Professor Roberta Berger
Trust and Estates
A. The Power to Transmit Property at Death
· The Right to Inherit and the Right to Convey
o The West has put a very high premium on the right to dispose of property at death (including the right to disinherit anyone except spouses)
Ø Hodel v. Irving (pg. 3)
§ Facts – Members of the Sioux Tribe alleged that the Indian Land Consolidation Act, by making fractional interests in land escheat back to the tribe, was a taking.
· This is a taking.
· SCOTUS establishes that everyone has a right to dispose of their property at death (not the right to inherit).
· This right is one in the bundle of sticks, and cannot be taken, no matter how small the interest in the land is.
§ This case comes very close to establishing a Constitutional right to devise property at death, but does not go all the way.
§ After this case, Congress passed the American Indian Probate Reform Act, which replaced state probate law with federal probate law and provided that if a decedent owned less than a 5% share in land, only the eldest child or grandchild would inherit and it would not be divided further.
Ø Shaw Family Archives v. CMG Worldwide (pg. 10)
§ Facts – Ps argued they were entitled to publicity rights of Marilyn Monroe because of the residuary clause in her will.
· Marilyn Monroe could not convey publicity rights in her will because such rights did not exist when she died.
§ CA tried to reverse this by making the statute creating publicity rights retroactive, but NY law applied because the court determined Monroe was domiciled in NY when she died.
§ Like Hodel, this case revolves around the rights of people to dispose of their property, NOT the right of others to inherit.
· The Problem of the Dead Hand
o Restatement (Third) of Property: Wills and Other Donative Transfers (2003)
§ § 10.9 The controlling consideration in determining the meaning of a donative document is the donor’s intention. The donor’s intention is given effect to the maximum extent allowed by law.
§ Rationale = property owners have nearly unrestricted right to dispose of property as they please.
o “dead hand” control
§ Decedent exercises power of beneficiary by conditioning the gift to beneficiary upon beneficiary behaving in a certain way
§ Generally dead hand control is OK
· Cant be in violation of constitution or public policy
o Illegal/ Impermissible uses of dead hand control
§ Absolute restriction on marriage
§ Requiring beneficiary to practice certain religion
§ Gifts that encourage/ require divorce
§ Gifts that direct property to be destroyed
Ø Shapira v. Union National Bank (pg. 28)
§ Facts – Father’s will provided that his sons could not inherit unless they married a Jewish girl with two Jewish parents within 7 years of his death.
· Court upholds the will.
· Father has the absolute right to dispose of the property in the way he wants
· It wasn’t unconstitutional because it did not limit the right to marry, only the right to inherit.
· However, the court also looked into the restriction itself under a reasonableness test and held that it didn’t violate public policy because it was only a partial restraint on marriage and not a total restraint.
· If the restriction were unreasonable, then it might be unconstitutional.
o Posner argues for cy pres approach to allow modification of conditions to testamentary gifts
o Restatement (Second) of Property: Donative Transfers
§ § 6.2 a restraint unreasonably limits the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur.
§ Today, most courts apply a reasonableness test to restrictions to marry in wills, but some courts will hold the restrictions invalid without consideration of their reasonableness.
o Incentive Trusts
§ Conditional gifts like in Shapira are today typically done as incentive trusts
§ People can leave their property in trust and the benefits can terminate if the beneficiary does or does not do certain things.
