Decedent’s Estates and Trusts
Introduction
1. 3 Types of Gifts
a. Inter Vivos – gift made during donor’s lifetime.
b. Causa Mortis – gift made approach death or on deathbed.
c. Testamentary – a written document providing for the disposition of property after death; a will.
2. Intestate Succession – Transmission of property or property interests of a decedent as provided by statute.
3. People tend not to pass their entire estate at death.
a. Tax Ramifications
b. People are living longer.
c. Spending more money on kids during their life. [Human Capital]
4. Mortmain Statute – Historically, if you have a spouse and children you are precluded from leaving most of your property to the church. Now there are ways to protect surviving spouses interest, but generally favor charitable giving.
5. Types of Remedies
a. Legal Remedies
b. Equitable Remedies – Only called into play if the legal remedies are insufficient.
i. Declaratory Judgment, Injunctions, Specific Performance.
6. Estate Planning Key Objectives:
a. Honoring the party’s intent
b. Avoiding estate taxes
c. Avoiding probate
7. In order to challenge a will as a whole or any provision thereof, the party involved must have standing AND grounds for contest.
a. Standing – You cannot bring a challenge unless you can say, but for that will I stood to inherit. Allege a pecuniary interest – a direct stake in the outcome. Some loss of your property rights will occur if the will is not carried out. “But for the will I would have inherited, or I would have inherited more.”
b. Grounds – You must also have a reason to bring that challenge. (Mental incapacity, fraud, duress, undue influence.)
8. Fiduciary Roles (Fiduciary Titles)
a. Guardian of the Estate
i. Least amount of Discretion
ii. Requires court approval for everything paid
b. Custodian – Holding the property for the minor/incompetent
i. You may spend rather freely on the child’s behalf until the time the children reaches the age of 21
ii. Uniform Transfers to Minors Act.
c. Trustee
i. Has the most discretion of any of these fidiciaries
ii. Depending on the Type – he may have sole discretion over the assets
9. Influences on Court Decisions
a. Courts are loath to distribute large amounts of money outside the country. (In re Honigman – 150).
b. Public Policy
Chapter 1: Introduction to Estate Planning
1. The right to transfer property at death is not a natural right. It is a government created right (civilly created – governed by statute – UPC)
2. A decedent has the right to dispose of his or her property at death. That states cannot completely abrogate the right.
a. Irving Trust co. v. Day – Governmental power to regulate
b. Hodel v. Irving
i. Government cannot abrogate completely
ii. Escheat statue held to be an unconstitutional “taking” of decedent’s property without just compensation
c. Exceptions: Stolen Property, Contingencies, Mentally incompetent, creditors, incarceration, and spousal share.
3. Right to Transfer vs. Right to Receive
a. Right of decedent to dispose of his or her property at death is protected
b. Right of heir or beneficiary to receive property from decedent is not necessarily protected
4. Arguments a/b transferring wealth @ death.
a. (+) 1. At death is natural and good in that it encourages one to save money and rewards hard work 2. promotes family values. 3. Consistent with private property system.
b. (-) 1. Perpetuates economic disparity 2. Unfairly rewards those lucky enough to have been born to rich parents.
c. Estate Tax – gov’t rationalization for perpetuating wealth; modern trend is a phased-in elimination of the estate tax
5. Restatement: Donor’s intention determines the meaning of a donative document and is given effect to the maximum extent allowed by low.
“Dead Hand” Control
1. “Dead Hand”
a. Where a decedent conditions a gift to a beneficiary upon a beneficiary behaving in a certain way.
i. Condition is an attempt for decedent to retain control.
b. RS(3) §10.1: favors freedom of disposition and errs on giving maximum effect allowable by law to the donor’s intent
2. A decedent may condition a beneficiary’s gift on the beneficiary behaving in a certain manner as long as the condition does not violate public policy (or is a state action that is an unconstitutional taking).
a. Motive and purpose of the testator is irrelevant.
b. Allowed:
i. Partial Restraint on Marriage. Father executed a will and left a sizeable amount of his will to his son with the condition that he marry a Jewish woman whose parents are both Jewish and does so within 7 years of his father’s passing. The court upholds the devise under the will as reasonable under public policy. (Shapira v. Union National Bank – 21)
c. NOT Allowed:
i. Racially restrictive covenants. (Shelly v. Kraemer)
ii. Totally wipes out a persons right to get married. Daughter’s inheritance was dependent on her marrying a Quaker from her own sect amounted to a total restraint because she had insufficient prospects. (Maddox v. Maddox).
iii. Encourage separation and/or divorce.
1. Exception: The dominant motive is to provide support in the event of separation or divorce.
iv. Promoting Family Strife
v. Property destruction directive. Reasoning: Impacts surrounding parties with no compensation.
1. Exception: Expense of tearing down the building provided for in the will.
2. Items of historical significance.
a. Weighing societal interests against the individual’
ntative will be appointed under law (Administrator) or under the will provisions (Executor)
a. Administrator appointed by statutory hierarchy. First surviving spouse and then children in age order and lastly more remote relatives.
i. If the administrator odes not want to be the administrator they can sign a certificate of renunciation. Not required to act as a personal representative.
b. Administrator must take death cert to register of wills to receive important documents necessary to have legal authority and access accounts.
i. Letters of testamentary (if there is a will) or Letter of Administration (if there is no will)
2. Three Jobs of a Personal Representative
a. Collect and Manage all assets of the decedent
i. Prepare and inventory assets.
ii. Decedent’s estate and income must be collected and managed until probate comes to an end.
b. Pay the just debts according to hierarchy listed in the statute.
i. Established by statute. Do not pay for anything until debts are checked for justification. Fiduciary duty requires that items be paid in a certain order with money from the estate or else you may personally liable for debts not correctly done.
ii. Just Debt Orders (UPC 3-805 thru 807).
1. Statutory set asides (statutory right of the surviving spouse)
2. Attorney’s fees
3. Funeral Expenses
4. Federal Taxes and Secured Debts
5. Last Illness Expenses
6. State and Local Taxes
c. Distribute the Gifts according to the dictates of the will. If there is no will you distribute the assets according to the intestate statutes.
Probate Process
1. Probate performs 3 functions:
a. Provides evidence of transfer of title to the new owners.
b. Protects creditors by requiring payment of debts.
c. Distributes the decedent’s property to those intended after the creditors are paid.
2. UPC- No probate formal or informal may be initiated more than three years form the date of death. If no will is probated within three years after death, the presumption of intestacy is conclusive. [CL – allow probate anytime after death.]
3. Notice to creditors – one year SOL running from decedent’s death, barring creditors claim thereafter, is believed to be constitutional even without notice to creditors.
