· Incentive Trusts (Page 27)
o A trust designed to encourage or discourage certain behaviors by using distributions of trust income or principal as an incentive.
o Incentive trusts pose a problem of inflexibility because the settlor cannot foresee all potential eventualities or circumstances and take them into account in the trust, the terms of the trust can prove to be a burden for the beneficiaries.
o Restatement: Donor’s intention determines the meaning of a donative document and is given effect to the maximum extent allowed by law.
o Rationale: The organizing principle of the American law of donative transfer is freedom of disposition.
o Effect of donative document: Unless disallowed by law, the donor’s intention not only determines the meaning but also the effect of a donative document.
o The main function of the law in this field is to facilitate rather than regulate.
o The court will usually look towards a reasonableness test and a public policy test.
o Cases: Shapira: Jewish wife (reasonableness), Shelley v. Kraemer: Racial covenants on real estate are unenforceable. (public policy)
· Formal Probate vs. Informal Probate (Page 43)
o Formal Probate = Notice Probate. Informal Probate = Ex Parte Probate
o Formal Probate
§ UPC 3-401: a litigated judicial determination after notice to interested parties. Become final judgments if not appealed.
§ The court supervises the actions of the personal rep in admining the estate.
§ Can be time consuming and costly.
§ Look to page 43 for a list of what can be involved in formal probate.
o Informal Probate
§ Court not involved after appointment of personal rep.
§ The personal rep acts like a trustee and has a variety of powers including collecting assets and selling property. UPC.
§ More powers listed on page 44.
§ Informal probate is the norm, but an interested party may file a petition for formality at anytime.
§ Look to page 44 for the UPC requirements for informal probate: UPC 3-301.
· Avoiding Probate (Page 45)
o Probate can be very costly, especially formal probate.
o Probate can also take a long time, and have many delays.
o Ways of avoiding probate:
§ Examples: Inter-vivos trust, joint tenancy.
o Statutes in almost every state permit heirs to avoid probate where the amount of property involved is small, often by requiring nothing more than an affidavit of the decedent’s successor.
§ The divergence across states is how much and what kind of property can be transferred by summary administration.
§ The figure defining a small estate, which can be collected upon affidavit, ranges from $5,000 (UPC 3-1201) to $100,000 (Illinois).
o Increasingly probate is only needed for large estates or to clear title to real property.
o Universal succession: Louisiana and Europe.
· Professional Responsibility, to Intended beneficiaries (Page 58)
o Simpson Case:
§ Although there was no privity between a drafting lawyer and an intended beneficiary, the obvious foreseeability of injury to the beneficiary demanded an exception to the privity rule and that an identified beneficiary had third-party beneficiary status. The court further held that an intended beneficiary stated a cause of action simply by pleading sufficient facts to establish that an attorney negligently failed to effectuate the testator’s intent as expressed to the attorney.
o About 10 states still follow the old rule for lack of privity (incl. NY, Ohio, Virginia).
o The validity and construction of the contract is a matter for a probate court. Any malpractice in so doing is a matter of general jurisdiction.
· Conflicts of Interest (Page 64)
o A. v. B.
§ In the instant paternity action, appellant, the mother’s former law firm, which contemporaneously represented respondent father and his wife in planning their estates, sought to disclose the existence of respondent’s illegitimate child to the wife. Appellant had jointly represented the husband and wife in drafting wills in which they devised their respective estates to each other. The devises created the possibility that the other spouse’s issue, whether legitimate or illegitimate, ultimately would acquire the decedent’s property. The court held that respondent’s deliberate omission of the existence of his illegitimate child constituted a fraud on his wife. When discussing their respective estates with the firm, the couple reasonably could expect that each would disclose information material to the distribution of their estates, including the existence of children who were contingent residuary beneficiaries. Respondent breached that duty. The court concluded that appellant was permitted to inform the wife of the existence of the illegitimate child.
o Crucial to the attorney-client relationship is the attorney’s obligation not to reveal confidential information learned in the course of representation.
o An attorney, on commencing joint representation of co-clients, should agree explicitly with the clients on the sharing of confidential information.
· Intestacy and Intestate Shares (see also below) (Page 71)
o Intestate: Dying without a will.
o If a will disposes of only part of the probate estate, then the result is a partial intestacy in which the part of the probate estate not disposed of by the will passes by intestacy.
o Generally, the law of the state where decedent was domiciled at death governs the disposition of personal property, and the law of the state where the decedent’s real property is located governs the disposition of real property.
o UPC on Intestacy: SECTION 2-101. INTESTATE ESTATE.
§ (a) Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this [code], except as modified by the decedent’s will.
§ (b) A decedent by will may expressly exclude or limit the right of an individual or
ndants by representation.
§ SECTION 2-105. NO TAKER.
· If there is no taker under the provisions of this [article], the intestate estate passes to the state.
o Under current intestacy laws in most states, the surviving spouse usually receives at least a one-half share of the decedent’s estate, an increase from the one-quarter or one-third of the estate that was typical 50 years ago. Though states diverge in just exactly what spouses get.
· Same-Sex Issues (Page 77)
o The chief policies that underpin the spousal intestate share – giving effect to the probable intent of the decedent and protecting those whom the decedent treated as family – seem also to apply to domestic partners.
o A substantial majority of committed partners want the surviving partner to take a share of the decedent partner’s estate, and this preference is even greater among same-sex partners.
o The law pertaining to the intestacy rights of domestic partners is in flux.
o The UPC does not expressly deal with domestic partnerships, gay couples, etc.
o A big issue here is raises big questions in re: conflict of laws.
· Ancillary probate (Pg. 75) (Real property v. Personal Property in different states, see above)
o A probate proceeding that is required in addition to the primary probate proceeding that will take place in your home state. Typically ancillary probate will be necessary because you own a piece of real estate that is located outside of your home state, although it could apply to tangible personal property, such as a car, boat, or airplane, that is registered and titled outside of your home state, or livestock or oil, gas, or mineral rights that are attached to real estate located outside of your home state.
o Drawbacks of Ancillary Probate
§ One of the biggest drawbacks of ancillary probate is the added cost of having to administer more than one probate estate, including multiple court fees, accounting fees, and attorneys’ fees.
Another drawback of ancillary probate can occur with an intestate estate, which is the estate of a person who dies without a valid Last Will and Testament. Because the intestacy laws of all 50 states and the District of Columbia are different, it is possible that the heirs of an intestate estate could be different in the state of the primary probate proceeding versus the state of the ancillary probate proceeding.
