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Hastings Law Journal

Abstract

The common law of future interests has long held that remainder interests are transmissible, unless a trust instrument expressly provides otherwise. This means that if a remainder beneficiary fails to survive until the time her interest becomes possessory, the remainder will pass under the terms of the deceased beneficiary's will (or to her heirs if she dies intestate). This constructional preference for vested remainders is considered preferable to the alternative: returning the remainder to the estate of the creator of the trust. Yet the probate and federal estate tax consequences of construing remainders as vested can in some cases be unfavorable. As a result, a growing number of scholars have advocated a statutory solution that construes a trust instrument to require survival of the remainder beneficiary, in an attempt to achieve optimal tax and probate results. Toward this end, section 2- 707 was added to the Uniform Probate Code in 1990. Seven states have adopted the provision.

California has not adopted UPC section 2-707. Yet during the Probate Code reform of the early 1980s, the legislature did enact a similar rule applicable to remainder interests created by will, and then repealed it before it became effective. Unfortunately, the result of that legislative tinkering was a statute fraught with ambiguity. The confusion in California law was compounded when the legislature expanded application of the Probate Code provisions to all "instruments," including wills, trusts, and deeds. As a result, it is not entirely clear what the California law of future interests provides.

This Article first examines California law, in order to determine if California continues to follow the common rule favoring vested remainders. It concludes that it does, in spite of some implications in the Probate Code to the contrary. It then considers the merits of UPC section 2-707, or any similar rule that effectively rewrites trust instruments. It concludes that adoption of section 2-707 is dangerous and largely indefensible: it dramatically changes the nature of remainder interests by taking away the beneficiary's power to direct disposition of the remainder, and may in many cases actually frustrate donor intent.

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