Clymer v. Mayo - Case brief PDF

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UTATA trust—inter vivos vs. testamentary trust: before the adoption of UTATA, when classifiying a trust based upon when it was created, there was only two possible types of trusts—inter vivos trusts AND testamentary trusts. To have an inter vivos trust- property had to be transferred to the trust INTER VIVOS The traditional testamentary trust was set forth in the decedent’s will and was funded when the settlor/ testator died. UTATA is a hybrid trust in that it can be wholly unfunded until time of death (Which makes it look like a testamentary trust), yet the express provisions of UTATA state that, for purposes of probate court supervision, it is treated like an inter vivos trust and is not subject to probate court supervision. To the extent the other doctrines draw a distinction between inter vivos trusts and testamentary trusts, the issue is how the UTATA trust should be classified and treated for purposes of those doctrines. a. Divorce: all jurisdictions have statutes that provide upon divorce all provisions in each spouses will in favor of the ex-spouse are automatically revoked by operation of law. Most statutes apply only to the ex-spouse’s wills and not to any will substitutes. Because a testamentary trust is considered part of the will, the doctrine applies to testamentary trusts. Inasmuch as inter vivos trusts are will substitutes, the statute does not apply to inter vivos trusts. The issue is whether a UTATA trust should be treated like a testamentary trust, which is subject to the divorce doctrine, or an inter vivos trust which is not. b. Example: Clymer v. Mayo---Clara Mayo properly executed a will and inter vivos, revocable trust instrument. The will gave her personal property to her husband and the residue of her probate property to the trustee of her trust, to hold and distribute pursuant to the terms of the trust o Clara also changed her life insurance policy and pernsion plans to make the proceeds payable to the trustee of her trust, to hold and distribute pursuant to the terms of the trust o Thereafter Clara and her husband divorced, and clara died w/o revising any of her estate planning documents o Claras heirs at law claimed that the pour over clause was invalid because the trust was wholly unfuneded at time of death and therefore they were entitled to receive her property. o Claras ex spouse admitted that he was not entitled to take under her will due to the revocation by operation of law doctrine, but claimed that he was still entitled to take under the terms of the trust because the revocation by divorce in that jurisdiction only applied to wills only. o First the court applied UTATA and held it proper to validate the pour over clause and trust. The trust was executed concurrently with the will and did not have to be funded inter vivos. o Second, the court held that because the decedent considered the will and trust one intergrated testamentary scheme, the UTATA trust should be treated like a testamentary trust—that is subject to the revocation by operation of law doctrine, at least where the trust was wholly unfunded at the time of death.

Clymer v. Mayo   

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Mayo executed a will and an inter vivos revocable trust Trust A – marital deduction trust for tax benefits o Gives Mayo power of appointment and he is the beneficiary Trust B o Retirement funds o Mayo beneficiary for life, then N&N until reach 30, then to Clark and Boston U They get divorced Issue – are the trusts valid? Holding o The pour over trusts are valid, even though there was on corpus in the trust when it was created (UTATA) o Trust A  Purpose of trust – to qualify it for an estate tax marital deduction  This is impossible after the Mayo’s divorce  Probate courts are empowered to terminate or reform a trust in whole in or in part where its purposes have become impossible to achieve and settlor did not contemplate what would happen in such a circumstance  Here, the was a frustration of purpose o Trust B  Mayo’s interest is invalidated because they got divorced  Apply will rule to the trust in this case – divorced spouse is taken out as a beneficiary of the trust because decedent’s will and trust were integrally related components of a single testamentary scheme o The bequests nieces and nephews because the divorce only invalidates the exspouses interest, not his relatives

What are the advantages of pour over wills? You can invest in larger investment funds and get a better return Fewer fees involved You don’t have so many trusteesconsolidation is what pour over wills are all about In NY the trust provision says you need assets to have a valid trust and the trust is only valid as to the assets in it The court in this case says it is valid as long as the trust is meant to be a pour over willspecial type of situation, there are 3rd party beneficiaries contract rights here, its associated with an estate plan and its valid so long as it is part of a pour over provision...