South Carolina Trust & Estates Outlin

Functions of Probate
 The three core functions of probate:
1) Provide evidence of transfer of title to the new owners;
2) Protect creditors by providing a procedure for payment
of debts; and
3) Distribute the decedent’s property to those intended after
the decedent’s creditors are paid.
Probate and Nonprobate Property
 Probate Property
 Property that passes through probate under the
decedent’s will or by intestacy.
 Nonprobate Property
 Property that passes outside of probate through a
nonprobate mode of transfer.
 Joint tenancy (real and personal)
 Life insurance
 Contracts with payable-on-death (POD) provisions
 Inter vivos trust
Formal v. Informal Probate
 Formal Probate
 The court supervises the actions of the personal
representative in administering the estate through
a potentially costly and time consuming process.
 Informal Probate
 The personal representative may administer the
estate without court supervision unless an interested party asks for court
review.
Problem #1
 T dies owning Blackacre. T has one intestate heir X, but T devises (has a valid will
leaving) T’s entire estate including Blackacre to Y. Two years later, D dies devising
Whiteacre to T if living and if not to T’s estate. Who get’s Whiteacre?
SC Malpractice Case
 Rydde v. Morris, 675 S.E. 2d 431 (SC 2009).
Chapter 2
INTESTACY: AN ESTATE PLAN BY DEFAULT
The Basic Scheme
Intestacy as Default Rules
 Testacy
 Decedent leaves a will that provides for the disposition
of her property at death.
 Intestacy
 Decedent leaves no will. The probate estate passes by
intestacy.
 Partial Intestacy
 Decedent leaves a will that disposes of only part of the
probate estate; the part of the estate not disposed of by
the will passes by intestacy.

Janus v. Tarasewicz,
482 N.E.2d 418 (Ill. App. 1985)
Simultaneous Death
 Uniform Simultaneous Death Act (1940, rev. 1953) (in SC for testacy only):
 If “there is no sufficient evidence” of survivorship, the beneficiary is deemed to have
predeceased the donor.
 SCPC §62-2-104 (for intestacy):
 Claimant must establish survivorship by 120 hours (5 days) by clear and convincing
evidence.
South Carolina Intestacy Statute
SCPC Sec. 62-2-101 to 109 (SCPC (62-2-104) requires any taker to survive decedent by 120
hours unless escheat would result)
1. Surviving spouse takes:
(a)
All if no surviving issue of the decedent.
(b)
½ if surviving issue.
2. Heirs other than surviving spouse take remainder. If no surviving spouse, that
share is added to this level. A taker at one level preempts any taker at subsequent
levels. Where representation is provided for, division is made at the first level at
which there are survivors.
1. Level (a) Issue of decedent equally if same degree; unequal degree take
by representation.
2. Level (b) Parents take equally, or the survivor
1. Level (c) Issue of parents by representation. Children and issue of whole
blood siblings and half-blood siblings
2. Level (d) Grandparents –
1/2 to maternal side, or the survivor
1/2 to paternal side, or the survivor
3. Level (e) Issue of grandparents by representation –
1/2 to maternal side,
1/2 to paternal side
(one side takes all if no takers on other side).
4. Levels (f) & (g) Great-grandparents or issue in similar manner as levels
(d) & (e).
5. Level (h) Stepchildren and issue by representation.
6. Level (i) State through escheat.

S.C. Intestacy (21-3-20)(PRE-SCPC §62-2-101 to 109)
1. Shares of Descendants (1)

1/3

1/6

1/6

1/3

Competing Systems of Representation
 English Per Stirpes
 Vertical equality – each line of descent treated equally
 Modern Per Stirpes
 Each line of descent treated equally beginning at first generation with a living
taker
Shares of Descendants (2)

1/2
1/3

English per stirpes
Modern per stirpes

1/4
1/3

1/4
1/3

Shares of Descendants (4)

1/2
1/3

English per stirpes
Modern per stirpes

1/8
1/6

1/8
1/6

Shares of Descendants (5)

1/2
1/3

1/8
1/6

1/8
1/6

1/4
1/3

English per stirpes
Modern per stirpes

1/4
1/3

Shares of Ancestors and Collaterals

1/4
1/4
English & Modern Per Stirpes

1/12

1/36

1/36

1/36 1/12

1/8
1/8

1/8

B. Transfers To Children
Hall v. Vallandingham, 540 A.2d 1162, (Md. Ct. Special App. 1988)
Minary v. Citizens Fidelity Bank, 419 S.W.2d 340 (Ky. 1967)
Woodward v. Comm’r of Soc. Sec., 760 N.E.2d 257 (Mass. 2002)
In re Martin B., 841 N.Y.S.2d 207 (N.Y. Surr. Ct. 2008)
Advancements: Hotchpot Example
Testator ($50,000)
Daughter A ($10,000)
Daughter B ($0)
Daughter C ($0)

Guardianship of Minors
 Guardianship of the property
 Origin in feudal practice in which a guardian took possession of the ward’s lands; still
subject to extensive judicial supervision.
 Conservatorship
 A guardian of property with investment powers similar to those of trustees, more
flexible than guardianship.
 Custodianship
 A person who is given property to hold for the benefit of a minor under the UTMA or
UGMA.
 Trusts
 Flexible and highly customizable property management arrangement.
C. Bars to Succession
In re Estate of Mahoney, 220 A.2d 475 (Vt. 1966)

Disclaimer and Representation

Pate v. Ford
Drye v. United States, 528 U.S. 49 (1999)
Disclaimers - Tax Requirements (and SC)
 IRC sec. 2518 requires a qualified disclaimer be:
 in writing;
 “signed either by the disclaimant or by the disclaimant’s legal representative;
 “irrevocable and unqualified (no acceptance of benefits);”
 the disclaimed interest must pass to someone other than the disclaimant, unless the
disclaimant is the transferor’s spouse;
 within 9 months of the transferor’s death or, if later, 9 months after the disclaimant
reaches the age of 21.
Sims v. Hall , 592 SE2d 315 (2003)

Chapter 3
WILLS: CAPACITY AND CONTESTS
A. Mental Capacity
Testator “must be capable of knowing and understanding in a general way[:]
[1] the nature and extent of his or her property,
[2] the natural objects of his or her bounty, and
[3] the disposition that he or she is making of that property,
And must also be capable of:
[4] relating these elements to one another and forming an orderly desire regarding the
disposition of the property.”
The test of whether a testator had the capacity to make a will is whether he knew:
 (1) his estate,
 (2) the objects of his affections, and
 (3) to whom he wished to give his property.
 “[T]he legal test for determining whether or not a person has sufficient mental
capacity to dispose of his property by will does not include the proviso that he must
have a reasonable basis on which to found his like or dislike of the natural objects of
his bounty.”
 “Further, the capacity to know or understand, rather than the actual knowledge or
understanding, is sufficient.”
In re Estate of Washburn, 690 A.2d 1024 (N.H. 1997) (slide 1)


Wilson v. Lane, 614 S.E.2d 88 (Ga. 2005)
Capacity Thresholds - SC
• “A person may execute a valid will, even if he or she is not competent to transact
ordinary, everyday affairs.” . . . “Ability to transact important business, or even ordinary
business, is not the legal standard of testamentary capacity.”
• Hairston v. McMillan
Burden of Proof
Hairston v. McMillan
• “ ‘[T]he party alleging incompetence bears the burden of proving incapacity at the time
of the transaction by a preponderance of the evidence.’ ”
• “An action to contest a will is an action at law, and in such cases reviewing courts will
not disturb the probate court's findings of fact unless a review of the record discloses no
evidence to support them.”

Insane Delusion

Proving Insane Delusion

In re Strittmater, 53 A.2d 205 (N.J. Ct. Errors & Appeals 1947)
Breeden v. Stone, 992 P.2d 1167 (Colo. 2000)

1996 Holographic Will
1991 Holographic Codicil
B. Undue Influence
“A donative transfer is procured by undue influence if the wrongdoer exerted such
influence over the donor that it[:]
 overcame the donor’s free will and
 caused the donor to make a donative transfer that the donor would not
otherwise have made….”
Presumptions & Burden Shifting
Confidential Relationship + Suspicious Circumstances = Presumption of Undue Influence
(Burden Shifting)
Types of Confidential Relationships:
 Fiduciary
 Reliant
 Dominant-subservient

Examples of Suspicious Circumstances:
 Secrecy or haste
 Reasonable person would regard it as unnatural, unjust or unfair
 Donor’s attitude toward others changed by reason of his relationship with the
alleged wrongdoer
 “If evidence of such a [fiduciary] relationship is presented, the proponents of the will
must offer rebuttal evidence. . . ‘We emphasize that although the proponents of the will
must present evidence in rebuttal, they do not have to affirmatively disprove the existence
of undue influence. Instead, the contestants of the will still retain the ultimate burden of
proof to invalidate the will.’”
 Hairston v. McMillan
 In re Will of Moses, 227 So. 2d 829 (Miss.1969)
 Lipper v. Weslow,
369 S.W.2d 698 (Tex. Civ. App. 1963)
Will Contest Planning
 Contest Grounds
o Most common grounds for a will contest are lack of capacity and undue influence.
o Often alleged together; testator’s mental status overlaps with the susceptibility
element of undue influence.
 Warning Signs
o New testamentary scheme makes a radical departure.
o Multiple or blended families.
o Imposes conditions that are likely to anger the beneficiary.
o Makes a disposition to a person unpopular with the testator’s family.
Precautionary Measures
Record Building
 Recorded Video Discussion
 Professional
Examination of Capacity
 Disinterested
Witnesses
 Inter Vivos Trust
Maintain Secrecy
 Inter Vivos Trust
 Inter Vivos Gifts
Sooth Feelings
 Family Meeting
 Letter or Video Explanation
Also, Letter to lawyer why and Letter from lawyer of Problems
No contest clause
“ ‘Should any beneficiary of this Will or of the trust agreement ... contest the validity of
this Will or any provision thereof or attempt to prevent any provision from being carried
out in accordance with its terms in legal proceedings or otherwise, then any interest
provided for such beneficiary and his or her descendents is revoked and such beneficiary
shall be deemed to have predeceased me for all purposes under this Will. ’ ” Russell v.
Wachovia, 633 S.E.2d 722 (SC 2006).
Bequests to Attorneys
 Undue Influence
Many courts hold that a presumption of undue influence arises when an attorney-drafter
receives a legacy, except when related to the testator.
 Unethical Conduct

