Essential Elements of a Will or Living Trust Part II
In this article, we will continue to explore the factors that we review for each of our clients when preparing your Will or Living Trust.
Residue of the Estate
A residuary clause is the final dispositive provision of a will or a trust. The residuary clause must be drafted in light of the other provisions of the document and so as to avoid any property passing intestate. To avoid the inadvertent exercise of a power of appointment, the residuary clause should specifically exclude any property over which the testator has a power of appointment. Distribution may be outright or to a (testamentary) trust.
The Fiduciary and Fiduciary Powers
There are six types of fiduciaries a client may want to designate:
- A guardian of the person of minor children
- A conservator of the estate of minor children
- A testamentary trustee (of any trusts created in the will or trust)
- A personal representative (or executor) of the probate estate, or a successor trustee of the trust estate (or both).
- A guardian of the person of the client
- A conservator of the estate of the client
When selecting the Fiduciary, State law requirements for fiduciaries must be known and accommodated. A lawyer or a financial advisor may act as a fiduciary, but neither can consciously influence the client to name them a fiduciary. Some states have statutes in place that prohibit lawyers from receiving compensation both as a lawyer and as a fiduciary. One or more alternates should be named. Consideration should be given to empowering the final named fiduciary to name a successor. A fiduciary, be he or she an executor or a successor trustee, a conservator or a guardian, is typically given numerous powers by state statue. Nevertheless, there should be a detailed recitation of the fiduciary's powers in the will or the trust, even if they duplicate the state statute, since the client may live in a different state at the time of his or her death and that state may have more restrictive powers, or the statutory powers may change.
Furthermore, particular assets or the particular wants and needs of the client may require a fiduciary to have powers in addition to those laid out in a particular state's statutes. There are several fiduciary powers and issues a will or a trust should always address:
- The power to hire managers, accountants and lawyers for the administration of the estate or trust.
- The power to sell, mortgage, pledge, or lease estate or trust property.
- The power to name an ancillary executor or trustee if the fiduciary cannot act in another jurisdiction.
- The power to dispose manage or dispose of environmentally hazardous property.
- The power to self deal, if that is what the client wants.
- The power to continue a business, if, the client owns a business and that is what the client wants.
- Fiduciary liability issues should also be addressed.
All states require certain explicit formalities that must accompany the execution of a will. Generally, a will must be in writing, signed, witnessed, and acknowledged all in strict conformity with applicable state law. Most states make exceptions for holographic wills and nuncupative wills. If the client writes a trust, state law requirements for the execution of a trust (or a contract) must be known and accommodated. The first formal requirement for execution for a will is that the document be in writing and signed by the client or by someone in the presence of and at the direction of the client.
What constitutes a valid signature depends upon the facts and the law of the state.
Typically a signature using a nickname or a misspelling does not make the signature inadequate. Although many states allow the signature to appear anywhere on the will, some states require the signature to appear at the end of the will or following the dispositive provisions of the will.
State law varies as to whether a testator must sign the will in the presence of the witnesses or merely acknowledge signing the will to the witnesses, and whether the witnesses must sign in the presence of the testator and/or in the presence of each other. There is no state law requirement that the witnesses must read the will or trust or know its contents. State law varies as to the number and competency of the witnesses. In most states, problems in terms of competency can result if a witness has an interest in the will.
Some states require the "publication" of the will. Publication is the statement by the testator to the witnesses that the document is the testator's will. In all cases the client, be he or she a testator or a trustee, should tell the witnesses that the document is their will or trust and request the witnesses to sign the document.
All states require attestation of most wills in some form. Attestation is the act of witnessing the actual execution of the will or trust or signing one's name as a witness to the fact that the document was executed. The attestation clause should reflect any special circumstances present at the execution of the will or trust. When the testator or truster receives assistance in signing the will or trust, has another sign for him, or is in bad health, or is illiterate the attestation clause should specify this information.
Self Proving Affidavits
Most states allow self-proving affidavits as a way of anticipating probate and the fact that the witnesses may not be available at that time. Appropriately executed self-proving affidavits assure the admission of the will to probate. They should be prepared and signed at the time the will is executed. If there were any special circumstances surrounding the signing of the will the self-proving affidavits should so state. A number of states have statutory forms for attestations and self-proving affidavits. If so, they should be used.
Testamentary Capacity and the Client's Volition
Testamentary capacity is the required capacity to make a will or a trust. The capacity typically required is typically "sound mind and memory." This requires the client to know:
- That the document being signed is his or her will or trust,
- The general contents of the will or trust,
- The nature and extent of the client's property generally, and,
- The natural objects of the client bounty (i.e. family, friends, etc.).
If the testator or trustee is blind, illiterate, in bad health, or does not understand English, the relevant portions of the will or trust should be read to or translated for them. Serious consideration should be given to videotaping the signing.
The client must tell the witnesses that he or she understands the contents of the will or trust. Capacity must exist at the time the will or trust is executed. Even if the client has dementia, Alzheimer's, has suffered multiple strokes, is forgetful, has delusions, or is senile, they may have lucid moments in which they are fully capable of executing a will or a trust. The law usually presumes that the executor or trustee had the required capacity if the will or trust is property executed.
What the client has written in his trust or will must be freely written. Fraud, duress, coercion, undue influence, or compulsion will invalidate a will or a trust even if the executor or trustee had the required capacity. Fraud exists when there is any trick, deception, or artifice used by which the testator is circumvented, cheated, or deceived as to the disposition of his property. Duress or coercion exist when one person, by the unlawful act of another, is induced to perform some act under circumstances that deprive the person of the exercise of his free will. Either exist when the client is prevented from using his free will by force or threats of harm to him or to those close to him.
Undue influence is defined by the courts in a number of ways. Most simply, it is influence exerted on the testator or trustor that causes him to make a disposition of his property that is not a free and voluntary act (i.e. a third person has substituted his will for the will or the testator or trustor in the disposition of assets). Just exactly what constitutes undue influence is dependent on the facts and circumstances of each case. If a person is accused of exercising undue influence over the testator or trustor, then the question of whether that influence is what constitutes "undue influence," is dependent on the facts and circumstances of each case. However, if the person exercising the influence over the testator or trustor is in a fiduciary relationship with the testator or trustor, and his influence is directly connected with the execution of the will or trust that benefits the fiduciary or the fiduciary's family, the law in most states will presume that the influence is "undue."
A fiduciary relationship normally exists between the client and his lawyer and between the client and his financial advisor. Because of the presumption of undue influence, the lawyer should not draft a will or a trust, and a financial advisor should not participate in the gathering of the information and advising as to the financial disposition of assets for a will or trust if the lawyer, or the financial advisor, or other of their families will be the beneficiaries of the will or trust. Both the lawyer and the financial advisor have ethical obligations to ensure that the client has the capacity to sign the will or the trust of his own violation. Neither should proceed until both are satisfied in these matters.