
        • d.  Trust Subject to IRC §2032A Recapture Tax  15.66
        • e.  Additional Example of Redetermination of Applicable Fraction  15.67
    • F.  Calculating and Paying GST Tax
      • 1.  Property Subject to GST Tax  15.68
        • a.  Direct Skips  15.69
        • b.  Taxable Terminations  15.70
        • c.  Taxable Distributions  15.71
      • 2.  Understanding the Hierarchy of GSTs  15.72
        • a.  Lifetime Direct Skip  15.73
        • b.  Direct Skip at Death, Taxable Distributions From Trusts Created During Lifetime, and Taxable Terminations From Trusts Created During Lifetime  15.74
        • c.  Taxable Distributions and Taxable Terminations From Trust Established at Death  15.75
        • d.  GST Tax Planning Implications  15.76
      • 3.  Filing Return and Paying Tax
        • a.  Tax on Direct Skips  15.77
        • b.  Taxable Terminations  15.78
        • c.  Taxable Distributions  15.79
        • d.  Tax Returns Due  15.80
      • 4.  Tax Proration Clauses  15.81
    • G.  Income Tax Aspects of GSTs
      • 1.  Income Tax Deduction for GST Tax  15.82
      • 2.  Redemption of Closely Held Stock  15.83
      • 3.  Basis Adjustments
        • a.  Basis Increase for GST Tax  15.84
        • b.  Adjustment for Direct Skips and Taxable Distributions  15.85
        • c.  Adjustment for Taxable Terminations  15.86
    • H.  Effective Date and Transition Rules
      • 1.  Prospective Application of GST Tax
        • a.  Retroactive Repeal of Former Law  15.87
        • b.  Effective Date of Current Law  15.88
        • c.  Inter Vivos Transfers Between September 25, 1985, and October 22, 1986  15.89
      • 2.  Transfers Before 1987 Under Wills and Revocable Trusts Executed Before October 22, 1986  15.90
      • 3.  Transfers After 1986 When Testator Had Mental Disability on October 22, 1986  15.91
      • 4.  Trusts Irrevocable on September 25, 1985  15.92
      • 5.  Constructive Additions to Trusts  15.93

16

Creating Powers of Appointment

Jonathan C. Lurie

Gordon A. Schaller

  • I.  PLANNING APPOINTMENT POWERS
    • A.  Nature of Power of Appointment  16.1
    • B.  Reasons for Creating Powers of Appointment  16.2
  • II.  POWER RULES AND DEFINITIONS
    • A.  Relationship Between State Law and Federal Tax Law  16.3
    • B.  Common Law and Probate Code  16.4
    • C.  Probate Code Requirements for Creation of Power  16.4A
    • D.  Jointly Held Powers  16.5
    • E.  “Exclusive” and “Nonexclusive” Powers  16.6
    • F.  When Power Is Considered to Be Created  16.7
    • G.  Revocability of Exercise or Release of Power  16.8
    • H.  Power to Create a Trust  16.9
    • I.  Disposition on Default of Appointment  16.10
  • III.  GENERAL POWERS
    • A.  Nature of General Power of Appointment  16.11
    • B.  Rights of Holder  16.12
    • C.  Tax Consequences to Holder
      • 1.  Pre-1942 and Post-1942 Powers  16.13
      • 2.  Estate Taxation  16.14
      • 3.  Gift Taxation  16.15
      • 4.  Income Taxation  16.16
    • D.  “Five or Five” Withdrawal Power  16.17
    • E.  Exceptions to General Powers
      • 1.  Post-1942 Power Subject to Joint Exercise by Person Having Adverse Interest  16.18
      • 2.  Power to Consume Limited by Ascertainable Standard  16.19
    • F.  Disguised General Powers
      • 1.  Power to Alter, Amend, Terminate, or Revoke  16.20
      • 2.  Power to Consume Not Limited by Ascertainable Standard
        • a.  Failure to Articulate Proper Standard  16.21
        • b.  Effect of Imposition of Ascertainable Standard Under State Law  16.22
        • c.  Power to Invade Principal for “Emergency”  16.23
      • 3.  Power to Withdraw  16.24
      • 4.  Power to Discharge Legal Obligation of Support  16.25
      • 5.  Power to Remove Trustee and Appoint Successor  16.26
  • IV.  SPECIAL OR LIMITED POWERS
    • A.  Nature of Special Power  16.27
    • B.  Purpose of Special Power  16.28
    • C.  Tax Consequences of Special Power
      • 1.  Donee of Power; Retained Power  16.29
      • 2.  Successive Powers (Delaware Tax Trap)  16.30
  • V.  RIGHTS OF POWERHOLDER’S CREDITORS
    • A.  General Powers of Appointment
      • 1.  Creditors’ Rights Cannot Be Negated  16.31
      • 2.  Creditors Must Exhaust Nonappointive Property  16.32
    • B.  Special Powers of Appointment  16.33
  • VI.  CONFLICT OF LAWS
    • A.  Law of Creation and Exercise of Power  16.34
    • B.  Law Governing Immovables  16.35
    • C.  Law Governing Movables  16.36
  • VII.  POWER FORMS
    • A.  Form: Lifetime Power of Appointment Created  16.37
    • B.  Form: Testamentary Power of Appointment Created  16.38
    • C.  Form: Release and Disclaimer of Powers Authorized  16.39
    • D.  Form: Disposition of Property on Default of Appointment  16.40
    • E.  Form: Joint Power of Appointment  16.41

17

Marital Deduction: Overview and Formula Clauses

Robert J. Durham, Jr.

  • I.  ROLE OF MARITAL DEDUCTION IN ESTATE PLANNING
    • A.  Purpose of Marital Deduction  17.1
    • B.  Limited Marital Deduction Before 1982  17.2
    • C.  Transition Rule for Wills Executed Before 1982  17.3
    • D.  Marital Deduction and Generation-Skipping Transfer (GST) Exemption  17.4
    • E.  California Estate Tax  17.5
    • F.  Not Applicable to Registered Domestic Partners  17.5A
  • II.  MARITAL DEDUCTION PLANNING
    • A.  Overview of Goals and Planning Options  17.6
    • B.  Paying Estate Tax on the First Death  17.7
    • C.  Lifetime Gifts  17.8
    • D.  Split of Control and Tax Benefit  17.9
    • E.  Nontax Considerations  17.10
    • F.  Community Property  17.11
    • G.  Effect of Portable Exclusion  17.11A
  • III.  QUALIFYING FOR MARITAL DEDUCTION  17.12
    • A.  Decedent as United States Citizen or Resident  17.13
    • B.  Surviving Spouse  17.14
    • C.  Property Passing to Surviving Spouse Must Be Included in Estate  17.15
    • D.  Property Must Pass in Deductible Form; Terminable Interest Rule  17.16
    • E.  Deductible Terminable Interests  17.16A
  • IV.  STRUCTURING THE MARITAL GIFT
    • A.  Outright Gift to Surviving Spouse  17.17
    • B.  Legal Life Estate With Power of Appointment  17.18
    • C.  Marital Deduction Qualifying Trusts  17.19
      • 1.  General Power of Appointment Trust (IRC §2056(b)(5))
        • a.  Income and Power of Appointment Requirements  17.20
        • b.  Income May Be From Separate Trust or Specific Portion of Trust  17.21
      • 2.  Qualified Terminable Interest Property (QTIP) Trust  17.22
      • 3.  Power of Appointment and QTIP Trusts Compared
        • a.  Advantages of Power of Appointment Trusts Over QTIP Trusts  17.23
        • b.  Advantages of QTIP Trusts Over Power of Appointment Trusts  17.24
      • 4.  Estate Trust  17.25
      • 5.  Qualified Domestic Trust (QDOT)  17.26
      • 6.  Charitable Split Interest Trust (IRC §2056(b)(8))  17.27
    • D.  Related Considerations
      • 1.  Selection of Trustee  17.28
      • 2.  Income Tax Planning  17.29
      • 3.  Trust Administrative Provisions
        • a.  Underproductive Property  17.30
        • b.  Funding Delay  17.31
        • c.  Saving Clauses and Protective Legislation
          • (1)  Purpose and Effect of Saving Clause  17.32
          • (2)  Form: Marital Deduction Intention  17.33
        • d.  Annuities  17.34
        • e.  Administration Expenses Claimed as Income Tax Deductions  17.35
        • f.  Tax Payment Clauses  17.36
        • g.  Successive Interests and Payment of Accrued Income  17.37
        • h.  Ineligible Assets  17.38
      • 4.  Disqualifying Contingencies
        • a.  Survival for Longer Than 6 Months  17.39
        • b.  Remarriage of Surviving Spouse  17.40
        • c.  Incapacity of Surviving Spouse  17.41
        • d.  Executor’s Election  17.42
        • e.  Forced Election Provisions  17.43
        • f.  Foreign Death Tax Credit  17.44
      • 5.  Simultaneous Death Statutes  17.45
  • V.  FUNDING AND ALLOCATION
    • A.  Unlimited Marital Deduction  17.46
    • B.  Disclaimer Will
      • 1.  Purpose of Disclaimer Trust  17.47
      • 2.  Form: Disclaimer Trust  17.48
    • C.  Overview of Formula Clauses  17.49
      • 1.  Types of Formula Clauses  17.49A
      • 2.  Disadvantages of Formula Clauses  17.49B
    • D.  Pecuniary Marital Formula  17.50
      • 1.  Overview of Pecuniary Marital Formula  17.51
      • 2.  Form: Pecuniary Marital Formula (Bypass Trust as Residue)  17.52
      • 3.  Factors Included in Pecuniary Marital Formula  17.53
        • a.  Federal Estate Tax Deductions  17.54
        • b.  Other Property Passing to Surviving Spouse  17.55
        • c.  Federal Estate Tax Credits  17.56
          • (1)  Adjusted Taxable Gifts  17.57
          • (2)  State Death Tax Credit  17.58
          • (3)  Credit for Tax on Prior Transfers  17.59
          • (4)  Foreign Death Tax Credit  17.60
      • 4.  Specific Allocation to Bypass Trust  17.61
      • 5.  Residue of Estate  17.62
      • 6.  Funding Marital Gift  17.63
      • 7.  Overview of Funding Issues When Pecuniary Marital Formula Is Used
        • a.  Revenue Procedure 64–19  17.64
        • b.  “Date-of-Distribution Value” Funding  17.65
        • c.  “Fairly Representative” Funding  17.66
        • d.  “Minimum Worth” Funding  17.67
        • e.  Allocation Effects of Funding Plan  17.68
        • f.  Income Tax Effects of Funding Plan  17.68A
      • 8.  Comparison of Funding Plans Used With Pecuniary Marital Formula
        • a.  Date-of-Distribution Value Funding
          • (1)  Advantages of Date-of-Distribution Value Funding  17.69
          • (2)  Disadvantages of Date-of-Distribution Value Funding  17.70
            • (a)  Reappraisals  17.70A
            • (b)  IRD Problems  17.70B
        • b.  Fairly Representative Funding
          • (1)  Advantages of Fairly Representative Funding  17.71
          • (2)  Disadvantages of Fairly Representative Funding  17.72
        • c.  Minimum Worth Funding
          • (1)  Advantages of Minimum Worth Funding  17.73
          • (2)  Disadvantages of Minimum Worth Funding  17.74
    • E.  Pecuniary Bypass Marital Formula
      • 1.  Overview of Pecuniary Bypass Marital Formula  17.75
      • 2.  Form: Pecuniary Bypass Marital Formula (Marital Trust as Residue)  17.76
      • 3.  Factors Included in Pecuniary Bypass Formula  17.77
      • 4.  Charitable Remainder Bypass Trust  17.78
      • 5.  Administration Expenses Claimed as Income Tax Deductions  17.79
      • 6.  Overview of Funding Issues When Pecuniary Bypass Formula Is Used
        • a.  Date-of-Distribution Value Funding  17.80
        • b.  Fairly Representative Funding  17.81
      • 7.  Comparison of Date-of-Distribution Value Funding and Fairly Representative Funding Used With Pecuniary Bypass Formula  17.81A
    • F.  Fractional Share Marital Formulas
      • 1.  Overview of Fractional Share Marital Formulas  17.82
      • 2.  Form: Fractional Share Marital Formula  17.83
      • 3.  Comparison to Pecuniary Funding Formulas
        • a.  Fractional Share Formula With Prorata Funding
          • (1)  Prorata Funding Not Compelled  17.84
          • (2)  Disadvantages of Prorata Funding  17.85
        • b.  Fractional Share Formula With Nonprorata Funding
          • (1)  Advantages of Nonprorata Funding  17.86
          • (2)  Disadvantages of Nonprorata Funding  17.87
    • G.  Summary of Planning Considerations  17.88
    • H.  Distribution and Allocation
      • 1.  Executor’s Discretion to Allocate  17.89
      • 2.  Timing of Allocation  17.90
    • I.  Specific Directions Concerning Certain Assets
      • 1.  Personal Residence  17.91
      • 2.  Stock in Closely Held Business
        • a.  Redemption Under IRC §303  17.92
        • b.  Deferred Tax Payment Under IRC §6166  17.93
          • (1)  Additional Eligibility Requirements  17.93A
          • (2)  When Lien Imposed or Bond Required  17.93B
        • c.  S Corporation Stock  17.94
      • 3.  Partnership Interests  17.95
      • 4.  Special Use Property (IRC §2032A)  17.96
      • 5.  Income in Respect of Decedent (IRD) Property  17.97
  • VI.  SURVIVOR’S SHARE OF PROPERTY  17.98
  • VII.  POSTMORTEM RECONSTRUCTION AND GIFTS  17.99

18

Marital Deduction Power of Appointment Trusts

Melitta Fleck

  • I.  MARITAL DEDUCTION TRUST PLANNING
    • A.  Alternative to QTIP Trust  18.1
    • B.  When to Use Power of Appointment Trust
      • 1.  Control by Surviving Spouse  18.2
      • 2.  Lifetime Gifts by Surviving Spouse  18.3
      • 3.  Assignment of Income Interest  18.4
      • 4.  Avoiding State Inheritance or Estate Tax on Out-of-State Property  18.5
      • 5.  Generation-Skipping Transfer (GST) Tax Planning  18.6
      • 6.  Appointment Power Valuation Issues  18.6A
  • II.  POWER OF APPOINTMENT EXCEPTION TO TERMINABLE INTEREST RULE  18.7
  • III.  REQUIREMENTS FOR POWER OF APPOINTMENT TRUSTS
    • A.  Income Requirements for Power of Appointment Trusts  18.8
      • 1.  Spouse’s Right to All Income Annually
        • a.  Income Must Be Paid Currently Without Accumulation  18.9
        • b.  Payment to Spouse Under Legal Disability  18.10
        • c.  Administrative Restrictions Do Not Disqualify Trust  18.11
      • 2.  Income From Specific Portion  18.12
      • 3.  California Marital Deduction Saving Statute  18.13
      • 4.  Problems With Mandatory Income Payout  18.14
    • B.  Requirement of General Power of Appointment  18.15
      • 1.  IRC §2056 Power Compared With IRC §2041 Power  18.16
      • 2.  Power Over Specific Portion  18.17
      • 3.  Exercisable by Spouse Alone and in All Events  18.18
      • 4.  No Power in Third Person to Appoint to Person Other Than Spouse  18.19
    • C.  Selection of Trustee  18.20
  • IV.  GENERAL POWER OF APPOINTMENT TRUST CLAUSES
    • A.  Introduction to General Power of Appointment Trust Clauses  18.21
    • B.  Distribution of Income
      • 1.  Form: Introduction to Marital Appointment Trust  18.22
      • 2.  Form: Distribution of Income  18.23
    • C.  Distribution of Principal
      • 1.  Form: Payment of Principal  18.24
      • 2.  Form: Spouse’s General Power of Appointment (Broad Standard)  18.25
    • D.  Miscellaneous Clauses
      • 1.  Form: Relevance of Other Income Sources  18.26
      • 2.  Form: Disclaimer Beneficiary  18.27
      • 3.  Form: Distribution to Separate Trust at Surviving Spouse’s Death  18.28
    • E.  Basis-Harvesting Provision  18.29

19

Qualified Terminable Interest Property Trusts and Qualified Domestic Trusts

Melitta Fleck

  • I.  MARITAL DEDUCTION QUALIFYING TRUSTS
    • A.  Drafting QTIPs and QDOTs  19.1
    • B.  When to Use Qualified Terminable Interest Property (QTIP) Trust
      • 1.  Control by Testator  19.2
      • 2.  Generation-Skipping Transfer (GST) Tax Planning  19.3
      • 3.  Accumulation of Income  19.4
      • 4.  Postmortem Tax Planning  19.5
  • II.  QTIP EXCEPTION TO TERMINABLE INTEREST RULE
    • A.  Definition of Terms in QTIP Trust  19.6
    • B.  QTIP Requirements
      • 1.  Qualifying Income Interest for Surviving Spouse  19.7
        • a.  Qualifying Unitrust Interest  19.7A
        • b.  Payment of Trust Income  19.7B
      • 2.  Gift Tax on Transfer of QTIP Income Interest  19.8
        • a.  Deemed Gift of Remainder Interest  19.8A
        • b.  Purchase of QTIP Remainder Interest  19.8B
        • c.  Sale of QTIP Remainder Interest  19.8C
      • 3.  Effect of Spouse’s Incapacity on Receipt of Income  19.9
      • 4.  No Restrictions on Powers Over Principal  19.10
      • 5.  QTIP Election  19.11
      • 6.  Partial Elections and Segregation of QTIP Property  19.12
      • 7.  “Reverse QTIP Election” for GST Tax Planning Purposes  19.13
      • 8.  Annuities as Qualified Terminable Interest Property  19.14
      • 9.  Charitable Remainder Trust Interests  19.15
    • C.  QTIP Trust Property at Surviving Spouse’s Death
      • 1.  Inclusion of QTIP Trust Property in Surviving Spouse’s Taxable Estate  19.16
      • 2.  Payment of Tax on QTIP Trust Property
        • a.  Surviving Spouse’s Right of Recovery  19.17
        • b.  Effect of Tax Apportionment Clauses  19.18
        • c.  Payment of GST Tax on QTIP Trust  19.19
        • d.  California Estate Tax on QTIP Trust  19.19A
      • 3.  Basis of Qualified Terminable Interest Property  19.20
    • D.  QTIP Trust Clauses
      • 1.  Introduction to QTIP Trust Clauses  19.21
      • 2.  Distribution of QTIP Trust Income
        • a.  Form: Introduction to QTIP Trust  19.22
        • b.  Form: Distribution of QTIP Trust Income  19.23
        • c.  Form: Payment of QTIP Unitrust Amount  19.24
      • 3.  Distribution of QTIP Trust Principal
        • a.  Form: Discretionary Payment of Principal  19.25
        • b.  Form: Relevance of Other Income Sources  19.26
        • c.  Form: Surviving Spouse’s Testamentary Special Power of Appointment  19.27
      • 4.  Form: QTIP Election Provisions  19.28
      • 5.  Form: Distribution on Surviving Spouse’s Death  19.29
      • 6.  Form: Payment of Taxes on Surviving Spouse’s Death  19.30
      • 7.  Form: Division of Trusts Reflecting Partial QTIP Election  19.31
  • III.  MARITAL DEDUCTION FOR TRANSFERS TO NONCITIZEN SPOUSE
    • A.  Taxation of Noncitizen Transfers  19.32
      • 1.  When Marital Deduction Allowed  19.32A
      • 2.  Joint Tenancy Marital Property  19.32B
      • 3.  Present-Interest Requirement  19.32C
      • 4.  Transfers of Intangible Assets  19.32D
    • B.  Requirements for Qualified Domestic Trust (QDOT)  19.33
    • C.  Qualifying for Marital Deduction When No QDOT Established
      • 1.  Postdeath Transfer to QDOT  19.34
      • 2.  Noncitizen Spouse Becomes Citizen  19.35
      • 3.  Judicial Reformation to Conform to QDOT Rules  19.36
      • 4.  Reformation by Trustee to Conform to QDOT Rules  19.36A
    • D.  Tax on QDOT Principal Distributions
      • 1.  Imposition of QDOT Tax  19.37
      • 2.  Amount of QDOT Tax  19.38
      • 3.  QDOT Drafting Considerations  19.39
    • E.  Form: Qualified Domestic Trust Provisions  19.40
    • F.  Form: Power to Reform Trust to Qualify as QDOT  19.41

