Estates and Trusts Outline

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School: Rutgers-Camden School of Law

Class: Estates and Trusts I

Professor: Brenda Eutsler

Semester: Fall 2011

I) Introduction

A) The Problem of the “Dead Hand”

1) To what extent should we allow ppl to use wealth to influence behavior after death?

2) RS3 of Property §10.1: Donor’s Intention Determines the Meaning of a Donative Document and is Given Effect to the Maximum Extent allowed by Law (p. 27)

(a) Property owners have the nearly unrestricted right to dispose of property as they please

(b) This general rule does not apply if donor attempts to make a disposition or achieve a purpose that is prohibited or restricted by an overriding rule of law

(i) Parental restraint of marriage which imposes only reasonable restrictions is not void as violative of public policy (Shapira v. Union National Bank, Ohio 1974 p.28)

Þ Restriction to marry a Jewish girl w/ two Jewish parents w/in 7 yrs permissible bc it does not infringe on Const right to marry, just a condition of inheritance

Þ Conditions to consider whether the restriction is reasonable

1. Whether there are enough ppl in the area to marry

2. Whether it creates an incentive to divorce or get into a hurried marriage

3. RS2 Property §6.2, cmt a (p.34): A “restraint unreasonably limits the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur”

(ii) Not all Cts consider the reasonableness standard (p.34)

(iii) Same principles apply to trusts where trusts which are contrary to public policy are voided (RS2 Trusts §29(c) p.35)

Þ Other incentive trusts are popular and permissible to:

1. Promote/pay for education expenses (pay out at certain ages)

2. Promote productivity (can be difficult to enforce)

3. Discourage substance abuse

Þ T wants a trust and will that is capable of changing w/ time

B) Transfer of the Decedent’s Estate

1) Probate v. Nonprobate Property (p.38)

(a) Probate Property – Property that passes through probate under the decedent’s will or by intestacy

(b) Nonprobate Property – Property that passes outside of probate under an instrument other than a will (will cannot control the non-probate assets), such as:

(i) Jt tenancy property (real and personal)

(ii) Life insurance

(iii) Contracts w/ payable-on-death (POD) provisions

(iv) Interests in trusts (inter vivos only)

Þ Atty’s have to determine when they first interview a client what assets are probate and what assets are non-probate

2) Administration of a Probate Estate

(a) Functions of Probate Court (p.39)

(i) Provides evidence that title passed to new owners

(ii) Protects creditors by providing a procedure for the payments of debts

(iii) It distributes the decedent’s property to those intended after the decedent’s creditors are paid

(b) Terminology (p.40)

(i) Probate Court – supervise admin of probate estates

(ii) Executor – Person named in will who executes the will and serves as administrator of the probate estate

(iii) Administrator – if the executor is unable or unwilling to do so, or if the person dies intestate, ct will name a representative

Þ Personal reps (execs and admins) have to ID all of the assets (probate assets and non-probate)

Þ Usually selected from statutory list of persons who are to be given preference: surviving spouse, children, parents, siblings, creditors

Þ Person appointed admin must give bond

(iv) A person dying testate devises real property to devisees and bequeaths personal property to legatees

(v) Under intestacy, real property descends to heirs and personal property is distributed to next-of-kin

(vi) Will – a disposition of property to take effect upon the death of the maker of the instrument

Þ Wills can also serve to:

1. Appoint guardians

2. ID executors

3. Waiving bond requirement

4. Achieve tax savings

(vii) Intestate – When there is no will, and the estate is administered in accordance w/ the laws of the state

(viii) Testate – When there is a will

(ix) Trust – a fiduciary relationship in which one person is the holder of the title to property subject to an equitable obligation to keep the property for the benefit of another

(c) If asked for an opinion of the exam try to work in the importance of mediation (p.207)

(i) Lowers litigation costs

(ii) Lessens unwanted publicity

(iii) May leave family members speaking to one another

(d) A Summary of Probate Procedure (p.42)

(i) Opening Probate:

Þ Jurisdiction where decedent was domiciled at death

Þ Ancillary jurisdiction=real property located in alternate jurisdiction

Þ Common form probate – ex parte proceedings where no notice is provided

Þ Interested parties can file for a caveat compelling probate in solemn form, in which notice is given to interested parties

1. Caveat normally required to be filed in a specific number of days after probate is initiated

2. Serves as a fast way to stop the will from being probated before you have all of the info

(ii) Formal vs. informal probate

Þ No proceeding, formal or informal may be initiated more than 3 years after death (UPC §3-108 p.43)

Þ Formal probate occurs after notice to interested parties (UPC §3-401 p.43)

Þ Informal Probate occurs when the personal rep administers the estate w/o going back to ct after appointment (UPC §3-715 p.44)

Þ Informal probate is the norm, but an interested party may file a petition for formal probate at any time during administration of estate (UPC §3-502 p.44)

Þ Requirements of informal probate (UPC § 3-301 p.44)

(iii) Barring creditors of the decedent p. 44

Þ Creditors and probate – Nonclaim statutes come in two forms:

1. Either Creditors claims barred if not filed within a relatively short period after probate proceedings are initiated (4 months under UPC);

2. Or Creditors claims barred if not filed within period after the death (1 year under UPC §3-803)

(iv) Closing the Estate

Þ Expected to complete administration and distribution of assets as promptly as possible. Creditors must be paid. Titles must be cleared. Taxes paid. Real estate sold.

Þ Court grants executor/admin discharge from fiduciary responsibility.

(v) NJ is a relatively simple state to probate a will

Þ Wills in NJ is the surrogates court (elected in NJ)

Þ Wills have to be probated in orphans courts in PA

Þ Other states call them chancery courts

(e) The Cost of Probate (p.45)

(i) Administrative costs: commission, attorney’s fees, court fees and appraisers and guardian ad litem fees

Þ Administration fees rank right below funeral expenses

Þ Attny has the option to turn down an estate administration case – you have to be careful upfront to make sure that you are able to get paid

(ii) Guardian ad litem: guardian appointed to appear on behalf of incompetent or minor for this probate proceeding

(iii) Statutes contain provisions for executor compensation, and the will can override it if the statutory default

(f) Is Probate Necessary (p.46)

(i) No, many decedents avoid probate w/ Nonprobate transfers and summary proceedings

C) Professional Responsibility

1) Duty to Intended Beneficiaries

(a) Attny owe a duty of care to the intended beneficiary of a will bc of the obvious foreseeability of injury upon malpractice (Simpson v. Calivas, NH 1994 p.58)

(i) Few states prevent malpractice claims bc of a lack of privity, and they have privity of K exceptions for beneficiaries or intended beneficiaries

(ii) Note: findings by probate Ct re: testators intent are not determinative in malpractice suit bc of evidentiary reasons

(b) Case law has evolved to make it easier to cure attny errors (may have been pushed by the bar to help lower malpractice expense)

2) Conflicts of Interest

(a) Attny cannot have clear conflicts of interests such as a r