Model Rule of Professional Conduct 1.8(c) reads:
A lawyer shall not solicit any substantial gift from a client, including a testamentary gift,
or prepare on behalf of a client an instrument giving the lawyer or a person related to the
lawyer any substantial gift unless the lawyer or other recipient … is related to the client.
 Fiduciary Appointments
The comment to Rule 1.8 advises:
In obtaining the client’s informed consent to the conflict, the lawyer should advise the
client concerning the nature and extent of the lawyer’s financial interest in the
appointment, as well as the availability of alternative candidates for the position.
C. Fraud
Forms of Fraud
 Fraud
 Testator is deceived by a deliberate misrepresentation and as a result does that
which he would not have done.
 Fraud in the Inducement
 A misrepresentation causes the testator to execute or revoke a will, to refrain from
executing or revoking a will, or to include particular provisions in the
wrongdoer’s favor.
 Fraud in the Execution
 A person intentionally misrepresents the character or contents of the instrument
signed by the testator, which does not in fact carry out the testator’s intent.
D. Duress
Latham v. Father Divine, 85 N.E.2d 168 (N.Y. 1949)
E. Tortious Interference with an Expectancy
Schilling v. Herrera,952 So. 2d 1231 (Fla. App. 2007)
 SC and Tortious Interference with an Inheritance
Douglass v. Boyce, 542 SE 2d 715 (SC 2001)
While finding the facts did not give rise to a TIWI action the court noted:
We have adopted the closely analogous tort of intentional interference with
prospective contractual relations . . . intentional interference with inheritance
closely analogous to intentional interference with economic relations).
Most jurisdictions adopting the tort of intentional interference with inheritance
have required the plaintiff to prove the following elements:
(1) the existence of an expectancy
(2) an intentional interference with that expectancy through tortious conduct
(3) a reasonable certainty that the expectancy would have been realized but for the
interference and
(4) damages

Chapter 4
WILLS: FORMALITIES AND FORMS
A. Execution of Wills
1. Attested Wills
Functions of Formalities
“Does this remark indicate finality of intention to transfer ?”
 Ritual Function
 The performance of some ceremonial for the purpose of impressing the transferor
with the significance of his statements.
 Evidentiary Function
 Supply satisfactory evidence to the court.
 Protective Function
 Prophylactic purpose of safeguarding the testator.
 Channeling Function
 Standardization of form simplifies administration.
UPC §2-502(a)
(1990, rev. 2008)
Except as otherwise provided…, a will must be:
(1) in writing;
(2) signed by the testator or in the testator’s name by some
other individual in the testator’s conscious presence and by
the testator’s direction; and
(3) either:
(A) signed by at least two individuals, each of whom signed
within a reasonable time after the individual witnessed
either the signing of the will as described in paragraph
(2) or the testator’s acknowledgment of that signature or
acknowledgment of the will; or
(B) acknowledged by the testator before a notary public or
other individual authorized by law to take
acknowledgments.
SCPC Sec. 2-502
Except as otherwise provided…, a will must be:
(1) in writing;
(2) signed by the testator or in the testator’s name by some
other individual in the testator’s conscious presence and by
the testator’s direction; and
(A) signed by at least two individuals, each of whom signed
within a reasonable time after the individual witnessed
either the signing of the will as described in paragraph
(2) or the testator’s acknowledgment of that signature or
acknowledgment of the will; or
(B) acknowledged by the testator before a notary public or
other individual authorized by law to take
acknowledgments.
Section 62-2-505
 A written will is valid if executed in compliance with § 62-2-502 either at the time of
execution or at the date of the testator's death or if its execution complies with the law at
the time of execution of (1) the place where the will is executed, or (2) the place where
the testator is domiciled at the time of execution or at the time of death.

In re Groffman, (1969) 2 All E.R. 108 (High Ct. of Justice, Eng.) (1)
Stevens v. Casdorph, 508 S.E.2d 610 (W. Va. 1998) (1)
“Presence” in Will Execution


“Signature” in Will Execution
Purpose: To provide evidence of finality and distinguishes a will from mere draft or notes.
What forms of “signature” serve this purpose?

Taylor v. Holt, 134 S.W.3d30
(Tenn. App. 2003)
Steve Godfrey’s Will

Estate of Morea,
645 N.Y.S.2d 1022 (N.Y. Surr. Ct. 1996)
§ 62-2-503. Attestation and self-proving.
(a) Any will may be simultaneously executed, attested, and made self-proved.
I, __________, the testator, sign my name to this instrument this ___ day of __________, 19___,
and being first duly sworn, do hereby declare to the undersigned authority that I sign and execute

this instrument as my last will and that I sign it willingly (or willingly direct another to sign for
me), that I execute it as my free and voluntary act for the purposes therein expressed, and that I
am eighteen years of age or older, of sound mind, and under no constraint or undue influence.
We, __________ and __________, the witnesses, sign our names to this instrument, and at least
one of us, being first duly sworn, does hereby declare, generally and to the undersigned
authority, that the testator signs and executes this instrument as his last will and that he signs it
willingly (or willingly directs another to sign for him), and that each of us, in the presence and
hearing of the testator, hereby signs this will as witness to the testator's signing, and that to the
best of our knowledge the testator is eighteen years of age or older, of sound mind, and under no
constraint or undue influence.
(b) An attested will may at any time subsequent to its execution be made self-proved:
The State of __________ County of __________ We, __________ and __________, the testator
and at least one of the witnesses, respectively, whose names are signed to the attached or
foregoing instrument, being first duly sworn, do hereby declare to the undersigned authority that
the testator signed and executed the instrument as his last will and that he had signed willingly
(or willingly directed another to sign for him), and that he executed it as his free and voluntary
act for the purposes therein expressed, and that each of the witnesses, in the presence and hearing
of the testator, signed the will as witness and to the best of his knowledge the testator was at that
time eighteen years of age or older, of sound mind, and under no constraint or undue influence.
Execution of Wills
2. Curing Defects
Substantial Compliance and Harmless Error

In re Will of Ranney, 589 A.2d 1339 (N.J. 1991)
No attestation clause but two-step affidavit
 witnesses did not sign the will
 affidavit language refers to attestation that NEVER happened

UPC §2-503: Harmless Error
Although a document or writing added upon a document was
not executed in compliance with Section 2-502, the document
or writing is treated as if it had been executed in compliance
with that section if the proponent of the document or writing
establishes by clear and convincing evidence that the
decedent intended the document or writing to constitute
(i) the decedent’s will,
(ii) a partial or complete revocation of the will,
(iii) an addition to or an alteration of the will, or
(iv) a partial or complete revival of his [or her] formerly
revoked will or of a formerly revoked portion of the
will.
In re Estate of Hall, 51 P.3d 1134 (Mont. 2002)
In re Pavlinko’s Estate,148 A.2d 528 (Pa. 1959)
In re Snide, 418 N.E.2d 656 (N.Y. 1981)
Holographic Will States (2008)

UPC §2-502(b)
(b) [Holographic Wills.] A will that does not comply with subsection (a) is valid as a holographic
will, whether or not witnessed, if the signature and material portions of the document are in the
testator’s handwriting.
Kimmel’s Estate, 123 A. 405 (Pa. 1924)
Estate of Gonzalez,855 A.2d 1146 (Me. 2004)

Estate of Gonzalez

B. The Revocation of Wills
UPC §2-507: Revocation of Wills
(a) A will or any part thereof is revoked:
(1) by executing a subsequent will that revokes the previous will or part expressly or by
inconsistency; or
(2) by performing a revocatory act on the will, if the testator performed the act with the intent
and for the purpose of revoking the will or part or if another individual performed the act in the
testator’s conscious presence and by the testator’s direction.
South Carolina version of (2): by being burned, torn, canceled, obliterated, or destroyed, with
the intent and for the purpose of revoking it by the testator or by another person in his presence
and by his direction.
Problem:
Revocation by Inconsistency

Harrison v. Bird, 621 So. 2d 972 (Ala. 1993)
Thompson v. Royall,175 S.E. 748 (Va. 1934)
LaCroix v. Senecal,99 A.2d 115 (Conn. 1953)
Estate of Alburn,118 N.W.2d 919 (Wis. 1963) (slide 1)

(. 274)

Is the Milwaukee Will revived?
If not, can the Kankakee will be admitted to probate or did Ottilie Alburn die
intestate?
 In Lyles - testator’s will gave 40 acres of her farm to A and 100 acres to B, T’s
heir. Then later struck out A and wrote “140” over the “100” acres given to
B. B is the intestate heir of T, A was not,
 Page 298, prob 3
 A argued that his gift was revoked only on the condition that the “140” gift to
B was valid.
 The court refused to apply DRR to A’s gift, because B was the testator’s heir
and would receive the 140 acres by intestacy.
Wilbanks I and II
 ‘82 will presumed revoke; ‘80 revived?
 Old Rule
 New Rule
 SC sec 62-2-508
 (a) The revocation by acts under § 62-2-506(2) of a will made subsequent to a
former will, where the subsequent will would have revoked the former will if
the subsequent will had remained effective at the death of the testator, shall
not revive or make effective any former will unless it appears by clear,
cogent, and convincing evidence that the testator intended to revive or make
effective the former will.
(b) The revocation by a third will under § 62-2-506(1) of a will made
subsequent to a former will, where the subsequent will would have revoked
the former will if the subsequent will had remained effective at the death of
the testator, shall not revive or make effective any former will except to the
extent it appears from the terms of the third will that the testator intended
the former will to take effect.
Revocation by Operation of Law
 Revocation by Divorce (SC 2-507)
 Applies in all but a handful of states where revocation occurs only if the divorce
is accompanied by a property settlement.
 Revocation by Marriage (SC 2-301)
 Revocation by Birth of Children (SC 2-302)
 No Revocation by Other Changes of Circumstances



SC Sec 62-2-507
 If after executing a will the testator is divorced or his marriage annulled or his spouse is a
party to a valid proceeding concluded by an order purporting to terminate all marital
property rights or confirming equitable distribution between spouses, the divorce or
annulment or order revokes any disposition or appointment of property including
beneficial interests made by the will to the spouse, any provision conferring a general or
special power of appointment on the spouse, and any nomination of the spouse as
executor, trustee, conservator, or guardian, unless the will expressly provides otherwise.
 Property prevented from passing to a spouse because of revocation by divorce or
annulment or order passes as if the spouse failed to survive the decedent, and other
provisions conferring some power or office on the spouse are interpreted as if the spouse
failed to survive the decedent.
SC Sec 62-2-301

 (a) If a testator fails to provide by will for his surviving spouse who married the testator
after the execution of the will, the omitted spouse, upon compliance with the provisions
of subsection (c), shall receive the same share of the estate he would have received if the
decedent left no will unless:
 (1) it appears from the will that the omission was intentional; or
 (2) the testator provided for the spouse by transfer outside the will and the intent
that the transfer be in lieu of a testamentary provision is shown by statements of
the testator or from the amount of the transfer or other evidence.
B. Rights of Descendants Omitted from the Will
Gray v. Gray, 947 So. 2d 1045 (Ala. 2006)
SC Section 62-2-302
 ((a) If a testator fails to provide in his will for any of his children born or adopted after
the execution of his will, the omitted child, upon compliance with subsection
 (d), receives a share in the estate equal in value to that which he would have received if
the testator had died intestate unless:
 (1) it appears from the will that the omission was intentional; or
 (2) when the will was executed the testator had one or more children and devised
substantially all his estate to his spouse; or
 (3) the testator provided for the child by transfer outside the will and the intent
that the transfer be in lieu of a testamentary provision is shown by statements of
the testator or from the amount of the transfer or other evidence.
SC Omitted Child Problem
 H and W marry and sign “I love you” wills. Thereafter, a child is born. W dies without
making a new will (assume H and child survive W). How is W’s estate divided?
C. Components of a Will
1. Integration of Wills
2. Republication by Codicil
3. Incorporation by Reference
4. Acts of Independent Significance
UPC §2-510: Incorporation by Reference (SC sec. 62-2-509 the same.)
Any writing in existence when a will is
executed may be incorporated by
reference if the language of the will
manifests this intent and describes the
writing sufficiently to permit its
identification.
Clark v. Greenhalge, 582 N.E.2d 949 (Mass. 1991)
SC sec. 62-2-512
• A will may refer to a written statement or list to dispose of items of tangible personal
property not otherwise specifically disposed of by the will, other than money, evidences
of indebtedness, documents of title . . ., securities . . ., and property used in trade or
business.
• To be admissible under this section as evidence of the intended disposition, the writing
must either be in the handwriting of the testator or be signed by him and must describe
the items and the devisees with reasonable certainty. The writing may be referred to as
one to be in existence at the time of the testator's death; it may be prepared before or after
the execution of the will; it may be altered by the testator after its preparation; and it may
be a writing which has no significance apart from its effect upon the dispositions made by
the will.
Johnson v. Johnson, 279 P.2d 928 (Okla. 1954)