20

Bypass Trusts and Disclaimer Trusts

Timothy J. Kay

Gordon A. Schaller

  • I.  CREDIT SHELTER TRUST PLANNING  20.1
  • II.  BYPASS TRUST
    • A.  Purpose of Bypass Trust
      • 1.  Using Estate and Gift Tax Credit to Shelter Applicable Exclusion Amount  20.2
        • a.  Applicable Exclusion Amount  20.2A
        • b.  Transfer Tax Rates  20.2B
        • c.  Marital Deduction Planning Considerations  20.2C
      • 2.  Using Bypass Trust in Coordination With Marital Deduction
        • a.  Application of Deceased Spouse’s and Survivor’s Applicable Credit Amounts  20.3
        • b.  When Estate Is Small  20.4
        • c.  When Estate Is Large  20.5
        • d.  Uncertain Applicable Exclusion Amount Problems  20.5A
    • B.  Formula Trust Funding  20.6
    • C.  Beneficiaries and Structure
      • 1.  Bypass Trust Drafting Considerations  20.7
      • 2.  Distribution of Entire Net Income or Fixed Amount  20.8
      • 3.  Discretionary Distributions: Avoiding Spousal General Power of Appointment
        • a.  Potential Inclusion of Trust Property  20.9
        • b.  When Spouse Is Trustee  20.10
        • c.  Consent to Discretionary Distribution by Person With Adverse Interest  20.11
        • d.  Distribution to Persons to Whom Spouse Owes Duty of Support  20.12
        • e.  Principal Invasion Powers
          • (1)  Limitation by Ascertainable Standard or “Five or Five” Power  20.13
          • (2)  Exhaustion of Marital Trust Principal  20.14
      • 4.  Surviving Spouse’s Special Power of Appointment  20.15
      • 5.  Similarity to Qualified Terminable Interest Property Trust  20.16
      • 6.  Allocation of Generation-Skipping Transfer (GST) Exemption  20.17
      • 7.  Distribution of Trust Property at Death of Surviving Spouse  20.18
      • 8.  QTIPable Bypass Trust; Clayton QTIP Trust  20.18A
    • D.  Bypass Trust Forms
      • 1.  Form: Introduction to Bypass Trust  20.19
      • 2.  Form: Designation of Beneficiaries  20.20
      • 3.  Form: Payment of Income  20.21
      • 4.  Form: Distribution of Principal  20.22
      • 5.  Form: Exhaustion of Marital Deduction Trust Principal Before Bypass Trust Principal Is Invaded for Surviving Spouse’s Benefit  20.23
      • 6.  Form: Surviving Spouse’s Special Power of Appointment  20.24
      • 7.  Form: Disclaimer of Trust Interest; Distribution Provisions  20.25
      • 8.  Form: Distribution at Surviving Spouse’s Death  20.26
      • 9.  Form: QTIPable Bypass Trust  20.26A
      • 10.  Form: Authorization to Make DSUE Election  20.26B
  • III.  DISCLAIMER TRUST
    • A.  Use of Disclaimer Trust
      • 1.  Purpose of Disclaimer Trust  20.27
      • 2.  Disclaimer Trust Problems  20.28
      • 3.  Providing for Spouse’s Beneficial Use of Disclaimed Property  20.29
    • B.  Elements of Disclaimer Trust
      • 1.  Limiting Discretionary Distributions by Surviving Spouse-Trustee  20.30
      • 2.  Disqualification by Special Power of Appointment  20.31
      • 3.  Bypass Trust as Recipient of Disclaimed Property  20.32
      • 4.  Disclaimer Trust as Sole Trust After First Death  20.32A
    • C.  Form: Disclaimer Trust  20.33

21

Overview of Trust Distributions

Bruce Givner

Timothy J. Kay

Gordon A. Schaller

  • I.  FORMAT OF TESTAMENTARY TRUSTS
    • A.  Trust Distribution Planning  21.1
    • B.  Standard Testamentary Trust Format  21.2
  • II.  DRAFTING DISTRIBUTION AND TERMINATION CLAUSES
    • A.  Need for Special Distribution Clauses  21.3
    • B.  Collecting Trust Information
      • 1.  Checklist: Beneficiary Information, Trust Objectives, and Trust Assets  21.4
      • 2.  Checklist: Distribution and Termination Clause  21.5
  • III.  PERIODIC DISTRIBUTIONS
    • A.  Traditional Distinction Between Income and Principal Distributions  21.6
    • B.  Alternatives: Payment of Fixed or Formula Amounts
      • 1.  Accumulated Income, Unitrust, or Annuity Payments  21.7
        • a.  Discretionary Distributions  21.7A
        • b.  Unitrust Approach  21.7B
        • c.  Annuity Approach   21.7C
        • d.  Form: Payment of Annuity Amount  21.8
        • e.  Form: Payment of Unitrust Amount  21.8A
      • 2.  Incentive Payment Option  21.8B
        • a.  Form: Incentive Distribution of Income  21.8C
        • b.  Form: Incentive Distribution of Principal  21.8D
      • 3.  Frequency of Payment  21.9
      • 4.  Form: Frequency of Payment  21.10
    • C.  Discretionary Distribution of Income
      • 1.  Discretionary Distributions in General  21.10A
        • a.  Reasons to Provide Guidelines for Discretionary Distributions  21.11
        • b.  Form: Discretionary Distribution of Income  21.12
      • 2.  Distributions for Specific Purposes
        • a.  Directions to Use Distributions for Specific Purposes  21.13
        • b.  Form: Distributions for Specific Purposes  21.14
      • 3.  Consideration of Beneficiary’s Other Resources
        • a.  Reasons to Provide Guidelines for Consideration of Other Resources  21.15
        • b.  Form: Trustee’s Consideration of Beneficiary’s Other Resources  21.16
      • 4.  Distributions Restricted or Redirected on Beneficiary’s Insolvency or Bankruptcy  21.17
        • a.  Form: Distributions Restricted on Beneficiary’s Insolvency or Bankruptcy  21.17A
        • b.  Form: Distributions Redirected on Beneficiary’s Insolvency or Bankruptcy  21.17B
      • 5.  Testator’s Distribution Preferences
        • a.  Testator’s Statement of Distribution Preferences Among Beneficiaries  21.18
        • b.  Form: Trustee Discretion to Sprinkle Distributions Among Multiple Income Beneficiaries  21.19
        • c.  Form: Income Beneficiary as Primary Beneficiary  21.20
        • d.  Distribution of Income to Third Party for Beneficiary  21.21
    • D.  Disposition of Undistributed Income
      • 1.  When to Direct Application of Undistributed Income  21.22
      • 2.  Form: Disposition of Undistributed Income  21.23
  • IV.  SPECIAL PROVISIONS FOR INCOME EARNED DURING PROBATE ADMINISTRATION
    • A.  Statement of Probate Income Problem  21.24
    • B.  Solutions to Probate Income Problem  21.25
    • C.  Avoiding Duplication of Payments of Trust Income and Family Allowance  21.26
    • D.  Form: Disposition of Probate Income  21.27
  • V.  DISTRIBUTION OF PRINCIPAL
    • A.  When Invasion Powers May Be Used  21.28
    • B.  Limiting Invasion Powers of “Tax-Sensitive” Trustee  21.29
    • C.  Invasion of Principal
      • 1.  Form: Discretionary Power to Invade Principal When Income Is Insufficient  21.30
      • 2.  Form: Principal Invasion on Beneficiary’s Request Limited by Ascertainable Standard  21.31
      • 3.  Form: “Five or Five” Withdrawal Power  21.31A
      • 4.  Form: Statement of Testator’s Intent Regarding Power to Invade Principal  21.32
      • 5.  Form: Power to Lend Principal to Beneficiary  21.33
      • 6.  Preliminary Distributions  21.34
      • 7.  Expenses; Taxes
        • a.  Last-Illness and Funeral Expenses; Death Taxes  21.35
        • b.  Form: Trustee Authorized to Pay Beneficiary’s Last-Illness and Funeral Expenses  21.36
  • VI.  TRUST TERMINATION AND RULES FOR DISTRIBUTION ON TERMINATION
    • A.  Description of Terminating Event and Distributive Pattern on Termination  21.37
    • B.  Form: Distribution on Trust Termination  21.38

22

Trusts for Children

Bruce Givner

Michele M. Mulrooney

Gordon A. Schaller

  • I.  TRANSFERS FOR BENEFIT OF CHILDREN  22.1
  • II.  TESTAMENTARY TRUSTS FOR CHILDREN AND ALTERNATIVES
    • A.  When Third Party Required for Management of Minor’s Property  22.2
    • B.  Emancipated Minor  22.3
    • C.  Trusts, Guardianships, and Custodianships Defined  22.4
    • D.  Advantages of Testamentary Trusts Over Guardianships of Estate
      • 1.  Flexibility in Termination Date  22.5
      • 2.  Less Court Supervision  22.6
      • 3.  Control Over Fiduciary’s Investment Powers  22.7
      • 4.  Flexibility in Providing for Children  22.8
      • 5.  Problem of Rich Parents and Poor Guardians  22.8A
      • 6.  Creditor Protection  22.9
      • 7.  Avoidance of Administration of Child’s Estate  22.10
      • 8.  Flexibility in Tax Planning  22.11
      • 9.  Common Misconceptions About Trusts  22.12
    • E.  Custodianships Under California Uniform Transfers to Minors Act (CUTMA)
      • 1.  Statutory Requirements  22.13
      • 2.  Form: Devise to Minor Under CUTMA  22.14
      • 3.  Comparison of Custodianships and Testamentary Trusts  22.15
    • F.  Gift Delivered to Parent of Minor With Small Estate  22.16
    • G.  Court-Ordered Disposition of Gift  22.17
  • III.  FAMILY POT TRUST VERSUS SEPARATE TRUSTS  22.18
    • A.  Advantages of Family Pot Trust  22.19
    • B.  Advantages of Separate Trusts  22.20
  • IV.  GENERAL CONSIDERATIONS WHEN DRAFTING TRUSTS FOR CHILDREN
    • A.  Selection of Trustee  22.20A
    • B.  Memorializing Testator’s Wishes  22.20B
  • V.  TRUST DISTRIBUTION PROVISIONS  22.20C
    • A.  Distribution to Minor Child or Child With Disabilities  22.20D
    • B.  Alternatives for Distribution Provisions  22.20E
      • 1.  Immediate Distribution  22.20F
      • 2.  “Birthday Clauses”
        • a.  When Appropriate  22.20G
        • b.  Form: Distribution at Specified Ages (“Birthday Clauses”)  22.20H
      • 3.  Lapsed Years
        • a.  When Appropriate  22.20I
        • b.  Form: Distribution After Lapse of Years  22.20J
      • 4.  Incentive Distributions
        • a.  When Appropriate  22.20K
        • b.  Form: Incentive Distributions  22.20L
      • 5.  Completely Discretionary Distributions
        • a.  When Appropriate  22.20M
        • b.  Form: Completely Discretionary Distributions  22.20N
      • 6.  Beneficiary-“Controlled” Distributions
        • a.  When Appropriate  22.20O
        • b.  Form: Beneficiary-“Controlled” Trust  22.20P
      • 7.  Equalization Clauses
        • a.  When Appropriate  22.20Q
        • b.  Form: Equalization Clause  22.20R
    • C.  Distributions of Trust Income  22.21
      • 1.  Income Tax Considerations  22.21A
      • 2.  Estate Tax Considerations  22.21B
    • D.  Distributions of Trust Principal  22.22
    • E.  Purposes for Which Trustee May Distribute Income or Principal  22.23
      • 1.  Support  22.24
        • a.  Specifying Nature of Support  22.24A
        • b.  Aid to Persons Caring for Children  22.25
        • c.  Form: Payments to Persons Caring for Children  22.26
        • d.  Payment of Deceased Beneficiary’s Last-Illness and Funeral Expenses and Other Debts  22.27
        • e.  Form: Trustee’s Discretion to Pay Beneficiary’s Last-Illness and Funeral Expenses and Obligations Incurred for Support  22.28
      • 2.  Education
        • a.  Guidance to Trustee Regarding “Education”  22.29
        • b.  Form: Definition of “Education”  22.30
      • 3.  Housing
        • a.  Delineating Trustee’s Authority to Provide Home for Children  22.31
        • b.  Form: Authorization to Make Payments for Housing Expenses  22.32
        • c.  Form: Retention and Use of Testator’s Residence as Home for Children  22.33
    • F.  Trustee’s Consideration of Other Resources Before Making Discretionary Payments
      • 1.  Importance of Specifying Whether Trustee Should Consider Other Resources  22.34
      • 2.  Trustee Consideration of Other Resources  22.35
      • 3.  Form: Trustee Consideration of Beneficiary’s Other Resources  22.36
    • G.  Restrictions on Assignment and Protection From Creditors  22.37
    • H.  Distributions to Minor Child or Beneficiary With Disability
      • 1.  Need for Specific Clauses [Deleted]  22.38
      • 2.  Drafting Considerations [Deleted]  22.39
    • I.  Distribution of Remainder  22.40
    • J.  Designing Trusts for “Postponed” Child  22.41
  • VI.  FAMILY POT TRUST  22.42
    • A.  Family Pot Trust Drafting Considerations
      • 1.  Guidelines for Discretionary Distributions  22.43
      • 2.  Support of Deceased Child’s Family  22.44
      • 3.  Distributions Charged Against Entire Trust Estate  22.45
      • 4.  Termination Date and Final Distribution  22.46
      • 5.  Preliminary Distributions  22.47
      • 6.  S Corporation Stock  22.48
    • B.  Family Pot Trust Clauses
      • 1.  Form: Principal and Income Sprinkled Among Children (With HEMS Standard)  22.49
      • 2.  Preliminary Distribution Clauses
        • a.  Form: Preliminary Distributions  22.50
        • b.  Form: Preliminary Distributions in Excess of Child’s Ultimate Share  22.51
      • 3.  Form: Termination of Trust and Distribution of Remainder  22.52
      • 4.  Form: Alternative Family Pot Trust (Short Form)  22.52A
  • VII.  SEPARATE TRUST FOR EACH CHILD  22.53
    • A.  Separate Trust Planning and Drafting Considerations
      • 1.  Division of Assets Into Separate Trusts  22.54
      • 2.  Discretionary Distributions  22.55
      • 3.  Trust Termination  22.56
      • 4.  Death of Child Beneficiary Before Trust Terminates  22.57
    • B.  Form: Separate Trust for Each Child  22.58

23

Special Needs Trusts

Michele M. Mulrooney

Ruth A. Phelps

Sterling L. Ross, Jr.

