Question 1 (60 minutes)

Margaret Tello died in 1983 having devised her estate to a trust for the primary benefit of her daughter, Lois Tello. Margaret's will provided for the following distribution of the trust at Lois's death.

This trust shall terminate at the death of my said daughter. At such time my trustee is directed to pay over all of the remaining corpus of the trust, together with any undistributed income, to the child or children of Lois Tello if she dies with children her surviving, to be divided equally. In the event that Lois Tello dies without children surviving her, I give, devise and bequeath all of the remaining corpus and undistributed income to my sisters, Jessie Moore and Dorothy Edson, in equal shares. In the event that my sister, Jessie Moore, predeceases me, I desire that her share go to my other sister, Dorothy Edson. In the event that the said Dorothy Edson predeceases me, I give, devise and bequeath her share to her daughters, Carol Edson, Kathie Edson Miller and Judith Edson Daley, in equal shares.

The family situation is as follows:

Margaret Tello, Testator Dorothy Edson Jessie Moore

(Died 4/27/83) (Died 7/21/94) (Died 1/27/85)

(Without issue)

Lois Tello, Daughter Carol Edson Kathie Miller Judith Daley

(Died 2/9/96) (Alive) (Alive) (Died 1/1/90) (Without issue)

John Daley

(Alive)

Lois Tello died on February 9, 1996, without ever having married and without issue. The trustee has now petitioned the court with jurisdiction over the trust for instructions as to how the trust assets should be distributed.

The trustee's petition sets out the following facts. Both Jessie Moore and Dorothy Edson predeceased Lois Tello. Jessie Moore died intestate on January 27, 1985, without issue. She had never been married. Dorothy Edson died on July 21, 1994, leaving a will which devised her entire estate to her husband, Cliff Edson, who survived her and is still living.

Lois Tello therefore, was survived by her cousins, Carol Edson and Kathie Miller. Her other cousin, Judith Daley, died intestate in 1990 survived by her only child, John Daley who is still living.

Answer each of the following questions. Note that some of the questions add new facts to be considered.

1) You are the judge assigned to the case. Write your order directing the trustee as to the proper distribution of the trust. Be sure to explain your ruling.

2) Now assume that you are the judge assigned to the case and the trustee has offered the testimony of the attorney who drafted the trust, Lance Dimeon. If permitted, Dimeon will testify that he recalls distinctly that Margaret Tello directed that the trust assets should be distributed to her closest family members alive at the time of distribution. As judge, would you admit this testimony? Expain your ruling.

3) Now assume that you are drafting the will of Margaret Tello, and you want to follow her instructions to have the trust assets distributed at Lois's death first to Lois's issue and if she has none, to the closest blood relatives of Margaret who are alive at that time. Draft the provision.

Question 2 (60 minutes)

Katherine Combes died several weeks ago leaving a net estate of $600,000. Her heirs were five nieces and nephews, Ann, Beth, Calvin, Donald and Ellen, each of whom would take one fifth of her estate if she died intestate. Last week Ann came to your office for advice. She brought three documents signed by Katherine for you to examine. You may assume that the jurisdiction where these events took place does not recognize holographic wills.

The first document was a will which you have determined was validly executed in 1987. This will leaves the residue to 'my beloved nieces, Ann and Beth and my beloved nephew, Calvin, in equal shares.' It made no reference to Donald or Ellen.

The second document was a will validly executed in 1991 which expressly revoked 'all prior wills and codicils executed by me.' It further provided: 'Because my nephew, Calvin, has recently married Mary King, one of the richest women in the world, and has no need for an inheritance, I give my entire estate to my nieces, Ann and Beth, in equal shares.' Across the top of the first page of this document is written in red ink, 'Canceled, January 2, 1995.' This writing does not touch any of the words of the will.

The third document is one sheet of paper with only the following words, 'I hereby revoke my 1991 will.' After these words is the date, 'August 14, 1995' and Katherine's signature. Following that are the signatures of Calvin and Beth with the notation, 'Witnesses.'