UPC §2-512: Acts of Independent Significance
 A will may dispose of property by reference to acts and events that have significance
apart from their effect upon the dispositions made by the will, whether they occur before
or after the execution of the will or before or after the testator’s death. The execution or
revocation of another individual’s will is such an event
D. Contracts Relating to Wills
UPC §2-514: Contracts Concerning Succession
A contract to make a will or devise, or not to revoke a will
or devise, or to die intestate . . . may be established only by
(i) provisions of a will stating material provisions of the contract,
(ii) an express reference in a will to a contract and extrinsic evidence proving the terms of
the contract, or
(iii) a writing signed by the decedent evidencing the contract and extrinsic evidence
proving the terms of the contract. The execution of a joint will or mutual wills does not
create a presumption of a contract not to revoke the will or wills.
SC section 62-2-701 difference in green.
Via v. Putnam, 656 So. 2d 460 (Fla. 1995)

Chapter 6: NONPROBATE TRANSFERS AND PLANNING FOR INCAPACITY
Will Substitutes

Will Substitutes: 1) tend to be asset-specific; 2) avoid probate; and 3) are not subject to the
Wills Act.
B. Will Substitutes and the Wills Act
1. Revocable Trusts
(Deferred)
B. Will Substitutes and the Wills Act
2. Payable on Death Contracts and Other Nonprobate Transfers
In re Estate of Atkinson, 175 N.E.2d 548 (Ohio Prob. 1961)
Estate of Hillowitz,238 N.E.2d 723 (N.Y. 1968)
“In the event of the death of any partner, his share will be transferred to his wife, with no
termination of the partnership.”
UPC §6-101: Nonprobate Transfers on Death
A provision for a nonprobate transfer on death in an insurance policy, contract of employment,
bond, mortgage, promissory note, certificated or uncertificated security, account agreement,
custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement
plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement, or other
written instrument of a similar nature is nontestamentary.
Uniform R/E TOD (pending in SC: 62-6-301)
 It is a non-testamentary transfer
 Only available for individual transferors
 But transferee can be an individual or other estate planning entities (for example a trust)
(SC will not limit)
 Revocable by law, even if deed says otherwise
 But might be subject to contract not to revoke
 Capacity is the same as for making a will
 Can be revoked by: recorded TOD deed, recorded “instrument of revocation,” recorded
deed expressly revoking TOD deed
 Can’t be revoked by Will
 Beneficiary’s creditors can’t reach during transferor’s lifetime
 Beneficiary must survive the transferor to take
 Creditors of transferor estate can reach similar to other non-probate transfers (SC rule?)
C. Will Substitutes and the Subsidiary Law of Wills
Types of Life Insurance: Life’s Great Lottery
 Whole Life Universal Life*
 Variable Life*
 Universal Life*
 Level Term

 Annual Renewal Term
 Lots of hybrids
 * investment/savings element
Cook v. Equitable Life Assurance Soc’y, 428 N.E.2d 110 (Ind. App. 1981) (slide 1)
SC Law 62-2-507 : Divorce is deemed pre-decease
• Applies only to Wills
• New Uniform Act (2-804) broader, but unanswered is: Retroactive?
• Qualified Retirement Designation of Beneficiary Pre-empted by ERISA and state law
can’t change (Egelhoff). (Plan Administrators protected)
Pension and Retirement Accounts

Varela v. Bernachea, 917 So. 2d 295 (Fla. App. 2005)
SCPC Multi-Party Accounts
• 62-6-102 Protects financial Institutions
• As does 62-6-108 to 6-113
Lifetime ownership (6-103):
 Joint Accounts - depositor(s) to extent of contribution*
 POD – original payee(s)*
 Trust Accounts belong to the Trustee, unless trust is irrevocable*
o *Unless clear and convincing evidence otherwise
Rights of Survivorship (6-104)
• Jt Acc’t - to survivor(s)* (can change by Will with clear & convincing evidence)
• POD - to original payee(s) surviving, or if none, to the POD payee*
• Trust Acc’t – survivor trustee(s) and if none to beneficiary*
• *unless pre-death written evidence different (acc’t agreement, etc)
• POD and Trust Acc’t - can’t change by Will
Rights of Creditors (6-107) Multi-party Accounts
• Creditors of the estate of a deceased account holder, through the Estate, can reach account
proceeds in the hands of survivor(s):
• if necessary to pay debts, and
• the decedent had a beneficial entitlement before death
• Two year S/L to assert liability
Transferor on Death (TOD)
• SC sec. 35-6-10, et seq. provides for registration of securities in Transfer on Death (TOD)
form

•

Creditors of a decedent owner can reach by 35-6-90, as otherwise allowed by state law,
whatever that may be!
D. Pour-Over Wills and Revocable Trusts in Modern Estate Planning (Deferred)
Joint Tenancies in R/E (Imperfect Will Substitute)
 Creation of Jt Tenancy in R/E gives the donee a present interest in the R/E, that cannot be
revoked
 Jt. T can be severed during lifetime
 Creditors of all tenants can reach
 SC 2-804 severs a Jt Ten, unless expressly JTWROS; and if JTWROS, loss of
testamentary power of disposal
F. Planning for Incapacity
In re Estate of Kurrelmeyer, 895 A.2d 207 (Vt. 2006)
62-5-501 SC Durable Power of Attorney
• Document must use the “magic” words to be durable, i.e., survive the incompetence of
the principal
• Executed and attested like a Will, and recorded like a deed
• Can be general or limited in scope
• 3rd party reliance if contains “magic” words
• Other Pwrs of Atty valid until actual notice of disability (62-2-502)
SC POA Gift Cases
• Fender v. Fender, 329 SE2d 430 (1985)
• Gordan v. Busbee, __ SE2d ___ (Aug 31 2011)
• Estate’s sued to recover property “gifted” by attorney-in-fact during the decedent’s
lifetime.
Advance Directives
 Instructional Directives
 Specifies treatment in end-of-life situation or in the event of incompetence.
 Proxy Directives
 Designates an agent to make health care decisions for the patient.
 Hybrid or Combined Directives
 Incorporates both of the first two approaches, that is, directs treatment preferences
and designates an agent to make substituted decisions.
Bush v. Schiavo, 885 So. 2d 321 (Fla. 2004)
SC Health Care Laws
• Death with Dignity Act (44-77-10, et seq.) also called Living Wills
• Health Care Power of Attorney (62-5-504)
• Adult Health Care Consent Act (44-66-10)
• Do Not Resuscitate Order Act (44-78-10)
• Uniform Determination of Death Act (44-43-450) (Page 80 of the Text)
• U. Anatomical Gifts Act (44-43-300 et seq)
Death with Dignity Act (44-77-10, et seq.)
• Deals with terminal illness and persistant legislative state
• Can direct treatment or direct withhold treatment
• Designate an agent to revoke or to enforce
• 6-hour waiting period
• Statutory form (44-77-50)
Living Will Continued
• Signed,witnessed by 2 and notaried (one of the witnesses may be the notary)

•

If in a hospital or a nursing home, someone from Office of Omsbudsman (Gov’s office),
must be one of the witnesses
Health Care Power of Attorney (62-5-504)
• Designate Agent to make health care decision any time the principal is not competent
• Choices: Organ Donor, Life-Sustaining Procedures, Tube Feeding
• Living Will trumps when applicable
• Signed and 2 witness (a number of individuals are disqualified)
• Statutory form
SC Adult Health Care Consent
• a guardian appointed by the court, if the decision is within the scope of the
guardianship;
• an attorney-in-fact appointed by the patient in a durable power of attorney, if the decision
is within the scope of his authority;
• a person given priority to make health care decisions for the patient by another statutory
provision;
• a spouse of the patient unless the spouse and the patient are separated and written etc
• a parent or adult child of the patient;
• an adult sibling, grandparent, or adult grandchild of the patient;
• any other relative by blood or marriage who reasonably is believed by the health care
• professional to have a close personal relationship with the patient;
• A person given authority to make health care decisions for the patient by another
statutory provision.
• If persons of equal priority disagree . . . may petition the probate court for an order
determining what care is to be provided or for appointment of a temporary or permanent
guardian.

Chapter 7:Rights of the Surviving Spouse
Marital Property Systems

Community Property States

Rights of Surviving Spouse to Support

Dower Rights (Wife’s right to 1/3 of Husband’s R/E for Life)
 Declared unconstitutional in Boan v Watson, 316 SE2d 401 (SC 1984) on equal
protection basis
 Prospective in effect from 5/22/1984
 Statute repealed (21-5-10)
Exempt Property - SCPC 62-2-401
 Surviving Spouse entitled to $5k of personal and household goods and effects – minor or
dependent children are so entitled if no surviving spouse
 If not enough property, the make up with other assets
 This is before creditors are paid (except admin costs and funeral expenses)
 There is an 120 hr survivorship rule
 If estate is sufficient, specifically devised property is not subject to exempt property
claim (62-2-402)