Gordon A. Schaller

  • I.  PURPOSE OF SPECIAL NEEDS TRUST (SNT)
    • A.  Preserving Public Benefits for Beneficiary With Disabilities  23.1
    • B.  Testamentary SNT Compared to Outright Gift  23.1A
    • C.  Testamentary SNT Compared With Litigation SNT  23.1B
    • D.  Testamentary SNT Compared With Inter Vivos SNT  23.2
    • E.  Preferred Methods in Making Annual Exclusion Gifts to SNT  23.2A
      • 1.  Cristofani-Type Trust  23.2B
      • 2.  College Savings Plan  23.2C
      • 3.  ABLE Accounts  23.2D
    • F.  Public Benefits Eligibility and Recovery Rules  23.3
    • G.  Role of Public Benefits in Estate Planning Practice  23.4
  • II.  OVERVIEW OF PUBLIC BENEFITS
    • A.  Social Security and Medicare: Benefits Without Asset and Income Eligibility Tests  23.5
    • B.  SSI and Medi-Cal: Need-Based Benefits
      • 1.  Sources of SSI and Medi-Cal Law  23.6
      • 2.  SSI Benefits  23.7
        • a.  Eligibility for Persons With Disabilities, the Blind, and the Aged Poor  23.7A
        • b.  Limitation on Resources  23.7B
        • c.  SSI Benefits Reduced by Income  23.7C
        • d.  Reduction for In-Kind Support and Maintenance (ISM)  23.7D
        • e.  SSI Transfer Rules  23.7E
      • 3.  Medi-Cal Benefits  23.8
        • a.  Eligibility for Medi-Cal Benefits  23.8A
        • b.  Medi-Cal Property Rules  23.8B
        • c.  Medi-Cal Income Rules  23.8C
        • d.  Medi-Cal Trust Rules  23.8D
        • e.  Special Medi-Cal Rules for Spouse in Long-Term Nursing Home Care  23.9
  • III.  DRAFTING TO PREVENT TRUST FROM COUNTING AS BENEFICIARY RESOURCE
    • A.  SSI Recipients: Restricted Access to Principal  23.10
    • B.  Medi-Cal Recipients  23.11
  • IV.  DRAFTING TO PREVENT BENEFITS REDUCTION CAUSED BY SNT DISTRIBUTIONS
    • A.  Distributions That Reduce Benefits  23.12
      • 1.  Reduction of SSI Benefits  23.12A
      • 2.  Reduction of Medi-Cal Benefits  23.12B
    • B.  Distributions That Will Not Affect Receipt of Public Benefits  23.13
    • C.  Conservative Drafting to Protect Benefits  23.14
  • V.  DRAFTING TO PROTECT TRUST FROM GOVERNMENT CLAIMS FOR PAYMENT AND REIMBURSEMENT
    • A.  Beneficiary Payment or Reimbursement Obligations Depend on Program  23.15
      • 1.  Estate Property Subject to Medi-Cal Recovery Claims  23.15A
      • 2.  No Recovery From Estate of Surviving Spouse or Child  23.15B
      • 3.  Limitations Period for Medi-Cal Recovery Claims  23.15C
    • B.  Prior Case Law Protected Nonsupport Trusts From Claims for Services to Institutionalized Mentally Ill  23.16
    • C.  Statutory “Spendthrift” Protection
      • 1.  Liability of Trust for Reimbursement When Required by Statute  23.17
      • 2.  Exemption From Reimbursement Liability of Most SNTs  23.18
      • 3.  Protection for Trust for Institutionalized Mentally Ill or Person With Developmental Disability Depends on Retained Medi-Cal Eligibility  23.19
      • 4.  Liability of Trust for Child Support  23.19A
    • D.  Potential Liability of Parental or Spousal Estate for Beneficiary Support  23.20
      • 1.  Statutes That Provide for Recoupment  23.20A
      • 2.  Statutes That Impose Liability  23.20B
  • VI.  SNT TRUSTEE
    • A.  Duty to Oversee Caregiving Arrangements  23.21
    • B.  Candidate Must Comprehend Extraordinary Duties  23.22
    • C.  Specific Instructions
      • 1.  Review of Beneficiary’s Situation  23.23
      • 2.  Special Property Management Instructions  23.24
      • 3.  Memorandum of Intent  23.24A
      • 4.  Form: Guidelines for Parents Writing Memorandum of Intent  23.24B
  • VII.  SPECIFIC SNT CLAUSES
    • A.  Introductory Clause
      • 1.  Statement of Trust Purpose  23.25
      • 2.  Sole Beneficiary or Multiple Beneficiaries  23.26
      • 3.  Form: Trust Purpose  23.27
    • B.  Distribution Provisions
      • 1.  Special Needs Standard  23.28
      • 2.  Discretionary Distribution Standard  23.29
      • 3.  Form: Trust Advisory Committee  23.30
      • 4.  Form: Distribution for Special Needs (Supplementary Standard)  23.31
      • 5.  Form: Trustee’s Absolute Discretion  23.32
    • C.  Distribution Guidelines
      • 1.  Guidelines Based on Beneficiary Situation  23.33
      • 2.  Form: Trustee to Consider Beneficiary’s Other Resources  23.34
      • 3.  Form: Trustee to Evaluate Beneficiary’s Needs  23.35
      • 4.  Form: Trustee to Seek Public Agency Support  23.36
      • 5.  Trustee to Avoid Interference With Public Benefits
        • a.  Restriction of Trustee Powers to Preserve Trust Assets  23.37
        • b.  Form: Trust Estate to Supplement Public Benefits  23.38
        • c.  Temporary Reduction in Public Benefits  23.39
        • d.  Permanent Loss of Public Benefits  23.40
    • D.  “Spendthrift” Clause
      • 1.  Function of “Spendthrift” Clause in SNT  23.41
      • 2.  Form: “Spendthrift” Clause  23.42
    • E.  Emergency Trust Termination
      • 1.  Termination to Preserve Trust Assets  23.43
      • 2.  Form: Discretionary Termination if Trust Interferes With Public Benefits  23.44
      • 3.  Form: Automatic Termination if Court Orders Reimbursement  23.45
      • 4.  Distribution on Emergency Trust Termination
        • a.  Distribution to Precatory Trustee  23.46
        • b.  Form: Distribution on Emergency Trust Termination  23.47
        • c.  Outright Distribution on Emergency Trust Termination  23.48
    • F.  Protection of Trust When Beneficiary Dies
      • 1.  Postdeath Asset Protection  23.49
      • 2.  Form: Expense Payments After Beneficiary’s Death  23.50
      • 3.  Disposition of Trust Remainder by Power of Appointment or Testator Gift  23.51
      • 4.  Form: Beneficiary’s Testamentary Special Power of Appointment  23.52
    • G.  Clause Adaptations for Multiple-Beneficiary SNT
      • 1.  “Sprinkling” and Other Clauses  23.53
      • 2.  Sample Sprinkling SNT Clauses
        • a.  Form: Trust Beneficiaries  23.54
        • b.  Form: Trust Purpose for Beneficiary With Disability  23.55
        • c.  Form: Payments Sprinkled Among Beneficiaries  23.56
        • d.  Form: Consideration of Other Resources Available to Beneficiary With Disability  23.57
        • e.  Form: No Distributions to Beneficiary With Disability if Trust Interferes With Public Benefits  23.58
        • f.  Form: No Power to Distribute to Beneficiary With Disability if Court Orders Reimbursement  23.59
    • H.  Trust Protector Clause
      • 1.  Function of Trust Protector  23.60
        • a.  Considering Trust Protector  23.61
        • b.  Defining Role of Trust Protector  23.62
        • c.  Powers of Trust Protector  23.63
        • d.  Selection of Trust Protector  23.64
        • e.  Additional Trust Protector Provisions  23.65
      • 2.  Form: Trust Protector  23.66

23A

Taxation of Trust Distributions

Michael Burnstein

Ann C. Harris

  • I.  WHEN DISTRIBUTIONS TAXABLE  23A.1
  • II.  TRUST INCOME TAXATION RULES
    • A.  Determining Distributable Net Income (DNI)
      • 1.  Adjustments to Distributable Net Income  23A.2
      • 2.  Allocation of Distributable Net Income  23A.3
    • B.  Simple Trusts
      • 1.  Definition of Simple Trust  23A.4
      • 2.  Taxation of Simple Trust and Its Beneficiaries  23A.5
      • 3.  Estimated Tax Payments for Simple Trusts  23A.6
    • C.  Complex Trusts
      • 1.  Definition of Complex Trust  23A.7
      • 2.  Taxation of Complex Trusts  23A.8
      • 3.  Estimated Tax Payments for Complex Trusts
        • a.  Determining Estimated Tax  23A.9
        • b.  Problems in Determining Estimated Tax Using Annualized Income Method  23A.10
          • (1)  Trustee Problems  23A.11
          • (2)  Beneficiary Problems  23A.12
      • 4.  Taxation of Beneficiaries of Complex Trusts  23A.13
        • a.  First-Tier Distributions  23A.14
        • b.  Second-Tier Distributions  23A.15
        • c.  The Intermediate Tier  23A.16
        • d.  The Variable Tier  23A.17
      • 5.  Separate Share Rule  23A.18
    • D.  Additional Trust Income Taxation Rules
      • 1.  Determining Trust Taxable Income  23A.19
      • 2.  Net Investment Income Tax  23A.19A
      • 3.  Definition of Net Investment Income  23A.19B
      • 4.  Charitable Deduction for Trust Income  23A.20
      • 5.  Taxable Year of Trust  23A.21
      • 6.  Income Tax Rates Applicable to Trusts  23A.22
      • 7.  Disallowance of Certain Capital Losses   23A.23
      • 8.  Alternative Minimum Tax (AMT)  23A.24
      • 9.  California and Other State Income Tax  23A.25
    • E.  Tax Consequences of Trust Termination  23A.26
      • 1.  Pass-Through of Unused Deductions and Losses to Beneficiaries  23A.27
      • 2.  No Pass-Through of Excess Deductions  23A.28
  • III.  CHARITABLE TRUSTS
    • A.  Charitable Remainder Trusts (CRTs)  23A.29
      • 1.  Taxation of CRTs  23A.30
      • 2.  Taxation of Noncharitable Beneficiaries  23A.31
      • 3.  Taxation of Charitable Beneficiaries  23A.32
    • B.  Charitable Lead Trusts (CLTs)  23A.33
  • IV.  TRUSTS HOLDING S CORPORATION STOCK
    • A.  Qualified Subchapter S Trusts (QSSTs)  23A.34
      • 1.  Basic Requirements for QSST  23A.35
        • a.  Requirement to Distribute All Income  23A.36
        • b.  One-Beneficiary Requirement  23A.37
      • 2.  QSST Election  23A.38
      • 3.  Taxation of QSSTs  23A.39
    • B.  Electing Small Business Trusts (ESBTs)  23A.40
      • 1.  Basic Requirements for ESBTs  23A.41
      • 2.  Determining Number of S Corporation Shareholders  23A.42
      • 3.  Taxation of ESBTs  23A.43

24

Guardianships of the Person

Robert A. Schlesinger

  • I.  ROLE OF GUARDIAN OF PERSON
    • A.  Providing for Minor Beneficiary   24.1
    • B.  Types of Guardianship  24.2
    • C.  Coordination of Guardianship With Other Provisions for Minor  24.3
    • D.  Statutory Guardianship Provisions
      • 1.  Parental Nomination Authorized  24.4
      • 2.  Definition of “Minor”  24.5
    • E.  Nature of Office; Duties and Powers  24.6
  • II.  NOMINATING GUARDIAN OF PERSON
    • A.  Considerations Regarding Nomination
      • 1.  Benefits of Parental Nomination  24.7
      • 2.  Both Parents’ Deaths  24.8
      • 3.  One Parent’s Death  24.9
      • 4.  Nonparent Cannot Nominate  24.10
      • 5.  Nomination of Same Individual as Guardian of Person and of Estate  24.11
    • B.  Choice of Guardian
      • 1.  Choice Often Limited  24.12
      • 2.  Nomination of Nonresident  24.13
      • 3.  Compatibility With Guardian of Estate or Trustee  24.14
      • 4.  Alternates and Successors  24.15
      • 5.  Co-guardians  24.16
      • 6.  Special Instructions  24.17
      • 7.  Frequent Review of Choice  24.18
    • C.  Financial Provisions for Guardianship of Person  24.19
  • III.  FORMS FOR NOMINATING GUARDIAN OF PERSON
    • A.  Form: Nomination of Guardian of Person  24.20
    • B.  Form: Nomination of Nonresident Guardian of Person  24.21
    • C.  Form: Authorization of Parental Authority Under Prob C §2108(a)  24.22
    • D.  Form: Special Estate Distributions  24.23

25

Guardianships of the Estate

Robert A. Schlesinger

  • I.  ROLE OF GUARDIAN OF ESTATE
    • A.  Management of Minor’s Estate  25.1
    • B.  Nature of Guardianship  25.2
    • C.  When Nomination of Guardian Is Desirable  25.3
  • II.  SELECTING GUARDIAN OF ESTATE
    • A.  Statutory Provisions for Nomination
      • 1.  Parent May Nominate Guardian of Estate; Parent or Nonparent May Nominate Guardian for Property  25.4
      • 2.  Guardian Appointed by Court; Authority May Be Expanded  25.5
    • B.  Duties and Powers  25.6
    • C.  General Considerations in Selecting Nominee  25.7
      • 1.  Experience; Corporation Versus Individual  25.8
      • 2.  No Conflict of Interest With Minor  25.9
      • 3.  Appointment of Same Individual as Guardian of Person and of Estate  25.10
      • 4.  Compatibility With Guardian of Person and Trustee  25.11
      • 5.  Nomination of Nonresident  25.12
      • 6.  Alternates and Successors  25.13
    • D.  Bond  25.14
  • III.  FORMS FOR NOMINATING GUARDIAN OF ESTATE
    • A.  Form: Nomination of Guardian of Estate  25.15
    • B.  Form: Nomination of Guardian for Property  25.16
    • C.  Form: Authorization of Independent Powers Under Prob C §2108(b)  25.17
    • D.  Form: Waiver of Bond  25.18

26

Transfer Tax Payment Clauses

Michael A. Roosevelt

Clare H. Springs

  • I.  ALLOCATION OF TRANSFER TAXES  26.1
  • II.  STATUTORY APPORTIONMENT FRAMEWORK  26.2
    • A.  Estate Taxes
      • 1.  California Apportionment Statutes
        • a.  General Rule: Equitable Proration  26.3
          • (1)  Apportionment of Burdens  26.3A
          • (2)  Apportionment of Benefits  26.3B
        • b.  Opting Out by Express Directions of Decedent  26.4
        • c.  Enforcement by Personal Representative  26.5
        • d.  Apportionment of IRC §2032A Recapture Tax  26.6
        • e.  Split-Interest Devises: No Proration  26.7
      • 2.  Federal Rights of Reimbursement  26.8
        • a.  Reimbursement for Tax on Insurance Proceeds (IRC §2206)  26.9
        • b.  Reimbursement for Tax on Power of Appointment Property (IRC §2207)  26.10
        • c.  Reimbursement for Tax on Qualified Terminable Interest Property (QTIP) (IRC §2207A)  26.11
        • d.  Reimbursement for Tax on IRC §2036 Retained Interest Property (IRC §2207B)  26.12
    • B.  Generation-Skipping Transfer Tax  26.13
  • III.  FACTORS TO CONSIDER IN PLANNING FOR APPROPRIATE TAX PAYMENT PROVISIONS
    • A.  Fairness of Statutory Apportionment Rules  26.14
    • B.  Gifts of Illiquid Assets  26.15
    • C.  Collection Problems  26.16
    • D.  Tax-Free General or Specific Gifts  26.17
    • E.  Temporal (Split) Interests  26.18
    • F.  Right of Reimbursement From QTIP Trust  26.19
    • G.  Is Property Passing to Surviving Spouse Deductible?  26.19A
    • H.  IRC §2032A Recapture Taxes  26.20
    • I.  Excludable Funds Under Former IRC §2039(c)  26.21
    • J.  Risks of Assigning Responsibility for Tax Liability to Residue  26.22
      • 1.  Risk of Unintended Windfall to Nonprobate Beneficiaries  26.23
      • 2.  Risk of Reduction of Marital or Charitable Deduction  26.24
      • 3.  “Equalizing” Lifetime and Testamentary Gifts  26.25
      • 4.  Risk of Unintentional Results From Failure to Consider Effect of Credits  26.26
      • 5.  Risk of Loss of Section 303 Benefits  26.27
      • 6.  Risk of Unavailability of Summary Administration  26.28
    • K.  Partial QTIP Election Problems  26.29
    • L.  Disclaimer Trust Problem  26.30
  • IV.  TAX PAYMENT DRAFTING CONSIDERATIONS
    • A.  Need for Clarity in Tax Payment Clauses  26.31
    • B.  Specifying Taxes to Be Covered by Tax Payment Clause  26.32
    • C.  Coordination of Tax Payment Clauses in Estate Plan Documents  26.33
  • V.  SAMPLE TAX PAYMENT CLAUSES
    • A.  Form: Equitable Apportionment With Specific Exceptions (Allocation Clause for Stand-Alone Will)  26.34
    • B.  Form: Estate Taxes Paid From Revocable Trust (Allocation Clause for Pourover Will)  26.35
    • C.  Form: Payment of Taxes on Qualified Terminable Interest Property  26.36
    • D.  Form: Alternative Tax Allocation Clause With Limited Waiver of Federal Recovery (Allocation Clause for Will)  26.37
    • E.  Form: Tax Allocation Clause for Revocable Trust With Pourover Will (Allocation Clause for Revocable Trust)  26.38

27

Spendthrift Clauses

Margaret M. Hand

  • I.  PROTECTING BENEFICIARIES’ INTERESTS IN TRUSTS  27.1
    • A.  Spendthrift Trusts (Prob C §§15300, 15301)  27.2
    • B.  Education and Support Trusts (Prob C §15302)  27.3
    • C.  Discretionary Trusts (Prob C §15303)  27.4
  • II.  LIMITS ON EFFECTIVENESS OF SPENDTHRIFT PROTECTION  27.5
    • A.  Judgment for Child or Spousal Support (Prob C §15305)  27.6
    • B.  Restitution Claims for Commission of Felony (Prob C §15305.5)  27.7
    • C.  Liability for Public Support (Prob C §15306)  27.8
    • D.  General Creditors and 25 Percent Limitation (Prob C §15306.5)  27.9
    • E.  Taxing Authorities  27.10
    • F.  Bankruptcy Trustees  27.11
  • III.  DESIRABILITY OF SPENDTHRIFT CLAUSE
    • A.  Spendthrift Clause May Prevent Income Shifting  27.12
    • B.  Spendthrift Clause Should Not Disqualify Marital Deduction  27.13
    • C.  Spendthrift Clause Will Not Bar Disclaimer  27.14
  • IV.  SAMPLE SPENDTHRIFT CLAUSES
    • A.  Form: Short-Form Spendthrift Clause  27.15
    • B.  Form: Long-Form Spendthrift Clause  27.16

28

Office of Trustee

George R. Dirkes

Bruce Givner

  • I.  ROLE OF TRUSTEE IN TESTAMENTARY TRUST
    • A.  Limited Scope of Chapter  28.1
    • B.  Nature of Trustee’s Duties  28.2
  • II.  SELECTING TRUSTEE
    • A.  Trustee’s Qualifications  28.3
      • 1.  Nonresident Trustee  28.3A
      • 2.  Corporate Trustee  28.3B
    • B.  Attorney as Trustee  28.4
    • C.  Considerations in Selecting Trustee
      • 1.  Institutional Trustee
        • a.  Advantages of Institutional Trustee  28.5
        • b.  Disadvantages of Institutional Trustee  28.5A
      • 2.  Individual Trustee
        • a.  Advantages of Individual Trustee  28.6
        • b.  Disadvantages of Individual Trustee  28.6A
      • 3.  Multiple Trustees  28.7
        • a.  Disadvantages of Cotrustees  28.7A
        • b.  Cotrustee Liability  28.7B
      • 4.  Tax Perils in Selecting Beneficiary or Related Party as Trustee  28.8
        • a.  Estate Tax Considerations  28.8A
        • b.  Gift Tax Considerations  28.8B
        • c.  Income Tax Considerations  28.8C
        • d.  Reciprocal Trust Doctrine  28.8D
    • D.  Using Special Trustee  28.9
    • E.  Asking Trustee to Review Trust  28.10
    • F.  Giving Special Trustee Veto Power  28.10A
  • III.  TRUSTEE APPOINTMENT, RESIGNATION, AND REMOVAL
    • A.  Trustee Appointment
      • 1.  Naming Trustees and Their Successors  28.11
      • 2.  Forms Naming Trustees and Their Successors
        • a.  Form: Nomination of Trustee and Successors for All Trusts  28.12
        • b.  Form: Nomination of Trustee Within Clause Creating Trust  28.13
        • c.  Form: Separate Clause Naming Successor Trustee  28.14
        • d.  Form: Court Appointment of Successor Trustee  28.15
        • e.  Form: Nomination of Special Trustee and Successors  28.16
      • 3.  Appointment of Successor Trustee by Trustee or Beneficiary  28.17
      • 4.  Drafting Trustee Appointment Powers  28.17A
    • B.  Trustee Resignation
      • 1.  Giving Trustee Right to Resign  28.18
      • 2.  Form: Trustee Resignation; Succession  28.19
    • C.  Trustee Removal by Beneficiary
      • 1.  Using Trustee Removal Clauses  28.20
      • 2.  Form: Trustee Removal by Beneficiary  28.21
    • D.  Trustee Replacement Owing to Incapacity
      • 1.  Need for New Trustee When Appointed Trustee Becomes Incapacitated  28.21A
      • 2.  Form: Replacement of Incapacitated Trustee  28.21B
      • 3.  Form: Trustee Required to Authorize Release of Health Information  28.21C
      • 4.  Form: Authorization for Use and Disclosure of Health Information  28.21D
  • IV.  TRUSTEE’S BOND
    • A.  When Bond Is Required; Advisability of Waiver  28.22
    • B.  Form: Waiver of Bond  28.23
  • V.  TRUSTEE COMPENSATION AND REIMBURSEMENT
    • A.  Using Clause for Trustee Compensation  28.24
    • B.  Form: Trustee Compensation  28.25
    • C.  Devise to Trustee
      • 1.  Devise in Lieu of Compensation  28.26
      • 2.  Form: Devise in Lieu of Compensation  28.27
    • D.  Trustee Expense Reimbursement  28.28
  • VI.  TRUSTEE DELEGATION OF DUTIES
    • A.  Trustee Power to Delegate
      • 1.  Delegation of Trust Administration Duties Generally  28.29
      • 2.  Delegation of Investment and Management Functions  28.29A
      • 3.  Compensation When Duties Are Delegated  28.29B
      • 4.  Trustee Liability for Agent’s Acts  28.29C
    • B.  Forms Giving Trustee Power to Delegate
      • 1.  Form: Power to Employ Agents and Advisers  28.30
      • 2.  Form: Beneficiary Selection of Investment Adviser; Trustee Exculpation  28.31
      • 3.  Form: Trustee Requested to Consult With Third Party Adviser  28.32
    • C.  Delegation of Duties Among Cotrustees
      • 1.  Reasons for Delegating Among Cotrustees  28.33
      • 2.  Forms Delegating Powers Among Cotrustees
        • a.  Form: Individual Cotrustee’s Delegation of Powers to Cotrustee During Absence  28.34
        • b.  Form: Action by Majority of Cotrustees Binds Trust  28.35
  • VII.  DIVISION OF DUTIES AMONG TRUSTEES
    • A.  Nontax Reasons to Allocate Duties
      • 1.  Allocating Duties to Use Trustees’ Special Skills or Resources  28.36
      • 2.  Form: Division of Investment Duties Between Cotrustees  28.37
      • 3.  Form: Special Trustee Powers Over Investments  28.38
    • B.  Tax Reasons for Delegating Powers and Duties Among Trustees
      • 1.  Tax Issues Presented by Trustee Powers  28.39
        • a.  Trustee-Beneficiary Invasion Power  28.39A
        • b.  Trustee Power to Apply Trust Property to Dependent’s Support  28.39B
        • c.  Trustee Power Over Insurance on Trustee’s Life  28.39C
      • 2.  Special Trustee to Act in Place of General Trustee
        • a.  Form: Special Trustee to Act if Trustee Disclaims Powers  28.40
        • b.  Form: Special Trustee to Exercise Sprinkling Power  28.41
  • VIII.  TRUSTEE’S DEALINGS WITH TRUST
    • A.  Trustee’s Duty to Avoid Conflicts of Interest  28.42
      • 1.  Self-Dealing by Individual Trustee  28.42A
      • 2.  Self-Dealing by Institutional Trustee  28.42B
    • B.  Self-Dealing by Attorney-Trustee  28.43
    • C.  Forms Permitting Trustee Self-Dealing
      • 1.  Form: Trustee Self-Dealing Permitted (Power to Loan, Buy, and Sell)  28.44
      • 2.  Form: Trustee Self-Dealing Permitted (Corporate Employee)  28.45
    • D.  Prohibition Against Commingling Assets  28.46
    • E.  Exculpatory Clauses
      • 1.  Trustee Standards of Conduct  28.47
      • 2.  Form: Trustee Exculpation  28.48
      • 3.  Effect of Trustee Exculpation Clause  28.48A
    • F.  Liability for Acts of Predecessor Trustee
      • 1.  Successor Trustee’s Liability  28.49
      • 2.  Form: Waiver of Liability for Acts of Predecessor Trustee  28.50
    • G.  Providing for Court Supervision of Trust
      • 1.  Court Supervision Generally Inadvisable  28.51
      • 2.  Form: Trusts Subject to Continuing Court Jurisdiction  28.52
    • H.  Limiting Court Jurisdiction
      • 1.  Purpose of Clause Limiting Court Jurisdiction  28.53
      • 2.  Form: Limiting Court Jurisdiction  28.54