Ann told you that the 1987 will and the 1995 document were found in a large envelope in the locked drawer of Katherine's desk where she kept various important papers including her life insurance policies. The beneficiaries of each of these policies were ÒAnn, Beth and Calvin, in equal shares.' The 1991 will was found in a cardboard file box with old income tax returns going back 20 years, canceled checks and other old financial records.

Ann has also told you that Katherine greatly favored Beth, Calvin and her over Donald and Ellen, and had said on many occasions that she did not want the latter to have any of her estate. This attitude had existed ever since Donald and Ellen had both moved to California over 20 years ago. They rarely returned for visits and had even stopped sending Christmas and birthday cards to Katherine. Katherine was a very outspoken person and had let these feelings be known not only to her family but her friends as well. Ann has assured you that many of Katherine's friends would be willing to detail many times when Katherine had expressed her feelings about her abandonment by Donald and Ellen.

Ann also told you Calvin was divorced from Mary King in July of 1995. He had told Katherine, Ann and Beth that he and Mary were separated and seeking a divorce when the family gathered for New Years Day, January 1, 1995.

In early August, 1995, Katherine suffered a stroke which left her paralyzed on her left side and unable to speak. She appeared to be alert at times and would respond to questions by nodding her head, but she never regained movement or the ability to speak before her death in April. The 1995 document was signed about a week after her stroke while she was still in the hospital. When she signed it, only Ann, Beth and Calvin were present. Ann explained that they did it that way because they did not want to overly excite Katherine with outsiders.

Ann has asked you to represent her, Beth and Calvin in making sure that Katherine's wishes are carried out. She wants you to make sure that she receives as much of the estate as she is entitled, and most of all wants to make sure that neither Donald nor Ellen receives any part of the property.

Will you take the case? If so, what arguments would you advance to support your position? What arguments against your position would you expect to encounter?

Question 3 (60 minutes)

A. (30 minutes) A statute of the state of California reads as follows:

For purposes of [modification or termination of a trust], the consent of a beneficiary who lacks legal capacity, including a minor, or who is an unascertained or unborn person may be given in proceedings before the court by a guardian ad litem, if it would be appropriate to do so. In determining whether to give consent, the guardian ad litem may rely on general family benefit accruing to living members of the beneficiary's family as a basis for approving a modification or termination of the trust.

You are the legal advisor for Senator Ember Young who serves on the Judiciary Committee of the State Legislature of Mitchell. A bill recommending this statute for adoption by the State of Mitchell is to be heard next week in the Judiciary Committee. Senator Young has asked you to prepare a memo giving her the reason why this legislation is necessary, its pros and cons and your recommendation whether she should support it. Write the brief memo.

B. (30 minutes) Albert Brooks was survived by 3 children, his daughters, Lynn and Rain, and his son, Basil. He left his estate to his 2 daughters as trustees of a Family Trust. By the terms of this trust all income was to be paid in equal shares to his 3 children. At the death of the first child, one third of the trust principal was to be distributed outright to the child's issue then living, per stirpes. At the death of the second, one-half of the remaining trust principal was to go to the second child's issue and so forth.

The trust included a parcel of valuable industrial real estate that was subject to a mortgage. Five years after Albert's death the lessee of the property became insolvent and defaulted on the rent. After evicting the tenant, the trustees were unable to obtain another tenant because of a temporary recession in the town. Lynn, Rain and Basil discussed the situation and decided to try to negotiate an extension of the mortgage to avoid selling other assets of the trust. The mortgagee bank refused an extension and threatened to foreclose.

To gain some time, Lynn's husband, Eric, purchased the mortgage from the bank and granted an extension of 6 months. Rain and Basil both expressed relief. At the end of the 6 months, however, the mortgage remained unpaid, and the other assets of the trust were insufficient to pay. Eric foreclosed the mortgage and purchased the property at the mortgage balance. Three years later he sold the property to Acme Industries for a profit of $200,000.

If the trust beneficiaries other than Lynn sued Lynn and Eric for the profits, what would be the likely result? Why?