 You aren’t likely to see in practice. You won’t represent estates that small.
SC Elective Share - Sections 62-2-201 to -207
 62-2-201
 (a) “If a married person domiciled in this State dies, the surviving spouse has a right of
election to take an elective share of one-third of the decedent's probate estate. . .”
 (b) For non-domiciliaries, law of domicile determines spousal rights
Who is a Surviving Spouse
 62-2-201(c): "Surviving spouse“ . . . is as defined in § 62-2-802.
 First, must be married to the decedent. Either by ceremony or by common-law
 Must survive
 Must not be divorced (see 2-802(b)
Who is not:
 62-2-802(a): “A person who is divorced from the decedent or whose marriage to the
decedent has been annulled is not a surviving spouse unless, by virtue of a subsequent
marriage, he is married to the decedent at the time of death.
 A decree of separate maintenance which does not terminate the status of husband and
wife is not a divorce for purposes of this section.
A surviving spouse does not include (2-802(b)):
 (1) a person who obtains or consents to a final decree or judgment of divorce from the
decedent or an annulment of their marriage, which decree or judgment is not recognized
as valid in this State, unless . . . they subsequently participate in a marriage ceremony
purporting to marry each to the other, or subsequently live together as husband and wife;
 (2) a person who, following a decree or judgment of divorce or annulment obtained by
the decedent, participates in a marriage ceremony with a third person; or
 (3) a person who was a party to a valid proceeding concluded by an order purporting to
terminate all marital property rights or confirming equitable distribution between
spouses.
 (4) a person claiming to be a common law spouse who has not been established to be a
common law spouse by an adjudication commenced before the death of the decedent or
within the later of eight months after the death of the decedent or six months after the
initial appointment of a personal representative; if the action is commenced after the
death of the decedent, proof must be by clear and convincing evidence.
Problem:
 H died, survived by his “wife” W. She had been married 8 times before and at least 2
were alive and not divorced from W when H and W married.
 Is W H’s surviving spouse?
 No, see Lovett v. Lovett, 494 SE2d 823 (SC App. 1997)
Probate Estate 62-2-202
 “. . . probate estate means the decedent's property passing under the decedent's will plus
the decedent's property passing by intestacy, reduced by funeral and administration
expenses and enforceable claims.”
 Seifert
 62-7-401(c) (formerly 62-2-112)
 Dreher
Waiving the Elective Share - SCPC 62-2-204(a)
 The rights of a surviving spouse to an elective share, homestead allowance, and exempt
property, or any of them, may be waived, wholly or partially, before or after marriage, by
a written contract, agreement, or waiver voluntarily signed by the waiving party after fair

and reasonable disclosures to the waiving party of the other party's property and financial
obligations have been given in writing.
Waivers – 62-2-204(b)
 Unless it provides to the contrary, a waiver of all rights in the property or estate of a
present or prospective spouse or a complete property settlement entered into after or in
anticipation of separation or divorce is a waiver of all rights to elective share, homestead
allowance, and exempt property by each spouse in the property of the other . . .
 . . . and a disclaimer by each of all benefits which would otherwise pass to him from the
other by intestate succession or by virtue of the provisions of a will executed before the
waiver or property settlement.
What is Fair Disclosure
 “the document acknowledged that . . . each disclaimed interest in the spouse's estate
except as provided in the will . . . of the other spouse; and each had made a full, fair and
complete disclosure to each other of all presently-owned assets.”
 Same as antenuptial agreement
Fair disclosure means (according to Ct App)
 “before signing an antenuptial agreement, each party must disclose to the other the facts
that exist at the time of the agreement and which, in the absence of the antenuptial
agreement, affect or determine the prospective intestate share of a surviving spouse in the
disclosing party's estate or which otherwise affect or determine distribution of property at
the disclosing party's death.”
 Mrs. G established she had no real or general knowledge of the total extent of her
husband's assets. . . . she had no knowledge of the value of husband's estate. The attorney
preparing the waiver document testified he did not discuss assets with Mrs. G when it
was executed.
 Geddings v. Geddings, 460 SE2d 376 (1995)
62-2-203
 The right of election of the surviving spouse may be exercised only during his lifetime by
him or by his duly appointed attorney in fact. In the case of a protected person, the right
of election may be exercised only by order of the court in which protective proceedings
as to his property are pending.
Proceeding for Elective Share - SCPC 62-2-205
 File claim within 8 months of death or 6 months of probate of Will, whichever is later
Spouse Dies While Pending
 Gallagher v. Evert, 577 SE2d 217 (SC App 2002)
Offset: 62-2-206
 A surviving spouse is entitled to benefits provided under or outside of the decedent's will,
by any homestead allowance, [exempt property], whether or not he elects to take an
elective share, but . . . [offset the elective share]
Offset 62-2-207
 In the proceeding for an elective share, all property, including beneficial interest, which
passes or has passed to the surviving spouse
 under the decedent's will or by intestacy,
 by a homestead allowance, and
 by Section 62-2-401, or
 which would have passed to the spouse but was renounced, or
 which is contained in a trust created by the decedent's will or

 a trust as described in Section 62-7-401(c) in which the spouse has a beneficial
interest,
is applied first to satisfy the elective share and to reduce contributions due from other
recipients of transfers included in the probate estate.
 A beneficial interest that passes or has passed to a surviving spouse under the decedent's
will includes
 an interest as a beneficiary in a trust created by the decedent's will or
 an interest as a beneficiary in property passing under the decedent's will to an
inter vivos trust created by the decedent.
 For purposes of this subsection, the value of the electing spouse's beneficial interest in
property which qualifies or would have qualified for the federal estate tax marital
deduction pursuant to Section 2056 of the Internal Revenue Code, as amended and in
effect on December 31, 2009, must be computed at the full value of the qualifying
property.
 Qualifying for these purposes must be determined without regard to whether an election
has been made to treat the property as qualified terminable interest property.
Problem
 Will gives house to H and residue to D. House=$75k; Total probate estate=$900k
 Elective Share = 1/3 x $900k = $300k
 $300k-$75k = $225k
 Same but $100k jt account with H
 Same but $100k jt account with D
 Not subject to elective share. Smith v. McCall, 477 SE2d 475 (SC
App. 1996)
 How about POD’s and Trust Accounts?
 $300k-$75k = $225k
 Same but $1m life ins to H
 Same but $1m life ins to D
 Life Ins? Retirement Benefits, $ due?
 Does 62-6-201 exempt?
Federal Estate Tax Marital Deduction – IRC sec. 2056
 (1) the decedent must be a U.S. citizen or resident;
 (2) there must be a surviving spouse, i.e., the spouse must survive the decedent;
 (3) the spouse must be a U.S. citizen; (2056(d) and 2056A provide an exception)
 (4) property or an interest in property must pass to the surviving spouse from the
decedent;
 (5) the property or interest in property transferred to the spouse must be included in the
decedent's gross estate; and
 (6) the surviving spouse must receive a “deductible” interest (non-deductible nonterminal interest).

Terminal Interest Exception
 (b)(5) surviving spouse is given an exclusive life income interest and a GPOA over the
trust assets.
 (b)(8) marital trust followed by charitable interests.
 (b)(7) qualified terminal interest property (QTIP).

 so-called “estate trust.”
Qualified Terminal Interest Property Trust (QTIP Trust)
 the surviving spouse has the absolute right for life to income from the property payable at
least annually;
 no one has an exercisable right during the surviving spouse's life to appoint any interest
to anyone other than the surviving spouse; and
 the PR elects to treat the interest as QTIP property. (The election is automatic if the
estate tax return is completed properly and the deduction claimed.)
 SC elective share offset statute does not require the devise to be claimed as a federal
estate tax deduction. It is only necessary that it could qualify.
 Making an election on a return is not needed to satisfy the SCPC offset rule.
 This is particularly important as the minimum filing requirements for a federal estate tax
return is $5m in 2011-12, but will be $1m in 2013.
Problem
 H’s Will devised to his wife my home . . . for the term of her natural life, a life estate,
provided however, that she
 (1) continues to occupy the home;
 (2) that this provision is null and void should she remarry;
 (3) that this provision is null and void should we divorce or be separated at the
time of my death; and
 (4) provided that she and she alone occupies the home.

Chapter 5: CONSTRUCTION OF WILLS
A. Mistaken or Ambiguous Language in Wills
 The decedent died in 1994 leaving an estate of approximately $200,000 to
 “my brothers and sisters living at the time of my death.”
Table of Consanguinity

In 1942, the decedent’s sister gave birth, out of wedlock, to a son she named Rudy.
The family took a solemn vow to tell the community Rudy was the decedent’s brother. They
agreed the siblings would speak of Rudy only as their brother and the parents would call
him their son.
They were so dedicated to this vow that Rudy did not find out the real truth until he was 47
years old.
When the father died, in the Petition For Letters Of Administration for his father's will,
Paul, another son, listed Rudy as a son. Thereafter, the father’s estate was evenly
distributed among the living siblings, including Rudy.
The decedent had executed a will in 1976, five years after her father's death. She had
named Paul her personal representative. However, in dividing the decedent’s estate, Paul
excluded Rudy this time, claiming he was not a brother.
Fenzel v. Floyd
 The decedent devised to her four daughters:
 “ ‘all of the lots that I own on Suber Street, Columbia, South Carolina, except those
hereinabove devised, under Item VI, share and share alike....’
 In Item IX of the Will, Mrs. Marshall left the residue of her estate to her daughter,
Maude Floyd.”
Bob Jones U. v .Strandell
 “I give and bequeath all of my personal and household effects of every kind,
including, but not limited to . . . and other insurance on or in connection with the use
of this property to Bob Jones University, Greenville, South Carolina[,] to be used in
a scholarship fund for needy students, . . . . I hereby declare that I have considered
my children, and have decided to dispose of my estate as stated herein due to
numerous circumstances.”
SC Cases – Extrinsic Evidence
 Estate of Fabian, 383 SE2d 474 (SC App 2001)
 Fenzel v Floyd, 347 SE2d 105 (SC App 1986)
 Bob Jones U v. Standell, 543 SE2d 251 (SC App 2001)
 Mahoney v. Grainger,186 N.E. 86 (Mass. 1933)
 Arnheiter v. Arnheiter, 125 A.2d 914 (N.J. Super. 1956)

Estate of Gibbs, 111 N.W.2d 413 (Wis. 1961)

Erickson v. Erickson, 716 A.2d 92 (1998)
Correcting Mistakes in Wills

UPC §2-805 (2008):
Reformation to Correct Mistakes
“The court may reform the terms of a governing instrument, even if unambiguous, to conform
the terms to the transferor’s intention if it is proved by clear and convincing evidence that the
transferor’s intent and the terms of the governing instrument were affected by a mistake of fact
or law, whether in expression or inducement.”
Fleming v. Morrison, 72 N.E. 499 (Mass. 1904)
B. Death of Beneficiary Before Death of Testator
Estate of Russell, 444 P.2d 353 (Cal. 1968) (slide 1)
SC Antilapse 2-603
• If a devisee, who is a great-grandparent or a lineal descendant of a great-grandparent of
the testator is dead at the time of execution of the will, fails to survive the testator, or is
treated as if he predeceased the testator, the issue of the deceased devisee who survive the
testator take in place of the deceased devisee and if they are all of the same degree of

kinship to the devisee they take equally, but if of unequal degree then those of more
remote degree take by representation. . . .
• . . . One who would have been a devisee under a class gift if he had survived the testator
is treated as a devisee for purposes of this section whether his death occurred before or
after the execution of the will.
Note: no 120-hour survivorship as in UPC
Antilapse: Case 4
T devises entire estate: one-half to Daughter, B, one-half to Son, A. B dies before T, leaving a
child, C. T dies. What happens to B’s share?
Common Law: B’s share lapses and passes by intestacy. A and C share B’s lapsed share, so A
gets ¾ of the estate, C gets ¼ of the estate.
Without the “no-residue-of the-residue” rule: B’s share, as a residuary devise to A and B, goes
to A, so A gets the entire estate.
With an applicable antilapse statute: C takes B’s share, so A gets ½ of the estate, C gets ½ of
the estate.

Antilapse: Case 5
T devises home to niece, A, and residue to B.
A dies before T, leaving a child, C.
T dies. What happens to A’s share?
UPC: As a descendant of T’s grandparents, A falls within the required relationship of the
antilapse rule. Therefore, C takes the home.
Some antilapse statutes: If the statute only applies to T’s descendants, then the antilapse statute
is not applicable, the devise lapses, and the house falls into the residue, to go to B.