29

Trustee Management Powers

M. Kimball Hettena

  • I.  POWERS OF TESTAMENTARY TRUSTEE
    • A.  Planning Trustee Powers  29.1
    • B.  Sources of Trustee Management Powers
      • 1.  Statutory Trustee Powers  29.2
      • 2.  Powers Conferred by Will  29.3
      • 3.  Powers Incorporated by Reference  29.3A
    • C.  Selecting and Limiting Trustee Powers
      • 1.  Determining Needed Powers  29.4
      • 2.  Avoiding Undue Restrictions on Powers  29.5
      • 3.  Giving Trustee Appropriate Discretion  29.6
    • D.  Avoiding Unintended Tax Consequences  29.7
      • 1.  Loss or Reduction of Marital Deduction  29.7A
      • 2.  Inadvertent Creation of General Power  29.7B
    • E.  Clauses Granting Statutory Powers to Trustee and Introducing Itemized Powers
      • 1.  Form: Trustee to Have Statutory Powers  29.8
      • 2.  Form: Introduction to Trustee Powers  29.9
  • II.  INVESTMENT POWERS
    • A.  Prudent Investor Rule  29.10
    • B.  General Investment Powers
      • 1.  “Prudent Investor” Clause  29.11
      • 2.  Form: Investment According to Prudent Investor Rule  29.12
      • 3.  “Broad Powers” Options  29.13
    • C.  Form: Restricted Investment Powers  29.14
    • D.  Power to Retain Any Property
      • 1.  Granting Power to Retain Unproductive Property  29.15
      • 2.  Form: Power to Retain Any Property  29.16
    • E.  Power to Abandon Property
      • 1.  Asset Abandonment  29.17
      • 2.  Form: Power to Abandon Property  29.18
    • F.  Power to Invest in Underproductive Property
      • 1.  Issues Presented by Investing in Unproductive Property  29.19
      • 2.  Form: Power to Retain or Acquire Underproductive Property  29.20
      • 3.  Spouse’s Power to Direct Trustee to Convert Unproductive Property to Productive Property  29.21
      • 4.  Form: Trustee Compliance With Spouse’s Direction to Convert Unproductive Property to Income Property  29.22
  • III.  MISCELLANEOUS MANAGEMENT POWERS
    • A.  Sale, Exchange, and Repair of Trust Property
      • 1.  Explicit Granting of Powers  29.23
      • 2.  Form: Power to Sell, Exchange, and Repair Trust Property  29.24
    • B.  Power to Lease
      • 1.  Stated Power Enhances Trustee Credibility  29.25
      • 2.  Form: Power to Lease, Including Mineral Rights  29.26
    • C.  Power to Borrow
      • 1.  Explicit Grant of Power May Be Required for Trustee to Borrow  29.27
      • 2.  Form: Power to Borrow  29.28
    • D.  Power to Initiate and Defend Litigation
      • 1.  Duty to Initiate and Defend Litigation  29.29
      • 2.  Form: Power to Initiate and Defend Litigation  29.30
      • 3.  Form: Power to Compromise Claims  29.31
    • E.  Power to Insure
      • 1.  Stated Power Reinforces Trustee Duty  29.32
      • 2.  Form: Power to Insure  29.33
    • F.  Powers to Address Environmental Concerns
      • 1.  Minimizing Risk of Fiduciary Environmental Liability  29.34
      • 2.  Form: Power to Monitor Property  29.35
      • 3.  Form: Powers to Comply With Environmental Laws  29.36
    • G.  General Business Interest Powers
      • 1.  Authority to Continue Business Operation  29.37
      • 2.  Form: Overall Powers for Business Interests  29.38
    • H.  Corporate Business Interest Powers
      • 1.  Authority to Participate in Corporate Organizational Matters  29.39
      • 2.  Form: Corporate Business Management  29.40
    • I.  Partnership Interest Powers
      • 1.  Authority to Hold Partnership Interest  29.41
      • 2.  Form: Power to Engage in Partnership Business  29.42
    • J.  Securities Ownership
      • 1.  Managing Securities Held in Trust  29.43
      • 2.  Form: Power to Manage Securities  29.44
      • 3.  Holding Securities in Nominee’s or Broker’s Name  29.45
      • 4.  Form: Power to Hold Securities in Nominee’s Name or in “Street Name”  29.46
    • K.  Buying Bonds at Premium
      • 1.  Premium Bonds  29.47
      • 2.  Form: Power to Buy Bonds at Premium  29.48
    • L.  Buying Bonds at Discount
      • 1.  Discount Bonds  29.49
      • 2.  Form: Power to Buy Bonds at Discount  29.50
  • IV.  SPECIFIC ASSET INVESTMENT AND MANAGEMENT POWERS
    • A.  Power to Invest in Life Insurance
      • 1.  Issues Presented by Trust Ownership of Life Insurance  29.51
        • a.  When Marital Deduction Trust Holds Life Insurance   29.51A
        • b.  When Trustee-Insured Holds Incidents of Ownership   29.51B
      • 2.  Form: Power to Invest in Life Insurance  29.52
      • 3.  Form: Special Trustee to Control Insurance on Trustee’s Life  29.53
    • B.  Bank and Savings and Loan Accounts  29.54
    • C.  Farming and Ranching Interests
      • 1.  Detailed Trustee Powers Necessary  29.55
      • 2.  Form: Powers for Farming Interests  29.56
    • D.  Mineral Rights
      • 1.  Powers Ease Trustee Negotiations  29.57
      • 2.  Form: Powers for Managing Oil, Gas, and Mineral Properties  29.58
    • E.  Subchapter S Corporation Stock  29.58A
      • 1.  Form: Power to Hold S Corporation Stock  29.58B
    • F.  Digital Assets  29.58C
    • G.  Qualified Tuition Program  29.58D
  • V.  Form: Power to Participate in Qualified Tuition Programs  29.58E
    • A.  Tax Shelter Properties  29.59
  • VI.  FORM: SHORT FORM OF TRUSTEE’S POWERS  29.60

30

Trustee Accounting Powers

Bruce Givner

Howard L. Sanger

Julia P. Wald

  • I.  IMPORTANCE OF FIDUCIARY ACCOUNTINGS  30.1
  • II.  SCOPE OF CHAPTER  30.2
  • III.  ASSUMPTIONS AND DEFINITIONS  30.3
    • A.  Assumptions  30.4
    • B.  Definitions  30.5
  • IV.  UNDERSTANDING REASONS FOR PRINCIPAL AND INCOME FIDUCIARY ACCOUNTINGS
    • A.  Multiple Owners  30.6
    • B.  Legal Owners and Beneficial Owners  30.7
      • 1.  Legal Owners Are Trustees  30.8
      • 2.  Beneficial Owners Are Trust Beneficiaries  30.9
    • C.  Principal and Income Accounting Rules  30.10
  • V.  DUTY TO RENDER ACCOUNTS
    • A.  Accountings Protect Beneficiaries  30.11
    • B.  Who May Object to Accountings  30.12
    • C.  When Accounting Is Required  30.13
    • D.  Who Gets Accountings  30.14
      • 1.  Remainder Beneficiaries Do Not Get Accountings  30.15
      • 2.  Remainder Beneficiaries Get Reports  30.16
    • E.  Detailed Account Requirements  30.17
    • F.  Sanctions Related to Accountings  30.18
      • 1.  Sanctions Against Fiduciary  30.19
      • 2.  Sanctions Against Contesting Beneficiary  30.20
    • G.  Period to Object to Noncourt Accountings  30.21
      • 1.  3-Year Statute of Limitations  30.22
      • 2.  Shortening Period to Object to Accounting  30.23
      • 3.  Form: Effect of Account  30.24
    • H.  When Accounting Is Not Required  30.25
    • I.  Trustee’s Duty to Report Information  30.26
    • J.  Basic Trustee Accounting Power Forms
      • 1.  Form: Duty to Account Privately  30.27
      • 2.  Form: Duty to Account to Court  30.28
      • 3.  Practical Considerations  30.29
  • VI.  ACCOUNTING FOR MULTIPLE TRUSTS
    • A.  Power to Consolidate or Divide Trusts  30.30
    • B.  Form: Physical Segregation of Separate Trusts Not Required; Division Into Separate Trusts Permitted  30.31
    • C.  Form: Consolidated Administration of Testamentary Trusts With Trusts Otherwise Created  30.32
  • VII.  ALLOCATION OF INCOME AND EXPENSE ITEMS TO PRINCIPAL AND INCOME ACCOUNTS
    • A.  Purpose of Provisions for Allocation to Principal or Income  30.33
    • B.  Will Controls; Principal and Income Statute Contains Default Rules  30.34
      • 1.  UPAIA Biased Toward Principal Classifications  30.35
      • 2.  Trustee Discretion to Adjust Between Principal and Income  30.36
        • a.  First Adjustment Power: Prob C §16336  30.37
        • b.  Second Adjustment Power: Prob C §16335(a)(2)  30.38
    • C.  Tax Considerations in Allocating Items to Principal or Income  30.39
    • D.  Form: Power to Make Allocations Between Principal and Income  30.40
    • E.  Particular Issues in Allocating Expenses Between Principal and Income Accounts  30.41
      • 1.  Encumbered Property  30.42
      • 2.  Underproductive and Unproductive Property  30.43
    • F.  Particular Issues in Allocating Entity Receipts Between Principal and Income (Prob C §16350)
      • 1.  General Rule: Entity Cash Receipts Are Trust Income  30.43A
      • 2.  Exceptions: When Entity Cash Receipts Are Trust Principal  30.43B
        • a.  Rule on Sale of Entity’s Business Assets  30.43C
        • b.  Partial Liquidation 10 Percent Rule [Deleted]  30.43D
  • VIII.  CREATING DEPRECIATION AND DEPLETION RESERVES
    • A.  Creating Depreciation Reserves
      • 1.  Trustee’s Discretion to Establish Depreciation Reserve; Effects on Beneficiaries  30.44
      • 2.  Form: Power to Establish Depreciation Reserve  30.45
    • B.  Allocation of Principal and Income From Natural Resources (Depletion Reserves)
      • 1.  Allocation Issues  30.46
      • 2.  Form: Allocation of Receipts to Account for Depletion  30.47
    • C.  Amortization of Intangibles
      • 1.  Intangible “Liquidating Assets”  30.48
      • 2.  Form: Power to Establish Amortization Reserve for Intangible Property  30.49
  • IX.  ALLOCATION OF DEFERRED COMPENSATION
    • A.  Deferred Compensation Payments  30.50
    • B.  Two Sets of Rules for Deferred Compensation Payments  30.51
      • 1.  Allocation of Payments Made to Nonmarital Deduction Trusts  30.52
        • a.  Payment Characterized  30.53
        • b.  Payment Not Characterized  30.54
          • (1)  When Payment Required  30.55
          • (2)  When Payment Not Required  30.56
        • c.  Nonmarital Trust Could Be Only Trust  30.57
      • 2.  Allocation of Payments Made to Marital Deduction Trusts  30.58
        • a.  Payment Characterized  30.59
        • b.  Payment Not Characterized  30.60
      • 3.  Form: Power to Allocate Deferred Compensation to Principal  30.61
  • X.  ALLOCATION OF INCOME AND PRINCIPAL ITEMS AMONG BENEFICIARIES
    • A.  Two Sets of Allocation Rules for Income and Principal  30.62
    • B.  Rule Set #1: Allocating Income and Principal Items to Various Types of Gift Donees  30.63
      • 1.  Administration Period Defined  30.64
      • 2.  Specific Gift Receipts During Administration Period  30.65
      • 3.  Form: Home Expenses Charged to Donee Immediately  30.66
      • 4.  General Pecuniary Gifts, Receipts, and Interest During Administration Period  30.67
      • 5.  Residuary Gifts and Receipts During Administration Period  30.68
    • C.  Rule Set #2: Allocating Income and Principal Receipts Between Successive Interests  30.69
      • 1.  Cash Basis Accounting Rules and Accrual Basis Accounting Rules Apply  30.70
      • 2.  Cash Basis Accounting for Undistributed Income and Sequential Interests  30.71
        • a.  Discussion and Answer to Example 1  30.72
        • b.  Discussion and Answer to Example 2  30.73
      • 3.  Accrual Basis Accounting for Accrued Income and Successive Interests  30.74
      • 4.  Reclassification of Income Receipt Is Based on Due Date  30.75
      • 5.  Form: Undistributed Income Payable to Succeeding Beneficiaries  30.76
    • D.  Allocating Items of Expense Among Succeeding Beneficiary Classes
      • 1.  Expense Allocation Rules  30.77
      • 2.  Form: Allocation of Expenses Among Successive Beneficiaries  30.78
    • E.  Making Adjustments for Allocation Decisions  30.79

31

Trustee Administrative Powers

Bruce Givner

Owen Kaye

  • I.  PLANNING ADMINISTRATIVE POWERS  31.1
  • II.  DISTRIBUTIONS OF TRUST CORPUS
    • A.  Distributions of Money  31.1A
    • B.  Distributions “In Kind”  31.2
    • C.  Prorata Distributions  31.2A
    • D.  Nonprorata Distributions  31.3
    • E.  Powers Regarding Asset Distribution
      • 1.  Form: Broad Powers of Distribution (Standard Clause)  31.4
      • 2.  Form: Nonprorata Distributions and Income Tax Basis  31.5
  • III.  DISTRIBUTIONS TO MINORS OR PERSONS WITH DISABILITIES
    • A.  Social Conditions Causing Disability  31.5A
    • B.  Statutory Rules and Trust Clauses for Distributing Gifts to Minors and Disabled Beneficiaries  31.6
    • C.  Form: Facilitating Distributions to Minors or Persons With Disabilities  31.7
    • D.  Form: Definition of Disability  31.7A
    • E.  Form: Back-Up Trust for Minor Beneficiary’s Distribution  31.8
    • F.  Form: Power to Disregard Beneficiary’s Power to Withdraw  31.8A
  • IV.  EFFECT ON DISTRIBUTIONS OF EVENTS AFFECTING BENEFICIAL INTERESTS
    • A.  Protecting Trustee From Liability
      • 1.  Protecting Trustee From Liability for Distributions Affected by Events of Which Trustee Had No Knowledge  31.9
      • 2.  No Protection From Liability for Failing to Notify Beneficiaries and Heirs When Revocable Trust Becomes Irrevocable or There Is Change of Trustees  31.9A
    • B.  Exculpating Trustee for Action Before Notice of Events Affecting Beneficial Interests
      • 1.  Form: Trustee Action Before Notice of Events Affecting Beneficial Interests  31.10
      • 2.  Form: Trustee May Distribute if No Notice of Exercise of Power of Appointment  31.11
    • C.  Effect of Disputes on Distributions
      • 1.  Trustee’s Right to Withhold Payment While Disputes Are Resolved  31.12
      • 2.  Form: Power to Withhold Distribution Pending Tax Payment and Conflict Resolution  31.13
  • V.  EXERCISING ADMINISTRATIVE POWERS TO AVOID UNWANTED TAX EFFECTS
    • A.  Trustee’s Disclaimer of Administrative Powers
      • 1.  Purpose of Disclaimer  31.14
        • a.  Trustee’s Right to Disclaim  31.14A
        • b.  Trustee’s Refusal to Act  31.14B
      • 2.  Form: Disclaimer of Administrative Powers  31.15
    • B.  Limiting Powers to Save Marital Deduction  31.16
    • C.  Trustee’s Power to Adjust for Tax Consequences
      • 1.  Tax Elections and Other Decisions  31.17
      • 2.  Form: Power to Adjust for Tax Consequences  31.18
  • VI.  EXPENSE PAYMENTS ON TERMINATION OF BENEFICIARY INTERESTS; USE OF RESIDENCE
    • A.  Payment of Beneficiary’s Estate Taxes
      • 1.  Authorizing Estate Tax Payment  31.19
      • 2.  Form: Trustee May Pay Beneficiary’s Estate Taxes  31.20
    • B.  Beneficiary’s Last-Illness and Funeral Expenses
      • 1.  Permitting Beneficiary Expense Payments  31.21
      • 2.  Form: Trustee May Pay Spouse or Partner’s Last-Illness and Funeral Expenses and Obligations Incurred for Support  31.22
    • C.  Authorizing Surviving Spouse or Other Beneficiary to Occupy Residence
      • 1.  Residence Occupancy Issues  31.23
        • a.  Bypass Trust or QTIP Trust  31.23A
        • b.  Trust Taxability Issues  31.23B
      • 2.  Form: Surviving Spouse or Partner May Occupy Residence  31.24
      • 3.  Form: Power to Permit Life Beneficiary to Occupy Real Property  31.24A
  • VII.  TRUSTEE POWERS AFFECTING TRUST CORPUS AS A WHOLE
    • A.  Power to Accept Additions to Trust
      • 1.  Power to Accept Additions; Tax Consequences  31.25
      • 2.  Form: Additions to Trust Authorized  31.26
    • B.  Combined Administration of Trusts  31.27
    • C.  Small Trust Termination
      • 1.  Trustee Powers to Terminate Trust  31.28
      • 2.  Form: Small Trust Termination  31.29
  • VIII.  CONTINUATION OF TRUSTEE POWERS AFTER TRUST TERMINATION
    • A.  Trustee Powers Must Continue Until Trust Business Is Wound Up  31.30
    • B.  Form: Trustee Powers Continue Until Trust Distribution  31.31
  • IX.  RULES OF CONSTRUCTION
    • A.  Trustee Powers Exercised in Fiduciary Capacity; Choice of Law  31.32
    • B.  Form: All Powers Exercisable Only in Fiduciary Capacity  31.33
    • C.  Form: Choice-of-Law Clause  31.34
  • X.  TRUST PROTECTOR
    • A.  Use of Trust Protector  31.35
    • B.  Trust Protector Defined  31.36
    • C.  Powers of Trust Protector  31.37
    • D.  Appointment of Trust Protector  31.38