· This is useful motivation to encourage beneficiaries to be productive members of society
· However, it can also backfire and does not account for changed circumstances
B. Transfer of the Decedent Estate
§ If decedent dies with valid will then he died testate and property will be distributed pursuant to will
§ If decedent dies w/out valid will decedent died intestate and property will be distributed pursuant to state law
§ Male who executes will
§ Female who executes will
§ Gift of real property under a will
§ Beneficiary receiving real property under a will
§ Gift of personal property under a will
§ Gift of money under a will
§ Beneficiary receiving money under will
o Personal representative
§ Person appointed by probate court to oversee the administrative process of wrapping up and probating decedent’s affairs
§ What personal representative is called if decedent died testate or and will names personal representative
§ What personal representative is called if decedent died intestate or testate but fails to name personal representative
§ Under statute decedent’s real property descends to heirs
o Heirs Apparent
§ When a decedent is still alive, the would-be heirs are called “heirs apparent;” you don’t have heirs until you die
§ Under statute decedents personal property is distributed to next-of-kin
· Probate Courts
o Special courts that manage the commencement, administration, and winding up of an estate
o Purposes = (1) taking property titled in decedent’s name and getting it titled to the living; (2) protecting creditors; (3) distributing property
· Probate and Non-Probate Property
o Probate Property
§ Property titled in the name of the decedent
§ passes under will or through intestacy
o Non-Probate Property
§ Property that passes outside of probate under an instrument other than a will
§ property that is not titled in the name of the decedent
· Joint tenancy property (both real and personal)
o Joint tenancy with right of survivorship
o Tenancy by the entireties
· Life insurance (so long as there is a named beneficiary)
· Pension funds/retirement funds
o (payable-on-death POD provisions)
· Interests in trusts
· Administration of Probate Estates (Process)
o Decedent dies
§ EVERYONE HAS A WILL
· either you execute one OR
· the legislature drafted one for you in the intestacy statute
o Personal representative named to be in charge of the process
§ If there’s a will, this person will be named in the will (aka executor)
§ If there’s no will, court will appoint someone according to statutory next-of-kin hierarchy
§ primary or domiciliary = where decedent domiciled at time of death
§ ancillary administration = for real estate, where property is located
o Personal representative files petition with probate court
o Probate court reviews the petition (without hearing)
§ Petition must identify name of decedent, date of death, interested parties
o general jurisdiction court, NOT probate court
o About 10 states retain the no privity rule and do not allow intended beneficiaries to bring malpractice suits
· Conflict of Interest
o Any time a couple walks into your office to do estate planning, there IS a conflict of interest
Ø A v. B (pg. 64)
§ Facts – Law firm represents husband and wife in estate planning and also represents other woman in paternity suit against husband.
§ Issue – Can the law firm disclose confidential facts about one client to another client?
· Yes. Although firm owes duty of confidentiality to husband, it also owes duty to disclose information to the wife in the course of estate planning, and the existence of a child out of marriage is relevant to the estate planning.
· Firm has discretion to disclose, but does not have a duty to disclose.
II. INTESTACY: AN ESTATE PLAN BY DEFAULT
A. The Basic Scheme
o Intestacy is common
§ well over half of the population dies without a will
· People don’t like to think about dying
· People procrastinate
· People don’t like dealing with lawyers
o Intestacy statutes
§ Every state has its own intestacy statute
§ UPC is NOT very widely adopted
§ Older statutes are NOT as mindful of modern higher divorce rates
o Governing principle = blood relationships
§ Two exceptions spouses, adopted children
o Partial intestacy
§ People can die partially intestate if their will fails to dispose of all their property
§ Policy = legislature tries to carry out what would most likely be the intent of the decedent
· General rules
o If there is a surviving spouse, no children, and parents
§ Most states = spouse gets everything
§ Some states = spouse would share with parents
o If there is a surviving spouse and 3 children of the marriage
§ UPC = spouse gets everything (assumption that spouse will benefit children)
§ Some states divide between the spouse and the children, regardless of whether or not the children are of the marriage
o If there is no spouse and three sons
§ UPC and most states = 3 sons share equally
o If there is no spouse, 3 sons, and 6 grandchildren (2 for son #1 and 4 for son #2)
§ UPC and most states = same as above, 3 sons share equally
o Same as above, but the childless son predeceased decedent
§ UPC and most states = 2 remaining sons divide equally
o Same as above, but only the son with 4 children was still alive
§ Half to the remaining son and half to the 2 kids of the dead son
· By right of representation or per stripes
o All three sons are dead and only 6 grandchildren are left
§ Per capita among grandchildren (modern rule)
· Each grandchild gets 1/6
§ English per stripes (traditional rule)
· By right of representation, 1/4 each for the two sons of son #1 and 1/8 each for the 4 sons of son #2\