Antilapse: Case 6
T devises entire estate: one-half to B, one-half to A, “but if A or B or both do not survive me, then
I give such predeceasing child’s share to my friend F.”
B dies before T, leaving a child, C.
T dies. What happens to B’s share?
Antilapse statute states a default rule: Because T has provided expressly for the possibility of
B predeceasing T, the antilapse statute does not apply. F receives one-half of the estate.

SCPC 62-2-601
 The intention of a testator as expressed in his will controls the legal effect of his
dispositions. The rules of construction expressed in the succeeding sections of this part
apply unless a contrary intention is indicated by the will.
Antilapse: Case 7
T devises entire estate: “to my living brothers and sisters, A, B, C, D, and E, to share and share
alike.”A, B, and C die before T, leaving descendants. T dies. What happens to A, B, and C ’s
shares?
Issue: Do the terms “living” and “share and share alike” express a condition of survival,
precluding application of the antilapse statute?
Allen v. Talley (1997): Terms indicate requirement of survival, antilapse statute does not
apply, D and E take the entire estate.

Antilapse: Case 8
T devises entire estate: “to my brothers and sisters, A, B, C, D, and E, to share and share alike.”
A, B, and C die before T, leaving descendants. T dies. What happens to A, B, and C ’s shares?
Issue: Does the term “share and share alike”, by itself, express a condition of survival,
precluding application of an antilapse statute?
Estate of Kuruzovich (2002): “Share and share alike” does not express contrary
intention, antilapse statute applies. D and E, and descendants of A, B, and C each take 1/5
of the estate.

Antilapse: Case 9
T devises Blackacre “to my son Sidney if he survives me,” residue to his wife Wilma.
Sidney dies before T, leaving a child, C. T dies. Who takes Blackacre?

Issue: Do the words “if he survives me” evidence an intention that Sidney’s descendants should
not be substituted for Sidney?
Majority Rule: An express requirement of survivorship, such as “if he survives me,” evidences
an intention that Sidney’s descendants should not be substituted for Sidney. Wilma takes
Blackacre.
UPC §2-603(b)(3): The term “if he survives me” is not a sufficient expression of contrary intent.
Antilapse statute applies. Debby takes Blackacre.

Ruotolo v. Tietjen, 890 A.2d 166 (Conn. App. 2006), aff’d 916 A.2d (Conn. 2007)
Difference of: “and” – “or”
• To A and A’s heirs and assigns
• Words of purchase- to A - and words of limitation – AND heirs and assigns
• To B or B’s heirs and assigns
• Words of purchase – to A - and then maybe survivorship?
• POA? later
How to Avoid Survivorship Uncertainty
• SC has no direct authority on survivorship language
1. Provide alternative gift if devisee does not survive
2. Provide in Will that antilapse statute does OR does not apply
3. Provide that issue of devisee take his or her parents share, per stirpes. See sample
codicil for issue of deceased child
Class Gifts
• What is a Class gift? p. 375 and Dawson
• My will says: I give $100k to my favorite WTE class of the last 20 years?
• Michael dies at Christmas
• I die New Year’s Eve
• I die next July?
• What if gift is to my former students who made an A in WTE?
Antilapse and Class Gifts: Case 10

Types of Devises
 Specific: Blackacre; my ring
 General: $10,000
 Demonstrative: $10k from the proceeds from sale of X asset
 Residue: remainder of estate not specifically devised

Order of Abatement
SCPC 62-3-902
 Unless Will provides otherwise - proportionally among:
 Intestate Property
 Residue Devises
 General Devises
 Specific Devises
 (Demonstrative Devises are Specific to the extent of the fund and General otherwise)
Case 13
 T executes a will in which she devises $300,000 to charity B, $100,000 to charity C, and
the residue of her estate to her son, A.
 At the time of the will’s execution, T has $800,000 in assets.
 T then becomes ill and undergoes an experimental treatment costing $500,000.
 The treatment fails: T dies.
 T’s estate is valued at $300,000.
 Under traditional abatement rules, A takes nothing, B takes $225,000, and C takes
$75,000.
 How to draft to avoid abatement?
 Drafting Solution
 Draft as percentages or max or min amounts
 For example: Charity B 40%, not to exceed $X, Charity C 10%,
not to exceed $X, residue to son A
 Or give son a preresiduary min gift: for example, son gets $X and
residue is divided among A, B, and C, equally or unequally.
Ademption – Specific Devise
SCPC 62-2-606(a)
• Devisee is entitled to:
• What’s left
• Unpaid purchase price
• Unpaid Condemnation Award
• Unpaid fire and casualty insurance proceeds
• Foreclosure property rec’d from sale of devised property
Example
• T devises coin collection to B.
• Subsequently, T sells ½ of the collection to C. C pays $10k in cash and owes T $15k for
the coins when T dies.
• T put the $10k paid for the coins in a “special” bank account that T sets aside for “hobby
mad money.”
• What does B get?
• What result if the coins were sold by T’s conservator?
• What result if sold by T’s attorney in fact?
Sale by Conservator
SCPC 62-2-606(b)
• Conversion by conservator (but maybe not POA), does not adeem
• Includes sales, condemnation, fire or casualty
• Not apply if disability ceases for more than one year
In re Estate of Anton, 731 N.W.2d 19 (Iowa 2007)
Accretion – Specific Securities
SCPC 2-605 ( text p. 390)1

• So much as is part of estate at death
• Plus, stock splits, etc by company
• Securities as a result of merger, consolidation, reorganization by company
• Reinvestment shares of a mutual fund
• Otherwise, additional securities are not part of devise
Example
• T owns 100 s/s of XYZ stock and devises 100 s/s of XYZ to B. The residue to C
• Before T dies, XYZ pays a 10% stock dividend (10s/s for T); and thereafter splits 2 for 1:
i.e. T now owns 220 s/s of XYZ
• Then T buys another 100 s/s of XYZ and then XYZ splits 2 for 1 again (T owns 640 s/s
of XYZ
• How many shares is B entitled to receive?
• Who gets the extra XYZ stock?
• SCPC 62-2-602 provides that after acquired property passes according to
the decedent’s Will.
(Ademption by) Satisfaction
• Case 12:T’s will devises $40,000 to her son, S, and her residuary estate to her daughter,
D. After executing the will, T gives $30,000. T dies with an estate valued at $100k
• How much does S receive?
SCPC 62-2-610
• Property which a testator gave in his lifetime to a person is treated as a satisfaction of a
devise to that person in whole or in part, only if the will provides for deduction of the
lifetime gift, or the testator declares in a contemporaneous writing that the gift is to be
deducted from the devise or is in satisfaction of the devise, or the devisee acknowledges
in writing that the gift is in satisfaction.
Problem
• T’s Will devises $30k to A and the residue to B. During T’s lifetime, T gives A 500 s/s of
Apple stock at at time when Apple is selling for $40 per share. T intends for the gift to
satisfy (at least in part) the devise. When T dies, Apple is selling for $400 per share.
• To what amount, if any, is A entitled to under T’s Will?
• For purpose of partial satisfaction, property given during lifetime is valued as of the time
the devisee came into possession or enjoyment of the property or as of the time of death
of the testator, whichever occurs first.
Similar Terms with Different Application
• Advancement – 2-109 – for intestacy only
• Ademption – 2-606 – applies to specific devises (ex: I give my bicycle to A)
• Satisfaction – 2-610 – applies to general devises (ex: I give $25k to A)
Exoneration/Non-Exoneration Example
• T owns Blackacre that is subject to a $100k Mortgage and T has $200,000 of cash
• Will directs that all just debts of the decedent be paid
• Will devises Blackacre to A
• $200,000 Residue devised to B
• In SC, how much does B inherit?
• $200,000
• If Will exonerates A from taking Blackacre subject to the mortgage, how much
does B inherit?
• $100,000
Non-Exoneration
SCPC62-2-607

•
•

A specific devise passes subject to any mortgage, pledge, security interest or other lien
existing at the date of death, without right of exoneration, regardless of a general
directive in the will to pay debts.
Unless Will provides otherwise (2-601)

Other Rules of Construction
• 1. Cardinal Rule of Construction: determine testator intent
• 2. If possible, determine intent from 4 corners of document (no extrinsic evidence)
• 3. Will should be read in light of surrounding circumstances (Fabian)
• 4. If possible, give effect to all parts of the Will
• 5. Words have ordinary meaning (BJU)
• 6. All provisions should be read as consistent, if possible – if not, more specific
controlling over more general – saying things differently in different places implies
different meaning (see next slide)
• 7. Will speaks as of time of death
• 8. Presumption against Intestacy
• 9. Devise of land is fee simple (62-2-611), even without words of limitation (Slide 33)
Construe All Parts Consistently
• Shelvin v. Colony Lutheran Church, 88 SE2d 674(1955)
• Walker v. Alverson, 68 SE 966 (1910)
• McQuage v. Calhoun, 183 SE 164 (1936)

Chapter 8 - TRUSTS: INTRODUCTION AND CREATION
Statistics and Sources of Law

Uniform Trust Code Adoptions (2009)

Types of Trusts
 Express Trusts
 Private Trusts
 Charitable Trusts or
 Implied
 Resulting Trusts (text pp. 571-72)
 Constructive Trusts (equitable remedy - text p. 214 – Father Devine)
Key Elements of a Trust:
 Division of Legal and Equitable title
 Settlor
 Trustee
 Beneficiary
 Transfer of Property

The Settlor, Trustee, and Beneficiaries

Parties to a Trust: The Settlor
 Settlor, also called Grantor and sometimes Trustor
 Requires Intent to create a Trust
 Requires Legal Capacity to create a Trust
 For revocable trust – same as Will (7-601)
 For irrevocable trust – understand nature of trust and probable consequences –
Maccauley et al. v. Wachovia Bank, 569 SE2d 371 (SC App. 2002)
Parties to a Trust- The Trustee Must Accept the Job
 One or more individuals or corporations
 Can be Settlor, beneficiary, or 3rd party
 Failure to name a Trustee not fatal
 C/L: must have some active duties, or trust will fail, and beneficiaries have legal title as
well as equitable ownership.
 In SC, no merger unless same Grantor, Trustee, and sole benef. (7-402(d))
Trustee: Fiduciary Duties
 Loyalty – administer in best interest of beneficiaries ; good faith (7-802); avoid conflicts
 Prudence –
 Duty of impartiality (7-803)
 Prudent Administration (7-804)
 Examples: Not commingle trust assets (with trustee’s personal assets); duty to
inform and account
 Administration – paperwork, filings (tax returns, etc), accountings (7-801)
 Investment - management
 Distribution – periodic and final
 Penalty for breach – loss of compensation or personal liability or removal
 Exercise Special Skills (7-806)
Corp (Professonal) v. Individual trustee (text p. 551)
 Cost (reasonable compensation 7-708 or by agreement); Professionals have fee schedule
(p 551)
 Experience
 Need for Successors
 Primary duties:
 Distribution
 Admin
 Investment
 Co-Trustees