32

Selection of Executor

Judith M. Copeland

  • I.  QUALIFICATIONS FOR AND NOMINATION OF EXECUTOR
    • A.  Definition and Appointment of “Executor”  32.1
    • B.  Statutory Qualifications for Executor  32.2
    • C.  Selecting Executor
      • 1.  Selection Criteria  32.3
      • 2.  Corporate Fiduciaries  32.4
      • 3.  Nominating Coexecutors  32.5
      • 4.  Delegating Authority to Nominate  32.6
    • D.  Contacting Nominated Executor  32.7
    • E.  Attorney as Executor
      • 1.  Ethical and Practical Issues for Attorney  32.8
      • 2.  Specific Will Clause Required for Dual Compensation  32.9
    • F.  Executor Nomination Clauses
      • 1.  Form: Individuals Nominated as Executor and Alternate or Successor Executors  32.10
      • 2.  Form: Nomination of Coexecutors  32.11
      • 3.  Form: Nomination of Corporate or Private Professional Fiduciary  32.12
      • 4.  Form: Delegation of Authority to Designate Executor  32.13
      • 5.  Form: Nomination of Attorney as Executor  32.14
      • 6.  Definition of “Executor”
        • a.  Effect of Clause Defining “Executor” to Include All Personal Representatives  32.15
        • b.  Form: Definition of “Executor”  32.16
  • II.  EXECUTOR’S BOND
    • A.  Bond Required Absent Waiver  32.17
    • B.  Form: Waiving or Requiring Bond  32.18
  • III.  COMPENSATION OF EXECUTOR AND EXECUTOR’S ATTORNEY
    • A.  Statutory Provisions for Compensation  32.19
    • B.  Testamentary Provisions for Compensation  32.20
  • IV.  EXECUTOR’S LIABILITY AND EXCULPATORY PROVISIONS
    • A.  Duties, Powers, and Potential Liabilities  32.21
    • B.  Executor’s Liability
      • 1.  Executor’s Duties Generally  32.22
      • 2.  Surcharges for Breach  32.23
    • C.  Particular Sources of Liability
      • 1.  Torts Committed During Administration; Unauthorized Contracts  32.24
      • 2.  Executor’s Personal Liability to Creditors and Beneficiaries  32.25
      • 3.  Executor’s Personal Liability for Taxes  32.26
      • 4.  Executor’s Personal Liability for Estate Obligations to Federal Government  32.26A
    • D.  Limited Value of Exculpatory Clauses  32.27
  • V.  ACCOUNTING REQUIREMENTS AND WAIVERS OF ACCOUNTS
    • A.  Statutory Accounting Requirements  32.28
    • B.  Waiver of Accounting  32.29
    • C.  Prohibition of Waiver  32.30

33

Powers and Duties of Executor

Judith M. Copeland

  • I.  PLANNING FOR EXERCISE OF POWERS AND DUTIES
    • A.  Powers and Duties Derived From Statute and Will  33.1
    • B.  Nondelegable Duties of Executor  33.2
  • II.  POWERS AND DUTIES NOT REQUIRING SPECIFIC WILL CLAUSES
    • A.  Probate Code Powers and Duties  33.3
    • B.  Collection and Care of Estate Assets  33.4
      • 1.  Duty to Preserve Property  33.4A
      • 2.  No Duty to Enhance Value of Property  33.4B
    • C.  Income Tax Return Preparation  33.5
      • 1.  Filing Joint Return  33.5A
      • 2.  Innocent Spouse Relief  33.5B
    • D.  Estate and Gift Tax Return Preparation  33.5C
      • 1.  Liability for Late Filing  33.5D
      • 2.  Liability for Late Payment  33.5E
    • E.  Power to Maintain Legal Actions on Estate’s Behalf  33.6
    • F.  Powers Regarding Creditors’ Claims  33.7
      • 1.  Effect of Limitations Period  33.7A
      • 2.  Payment of Claims  33.7B
    • G.  Power to Contract and Perform Decedent’s Contracts  33.8
    • H.  Power to Seek Court Authorization to Act  33.9
  • III.  INDEPENDENT ADMINISTRATION OF ESTATES ACT (IAEA)
    • A.  IAEA Reduces Need for Court Supervision  33.10
      • 1.  Actions That Require Court Approval Even With Full Authority Under IAEA  33.10A
      • 2.  Actions That Executor Can Take After Notice of Proposed Action  33.10B
      • 3.  Actions That Executor Can Take Without Court Approval or Notice of Proposed Action  33.10C
    • B.  Will Clauses Regarding IAEA Powers
      • 1.  Form: IAEA Applicable  33.11
      • 2.  Form: IAEA Not Applicable  33.12
      • 3.  Form: Limited Authority or Restricted Powers Under IAEA  33.13
  • IV.  CLAUSES REGARDING SPECIFIC POWERS AND DUTIES
    • A.  Using Power-Granting Clauses  33.14
    • B.  Drafting for Specific Powers
      • 1.  Sale of Estate Assets
        • a.  Reasons for Clause Granting Power to Sell  33.15
          • (1)  Power May Eliminate Need for Court Confirmation  33.15A
          • (2)  Power May Facilitate Tax Deductions  33.15B
        • b.  Form: Power to Sell or Lease Estate Assets  33.16
      • 2.  Lease of Estate Assets
        • a.  Uses of Separate Clause Permitting Leases  33.17
        • b.  Form: Power to Lease Estate Assets  33.18
      • 3.  Power to Invest
        • a.  Will Can Expand Executor’s Investment Powers  33.19
          • (1)  Limited Power of Executor Without Authority Under IAEA  33.19A
          • (2)  Investment Power of Executor With Authority Under IAEA  33.19B
        • b.  Form: Broad Power to Invest  33.20
      • 4.  Tax Powers and Duties
        • a.  Tax Clauses Highlight Issues and Clarify Duties  33.21
          • (1)  Executor’s Authority to Make Tax Elections  33.21A
          • (2)  Effect of Other Tax Decisions  33.21B
        • b.  Form: Power to Take Actions Without Regard to Tax Consequences  33.22
      • 5.  Distributing Estate Assets
        • a.  Timing Distributions
          • (1)  Control Over Timing Is Limited  33.23
          • (2)  Form: Power to Postpone Selling Assets Pending Outcome of Estate Tax Audit  33.24
        • b.  Selecting Assets to Satisfy Shares
          • (1)  Clause Permitting Executor Asset Selection Gives Needed Protection  33.25
          • (2)  Form: Power to Distribute Property Nonprorata  33.26
          • (3)  Form: Power to Allocate Property to Shares  33.27
          • (4)  Form: Power to Consider Basis and Make Adjustments When Making Distributions  33.28
        • c.  Using In-Kind Property to Satisfy Pecuniary Devises
          • (1)  Proper Asset Valuation Assures Fairness and Protects Deductions  33.29
          • (2)  Form: Power to Use In-Kind Property to Satisfy Pecuniary Devise  33.30
        • d.  Dividing Community Property Nonprorata
          • (1)  No Gain or Loss Recognition on Nonprorata Division  33.31
          • (2)  Form: Power to Divide Community Property Nonprorata  33.32
        • e.  Distributing Devises for Benefit of Minors or Persons With Disabilities
          • (1)  Gifts to Minors or Persons With Disabilities May Require Special Distribution Clauses  33.33
            • (a)  Distribution of Gifts to Minors Without Specific Authorization  33.33A
            • (b)  Gifts to Adults With Disabilities  33.33B
          • (2)  Form: Distributing Gifts to Minors or Disabled Persons  33.34
          • (3)  Form: Power to Distribute Gift to Minor  33.35
        • f.  Authorizing Payment for Distribution Costs
          • (1)  Clause Prevents Beneficiary Disputes Over Distribution Costs  33.36
          • (2)  Form: Power to Pay Costs of Distribution  33.37
      • 6.  Avoiding Interest on General Pecuniary Devises
        • a.  Clause Prevents Imposition of Statutory Interest  33.38
        • b.  Form: General Pecuniary Devises Do Not Bear Interest  33.39
      • 7.  Retaining Investment Counsel
        • a.  Clause Is Prerequisite for Adviser’s Employment  33.40
        • b.  Form: Power to Retain Investment Adviser  33.41
      • 8.  Continuing Decedent’s Business
        • a.  Clause Regarding Business Operation Must Work With Codes and Agreements  33.42
          • (1)  Need for Court Authorization to Continue Business Operation  33.42A
          • (2)  Effect of Stock Ownership Rights and Partnership Agreements  33.42B
        • b.  Form: Power to Continue or Sell Decedent’s Business  33.43
      • 9.  Purchasing Property From Estate
        • a.  Statutes Limit Executor’s Purchases  33.44
          • (1)  Exceptions to Prohibition Against Executor’s Purchases  33.44A
          • (2)  Authorization of Executor’s Purchases  33.44B
        • b.  Form: Power to Purchase Estate Assets  33.45
      • 10.  Retaining Estate Assets
        • a.  Authorization to Retain Assets Protects Executor  33.46
        • b.  Form: Power to Retain Estate Assets  33.47
      • 11.  Instructions Regarding Disposition of Remains and Services; Other Matters  33.48
      • 12.  Qualified Terminable Interest Property (QTIP) Elections  33.49
      • 13.  Powers Regarding Application of Generation-Skipping Transfer (GST) Tax  33.50
      • 14.  Handling Digital Assets
        • a.  Executor’s Power Over Digital Assets  33.51
        • b.  Form: Power Over Digital Assets  33.52
      • 15.  Dealing With Out-of-State and Foreign Property
        • a.  Out-of-State and Foreign Property Issues  33.53
        • b.  Form: Power to Deal With Out-of-State and Foreign Property  33.54

34

Rule Against Perpetuities

Edward C. Halbach, Jr.

  • I.  CALIFORNIA’S UNIFORM STATUTORY RULE AGAINST PERPETUITIES  34.1
  • II.  CALIFORNIA AND COMMON LAW RULE AGAINST PERPETUITIES
    • A.  Present-Day Perpetuities Problem  34.2
    • B.  Present-Day California Rule  34.3
    • C.  California Rule Dissected
      • 1.  “A Nonvested Property Interest Is Invalid”  34.4
      • 2.  “Is Certain to Vest or Terminate”  34.5
      • 3.  “21 Years After the Death of an Individual Then Alive”
        • a.  When Period Begins  34.6
        • b.  Measuring Lives  34.7
      • 4.  Alternative Period: 90 Years  34.8
    • D.  Interests Exempt From Rule
      • 1.  Gifts to Charity  34.9
      • 2.  Vested Interests  34.10
      • 3.  Nondonative Transfers  34.10A
      • 4.  Fiduciary Powers  34.10B
      • 5.  Other Exempt Interests  34.11
    • E.  Effect of Violations  34.12
    • F.  Construction and Reformation of Wills  34.13
  • III.  RELATED RULES
    • A.  Duration of Trusts  34.14
    • B.  Limitations on Accumulations  34.15
  • IV.  CAUTIONS AND RECOMMENDATIONS FOR DRAFTING
    • A.  Recognizing and Avoiding Pitfalls  34.16
      • 1.  Common Law Technical Traps  34.17
      • 2.  Rules of Thumb as Warnings and Guides  34.18
    • B.  Class Gifts  34.19
    • C.  Powers of Appointment and Trustee’s Powers  34.20
      • 1.  Donor’s Problem: Validity of Power  34.21
      • 2.  Donee’s Problem: Validity of Exercise
        • a.  Measuring Period: Relation Back  34.22
        • b.  Second-Look Doctrine  34.23
      • 3.  Creating Powers of Appointment
        • a.  General Precautions  34.24
        • b.  Relation-Back Rule: Reminders to Donees  34.25
      • 4.  Exercising Powers of Appointment
        • a.  Inadvertent Exercise  34.26
        • b.  Creating New Powers of Appointment  34.27
        • c.  Estate Tax (“Delaware”) Trap  34.28
        • d.  Creating Discretionary Trusts  34.29
    • D.  Good Drafting Habits for All Future Interests  34.30
      • 1.  Review by Colleague  34.31
      • 2.  Applicability of Foreign Law  34.32
      • 3.  Possible Afterborn Beneficiaries  34.33
      • 4.  Scrutinize Trusts That May Outlast Perpetuities Period  34.34
  • V.  PERPETUITIES SAVING CLAUSE
    • A.  Clauses Apply Only to Trusts  34.35
    • B.  How Saving Clauses Operate  34.36
      • 1.  “Wait-and-See” Function  34.36A
      • 2.  Alternative Distribution  34.36B
    • C.  Clause Extends Perpetuities Period  34.37
    • D.  Saving Clause for Testamentary Trust  34.38
      • 1.  Cutoff Clause: Terminates Trust  34.39
      • 2.  Postcutoff Distribution Clause  34.40
      • 3.  Form: Perpetuities Saving Clause  34.41
  • VI.  CONCLUDING OBSERVATIONS  34.42

35

Concluding Clauses

Clare H. Springs

  • I.  DISINHERITANCE AND NO-CONTEST CLAUSES DISTINGUISHED  35.1
  • II.  DISINHERITANCE CLAUSES
    • A.  Avoiding Omitted Heirs  35.2
    • B.  Omitted Spouse or Registered Domestic Partner  35.3
    • C.  Omitted Child  35.4
    • D.  Drafting Disinheritance Clauses
      • 1.  Purpose of Disinheritance Clause  35.5
      • 2.  Drafting to Disinherit Spouse or Registered Domestic Partner  35.6
      • 3.  Drafting to Disinherit Children  35.7
    • E.  Form: Disinheritance Clauses  35.8
  • III.  NO-CONTEST CLAUSES
    • A.  Discouraging Contests by Beneficiaries  35.9
      • 1.  Enforceability of No-Contest Clause  35.9A
      • 2.  Optional Provisions of No-Contest Clause  35.9B
      • 3.  Effectiveness of No-Contest Clause  35.9C
    • B.  Form: No-Contest Clause  35.10
  • IV.  DEFINITIONS
    • A.  Purpose of Definition Clauses  35.11
    • B.  Statutory Definitions  35.12
    • C.  When and Where to Include Definition Clauses  35.13
    • D.  Common Types of Definition Clauses
      • 1.  Some Terms Defined in Other Articles of Will  35.14
      • 2.  Gender and Number
        • a.  Use of Proper Gender and Number Designations  35.15
        • b.  Form: Gender and Number  35.16
      • 3.  “Spouse,” “Husband,” or “Wife” and “Domestic Partner”
        • a.  Purpose of Relationship Definition  35.17
        • b.  Form: Spouse, Husband, or Wife  35.18
        • c.  Form: Domestic Partner  35.18A
      • 4.  “Child,” “Children,” “Issue,” and “Heirs”  35.19
  • V.  SEVERABILITY CLAUSE
    • A.  Purpose of Severability Clause  35.20
    • B.  Form: Severability Clause  35.21

36

Execution of Wills

Clare H. Springs

  • I.  EXECUTION REQUIREMENTS
    • A.  Witnessed Will  36.1
    • B.  Other Wills  36.2
  • II.  TESTATOR’S SUBSCRIPTION OR ACKNOWLEDGMENT  36.3
  • III.  ATTESTING WITNESSES  36.4
    • A.  Using Disinterested Witnesses  36.4A
    • B.  Attorney Selection of Witnesses  36.4B
  • IV.  SELF-PROVING WILLS  36.5
  • V.  PROCEDURE FOR EXECUTION
    • A.  Model Procedure  36.6
    • B.  Duplicate Originals  36.7
    • C.  Number of Copies  36.8
    • D.  Interlineated Corrections and Additions  36.9
    • E.  Safekeeping and Custody of Wills  36.10
      • 1.  Preservation of Wills Held by Attorneys for Safekeeping  36.10A
      • 2.  Form: Agreement for Deposit of Will  36.10B
    • F.  Destruction of Prior Wills  36.11
    • G.  Adjustments for Illiterate, Non-English-Speaking, or Blind Clients  36.12
  • VI.  SPECIAL PRECAUTIONS IF WILL CONTEST FORESEEABLE
    • A.  Documentation of Capacity  36.13
    • B.  Establishing Absence of Undue Influence  36.14
    • C.  Perpetuating Testimony of Witnesses  36.15
  • VII.  FORM: EXECUTION AND ATTESTATION CLAUSES  36.16

