Sample Question 2

Harry, a widower, and Wanda, residents of State A, decided to marry. Prior to the wedding ceremony, they signed a prenuptial agreement in which Wanda waived her right to receive alimony in the event of a divorce. The agreement further stated that "in consideration of this waiver, Harry shall establish an inter vivos trust of the first $1 million he inherits from his mother, with himself as trustee to pay the income to Wanda for life." They agreed that Harry was free to designate any person to take the trust property at Wanda's death.

Three years later, Harry's mother died, leaving her substantial estate to him. In addition to Harry, her only surviving relatives were Charles, who is Harry's child from his first marriage, and Mary and Pat, Harry's two nieces.

Two months after his mother died, Harry orally declared himself trustee of $1 million. In making this oral declaration Harry stated: "I will pay all trust income to my wife, Wanda, for her life and, when she dies, if I don't have any issue who survive me, then I or my successor should distribute the trust principal to my surviving nieces and nephews." Harry did not state who would succeed him as the trustee if he died prior to the termination of trust.

Harry died two months ago at his home in State A. Until his death, he faithfully paid the trust income to Wanda. Harry was survived by Wanda and by Charles, Mary, and Pat. One month after Harry died, Wanda, who had recently inherited substantial property from her father, disclaimed her income interest in the trust property.

Under the laws of State A, Wanda's disclaimer of her interest in the trust property is valid. In addition, under the intestacy laws of State A, any property distributable as part of Harry's probate estate passes one-third to Wanda and two-thirds to Charles.

1. Was Harry's promise in the prenuptial agreement to create a trust in the future for Wanda legally enforceable? Explain.

2. Was the trust Harry later created for Wanda validly created? Explain.

3. Assuming the trust for Wanda was validly created, did the trust terminate at Harry's death because there was then no trustee? Explain.

4. Assuming the trust for Wanda was validly created, what is the effect of her valid disclaimer, and should the trust principal be immediately distributed and, if so, to whom? Explain.