 Trust Protector (Advisor) (7-808(b)-(c))
 Private Trust Co.
 Family Office
Third-Party Rights

Parties to a Trust: Benefi- ciaries – Equitable Owner
 Present or current beneficiaries –sometimes called life beneficiaries
 Future beneficiaries – sometimes call successor beneficiaries
 Final beneficiaries- sometimes called remaindermen or remainder beneficiaries
 – Beneficiaries must be:
 definite (7-402(b)), or
 Charitable (7-405), or
 animals (7-408)
 or certain special, non-charitable trusts (7-409), but is subject to RAP or must be
for the benefit of a cemetery, etc
 Example – Trustee can give money to anyone regardless of need
Life Estate Distinguished
 With a Life Estate, there is no division of legal and equitable title
 Life Estate has legal title for life
 Issues for L/E include waste, maintenance, payment of taxes
B. Creation of a Trust
Intent to Create
 Must not be precatory – I wish, hope
 Not an equitable charge (security interest, not a trust)
 Not an agent, security deposit, 3rd party contract
 Delivery of trust property, or symbolic delivery
Jimenez v. Lee,547 P.2d 126 (Ore. 1976)

The Hebrew University Assc. v. Nye, 169 A.2d 641 (Conn. 1961)
Methods to Create- SCTC 62-7-401
• Created by:
Transfer to a 3rd Party* (Deed of Trust) delivery of property or title; or by devise in a Will
(does not have to be in writing), or
Written Declaration of Trust – no deed required, but usually done
Exercise of Power of Appt (POA) in favor of a Trustee

*oral trust requires clear and convincing evidence to establish
Necessity of Trust Property
• Settlor
• Trustee
• Beneficiary
• Transfer of Property
Brainard v. Commissioner,91 F.2d 880 (7th Cir. 1937)
Speelman v. Pascal, 178 N.E.2d 723 (N.Y. 1961)
Will Substitutes
Revocable Trusts
SCTC § 62-7-601. Capacity of Settlor of Revocable Trust.
• The capacity required to create, amend, revoke, or add property to a revocable trust, or to
direct the actions of the trustee of a revocable trust, is the same as that required to make a
will.
SCTC§ 62-7-602. Revocation or amendment of Rev Trust.
• (a) Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor
may revoke or amend the trust. This subsection does not apply to a trust created under an
instrument executed before the effective date of this article.
Revoking Community Property Trusts (62-7-602)
• (b) If a revocable trust is created or funded by more than one settlor:
• (1) to the extent the trust consists of community property, the trust may be
revoked by either spouse acting alone but may be amended only by joint action of
both spouses; and . .
• (3) the trustee shall promptly notify the other settlors of the revocation or
amendment.
Revoking Joint Trusts - -62-7-602(b)
• (b) If a revocable trust is created or funded by more than one settlor: . . .
• (2) to the extent the trust consists of property other than community property, each
settlor may revoke or amend the trust with regard to the portion of the trust
property attributable to that settlor's contribution; and . . .
• (3) the trustee shall promptly notify the other settlors of the revocation or
amendment.
62-7-602(e)
• (e) A settlor's powers with respect to revocation, amendment, or distribution of trust
property may be exercised by an agent under a power of attorney only to the extent
expressly authorized by the terms of the trust or the power of attorney provided the
exercise of the power does not alter the designation of beneficiaries to receive the
property on the settlor's death under the settlor's existing estate plan.
Sample Drafting to Amend a Rev. Trust
• The Settlor may, by signed instruments delivered to the Trustee, during the Settlor's life,
amend:
• This Trust Agreement in any respect; or,
• Revoke this Trust in its entirety or any provision.
§ 62-7-603. Settlor's powers.
• While a trust is revocable, rights of the beneficiaries are subject to the control of, and the
duties of the trustee are owed exclusively to, the settlor.
SCTC § 62-7-604. Limitation on action contesting validity of revocable trust; distribution
of trust property.

•

(a) Time to Contest:
• 1 yr after Settlor’s death, or
• 120 days after notice of trust and the time limit to contest,
• whichever is sooner
• (b) Upon the death of the settlor of a trust that was revocable at the settlor's death, the
trustee may proceed to distribute the trust property in accordance with the terms of the
trust. The trustee is not subject to liability for doing so unless:
• (1) the trustee knows of a pending judicial proceeding contesting the validity of
the trust; or
• (2) a potential contestant has notified the trustee of a possible judicial proceeding
to contest the trust and a judicial proceeding is commenced within one hundred
twenty days after the contestant sent the notification.
• (c) A beneficiary of a trust that is determined to have been invalid is liable to return any
distribution received.
§ 62-7-605. Effect of penalty clause for contest.
• A provision in a revocable trust purporting to penalize any interested person for
contesting the validity of the trust or instituting other proceedings relating to the trust is
unenforceable if probable cause exists for instituting proceedings.
• In re Estate and Trust of Pilafas, 836 P.2d 420 (Ariz. App. 1992)
• Questions presented:
• Is the will revoked?
• Is the trust revoked?
D. Pour-Over Wills and Revocable Trusts in Modern Estate Planning
Reasons for creating Revocable Trusts:
• Avoid the so-called “probate process” and costs (In SC –fees are ¼ of 1% (§ 8-21-770))
• Greater confidentiality than owning assets directly and at death disposing of them by will
(i.e., publicity)
• Provide an arrangement for property management (especially during a time of legal
incapacity of the grantor), and
• Avoid Ancillary Probate
• Avoiding delays in starting and completing the administration process to transfer
ownership of property after a grantor’s death.
• The objectives of the revocable trust are achieved only to the extent that the trust is
funded.
• Rev trusts do not save estate taxes that can’t be saved with a properly drafted will.
• Usually the settlor has a will that “pours over” to the revocable trust all of the decedent’s
property still individually owned at death.

Pour-Over Wills, Revocable Trusts, and Nonprobate Transfers

§ 62-2-510. Additions to trusts.
• (a) A devise . . . may be made by a will to the trustee of a trust established or to be
established by the testator or by the testator and some other person or by some other
person if the trust is identified in the testator's will and its terms are set forth in a
written instrument (other than a will) executed before or concurrently
• The devise is not invalid because the trust is amendable or revocable, or
because the trust was amended after the execution of the will or after the death of
the testator . . . and shall be administered and disposed of in accordance with
the provisions of the instrument . . ., including any amendments thereto made
before the death of the testator . . .
• A revocation or termination of the trust before the death of the testator causes the
devise to lapse.
• (b) Death benefits of any kind, including . . . life insurance policies and payments
under . . . a pension, stock-bonus or profit-sharing plan, or under a retirement annuity
contract, may be paid to the trustee of a trust . . . in existence at the death of the
insured, employee, or annuitant [or]
• (c) Death benefits of any kind . . . may be paid . . . to a trustee named, or to be
named, in a will . . . . Such payments shall be deemed to pass directly to the trustee
of the testamentary trust and shall not be deemed to have passed to or be receivable by
the executor of the estate of the insured, employee, or annuitant.
Sample Pour-Over Drafting
• “I give and devise all the rest, residue and remainder of my property of every kind and
description, (including lapsed legacies and devises), wherever situate and whether
acquired before or after the execution of this Will, to the Trustee of that certain Trust
Agreement between myself as Settlor and myself as Trustee executed on the same day,
but before I executed this Will. . . .
• . . . The Trustee shall add this property to the corpus of the Trust and shall administer and
distribute the property in accordance with the provisions of that Trust Agreement,
including any amendments made by me before my death.”

Clymer v. Mayo, 473 N.E. 2d 1084 (Mass. 1985)

§ 62-7-607. Divorce or annulment as revoking revocable trust.
• If . . . the settlor is divorced or his marriage annulled or his spouse is a party to a valid
proceeding concluded by an order purporting to terminate all marital property rights or
confirming equitable distribution between the spouses, the divorce or annulment or order
revokes any disposition or appointment of property including . . . any nomination of the
spouse as trustee, unless the trust expressly provides otherwise.
• Property prevented from passing to a spouse because of revocation by divorce or
annulment or order passes as if the spouse failed to survive the settlor, and other
provisions conferring some power or office on this spouse are interpreted as if the spouse
failed to survive the settlor. If provisions are revoked solely by this section, they are
revived by the settlor's remarriage to the former spouse.
• . . . divorce or annulment or order means any divorce or annulment or order which would
exclude the spouse as a surviving spouse within the meaning of subsections (a) and (b) of
Section 62-2-802. . . .
• [This is similar to SCPC § 62-2-507.]
Oral Trusts
Estate of Fournier, 902 A.2d 852 (Me. 2006) (1)
Olliffe v. Wells, 130 Mass. 221 (1881)

Oral Trusts in SC
• 62-7-407 says oral trusts OK except for otherwise provided by statute:
• 62-7-401 says no oral declarations of trust (settlor is trustee)
• Statute of Frauds requires writing to prove R/E trust (Settlemeyer v. McCluney)
• So, only oral trust possible in SC is transfer to trustee (settlor is not trustee) involving
personal property
• 62-7-401 (b) is from old statute and says real estate constructive and resulting trusts can
be oral and that continues under SCTC
Settlemeyer v. McCluney 596 SE2d 514
• Between 1982 and 1991, Settlemeyer purchased 4 properties. Each time, he had the title
issued in his daughter’s name.
• Subsequently, Settlemeyer filed a lawsuit, alleging the properties were held in an
express, constructive or resulting trust, with McCluney as the trustee and Settlemeyer as
the beneficiary.
• Settlemeyer testified he voluntarily placed title of the properties in daughter's name and
admitted daughter had not induced him to have the properties conveyed to her.