37

Multijurisdictional Issues in Will Drafting

CEB Staff

  • I.  ESTATE PLANNING FOR CLIENTS WITH OUT-OF-STATE CONCERNS  37.1
  • II.  CONFLICT-OF-LAWS BACKGROUND  37.2
    • A.  Law Controlling Validity of Will  37.3
      • 1.  Personal Property  37.4
        • a.  Definition of Domicile  37.5
        • b.  Statutory Residence Rules  37.6
      • 2.  Real Property  37.7
      • 3.  Doctrine of Equitable Conversion  37.8
    • B.  Law Controlling Interpretation of Will
      • 1.  Law Designated by Testator Controls  37.9
      • 2.  Personal Property  37.10
      • 3.  Real Property  37.11
    • C.  Domiciliary and Ancillary Administration
      • 1.  Jurisdiction to Administer Estate  37.12
      • 2.  Location of Intangible Property  37.13
  • III.  WILL DRAFTING FOR CLIENT WITH OUT-OF-STATE PROPERTY
    • A.  Avoiding Multijurisdictional Will Drafting Problems  37.14
    • B.  Execution Requirements
      • 1.  Importance of Checking Will’s Validity Under Law of Situs of Real Property  37.15
      • 2.  Uniform International Wills Act  37.16
      • 3.  Form: Attestation and Prob C §6384 Certificate for International Will  37.17
    • C.  Avoiding Problems Over Interpretation of Will
      • 1.  Need for Precision in Drafting  37.18
      • 2.  Form: Construction of Will Governed by California Law  37.19
    • D.  Ancillary Administration  37.20
    • E.  Special Concerns for Testator With Out-of-State Property  37.21
      • 1.  Rule Against Perpetuities  37.22
      • 2.  Revocation of Prior Wills  37.23
      • 3.  Granting Trustee Powers  37.24
      • 4.  Disinheritance Clauses  37.25
      • 5.  Tax Payment Clauses  37.26
  • IV.  WILL DRAFTING FOR MOBILE CLIENTS  37.27
    • A.  Characterization of Property  37.28
    • B.  Advising Client on Selection of Domicile  37.29
      • 1.  Factors to Consider in Selecting Domicile  37.30
      • 2.  Establishing Domicile  37.31
  • V.  WILL DRAFTING FOR CLIENT WITH ASSETS ABROAD OR LIVING ABROAD
    • A.  Performing Complete Estate Planning Services for International Client Unwise  37.32
    • B.  Recommended Provisions in United States Will  37.33

38

Complete Will Forms

CEB Staff

  • I.  NONTRUST WILL FOR SINGLE PERSON
    • A.  Description of Nontrust Will for Single Person  38.1
    • B.  Form: Nontrust Will for Single Person  38.2
  • II.  NONTRUST WILL FOR MARRIED COUPLE WITH CHILDREN
    • A.  Description of Nontrust Will for Married Couple with Children  38.3
    • B.  Form: Nontrust Will for Married Couple with Children: Contingent Separate Trusts  38.4
    • C.  Form: Nontrust Will for Married Couple with Children: Contingent Family Pot Trust  38.5
  • III.  NONTRUST WILL WITH RESIDUE TO SPOUSE OR DOMESTIC PARTNER FOR TESTATOR WITHOUT CHILDREN
    • A.  Description of Nontrust Will With Residue to Spouse or Domestic Partner  38.6
    • B.  Form: Nontrust Will With Residue to Spouse or Domestic Partner  38.7
  • IV.  WILL WITH QTIP TRUST AND BYPASS TRUST FOR MARRIED TESTATOR
    • A.  Description of Will With QTIP Trust and Bypass Trust  38.8
    • B.  Form: Will With QTIP Trust and Bypass Trust  38.9
  • V.  WILL WITH BYPASS TRUST FOR MARRIED TESTATOR
    • A.  Description of Will With Bypass Trust  38.10
    • B.  Form: Will With Bypass Trust  38.11
  • VI.  WILL WITH STANDBY DISCLAIMER TRUST FOR MARRIED TESTATOR
    • A.  Description of Will With Standby Disclaimer Trust  38.12
    • B.  Form: Will With Standby Disclaimer Trust  38.13
  • VII.  POUROVER WILL FOR MARRIED TESTATOR
    • A.  Description of Pourover Will for Married Testator  38.14
    • B.  Form: Pourover Will for Married Testator  38.15
  • VIII.  WILL CREATING SPECIAL NEEDS TRUST
    • A.  Description of Will Creating Special Needs Trust  38.16
    • B.  Form: Will Creating Special Needs Trust  38.17

CALIFORNIA WILL DRAFTING

(3d Edition)

November 2018

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Professional Responsibility

01-031A

§1.31A

Consent to Dual Representation

01-036

§1.36

Certificate of Independent Review

01-041

§1.41

Nomination of Practice Administrator

01-046

§1.46

Petition for Appointment of Practice Administrator

01-047

§1.47

Order Appointing Practice Administrator

CH02

Chapter 2

Initial Client Conference

02-002

§2.2

Checklist: Client Interview

02-005

§2.5

Client Questionnaire

02-036

§2.36

Estate Planning Time Sheet

02-037

§2.37

Estate Planning Bill

CH03

Chapter 3

Planning for Incapacity

03-065

§3.65

Statutory Form Advance Health Care Directive (Prob C §4701)

CH04

Chapter 4

Review of Existing Wills and Estate Plans

04-002

§4.2

Checklist: Will and Estate Plan Review

04-006

§4.6

Checklist: Changes That Necessitate Review of Will and Estate Plan

CH05

Chapter 5

Reference to Matters Outside Will

05-005

§5.5

Reference to Letter of Instruction

CH06

Chapter 6

Codicils

06-003

§6.3

FORM: CODICIL

CH08

Chapter 8

Pourover Wills

08-007

§8.7

FORM: POUROVER AND POUROVER SAVINGS PROVISIONS

CH09

Chapter 9

Revocation

09-003

§9.3

Revocation of Prior Will

CH10

Chapter 10

Getting Started: Introductory Clauses

10-006

§10.6

Introductory Clause

10-008

§10.8

Declaration of Marital or Partnership Status

10-010

§10.10

Declaration Concerning Children

10-011J

§10.11J

Marital or Domestic Partnership Property Agreement

10-011L

§10.11L

Confirmation of Marital Property Rights

10-011M

§10.11M

Confirmation of Domestic Partnership Property Rights

10-013

§10.13

No Contract to Make Wills

10-015

§10.15

Rule Preferring Relatives Inapplicable

10-017

§10.17

Funeral and Burial Instructions

CH11

Chapter 11

Exercising Powers of Appointment

11-027

§11.27

Exercise of Testamentary Special Power of Appointment

11-028

§11.28

Nonexercise of Testamentary Power of Appointment

CH12

Chapter 12

Outright Noncharitable Gifts

12-006

§12.6

Abatement of Gifts

12-015

§12.15

Ademption by Satisfaction

12-018

§12.18

Gifts Lapse

12-020

§12.20

Disposition of Any Disclaimed Gift

12-023

§12.23

Survivorship Conditions

12-026

§12.26

Gift to Employee

12-033

§12.33

Lapsing Class Gift to Children

12-034

§12.34

Class Gift of Residue to Issue

12-034A

§12.34A

Class Gift to Named Persons and Their Issue—Equal Shares

12-034B

§12.34B

Class Gift to Named Persons and Their Issue—Unequal Shares

12-045

§12.45

Specific Gifts of Items of Personal Property

12-046

§12.46

Gift of Tangible Personal Property to Individual

12-047

§12.47

Gift of Tangible Personal Property to Children

12-049

§12.49

Gift of Residence to Spouse or Domestic Partner

12-050

§12.50

Gift of Residence to Other Beneficiary With No Probate Homestead

12-052

§12.52

Exoneration of Encumbrances on Real Property

12-054

§12.54

Payment of Expenses Relating to Real Property

12-056

§12.56

Substitution for Gift of Real Property That Has Been Sold

12-057

§12.57

Gift of Condominium Unit or Cooperative Apartment

12-058

§12.58

Gift of Income-Producing Property

12-059

§12.59

Gift of Farm or Ranch

12-062

§12.62

Specific Gift of Publicly Traded Stock

12-063

§12.63

Specific Gift of Closely Held Stock

12-065

§12.65

Specific Gift of General Partnership Interest

12-066

§12.66

Specific Gift of Limited Partnership Interests

12-068

§12.68

Specific Gift of Sole Proprietorship

12-071

§12.71

General Pecuniary Gifts

12-072

§12.72

General Pecuniary Gift From Couple

12-073

§12.73

General Gift of Stock

12-074

§12.74

Forgiveness of Indebtedness

12-076

§12.76

Demonstrative Gift

12-078

§12.78

Gift of Commercial Annuity

12-080

§12.80

Residuary Gifts

12-081

§12.81

Retention of Gift in Trust

CH13

Chapter 13

Outright Gifts to Charity

13-006

§13.6

Specific Gift to Charity for General Use

13-008

§13.8

Specific Gift to Establish Endowment

13-010

§13.10

Direction for Payment of Lifetime Pledge to Charity

13-012

§13.12

Gift Not Reduced by Taxes

13-014

§13.14

Residue to Charity if Primary Beneficiary Does Not Survive

13-019

§13.19

Residue to Pooled Income Fund

13-021

§13.21

Remainder in Personal Residence to Charity

13-023

§13.23

Pourover Distribution to Inter Vivos Unitrust

13-025

§13.25

Testamentary Charitable Gift Annuity

CH14

Chapter 14

Charitable Split-Interest Trusts

14-013

§14.13

Distribution to Trustee

14-016

§14.16

Payment of Unitrust Amount to One Recipient

14-016A

§14.16A

Payment of Part of Unitrust Amount to Charitable Organization

14-018

§14.18

Payment of Unitrust Amount Sprinkled Among Class of Recipients

14-020

§14.20

Payment of Unitrust Amount to Joint and Survivor Recipients

14-022

§14.22

Payment of Lesser of Income or Fixed Percentage (NIMCRUT or NICRUT)

14-022A

§14.22A

Payment of Lesser of Income or Fixed Percentage (“Flip” Unitrust)

14-024

§14.24

Adjustment for Incorrect Valuation (Mandatory)

14-026

§14.26

Deferral of Payment of Unitrust Amount During Probate Administration (Mandatory)

14-028

§14.28

Proration of Unitrust Amount (Mandatory)

14-029A

§14.29A

Additional Contributions Prohibited

14-030

§14.30

Adjustment Clause if Additional Contributions to Unitrust Permitted (Mandatory)

14-033

§14.33

Remainder to Qualified Charity (Mandatory)

14-035

§14.35

Prohibitions Governing Private Foundations (Mandatory)

14-037

§14.37

Investment Restrictions on Trustee

14-039

§14.39

Trustee’s Powers (Optional)

14-041

§14.41

Distributions in Kind

14-043

§14.43

Excess Income to Charity (Optional)

14-045

§14.45

Limited Power of Amendment

14-047

§14.47

“Spendthrift” Clause (Optional)

14-051

§14.51

Distribution to Trustee

14-053

§14.53

Payment of Annuity Amount to One Named Recipient (Mandatory)

14-053A

§14.53A

Payment of Annuity Amount to One Named Recipient With Contingent Termination

14-055

§14.55

Payment of Annuity Amount Sprinkled Among Class of Recipients (Mandatory)

14-057

§14.57

Payment of Annuity Amount to Joint and Survivor Recipients (Mandatory)

14-057A

§14.57A

Payment of Annuity Amount to Joint and Survivor Recipients With Contingent Termination

14-058

§14.58

Deferral of Payment of Annuity Amount During Probate Administration (Mandatory)

14-060

§14.60

Proration of Annuity Amount (Mandatory)

14-060A

§14.60A

Termination of Annuity Amount

14-062

§14.62

Additional Contributions to Annuity Prohibited (Mandatory)

14-065

§14.65

Remainder to Qualified Charity (Mandatory)

14-067

§14.67

Prohibitions Governing Private Foundations (Mandatory)

14-069

§14.69

Investment Restrictions on Trustee (Optional)

14-071

§14.71

Governing Law (Optional)

14-073

§14.73

Distributions in Kind (Optional)

14-075

§14.75

Excess Income to Charity (Optional)

14-077

§14.77

Trustee’s Power to Amend Trust (Optional)

14-079

§14.79

“Spendthrift” Clause (Optional)

14-094

§14.94

Payment of Guaranteed Annuity

14-096

§14.96

Annuity Trust or Unitrust Mandatory Clause (Private Foundation Prohibitions)

14-098

§14.98

Charitable Deduction Saving Clause

CH15

Chapter 15

Generation-Skipping Transfer Tax: Law, Regulations, and Planning

15-043

§15.43

Division of Marital Trust Into Exempt and Nonexempt Trusts

CH16

Chapter 16

Creating Powers of Appointment

16-037

§16.37

Lifetime Power of Appointment Created

16-038

§16.38

Testamentary Power of Appointment Created

16-039

§16.39

Release and Disclaimer of Powers Authorized

16-040

§16.40

Disposition of Property on Default of Appointment

16-041

§16.41

Joint Power of Appointment

CH17

Chapter 17

Marital Deduction: Overview and Formula Clauses

17-033

§17.33

Marital Deduction Intention

17-048

§17.48

Disclaimer Trust

17-052

§17.52

Pecuniary Marital Formula (Bypass Trust as Residue)

17-076

§17.76

Pecuniary Bypass Marital Formula (Marital Trust as Residue)

17-083

§17.83

Fractional Share Marital Formula

CH18

Chapter 18

Marital Deduction Power of Appointment Trusts

18-022

§18.22

Introduction to Marital Appointment Trust

18-023

§18.23

Distribution of Income

18-024

§18.24

Payment of Principal

18-025

§18.25

Spouse’s General Power of Appointment (Broad Standard)

18-026

§18.26

Relevance of Other Income Sources

18-027

§18.27

Disclaimer Beneficiary

18-028

§18.28

Distribution to Separate Trust at Surviving Spouse’s Death

CH19

Chapter 19

Qualified Terminable Interest Property Trusts and Qualified Domestic Trusts

19-022

§19.22

Introduction to QTIP Trust

19-023

§19.23

Distribution of QTIP Trust Income

19-024

§19.24

Payment of QTIP Unitrust Amount

19-025

§19.25

Discretionary Payment of Principal

19-026

§19.26

Relevance of Other Income Sources

19-027

§19.27

Surviving Spouse’s Testamentary Special Power of Appointment

19-028

§19.28

QTIP Election Provisions

19-029

§19.29

Distribution on Surviving Spouse’s Death

19-030

§19.30

Payment of Taxes on Surviving Spouse’s Death

19-031

§19.31

Division of Trusts Reflecting Partial QTIP Election

19-040

§19.40

Qualified Domestic Trust Provisions

19-041

§19.41

Power to Reform Trust to Qualify as QDOT

CH20

Chapter 20

Bypass Trusts and Disclaimer Trusts

20-019

§20.19

Introduction to Bypass Trust

20-020

§20.20

Designation of Beneficiaries

20-021

§20.21

Payment of Income

20-022

§20.22

Distribution of Principal

20-023

§20.23

Exhaustion of Marital Deduction Trust Principal Before Bypass Trust Principal Is Invaded for Surviving Spouse’s Benefit

20-024

§20.24

Surviving Spouse’s Special Power of Appointment

20-025

§20.25

Disclaimer of Trust Interest; Distribution Provisions

20-026

§20.26

Distribution at Surviving Spouse’s Death

20-026A

§20.26A

QTIPable Bypass Trust

20-026B

§20.26B

Authorization to Make DSUE Election

20-033

§20.33

Disclaimer Trust

CH21

Chapter 21

Overview of Trust Distributions

21-004

§21.4

Checklist: Beneficiary Information, Trust Objectives, and Trust Assets

21-005

§21.5

Checklist: Distribution and Termination Clause

21-008

§21.8

Payment of Annuity Amount

21-008A

§21.8A

Payment of Unitrust Amount

21-008C

§21.8C

Incentive Distribution of Income

21-008D

§21.8D

Incentive Distribution of Principal

21-010

§21.10

Frequency of Payment

21-012

§21.12

Discretionary Distribution of Income

21-014

§21.14

Distributions for Specific Purposes

21-016

§21.16

Trustee’s Consideration of Beneficiary’s Other Resources

21-017A

§21.17A

Distributions Restricted on Beneficiary’s Insolvency or Bankruptcy

21-017B

§21.17B

Distributions Redirected on Beneficiary’s Insolvency or Bankruptcy

21-019

§21.19

Trustee Discretion to Sprinkle Distributions Among Multiple Income Beneficiaries

21-020

§21.20

Income Beneficiary as Primary Beneficiary

21-023

§21.23

Disposition of Undistributed Income

21-027

§21.27

Disposition of Probate Income

21-030

§21.30

Discretionary Power to Invade Principal When Income Is Insufficient

21-031

§21.31

Principal Invasion on Beneficiary’s Request Limited by Ascertainable Standard

21-031A

§21.31A

“Five or Five” Withdrawal Power

21-032

§21.32

Statement of Testator’s Intent Regarding Power to Invade Principal

21-033

§21.33

Power to Lend Principal to Beneficiary

21-036

§21.36

Trustee Authorized to Pay Beneficiary’s Last-Illness and Funeral Expenses

21-038

§21.38

Distribution on Trust Termination

CH22

Chapter 22

Trusts for Children

22-014

§22.14

Devise to Minor Under CUTMA

22-020H

§22.20H

Distribution at Specified Ages (“Birthday Clauses”)

22-020J

§22.20J

Distribution After Lapse of Years

22-020L

§22.20L

Incentive Distributions

22-020N

§22.20N

Completely Discretionary Distributions

22-020P

§22.20P

Beneficiary-“Controlled” Trust

22-020R

§22.20R

Equalization Clause

22-026

§22.26

Payments to Persons Caring for Children

22-028

§22.28

Trustee’s Discretion to Pay Beneficiary’s Last-Illness and Funeral Expenses and Obligations Incurred for Support

22-030

§22.30

Definition of “Education”

22-032

§22.32

Authorization to Make Payments for Housing Expenses

22-033

§22.33

Retention and Use of Testator’s Residence as Home for Children

22-036

§22.36

Trustee Consideration of Beneficiary’s Other Resources

22-049

§22.49

Principal and Income Sprinkled Among Children (With HEMS Standard)

22-050

§22.50

Preliminary Distributions

22-051

§22.51

Preliminary Distributions in Excess of Child’s Ultimate Share

22-052

§22.52

Termination of Trust and Distribution of Remainder

22-052A

§22.52A

Alternative Family Pot Trust (Short Form)

22-058

§22.58

Separate Trust for Each Child

CH23

Chapter 23

Special Needs Trusts

23-024B

§23.24B

Guidelines for Parents Writing Memorandum of Intent

23-027

§23.27

Trust Purpose

23-030

§23.30

Trust Advisory Committee

23-031

§23.31

Distribution for Special Needs (Supplementary Standard)

23-032

§23.32

Trustee’s Absolute Discretion

23-034

§23.34

Trustee to Consider Beneficiary’s Other Resources

23-035

§23.35

Trustee to Evaluate Beneficiary’s Needs

23-036

§23.36

Trustee to Seek Public Agency Support

23-038

§23.38

Trust Estate to Supplement Public Benefits

23-042

§23.42

“Spendthrift” Clause

23-044

§23.44

Discretionary Termination if Trust Interferes With Public Benefits

23-045

§23.45

Automatic Termination if Court Orders Reimbursement

23-047

§23.47

Distribution on Emergency Trust Termination

23-050

§23.50

Expense Payments After Beneficiary’s Death

23-052

§23.52

Beneficiary’s Testamentary Special Power of Appointment

23-054

§23.54

Trust Beneficiaries

23-055

§23.55

Trust Purpose for Beneficiary With Disability

23-056

§23.56

Payments Sprinkled Among Beneficiaries

23-057

§23.57

Consideration of Other Resources Available to Beneficiary With Disability

23-058

§23.58

No Distributions to Beneficiary With Disability if Trust Interferes With Public Benefits

23-059

§23.59

No Power to Distribute to Beneficiary With Disability if Court Orders Reimbursement

