Bar Exam Trusts and Estates Review

Trusts and estates law forms a significant component of the Multistate Essay Examination (MEE), demanding precise application of rules that govern how property is managed and transferred. Your ability to dissect factual scenarios involving wills, trusts, and intestacy directly impacts your essay scores and reflects foundational lawyering skills. This review focuses on the high-yield concepts tested, emphasizing the critical distinctions between traditional common law principles and modern statutory frameworks like the Uniform Probate Code (UPC) and Uniform Trust Code (UTC).

Foundational Elements: Trust Creation and Modification

A trust is a fiduciary relationship where a settlor transfers property to a trustee to hold for the benefit of beneficiaries. For a valid express trust to be created, you must identify the five elements: settlor intent, a definite trustee, identifiable trust property, ascertainable beneficiaries, and a valid trust purpose. On the MEE, a classic trap is a settlor's imperfect attempt to create a trust, which may result in a resulting trust imposed by equity to fulfill implied intent.

Trust modification post-creation is a frequent essay topic. Under common law, a trust could generally only be modified with unanimous consent of all beneficiaries or due to unforeseen circumstances making the trust's purpose impossible (the doctrine of cy pres). Modern statutes, particularly the UTC, are more flexible, allowing modification by a court if it furthers the trust's primary purpose or if unanticipated circumstances impair its administration. A spendthrift provision is a clause restraining the voluntary or involuntary transfer of a beneficiary's interest, protecting it from most creditors. However, you must remember key exceptions: such provisions cannot shield against claims for child support, alimony, or necessary services supplied to the beneficiary. When analyzing a fact pattern, first determine if a valid trust exists, then assess whether any modification is permissible under the applicable law.

Fiduciary Obligations: Trustee Duties and Liability

Once a trust is established, the trustee's conduct is scrutinized under strict fiduciary duties. The core duties include the duty of loyalty (requiring the trustee to act solely in the beneficiaries' interest, avoiding self-dealing), the duty of prudence (to act as a reasonable person would in managing the property), the duty to account, and the duty of impartiality among beneficiaries. Breach of any duty gives rise to fiduciary liability.

On the exam, you will often encounter scenarios where a trustee's action, like investing in a speculative venture or loaning trust funds to themselves, constitutes a breach. The remedies for breach include surcharge (personal monetary liability), removal of the trustee, or imposition of a constructive trust on wrongfully acquired assets. A sophisticated analysis requires you to distinguish between mere errors in judgment (which may not be a breach if the trustee acted reasonably) and clear conflicts of interest. Always apply the prudent investor rule for investment decisions and remember that the duty of loyalty is virtually absolute—even fair deals can be voidable if they involve self-dealing.

Testamentary Transfers: Will Formalities and Contests

The validity of a will hinges on strict formalities. At common law, a witnessed will requires testamentary capacity, intent, and a writing signed by the testator and attested by at least two competent witnesses who sign in the testator's presence. Modern statutes, especially the UPC, have relaxed some rules, allowing for harmless error correction if clear and convincing evidence proves the document embodies the testator's intent.

Will contests arise when these formalities are challenged. The primary grounds are lack of testamentary capacity, undue influence, fraud, duress, or forgery. For capacity, the testator must understand the nature of their assets, the natural objects of their bounty, and the act of making a will. Undue influence involves wrongful persuasion that overpowers the testator's free will, often involving a confidential relationship. In an essay, systematically check for formal compliance, then analyze any allegations of invalidity. A common pitfall is conflating a testator's unusual beliefs or eccentricities with a lack of legal capacity; the standard is relatively low. Also, note that the UPC permits self-proving affidavits to streamline probate, eliminating the need for witness testimony in uncontested cases.

Default Rules: Intestate Succession and Estate Administration

When a person dies without a valid will, their estate passes via intestate succession. Statutes provide a fixed order of takers, typically: surviving spouse, then descendants, then parents, then siblings and their descendants. The key calculation involves the spouse's share, which under the UPC is the entire estate if no surviving descendants or parents exist, but is split if there are descendants from another relationship. Distribution among descendants is usually per stirpes (by root, representing each deceased ancestor's branch) unless a statute specifies per capita at each generation.

Estate administration is the process of collecting assets, paying debts and taxes, and distributing the residue. The personal representative (executor or administrator) has fiduciary duties similar to a trustee. Creditors' claims are paid in a statutory order, typically administrative costs, funeral expenses, taxes, and secured debts before unsecured debts. A frequent MEE issue involves the abatement of gifts—if estate assets are insufficient, general legacies abate before specific or demonstrative legacies. In your analysis, always determine the applicable law (common law vs. UPC), map the family tree for intestacy, and prioritize creditors' claims correctly. Remember that non-probate assets like joint tenancy property or life insurance proceeds pass outside this process.

Common Pitfalls

1. Confusing Trust Types and Requirements: Students often mistake a testamentary trust (created in a will) for an inter vivos trust (created during life). Remember, testamentary trusts are subject to will formalities and probate, while inter vivos trusts are not. This affects analysis of validity and modification rules.
2. Over-Simplifying Fiduciary Breaches: It's a trap to assume any trustee mistake is a breach. The duty of prudence is measured by process, not outcome. A well-researched, diversified investment that loses value likely isn't a breach, whereas a speculative gamble without research is.
3. Misapplying Intestacy Rules: A classic error is to overlook a surviving spouse's elective share statute, which may allow the spouse to claim a portion of the estate regardless of the will's terms or intestacy rules. Always check if an elective share claim is possible in your fact pattern.
4. Ignoring the Modern Statutory Shift: Relying solely on common law rules can lead to incorrect conclusions. For example, at common law, a will with improper witnessing is void. Under the UPC's harmless error rule, it might be saved. Always identify which legal regime applies and argue in the alternative if the facts are ambiguous.

Summary

• Trust validity requires five clear elements: intent, trustee, property, beneficiaries, and purpose. Modern laws allow greater flexibility for modification and enforce spendthrift provisions with exceptions for certain creditors.
• Trustees are held to stringent fiduciary duties of loyalty, prudence, and impartiality. Breach leads to personal liability for losses, and self-dealing transactions are presumptively invalid.
• Will execution demands strict formalities, but contemporary statutes may cure minor errors. Contest grounds focus on testator capacity and freedom from undue influence, fraud, or forgery.
• Intestate succession provides a default distribution scheme to heirs, while estate administration involves marshaling assets, paying prioritized debts, and distributing the remainder.
• For the MEE, consistently compare common law and modern statutory approaches (like the UPC/UTC), and methodically apply rules to each step of the fact pattern, avoiding assumptions about validity or intent.