•
•
•
•
•
•
•

He admitted that there was never an agreement that she would reconvey the property
back. “It wasn't brought up. I trusted her to think she would deed it back to me.”
Settlemeyer denied owneship in a divorce proceeding and in a HDEC investigation
Daughter denied she and her father had an agreement in which she was to convey the
properties to him but confirmed she did not pay the purchase price or property taxes for
the properties. She believed the properties were gifts from Settlemeyer.
Ct – oral trust not established by “clear evidence
Ct – he can’t regain title when he put property out of his control for fraudlent purposes
Ct- a presumption of a gift exists when transfer is to a child and requires proof of not gift
– No Resulting Trust arises
So . . . 62-7-401(b) opens up old rules concerning constructive trusts
• Secret trust - testamentary – constructive trust (Stuckey v. Truette, 177 SE 192
(1923))
• Secret trust – inter vivos – donee keeps, unless fraud or confidential relationship,
but then keeps if natural object of bounty (Kinsey v. Bennett, 15 SE 965 (1892));
All v. Prillaman, 20 SE2d 741 (1942))
• Semisecret trust still fails – No SC cases

Chapter 9 - RIGHTS TO DISTRIBUTIONS FROM THE TRUST FUND
A. Rights of the Beneficiary to Distributions
 Mandatory Trusts – Elective Share Trust is a sample
 Discretionary Trust – The Feline Family Trust is a sample (See next slide!)
 Spray (inc must be distributed, but who gets it?)
 Sprinkle trusts (inc may be distributed)
Extended Discretion; Exculpation; and Arbitration

Arbitration – Nationally
 Rachel v. Reitx, 347 SW3d 305 (Tex App, Oct 2011) - Ct said no – state arbitration
applies to contracts, i.e., agreement
 Schoneberger v. Oelze, 96 P.3d 1078 (Ariz.App. 2004) (AZ Legislature changed the law)
 Diaz v. Bukey, 125 Cal.Rptr.3d 610 (Cal. App. 2011)
B. Rights of the Beneficiary’s Creditors
Alienability of Beneficial Interest
 Under the C/L, a beneficial interest in a trust was alienable – both voluntary and
involuntary (but spendthrift trust provides otherwise)
 Thus under C/L, rights of a beneficiary’s creditors is based on what right the beneficiary
may have to income or principal, upon what conditions and when – (SCTC 62-7-501)
Types of Trusts and Creditors -SCTC Provisions
 Revocable Trust (62-7-505)
 Mandatory Trust (62-7-501)
 Pure Discretionary Trust (62-7-504) (and probably includes Support Trust)
 Spendthrift Trust (62-7-502, -503), can apply to both Mandatory and Discretionary Trust
 Self-Settled Asset Protection Trust (n/a)
SCTC § 62-7-501. Rights of creditor or assignee
 a) Except as provided in subsection (b), the court may authorize a creditor or assignee of
the beneficiary to reach the beneficiary's interest by attachment of present or future
distributions to or for the benefit of the beneficiary or other means. The court may limit
the award to such relief as is appropriate under the circumstances
 (b) This section shall not apply and a trustee shall have no liability to any creditor of a
beneficiary for any distributions made to or for the benefit of the beneficiary to the extent
a beneficiary's interest:
 (1) is protected by a spendthrift provision, or
 (2) is a discretionary trust interest
State Street Bank and Trust Co. v. Reiser, 389 N.E.2d 768 (Mass. App. 1979)
Can the bank recover against the trust assets?
Creditors and Rev Trusts - SCTC § 62-7-505

 (a) Whether or not the terms of a trust contain a spendthrift provision, the following rules
apply:
(1) During the lifetime of the settlor, the property of a revocable trust is subject to claims
of the settlor's creditors.
 (2) With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the
maximum amount that can be distributed to or for the settlor's benefit.
 If a trust has more than one settlor, the amount the creditor or assignee of a
particular settlor may reach may not exceed the settlor's interest in the portion of
the trust attributable to that settlor's contribution.
 (3) After the death of a settlor, . . . the property of a trust that was revocable at the
settlor's death is subject to claims of the settlor's creditors, costs of administration of the
settlor's estate . . . to the extent the settlor's probate estate is inadequate to satisfy those
claims, costs, . . ., unless barred by Section 62-3-801 et seq.
Discretionary Trusts: SCTC §62-7-504
 (b) Except as otherwise provided in subsection (c), a creditor of a beneficiary may not
compel a distribution from a trust in which the beneficiary has a discretionary trust
interest, even if:
(1) the discretion is expressed in the form of a standard of distribution; or
(2) the trustee has abused the discretion.
Standard of Distribution (Feline Family Trust)
 The Trustee may pay to or apply for the benefit of each Beneficiary such of the net
income and principal of the Trust as the Trustee in its discretion may determine primarily
for the medical care, education, support and maintenance in reasonable comfort of a
Beneficiary . . . .
SCTC §62-7-504 continued
 (c) To the extent a trustee has not complied with a standard of distribution or has abused a
discretion:
 (1) a distribution may be ordered by the court to satisfy a judgment or court order
against the beneficiary for support or maintenance of the beneficiary's child; and
 (2) the court shall direct the trustee to pay to the child such amount as is equitable
under the circumstances but not more than the amount the trustee would have
been required to distribute to or for the benefit of the beneficiary had the trustee
complied with the standard or not abused the discretion.
Problem 3 on p. 611
 Trust is to pay inc or prin to A in trustee’s uncontrolled discretion, the remainder to B.
 Q – If A has a judgment creditor, can the Trustee make payments directly for A’s support?
 See SCTC 7-501 and 7-504
Problem on p. 613
 Trust for A provides for inc and prin for A’s comfortable support and maintenance in
Trustee’s discretion. A is insolvent.
 Question: can a creditor of A sue Trustee and force a payment and then receive the
distribution?
 See, SCTC 7-504
Estate of Stevens (SC 2005)
 $6m testamentary trust
 Discretionary inc and prin for 2 kids
 One benef wants distributions to pay his children’s private school tuition, arguing the cost
is part of his support
 Ct: trustees may consider “family” when considering support – but still discretion

Spendthrift Provisions - SCTC § 62-5-502
 (a) A spendthrift provision is valid only if it restrains both voluntary and involuntary
transfer of a beneficiary's interest.
 (b) A term of a trust providing that the interest of a beneficiary is held subject to a
'spendthrift trust', or words of similar import, is sufficient to restrain both voluntary and
involuntary transfer of the beneficiary's interest.
 (c) A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift
provision and, except as otherwise provided in this article, a creditor or assignee of the
beneficiary may not reach the interest or a distribution by the trustee before its receipt by
the beneficiary.
SPENDTHRIFT (drafting)
 “All payments of principal and income payable, or to become payable, to the beneficiary
of any trust created hereunder shall not be subject to anticipation, assignment, pledge,
sale, or transfer in any manner, nor shall any beneficiary have the power to anticipate or
encumber their interest, nor shall their interest, while in the possession of the Trustee, be
liable for, or subject to, the debts, contracts, obligations, liabilities or torts of any
beneficiary.”
Exceptions to Spendthrift Provision: SCTC §503
(b) Even if a trust contains a spendthrift provision, a beneficiary's child who has a
judgment or court order against the beneficiary for support or maintenance may obtain
from a court an order attaching present or future distributions to or for the benefit of the
beneficiary.
(c) The exception in subsection (b) is unenforceable against a special needs trust,
supplemental needs trust, . . .
 Self-Settled Trusts – Generally considered an available asset, i.e., trust created with
beneficiary’s assets, even if trust doc created by someone else
 Exceptions:
 Testamentary Discretionary Trust created by Spouse
 Trust of disabled person if trust reimburses the state upon death
C. Modification and Termination of Trusts
In re Trust of Stuchell,801 P.2d 852 (Or. App. 1990)
Can trust be modified to provide for continuation as special needs trust if necessary to preserve
John’s public assistance?
In re Riddell,157 P.3d 888 (Wash. App. 2007)
Can trust be modified to provide for continuation as special needs trust for Nancy’s benefit?

SCPC – Family Settlement- 62-3-1101 and -1102
 A compromise of a controversy as to admission to probate . . . , the construction, validity,
or effect of a probated will, the rights or interests in the estate of the decedent, of a
successor, or the administration of the estate, if approved by the court after hearing, is
binding on all the parties . . .
 . . . including those unborn, unascertained, or who could not be located. An approved
compromise is binding even though it may affect a trust or an inalienable interest. . . .
 (62-3-1102 provides the probate court procedure for approval.)
§ 62-7-411. Modification or termination of noncharitable irrevocable trust by consent with court
approval.

 (a) A noncharitable irrevocable trust may be modified or terminated with court approval
upon consent of the settlor and all beneficiaries, even if the modification or termination is
inconsistent with a material purpose of the trust.
 A settlor's power to consent . . . may be exercised by an agent under a power of
attorney only to the extent expressly authorized by the power of attorney or the
terms of the trust; by the settlor's conservator with the approval of the court
supervising the conservator if an agent is not so authorized; or by the settlor's
guardian with the approval of the court supervising the guardianship
 (b) A noncharitable irrevocable trust may be terminated upon consent of all beneficiaries
if the court concludes that continuance of the trust is not necessary to achieve any
material purpose of the trust.
 A noncharitable irrevocable trust may be modified upon consent of all of the
beneficiaries if the court concludes that modification is not inconsistent with a
material purpose of the trust.
 (d) If not all of the beneficiaries consent to a proposed modification or termination of the
trust under subsection (a) or (b), the modification or termination may be approved by the
court if the court is satisfied that:
 (1) if all of the beneficiaries had consented, the trust could have been modified or
terminated under this section; and
 (2) the interests of a beneficiary who does not consent will be adequately
protected.
§ 62-7-412. Modification or termination because of unanticipated circumstances or inability
to administer trust effectively.
 (a) The court may modify the administrative or dispositive terms of a trust or terminate
the trust if, because of circumstances not anticipated by the settlor, modification or
termination will further the purposes of the trust. To the extent practicable, the
modification must be made in accordance with the settlor's probable intention.
Ex Parte Guaranty Bank & Trust Co. 177 SE2d 358 (1970)
 Trustee directed to use land for farming, but two interstate highways crossed the property
rendering it more valuable as commercial property. Ct approved sale of property although
the trust document did not include a power to sell.
§ 62-7-414. Modification or termination of uneconomic trust.
 (a) After notice to the qualified beneficiaries, and without court approval, the trustee of a
trust consisting of trust property having a total value less than $100k may terminate the
trust if the trustee concludes that the value of the trust property is insufficient to justify
the cost of administration.
 (b) The court may modify or terminate a trust or remove the trustee and appoint a
different trustee if it determines that the value of the trust property is insufficient to
justify the cost of administration.
§ 62-7-415. Reformation to correct mistakes.
 The court may reform the terms of a trust, even if unambiguous, to conform the terms to
the settlor's intention if it is proved by clear and convincing evidence that both the
settlor's intent and the terms of the trust were affected by a mistake of fact or law,
whether in expression or inducement.
§ 62-7-416. Modify to achieve tax objectives.
 To achieve the settlor's tax objectives, the court may modify the terms of a trust in a
manner that is not contrary to the settlor's probable intention. The court may provide that
the modification has retroactive effect.
§ 62-7-417. Combination and division of trusts.

 After notice to the qualified beneficiaries, a trustee may combine two or more trusts into
a single trust or divide a trust into two or more separate trusts, if the result does not
impair rights of any beneficiary or adversely affect achievement of the purposes of the
trust.
Chiles v. Chiles
 Apply SCTC to facts
 Trust is irrevocable because it says so
 Apply 7-411
 Specifically, look at 7-411(d)
 7-412 and 7-414 no help
 7-415 ?
 7-416
 7-413 – n/a
Trust Decanting (p. 650)
 Power to invade principal is exercised to distribute all trust assets to a new trust that is
typically similar, but “fixes” whatever was wrong with original trust
 SC Stay Tuned!
 Now available in NC, Alaska, etc.
Trust Protectors - SCTC 62-7-808 (b)-(c)

Claflin and Material Purpose
 Traditional Claflin Doctrine:
 If continuance of the trust without modification or termination is necessary to
carry out a material purpose of the settlor, the beneficiaries cannot compel
modification or termination.
 Examples of Material Purpose (traditional law):
 Spendthrift trust (Germann v. NY Life Co. (331 SSE2d 385 (SC App. 1985))
 Discretionary trust
 Support trust
 Postponed enjoyment
In re Estate of Brown,528 A.2d 752 (Vt. 1987)
(3) The … trust … shall be used to provide an education … for the children of my nephew … .
Said trust to continue for said purpose … until … accomplished.
At such time as this purpose has been accomplished … [the trust shall continue] for the care,
maintenance and welfare of [my nephew and wife] for and during the remainder of their natural
lives.
1) Has the educational purpose been satisfied?
2) If so, is there any other material purpose preventing termination?