23-066

§23.66

Trust Protector

CH24

Chapter 24

Guardianships of the Person

24-020

§24.20

Nomination of Guardian of Person

24-021

§24.21

Nomination of Nonresident Guardian of Person

24-022

§24.22

Authorization of Parental Authority Under Prob C §2108(a)

24-023

§24.23

Special Estate Distributions

CH25

Chapter 25

Guardianships of the Estate

25-015

§25.15

Nomination of Guardian of Estate

25-016

§25.16

Nomination of Guardian for Property

25-017

§25.17

Authorization of Independent Powers Under Prob C §2108(b)

25-018

§25.18

Waiver of Bond

CH26

Chapter 26

Transfer Tax Payment Clauses

26-034

§26.34

Equitable Apportionment With Specific Exceptions (Allocation Clause for Stand-Alone Will)

26-035

§26.35

Estate Taxes Paid From Revocable Trust (Allocation Clause for Pourover Will)

26-036

§26.36

Payment of Taxes on Qualified Terminable Interest Property

26-037

§26.37

Alternative Tax Allocation Clause With Limited Waiver of Federal Recovery (Allocation Clause for Will)

26-038

§26.38

Tax Allocation Clause for Revocable Trust With Pourover Will (Allocation Clause for Revocable Trust)

CH27

Chapter 27

Spendthrift Clauses

27-015

§27.15

Short-Form Spendthrift Clause

27-016

§27.16

Long-Form Spendthrift Clause

CH28

Chapter 28

Office of Trustee

28-012

§28.12

Nomination of Trustee and Successors for All Trusts

28-013

§28.13

Nomination of Trustee Within Clause Creating Trust

28-014

§28.14

Separate Clause Naming Successor Trustee

28-015

§28.15

Court Appointment of Successor Trustee

28-016

§28.16

Nomination of Special Trustee and Successors

28-019

§28.19

Trustee Resignation; Succession

28-021

§28.21

Trustee Removal by Beneficiary

28-021B

§28.21B

Replacement of Incapacitated Trustee

28-021C

§28.21C

Trustee Required to Authorize Release of Health Information

28-021D

§28.21D

Authorization for Use and Disclosure of Health Information

28-023

§28.23

Waiver of Bond

28-025

§28.25

Trustee Compensation

28-027

§28.27

Devise in Lieu of Compensation

28-030

§28.30

Power to Employ Agents and Advisers

28-031

§28.31

Beneficiary Selection of Investment Adviser; Trustee Exculpation

28-032

§28.32

Trustee Requested to Consult With Third Party Adviser

28-034

§28.34

Individual Cotrustee’s Delegation of Powers to Cotrustee During Absence

28-035

§28.35

Action by Majority of Cotrustees Binds Trust

28-037

§28.37

Division of Investment Duties Between Cotrustees

28-038

§28.38

Special Trustee Powers Over Investments

28-040

§28.40

Special Trustee to Act if Trustee Disclaims Powers

28-041

§28.41

Special Trustee to Exercise Sprinkling Power

28-044

§28.44

Trustee Self-Dealing Permitted (Power to Loan, Buy, and Sell)

28-045

§28.45

Trustee Self-Dealing Permitted (Corporate Employee)

28-048

§28.48

Trustee Exculpation

28-050

§28.50

Waiver of Liability for Acts of Predecessor Trustee

28-052

§28.52

Trusts Subject to Continuing Court Jurisdiction

28-054

§28.54

Limiting Court Jurisdiction

CH29

Chapter 29

Trustee Management Powers

29-008

§29.8

Trustee to Have Statutory Powers

29-009

§29.9

Introduction to Trustee Powers

29-012

§29.12

Investment According to Prudent Investor Rule

29-014

§29.14

Restricted Investment Powers

29-016

§29.16

Power to Retain Any Property

29-018

§29.18

Power to Abandon Property

29-020

§29.20

Power to Retain or Acquire Underproductive Property

29-022

§29.22

Trustee Compliance With Spouse’s Direction to Convert Unproductive Property to Income Property

29-024

§29.24

Power to Sell, Exchange, and Repair Trust Property

29-026

§29.26

Power to Lease, Including Mineral Rights

29-028

§29.28

Power to Borrow

29-030

§29.30

Power to Initiate and Defend Litigation

29-031

§29.31

Power to Compromise Claims

29-033

§29.33

Power to Insure

29-035

§29.35

Power to Monitor Property

29-036

§29.36

Powers to Comply With Environmental Laws

29-038

§29.38

Overall Powers for Business Interests

29-040

§29.40

Corporate Business Management

29-042

§29.42

Power to Engage in Partnership Business

29-044

§29.44

Power to Manage Securities

29-046

§29.46

Power to Hold Securities in Nominee’s Name or in “Street Name”

29-048

§29.48

Power to Buy Bonds at Premium

29-050

§29.50

Power to Buy Bonds at Discount

29-052

§29.52

Power to Invest in Life Insurance

29-053

§29.53

Special Trustee to Control Insurance on Trustee’s Life

29-056

§29.56

Powers for Farming Interests

29-058

§29.58

Powers for Managing Oil, Gas, and Mineral Properties

29-058B

§29.58B

Power to Hold S Corporation Stock

29-058E

§29.58E

Power to Participate in Qualified Tuition Programs

29-060

§29.60

FORM: SHORT FORM OF TRUSTEE’S POWERS

CH30

Chapter 30

Trustee Accounting Powers

30-024

§30.24

Effect of Account

30-027

§30.27

Duty to Account Privately

30-028

§30.28

Duty to Account to Court

30-031

§30.31

Physical Segregation of Separate Trusts Not Required; Division Into Separate Trusts Permitted

30-032

§30.32

Consolidated Administration of Testamentary Trusts With Trusts Otherwise Created

30-040

§30.40

Power to Make Allocations Between Principal and Income

30-045

§30.45

Power to Establish Depreciation Reserve

30-047

§30.47

Allocation of Receipts to Account for Depletion

30-049

§30.49

Power to Establish Amortization Reserve for Intangible Property

30-061

§30.61

Power to Allocate Deferred Compensation to Principal

30-066

§30.66

Home Expenses Charged to Donee Immediately

30-076

§30.76

Undistributed Income Payable to Succeeding Beneficiaries

30-078

§30.78

Allocation of Expenses Among Successive Beneficiaries

CH31

Chapter 31

Trustee Administrative Powers

31-004

§31.4

Broad Powers of Distribution (Standard Clause)

31-005

§31.5

Nonprorata Distributions and Income Tax Basis

31-007

§31.7

Facilitating Distributions to Minors or Persons With Disabilities

31-007A

§31.7A

Definition of Disability

31-008

§31.8

Back-Up Trust for Minor Beneficiary’s Distribution

31-008A

§31.8A

Power to Disregard Beneficiary’s Power to Withdraw

31-010

§31.10

Trustee Action Before Notice of Events Affecting Beneficial Interests

31-011

§31.11

Trustee May Distribute if No Notice of Exercise of Power of Appointment

31-013

§31.13

Power to Withhold Distribution Pending Tax Payment and Conflict Resolution

31-015

§31.15

Disclaimer of Administrative Powers

31-018

§31.18

Power to Adjust for Tax Consequences

31-020

§31.20

Trustee May Pay Beneficiary’s Estate Taxes

31-022

§31.22

Trustee May Pay Spouse or Partner’s Last-Illness and Funeral Expenses and Obligations Incurred for Support

31-024

§31.24

Surviving Spouse or Partner May Occupy Residence

31-024A

§31.24A

Power to Permit Life Beneficiary to Occupy Real Property

31-026

§31.26

Additions to Trust Authorized

31-029

§31.29

Small Trust Termination

31-031

§31.31

Trustee Powers Continue Until Trust Distribution

31-033

§31.33

All Powers Exercisable Only in Fiduciary Capacity

31-034

§31.34

Choice-of-Law Clause

CH32

Chapter 32

Selection of Executor

32-010

§32.10

Individuals Nominated as Executor and Alternate or Successor Executors

32-011

§32.11

Nomination of Coexecutors

32-012

§32.12

Nomination of Corporate or Private Professional Fiduciary

32-013

§32.13

Delegation of Authority to Designate Executor

32-014

§32.14

Nomination of Attorney as Executor

32-016

§32.16

Definition of “Executor”

32-018

§32.18

Waiving or Requiring Bond

CH33

Chapter 33

Powers and Duties of Executor

33-011

§33.11

IAEA Applicable

33-012

§33.12

IAEA Not Applicable

33-013

§33.13

Limited Authority or Restricted Powers Under IAEA

33-016

§33.16

Power to Sell or Lease Estate Assets

33-018

§33.18

Power to Lease Estate Assets

33-020

§33.20

Broad Power to Invest

33-022

§33.22

Power to Take Actions Without Regard to Tax Consequences

33-024

§33.24

Power to Postpone Selling Assets Pending Outcome of Estate Tax Audit

33-026

§33.26

Power to Distribute Property Nonprorata

33-027

§33.27

Power to Allocate Property to Shares

33-028

§33.28

Power to Consider Basis and Make Adjustments When Making Distributions

33-030

§33.30

Power to Use In-Kind Property to Satisfy Pecuniary Devise

33-032

§33.32

Power to Divide Community Property Nonprorata

33-034

§33.34

Distributing Gifts to Minors or Disabled Persons

33-035

§33.35

Power to Distribute Gift to Minor

33-037

§33.37

Power to Pay Costs of Distribution

33-039

§33.39

General Pecuniary Devises Do Not Bear Interest

33-041

§33.41

Power to Retain Investment Adviser

33-043

§33.43

Power to Continue or Sell Decedent’s Business

33-045

§33.45

Power to Purchase Estate Assets

33-047

§33.47

Power to Retain Estate Assets

33-052

§33.52

Power Over Digital Assets

33-054

§33.54

Power to Deal With Out-of-State and Foreign Property

CH34

Chapter 34

Rule Against Perpetuities

34-041

§34.41

Perpetuities Saving Clause

CH35

Chapter 35

Concluding Clauses

35-008

§35.8

Disinheritance Clauses

35-010

§35.10

No-Contest Clause

35-016

§35.16

Gender and Number

35-018

§35.18

Spouse, Husband, or Wife

35-018A

§35.18A

Domestic Partner

35-021

§35.21

Severability Clause

CH36

Chapter 36

Execution of Wills

36-010B

§36.10B

Agreement for Deposit of Will

36-016

§36.16

FORM: EXECUTION AND ATTESTATION CLAUSES

CH37

Chapter 37

Multijurisdictional Issues in Will Drafting

37-017

§37.17

Attestation and Prob C §6384 Certificate for International Will

37-019

§37.19

Construction of Will Governed by California Law

CH38

Chapter 38

Complete Will Forms

38-002

§38.2

Nontrust Will for Single Person

38-004

§38.4

Nontrust Will for Married Couple with Children: Contingent Separate Trusts

38-005

§38.5

Nontrust Will for Married Couple with Children: Contingent Family Pot Trust

38-007

§38.7

Nontrust Will With Residue to Spouse or Domestic Partner

38-009

§38.9

Will With QTIP Trust and Bypass Trust

38-011

§38.11

Will With Bypass Trust

38-013

§38.13

Will With Standby Disclaimer Trust

38-015

§38.15

Pourover Will for Married Testator

38-017

§38.17

Will Creating Special Needs Trust

 

Selected Developments

November 2018 Update

Chapter 1: Professional Responsibility

The Supreme Court of California approved a comprehensive revision to the Rules of Professional Conduct. The revised rules are effective November 1, 2018. Throughout the book, references have been updated. Heavily affected is chapter 1. In some instances, the revised Rules add new requirements. For example, a fee-splitting agreement between attorneys must be in writing; client consent must be obtained either at the time the lawyers enter into the fee-splitting agreement or “as soon thereafter as reasonably practicable.” Cal Rules of Prof Cond 1.5.1(a). See §1.4A.

Chapter 2: Initial Client Interview

Miscellaneous itemized deduction suspended. For taxable years beginning after December 31, 2017 and before January 1, 2026, the miscellaneous itemized deduction subject to the 2 percent floor of adjusted gross income (e.g., attorney fees, tax preparation fees, investment fees, safe deposit box rental fees) is suspended. Hence, to the extent attorney fees for estate planning were deductible, as discussed in , deductibility is not available during 2018–2025. See §§2.34, 2.37, 23A.19, 23A.19A, 23A.28, 33.15, 33.15B.

Chapter 3: Planning for Incapacity

In Estate of O’Connor (2017) 16 CA5th 159, the court held that a joint bank account belongs to the surviving party at death as against the estate of the decedent unless there is clear and convincing evidence of a different intent. Prob C §5302(a). See §3.35.

In Higgins v Higgins (2017) 11 CA5th 648, the court imposed a constructive trust in favor of decedent’s estate on bank accounts that were established by the surviving co-owner with funds deposited by decedent in multiparty bank accounts “in trust for” the decedent. The bank accounts here were not Totten trust accounts but irrevocable trust accounts that belong beneficially to beneficiary under Prob C §5301(e). See §3.35.

The discussion of the effect of an arbitration agreement signed by an agent when the principal is admitted to a residential care or nursing home facility has been updated in light of several new cases. See Hutcheson v Eskaton Fountainwood Lodge (2017) 17 CA5th 937; Avila v Southern Cal. Specialty Care, Inc. (2018) 20 CA5th 835. See also American Health Care Ass’n v Burwell (ND Miss 2016) 217 F Supp 3d 921. See §3.49A.

The End of Life Option Act (Stats 2015, 2d Extra Sess, ch 1) (Health & S C §§443–443.22, effective until January 1, 2026) which allows a terminally ill person to end his or life with a prescribed drug, is being litigated at the time of this writing. On June 15, 2018, the Fourth District Court of Appeal stayed the trial court’s order which invalidated the law pending determination of the petition for writ of supersedeas (petition seeking a stay of the enforcement of a judgment or order pending appeal). Ahn v Hestrin (June 15, 2018, E070634) . See §3.52.

Chapter 12: Outright Noncharitable Gifts

In the context of the antilapse statute, an amendment to Prob C §21110(c) defines the term “kindred” to specifically exclude a spouse or registered domestic partner of the transferor—hence the antilapse statute does not apply. Stats 2018 chap 71, §1. See §12.7.

Chapter 15: Generation-Skipping Transfer Tax: Law, Regulations, and Planning

The update has revised examples of a reverse QTIP election and proration of estate tax reflecting the current $11,180,000 GST exemption and applicable exclusion amount in 2018. See §§15.37, 15.81.

Chapter 17: Marital Deduction: Overview and Formula Clauses

With the temporary increase in the basic exclusion amount to $10 million (plus cost-of-living adjustments, for 2018–2025), the self-adjusting feature of formula clauses may create undesired results and leave the bypass trust overfunded and the marital gift unfunded or underfunded. Estate planners must take the uncertainty into account by building flexibility into their documents. The QTIPable bypass trust (or credit trust) remains the touchstone of estate planning for married clients with combined estates of $10 million for whom there might be a need or desire to cause inclusion (or not) in the survivor’s estate. The primary advantage of the QTIPable bypass trust approach is preservation of the option of making the QTIP election for more of the trust than is necessary to reduce the estate tax to zero. See Warning in §17.49. See also §§17.49A, 20.5A.

Chapter 19: Qualified Terminable Interest Property and Qualified Domestic Trust

The update has revised examples reflecting the current $11,180,000 exclusion amount in 2018.

Chapter 20: Bypass and Disclaimer Trust

Problems of uncertain applicable exclusion amount are addressed in §20.5A.

Chapter 23A: Taxation of Trust Distributions

In Green v U.S. (10th Cir 2018) 880 F3d 519, reversing a district court decision, the court of appeals held that the trust charitable deduction for contributions of real property is limited to the donor’s income tax basis in the property. See §23A.20.

The Tax Cuts and Jobs Act (Pub L 115–97, §§11045–11046, 131 Stat 2054) reduced and revised the ordinary income tax rates for trusts and estates from 15–25–28–33–39.6 to 12–24–35–37. IRC §1(e), (j). The 37 percent rate applies to income over $12,500 ($12,700 for the 20 percent top rate on capital gain). Note that barring further legislation, the Tax Cuts and Jobs Act changes will expire at the end of 2025. See §23A.22.

The Tax Cuts and Jobs Act allows net operating losses to be carried forward indefinitely until exhausted (previously limited to 20 years). IRC §172(b)(1)(A). See §23A.27.

Chapter 30: Trustee Accounting Powers

Probate Code §16350, concerning the allocation of receipts from entities, has been repealed and a revised version has been added. Stats 2017, chap 577. Most significantly, the revised section no longer relies on the partial liquidation concept as a basis for allocation of money received from an entity to principal. Instead, money received from an entity can be allocated to principal if and to the extent that the trustee determines that the distribution is a return of capital. Prob C §16350(c)(3). The trustee may treat as principal-cash amounts received from the sale of “business assets” that are not sold to customers in the normal course of business (i.e., inventory). Prob C §16350(e)(2)(B). Another way the new section differs from the repealed one is that the revised statute provides that money received from a regulated investment company or a real estate investment trust is allocated to principal if the money distributed is a capital gain dividend for federal income tax purposes, without regard to whether the dividend is attributable to short-term capital gains. Prob C §16350(c). For discussion of these and other changes, see §§30.35, 30.43A–30.43C.

Chapter 33: Powers and Duties of Executor

In Estate of Kerkorian (2018) 19 CA5th 709, the appellate court held that the probate court did not abuse its discretion in granting the executor’s request to oppose an omitted spouse petition. See §33.6.

About the Third Edition Authors

THOMAS R. BENNETT, B.S., 1969, Michigan State University; J.D., 1973, Yale University. Mr. Bennett, Senior Counsel with Bank of America Legal Department, specializes in trust law. He is the author of Part I (Planning and Procedure), including chapters 1–3.

FRAYDA L. BRUTON, B.A., Wayne State University; J.D., 1985, McGeorge School of Law; LL.M., 1987, McGeorge School of Law. Ms. Bruton practices trust and estate planning in Sacramento. Ms. Bruton is a Fellow of the American College of Trust and Estate Counsel and is a board-certified specialist in Estate Planning, Trust and Probate Law. Ms. Bruton is a frequent author and speaker on topics ranging from trust and estate litigation to various estate planning issues, including ethics and change-in-ownership rules. Ms. Bruton is a former member of the Executive Committee of the California State Bar Trusts and Estates Section. She is a coauthor of chapter 1 (Professional Responsibility).

MICHAEL BURNSTEIN, B.S., 1992, and J.D. and M.B.A., 1995, St. John’s University; LL.M., 2002, New York University. Mr. Burnstein, a partner with the law firm of Schiff Hardin LLP, San Francisco, specializes in wealth management and tax-exempt organizations. He is a coauthor of chapter 23A (Taxation of Trust Distributions).

JUDITH M. COPELAND, A.B., 1970, University of California, Berkeley; J.D., 1974, the University of California, Hastings College of the Law. Ms. Copeland, a member of Copeland & Tierman, San Diego, practices in the fields of elder law and probate. She is a member of the National Academy of Elder Law Attorneys and a Certified Specialist in Estate Planning, Trust, and Probate Law. She is the author of Part XIII (Executor Provisions), including chapters 32–33.