Chapter 11 - CHARITABLE TRUSTS
A. Introduction
Charitable Trusts v. Private Trusts

B. Nature of Charitable Purposes
Charitable Purposes - SCTC 62-7-405
Charitable purposes include:
(a) the relief of distress or poverty;
(b) the advancement of knowledge or education;
(c) the advancement of religion;
(d) the promotion of health, scientific, literary, benevolent purposes;
(e) governmental or municipal purposes; and
(f) other purposes that are beneficial to the community.
 (b) If the terms of a charitable trust do not indicate a particular charitable purpose or
beneficiary, the court may select one or more charitable purposes or beneficiaries. The
selection must be consistent with the settlor's intention to the extent it can be ascertained.
 (c) The settlor of a charitable trust, the trustee, and the Attorney General, among others
may maintain a proceeding to enforce the trust.
Shenandoah Valley National Bank v. Taylor, 63 S.E.2d 786 (Va. 1951)
(1) On the last school day of each calendar year before Easter my Trustee shall divide the net
income into as many equal parts as there are children in the first, second and third grades of the
John Kerr School … , and shall pay one of such equal parts to each child in such grades, to be
used by such child in the furtherance of his or her obtainment of an education.
1) Did the testator intend to create a charitable trust?
2) Is the trust, in the court’s judgment, charitable?
Taylor under SC Law
• Is it a charitable trust?
• How about under 62-7-402(3)(C), refers over to the statutory RAP
• How about 72-7-405(a)?
approves benevolence
C. Modification of Charitable Trusts: Cy Pres or Equitable Deviation in SC
§ 62-7-413. Equitable deviation (Cy Pres).
 (a) Except as otherwise provided in Subsection (b), if a particular charitable purpose
becomes unlawful, impracticable, impossible to achieve, or wasteful:
 (1) the trust does not fail, in whole or in part;
 (2) the trust property does not revert to the settlor or the settlor's successors in
interest; and

 (3) the court may deviate from the terms of the trust to modify or terminate the
trust by directing that the trust property be applied or distributed, in whole or in
part, in a manner consistent with the settlor's charitable intent.
 (b) A provision in the terms of a charitable trust that would result in distribution of the
trust property to a noncharitable beneficiary prevails over the power of the court under
subsection (a) to modify or terminate the trust only if, when the provision takes effect:
 (1) the trust property is to revert to the settlor and the settlor is still living; or
 (2) fewer than the number of years allowed under the South Carolina Uniform
Statutory Rule Against Perpetuities (S.C. Code Section 27-6-10 et seq.) have
elapsed since the date of the trust's creation.
In re Neher, 18 N.E.2d 625 (N.Y. 1939)
[M]y home in Red Hook Village … to the incorporated Village of Red Hook, as a memorial to
the memory of my beloved husband, Herbert Neher, with the direction to said Village that said
property be used as a hospital to be known as “Herbert Neher Memorial Hospital.”
1) Did testator have a general or specific charitable intent?
2) If the testator had a general charitable intent, what alternative charitable purposes would
be consistent with that intent?
Expansion of Cy Pres
 “Wasteful” as basis for cy pres:
 Cy pres allowed if stated charitable purpose becomes “unlawful, impracticable,
impossible to achieve, or wasteful.”
 Presumption of general charitable intent:
 Party opposing cy pres must show donor lacked general charitable intent.
San Francisco Chronicle:The Buck Trust
1) Which was more important, SFF as trustee or the Marin County limit?
2) What result if “wasteful” was a recognized grounds for cy pres?
Philadelphia Story:The Barnes Foundation
Tax Rules
• Income Tax Deduction - IRC § 170 (& sometimes § 664 for some gifts to trusts)
• Tax Exemption Entity - IRC § 501(c)
IRS approval required - § 508 (except churches and less than $5k)
• Estate Tax Deduction – IRC § 2055
Charitable Remainder Trusts (Tax structured by IRC § 664)
• Common type charitable trust
• Must have at least one non-charitable beneficiary, and
• when all non-charitable interests terminate, the must pay over to charity, or
continue as a wholly charitable trust
• Can be for term of years (20 yr. max) or for life or lives of individuals
• Two basic types:
• Charitable remainder annuity trust - CRAT - (pays a fixed sum at least annually)–
5% minimum, 50% max
• Ex: pay $50k a year from $1m trust
• Charitable remainder unitrust – CRUT - (pays a fixed percentage of FMV of trust
assets, at least annually; recalculated each year- 5% min, 50% max.
• Ex: 5% of FMV annually from $1m trust
• No invasion of principal permitted
• Value of remainder must be at least 10%
• CRT is inc tax exempt, but distributions are income to the beneficiary, to the extent that
trust has current or accumulated income
Other Forms of Charitable Gifts

•
•
•
•

Pooled income funds (sponsored by the charity)- pays a variable % each year
Charitable gift annuity – pays a fixed annuity annually
Remainder interest in a farm or residence
Charitable lead trust (it’s the reverse of the charitable remainder trust: charity first and
then non-charitable remainder. Not an income tax exempt entity. Not affected by 7413(b) – purpose satisfied – not failed.)

Chapter 12 - POWERS OF APPOINTMENT: BUILDING FLEXIBILITY INTO TRUSTS
A. Introduction
Advantages of Powers of Appointment
 Postpone and delegate decisions about who will receive future distributions of trust
property.
 Addresses problem of changes in circumstances.
 Tax avoidance.
 Can be structured to avoid taxation when exercised.
Terminology and Types of Powers of Appointment

General Powers (GPOA)
 Appointing to self, estate, creditors, and creditors of estate is based on federal estate tax
law. See IRC § 2041 and applicable regulations
 The power to appoint to the entire world except “self, estate, creditors, ad creditors of
estate” is not GPOA
 Power to appt to heirs and charities is not a GPOA, it’s a SPOA
Tax Considerations for Powers of Appointment
 General Power
 Donee is treated as owner of appointive property and taxed accordingly (income,
gift, and estate).
 Special Power
 Donee is not treated as owner of appointive property for tax purposes (income,
gift, and estate).
 Possible to give donee something close to functional equivalent of
ownership without additional tax.
 Used regularly in contemporary estate planning to preserve flexibility
without tax cost.
 Where RAP has been abolished, can create a dynasty trust, exempt from
transfer tax, in perpetuity.
Irwin Union Bank & Trust Co. v. Long, 312 N.E.2d 908 (Ind. App. 1974)
Can Victoria reach the appointive property to satisfy her divorce judgment?
C. Exercise of a Power of Appointment
General Requisites for Exercise of a Power
A power of appointment is exercised to the extent that:
(1) the donee manifests an intent to exercise the power in an otherwise effective
document;
(2) the donee’s expression of an intent to appoint satisfies the formal requirements of
exercise imposed by the donor and by applicable law; and
(3) the donee’s appointment constitutes a permissible exercise of the power. …

Whether or not the donee has manifested an intent to exercise a power of appointment is a
question of construction. Restatement (Third) of Property: Wills and Other Donative Transfers,
§§19.1-19.2 (T.D. No. 5, 2006)
Beals v. State Street Bank & Trust Co., 326 N.E.2d 896 (Mass. 1975)
Residuary Clauses and Testamentary Powers

Exercise of Powers of Appointment: SCPC §62-2-608
A general residuary clause in a will, or a will making general disposition of all of the testator's
property, does not exercise a power of appointment held by the testator unless specific reference
is made to the power or there is some other indication of intention to include the property subject
to the power.
Limitations on Exercise
 General power:
 Donee can appoint in further trust.
 Special power:
 Traditional view – Donee cannot appoint in further trust unless expressly
permitted.
 Modern view – Donee can appoint in further trust.
Exclusive versus Nonexclusive Powers
 Exclusive Power
 Donee can appoint all the property to one or more objects, excluding others.
 Language such as: “to any one or more”; “to such of.”
 Nonexclusive Power
 Donee must appoint some amount to each object.
 Language such as: “to all and every one”; “to each and every one.”
 Illusory Appointment Rule: Each object must receive a “reasonable benefit.”
Fraud on POA
 Problem on p. 823 – Special power exercised in favor of permissive appointment
($250k to cousin) with side deal to give portion of appointed property ($100k) to
non-permissive appointee (husband)
Allocation and Capture
 Allocation (Marshalling)
 If appointive property and the donee’s property are disposed of in a common
disposition, the property is allocated to give maximum effect to the donee’s
intended disposition.
 Typically applied when there is an ineffective appointment to a nonobject or an
appointment violates the RAP.

 Capture
 When donor makes an ineffective appointment and allocation cannot save it,
appointive property passes through donee’s estate if the power is general.
 Applied when donee of a general power “manifests an intent to assume control of
appointive property for all purposes.”
Lapse Problem
 T’s will reads:
 1. exercise POA to A;
 2. rest to B.
 A predeceases but is, say, a cousin with issue, so anti-lapse statute would apply to a
devise.
D. Release of a Power of Appointment
Seidel v. Werner, 364 N.Y.S.2d 963 (Sup. Ct. 1975)
Is contract to exercise testamentary power of appointment in favor of Anna and Frank
enforceable?
E. Failure to Exercise a Power of Appointment
Loring v. Marshall, 484 N.E.2d 1315 (Mass. 1985)
At Anna’s death, who takes the trust principal?
Necessity of Trust Beneficiaries
Clark v. Campbell, 133 A. 166 (N.H. 1926)
I therefore give and bequeath to my trustees all my property embraced within the classification
aforesaid in trust to make disposal by the way of a memento from myself, of such articles to such
of my friends as they, my trustees, shall select.
 Must “the bequest for the benefit of the testator’s ‘friends’…fail for the want of certainty
of the beneficiaries”?
The Will of Marilyn Monroe

1) Did Monroe intend to create a trust?
2) If so, did Monroe designate an ascertainable beneficiary?
§ 62-7-402. Requirements for creation- Powers in Trust
• (c) A power in a trustee to select a beneficiary from an indefinite class is valid. If the
power is not exercised within a reasonable time, the power fails and the property subject
to the power passes to the persons who would have taken the property had the power not
been conferred.
In re Searight’s Estate, 95 N.E.2d 779 (Ohio App. 1950)
Trusts for Noncharitable Purposes

§ 62-7-408. Trust for care of animal.
• (a) A trust may be created to provide for the care of an animal or animals alive or in
gestation during the settlor's lifetime, whether or not alive at the time the trust is created.
The trust terminates upon the death of the last surviving animal.
(b) A trust authorized by this section may be enforced by a person appointed in the terms
of the trust or, if no person is so appointed, by a person appointed by the court. A person
concerned for the welfare of the animal may request the court to appoint a person to
enforce the trust or to remove a person appointed.
(c) Property of a trust authorized by this section may be applied only to its intended use,
except to the extent the court determines that the value of the trust property exceeds the
amount required for the intended use. Except as otherwise provided in the terms of the
trust, property not required for the intended use must be distributed to the settlor, if then
living, otherwise to the settlor's successors in interest.
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