GEORGE R. DIRKES, A.B., 1964, Bucknell University; J.D., 1967, St. John’s University School of Law; LL.M. (taxation), 1974, New York University Graduate School of Law. Mr. Dirkes, a member of Bancroft & McAllister, LLP, Greenbrae, practices in the fields of estate planning, taxation, and trust law. He is a Fellow of the American College of Trust and Estate Counsel. He is the author of chapter 28 (Office of Trustee).

ROBERT J. DURHAM, JR., B.A., 1962, Williams College; Ph.D. 1969, Yale University; J.D., 1975, Stanford Law School. Mr. Durham is a member of Luce, Forward, Hamilton & Scripps, LLP, La Jolla. He is the author of chapter 17 (Marital Deduction: Overview and Formula Clauses).

MELITTA FLECK, B.A., 1970, Mount St. Mary’s College; M.S., 1976, San Diego State University; J.D., 1979, the University of California, Hastings College of the Law. Ms. Fleck practiced law in La Jolla in the fields of estate planning, trust administration, and probate. She was a Fellow of the American College of Trust and Estate Counsel. She is the author of chapter 18 (Marital Deduction Power of Appointment Trusts) and chapter 19 (Qualified Terminable Interest Property Trusts and Qualified Domestic Trusts).

JON J. GALLO, B.A., 1964, Occidental College; J.D., 1967, University of California, Los Angeles, School of Law. Mr. Gallo, a partner in the law firm of Greenberg, Glusker, Fields, Claman, Machtinger & Kinsella, Los Angeles, is an Academician of the International Academy of Estate and Trust Law and a Fellow of the American College of Trust and Estate Counsel. He is the current Chair of the Psychological and Emotional Issues of Estate and Financial Planning Committee of the American Bar Association Section of Real Property, Probate, and Trust Law, and former Chair of the Section’s Committee on Generation-Skipping Transfers: Tax Regulations and Legislation. Mr. Gallo was Chair of the Advisory Board of the UCLA Estate Planning Institute (1993–2000) and is a Certified Specialist in Estate Planning, Trust, and Probate Law, California Board of Legal Specialization, State Bar of California. Mr. Gallo lectures on all aspects of estate planning throughout the United States. He is the author of chapter 15 (Generation-Skipping Transfer Tax: Law, Regulations, and Planning).

BRUCE GIVNER, B.A., 1973, University of California, Los Angeles; J.D., 1976, Columbia University; LL.M. (Taxation), 1977, New York University. Mr. Givner, who is a partner with the firm of Givner & Kaye, Los Angeles, specializes in tax and estate planning. He is coauthor of chapter 21 (Overview of Trust Distributions), chapter 22 (Trusts for Children), chapter 30 (Trustee Accounting Powers), and chapter 31 (Trustee Administrative Powers).

EDWARD C. HALBACH, JR., B.A., 1953, and J.D., 1958, University of Iowa; LL.M., 1959, Harvard University. Professor Emeritus Halbach was dean of the University of California, Berkeley, School of Law from 1966 to 1975. He has written and lectured extensively on wills, trusts, future interests, taxation, and estate planning. He is the editor of CEB’s Estate Planning and California Probate Reporter. He was Reporter, Uniform Probate Code (1969), and is Reporter, American Law Institute Restatement (Third) of Trusts. Offices he has held include President of the International Academy of Estate and Trust Law and Chair of the American Bar Association Section of Real Property, Probate, and Trust Law. He is the author of chapter 34 (Rule Against Perpetuities).

MARGARET M. HAND, is a partner with the firm Hartog, Baer & Hand in Orinda, California, and has been serving trust and probate clients in the Bay Area since 1993. Ms. Hand received her undergraduate degree from the University of California, San Diego, and her J.D. from the University of California, Berkeley, School of Law. Ms. Hand is a certified specialist in estate planning, trust, and probate law, and is a fellow of the American College of Trust and Estate Counsel (ACTEC). She specializes in probate and trust administration, as well as conservatorships and guardianships. In addition, she teaches fiduciary accounting for the CalCPA Education Foundation. She is the author of chapter 27 (Spendthrift Clauses).

ANN C. HARRIS, B.A., 1972, University of California, San Diego; J.D., 1980, University of San Diego; LL.M., 1981, Boston University. Ms. Harris, who practices law in Carlsbad, specializes in probate, estate and tax planning, and trust administration. She is a coauthor of chapter 23A (Taxation of Trust Distributions).

M. KIMBALL HETTENA, B.A., 1974, Yale University; J.D., 1977, University of Connecticut School of Law. Ms. Hettena was Vice President and Senior Corporate Counsel of Charles Schwab & Co., San Francisco. She is the author of chapter 29 (Trustee Management Powers).

SUSAN YORK JANIN, A.B., 1979, Stanford University; J.D., 1982, the University of California, Hastings College of the Law. Ms. Janin practiced with the law firm of Shartsis, Friese & Ginsburg, San Francisco, in the fields of estate planning and estate administration. She is the author of Part II (Testamentary Gifts in General), including chapters 5–9.

TIMOTHY J. KAY, B.A., 1975, University of San Francisco; J.D., 1987, Stanford Law School. Mr. Kay, a partner with the law firm of Snell & Wilmer, LLP, Costa Mesa, practices primarily in the fields of estate planning, trust administration and probate. He is a coauthor of chapter 20 (Bypass Trusts and Disclaimer Trusts) and chapter 21 (Overview of Trust Distributions).

OWEN KAYE, B.A., San Diego State University; J.D., Western State University of Law. Mr. Kaye is a partner with Givner & Kaye, Los Angeles. He is a member of the American Bar Association, the Los Angeles County Bar Association and the Beverly Hills Bar Association. He specializes in estate planning and tax law. He is coauthor of chapter 31 (Trustee Administrative Powers).

JONATHAN C. LURIE, B.A., 1973; LL.B., 1976; and H. Dip. Tax, 1981, University of Witwatersrand, Johannesburg, South Africa. Mr. Lurie practices with the law firm of McDermott, Will & Emery, Los Angeles, in the fields of estate planning and probate. He has lectured extensively on estate planning topics. He is a coauthor of chapter 16 (Creating Powers of Appointment).

KIM MAROIS, B.S., 1972, University of California, Berkeley; J.D., 1976, University of California, Hastings College of the Law. Ms. Marois is a principal with Clement, Fitzpatrick & Kenworthy, Inc., in Santa Rosa. Her practice focuses on estate planning, probate, trusts, and estates. She is a member of the Bar Association of San Francisco (Co-Chair, Taxation Section, 1989), the Sonoma County Bar Association, and the State Bar of California (Taxation Section: Chair, Education Committee, 1982–1983; Member, Executive Committee, 1981–1984). Ms. Marois is a frequent lecturer on estate planning topics. She is coauthor of chapter 15 (Generation-Skipping Transfer Tax).

DONALD J. McCUBBIN, A.B., 1966, University of California, Santa Barbara; J.D., 1969, the University of California, Hastings College of the Law. Mr. McCubbin is a member of Friedman, McCubbin, Spalding, Bilter, Roosevelt, Montgomery & Hastings, P.C., San Francisco. He practices law in the fields of estate planning, probate, and trust administration. He is a coauthor of Part V (Charitable Gifts), including chapters 13–14.

MICHELE M. MULROONEY, B.S., 1982, and J.D., 1985, University of Southern California. Ms. Mulrooney is a member of Jackoway, Tyerman, Werthheimer, Austen, Mandelbaum, Morris & Klein, P.C., Los Angeles, with an emphasis on estate planning. She is a coauthor of chapter 22 (Trusts for Children) and chapter 23 (Special Needs Trusts).

MARTIN A. NEUMANN, B.A., 1978, and J.D., 1981, University of California, Los Angeles, School of Law, is a director of Weinstock, Manion, Reisman, Shore & Neumann, P.C., Los Angeles, in the fields of taxation, estate planning, and probate. He has lectured in these fields as well as written and contributed to other CEB publications. He is a coauthor of chapter 12 (Outright Noncharitable Gifts).

MARSHAL A. OLDMAN, B.A., 1973, University of Southern California; J.D., 1976, University of California, Los Angeles, School of Law. Mr. Oldman is a partner in the firm of Oldman, Cooley, Sallus, Gold, Birnberg & Coleman LLP in Encino. His practice focuses on probate administration and litigation and estate planning. He is past chair of the Trusts and Estates Section of the Los Angeles County Bar Association, past president of the San Fernando Valley Bar Association, and past chair of the Trusts and Estates Section of the State Bar of California. He is a coauthor of chapter 1 (Professional Responsibility).

RUTH A. PHELPS, B.A., Immaculate Heart College in Los Angeles; J.D. and LL.M., Loyola Law School. Mrs. Phelps is a partner with the law firm Phelps, Schwarz & Phelps, Pasadena. She is a Certified Elder Law Attorney and a Certified Specialist in Estate Planning, Trust, and Probate Law. She is a coauthor of chapter 23 (Special Needs Trusts).

MICHAEL A. ROOSEVELT, B.A., 1969, Harvard University; J.D., 1972, Columbia University. Mr. Roosevelt is a member of Friedman, McCubbin, Spalding, Bilter, Roosevelt, Montgomery & Hastings, P.C., San Francisco. He practices in the fields of estate planning and trusts. He is a coauthor of chapter 26 (Tax Payment Clauses).

STERLING L. ROSS, JR., B.A., 1968, Stanford University, and J.D., 1971, University of Michigan. Mr. Ross is a partner with the law firm Robb & Ross, Mill Valley, and is a certified specialist in estate planning, trust and probate law. He is a coauthor of chapter 23 (Special Needs Trusts).

HOWARD L. SANGER, B.A., 1964, University of California, Berkeley; J.D., 1967, University of California, Los Angeles, School of Law; LL.M. (Taxation), New York University. Mr. Sanger is a partner with the firm of Sanger & Manes LLP, Palm Springs. He is a certified specialist in taxation law. He is a coauthor of chapter 30 (Trustee Accounting Powers).

GORDON A. SCHALLER, B.S., 1970, Iowa State University; J.D., 1973, University of Minnesota Law School. Mr. Schaller, a managing shareholder of Jeffers, Mangel, Butler & Marmaro, LLP, Costa Mesa, practices in the fields of estate and personal tax planning, probate, and trust administration. He is a coauthor of Part IX (Trust Distributions), including chapters 21–23.

ROBERT A. SCHLESINGER, B.S., 1948, University of California, Los Angeles; J.D., 1953, University of Southern California. Mr. Schlesinger (deceased) practiced law in Palm Springs and was a fellow of the International Academy of Estate and Trust Law and the American College of Trust and Estate Counsel. Mr. Schlesinger was a Certified Specialist in Probate, Estate Planning, and Trust Law. He is the author of Part X (Guardianships), including chapters 24–25.

SUSSAN H. SHORE, B.A., 1973, University of California, Los Angeles; J.D., 1976, Loyola School of Law, is a director of Weinstock, Manion, Reisman, Shore & Neumann, P.C., Los Angeles. She practices in the fields of taxation, estate planning, and probate. She has lectured in these fields as well as written and contributed to other CEB publications. Ms. Shore is a Certified Specialist in Estate Planning, Trust, and Probate Law. She is a coauthor of chapter 12 (Outright Noncharitable Gifts).

CLARE H. SPRINGS, B.A., 1965, Mills College; J.D., 1973, University of California, Berkeley, School of Law. Ms. Springs, who practices law with Springs & Associates, San Francisco, is a Certified Specialist in Estate Planning, Probate and Trust Law; a Fellow and former Regent (1989–1996) of the American College of Trust and Estate Counsel; and former Finance Officer (1992–1996) of the American Bar Association Section on Real Property, Probate, and Trust Law. She is a coauthor of chapter 26 (Transfer Tax Payment Clauses) and the author of chapter 35 (Concluding Clauses) and chapter 36 (Execution of Wills).

JULIA P. WALD, A.B., 1963, Wellesley College; M.A., 1965, University of California, Berkeley; J.D., 1977, University of Idaho Law School. Ms. Wald, who practices law in the law offices of Julia P. Wald, San Francisco, is a Certified Specialist in Estate Planning, Trust, and Probate Law. She is a coauthor of chapter 30 (Trustee Accounting Powers).

MARY PILIBOS WHITE, B.S., 1974, Menlo School of Business Administration; J.D., 1978, University of Santa Clara. Ms. White is a member of White Law, P.C., Menlo Park. She practices law in the fields of estate planning, probate, and trust administration. She is a coauthor of Part V (Charitable Gifts), including chapters 13–14.

Chapters 4, 11, 27, 31, and 37 were prepared by CEB staff attorneys.

Chapter 11 is based in part on California Will Drafting Practice, chap 10 (Cal CEB), which was written by William A. Farrell (deceased) of San Francisco.

Chapter 27 is based in part on California Will Drafting Practice, chap 9 (Cal CEB), written by Theodore E. Calleton of Los Angeles.

Chapter 31 is based on California Will Drafting Practice, chap 14 (Cal CEB), written by Raymond G. Ellis of Orrick, Herrington & Sutcliffe, San Francisco. In preparing chapter 31, CEB staff attorneys received generous assistance from Elizabeth Anne Bird of San Francisco. Ms. Bird is a Certified Specialist in Estate Planning, Trust, and Probate Law and is a coauthor of Estate Planning for Special Assets (Cal CEB).

About the 2018 Update Authors

MATTHEW A. CLAUSEN is an update author of chapter 13 (Outright Gifts to Charity) and chapter 14 (Charitable Split-Interest Trusts). Mr. Clausen is an associate with the firm of Adler & Colvin in San Francisco, providing legal services and support to the nonprofit and philanthropic sector. He received his B.A. degree from the University of British Columbia; his J.D. degree from the University of California, Davis, School of Law; and his LL.M. in Taxation from New York University. He is an adjunct professor at Golden Gate University, where he teaches Tax Aspects of Charitable Giving in the LL.M. program. Mr. Clausen is a member of the Exempt Organizations Committee of the American Bar Association Tax Law Section.

CHARLES W. DAFF is an update author of chapter 17 (Marital Deduction: Overview and Formula Clauses), chapter 19 (Qualified Terminable Interest Property Trusts and Qualified Domestic Trusts) and chapter 20 (Bypass Trusts and Disclaimer Trusts). Mr. Daff is an associate with the firm of Dorsey & Whitney LLP, Costa Mesa. His practice focuses on estate, tax and wealth planning and trust and probate administration. He received his B.A. from the University of California, Santa Barbara, and his J.D. from the University of California, Irvine, School of Law.

SCOTT A. FRASER is the update author of chapter 26 (Transfer Tax Clauses). Mr. Fraser is an associate with the firm of Greene Radovsky Maloney Share & Hennig, LLP in San Francisco. He received his B.A. from San Diego State University and his J.D. from Santa Clara University School of Law. Mr. Fraser’s practice includes all aspects of estate planning, drafting, estate and trust administration, and trust and probate litigation.

BRUCE GIVNER is an original author and continuing update author of chapter 21 (Overview of Trust Distributions), chapter 22 (Trusts for Children), chapter 28 (Trustee Management Powers), chapter 30 (Trustee Accounting Powers), chapter 31 (Trustee Administrative Powers) and an update author of chapter 28 (Office of Trustee) and chapter 29 (Trustee Management Powers). See his biography in the About the Authors section.

MARGARET M. HAND is the original author and continuing update author of chapter 27 (Spendthrift Clauses). See her biography in the About the Authors section.

BRIGIT KAVANAGH is an update author of chapter 13 (Outright Gifts to Charity) and chapter 14 (Charitable Split-Interest Trusts). Ms. Kavanagh is a partner in the firm of Kavanagh Rhomberg LLP in Belmont, providing legal services and support to nonprofit and tax-exempt organizations and their charitable donors. She is an adjunct professor at Golden Gate University, where she teaches Tax Aspects of Charitable Giving in the LL.M. program. Ms. Kavanagh was recognized as a “Rising Star” by the Northern California Super Lawyers magazine for 2016. She received her B.A. degree from the University of Virginia and her J.D. degree from Golden Gate University School of Law.

OWEN KAYE is an original author and continuing update author of chapter 31 (Trustee Administrative Powers) and an update author of chapter 21 (Overview of Trust Distributions), chapter 22 (Trusts for Children), chapter 28 (Office of Trustee), chapter 29 (Trustee Management Powers) and chapter 30 (Trustee Accounting Powers). See his biography in the About the Authors section.

DAVID G. KNITTER is an update author of chapter 3 (Planning for Incapacity). Mr. Knitter is partner with the law firm of Knitter & Knitter, LLP, in Vacaville. He received his B.A. from the University of Wisconsin, Milwaukee, and his J.D. from McGeorge School of Law, University of the Pacific. He practices in the areas of financial elder abuse, contested conservatorships, and trust and probate litigation. He is a member of the Executive Committee of the Trusts and Estates Section of the California Lawyers Association (TEXCOM) and Past President of the Solano County Bar Association (SCBA). He has written extensively on financial elder abuse, undue influence, and trust and probate litigation issues and presented locally and nationally on these topics for organizations including the National Academy of Elder Law (NAELA), the Elder Financial Protection Network, county bar associations, and civic and professional groups.

KIM MAROIS is the original author and continuing update author of chapter 15 (Generation-Skipping Transfer Tax: Law, Regulations, and Planning). See her biography in the About the Authors section.

MARSHAL A. OLDMAN is the original author and continuing update author of chapter 1 (Professional Responsibility) and an update author of chapter 12 (Outright Noncharitable Gifts). See his biography in the About the Authors section.

RUTH A. PHELPS is the original author and continuing update author of chapter 23 (Special Needs Trust). See her biography in the About the Authors section.

MARK E. POWELL is an update author of chapter 17 (Marital Deduction: Overview and Formula Clauses), chapter 19 (Qualified Terminable Interest Property Trusts and Qualified Domestic Trusts), and chapter 20 (Bypass Trusts and Disclaimer Trusts). Mr. Powell is a partner with the firm of Dorsey & Whitney LLP, Costa Mesa. His practice focuses on estate planning for high net worth families. He received his A.B.J. from the University of Georgia and his J.D. from Mercer University School of Law. Mr. Powell is a Fellow of the American College of Trust and Estate Counsel (ACTEC) and a member of the Society of Trust and Estate Practitioners (STEP).

MAY LEE TONG is the update author of chaper 10 (Getting Started: Introductory Clauses), chapter 11 (Exercising Powers of Appointment), and chapter 33 (Powers and Duties of Executor). She practices in Oakland, specializing in estate planning, trusts, and probate administration. She received her B.A. from omona College and her J.D. from Golden Gate University School of Law.

M. BROOKE WILSON is the update author for chapter 23A (Taxation of Trust Distribution). Ms. Wilson is a senior counsel with the firm of Greene Radovsky Maloney Share & Hennig, LLP, in San Francisco. She is certified as a specialist in estate planning, trusts, and probate law by the State Bar of California Board of Legal Specialization. Ms. Wilson received her B.A. from the University of California, Berkeley; her J.D. from Temple University, Beasly School of Law (Pennsylvania); and her LL.M. in Taxation also from Temple University, Beasly School of Law. She has been recognized as a “Rising Star” by the Northern California Super Lawyers magazine for 2015–2017, and is a member and past chair of the East Bay Trusts & Lawyers’ “Estate Planning and Administration Committee.”

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PRODUCT GROUP Publication
PRACTICE AREA Estate Planning