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Trusts and Estates
Rutgers University, Newark School of Law
Scorese, Joseph P.

 
TRUSTS & ESTATES – Fall 2013 – Prof. Scorese
 
“Right” to Inherit
·         Dead hand control is typically held to be valid, so long as the conditions implemented by the testator don’t violate public policy or violate a constitutional right of the beneficiary
·         Examples of Dead Hand that is NOT allowed:
o   Forfeiture of a gift upon marriage of the beneficiary
§  Reasonable restrictions on whom one may marry are upheld (Shapira)
o   Gift requiring practice of a certain religion
o   Gift requiring separation or divorce
·         What happens to a gift that violates public policy?
o   “Gift over” clause allows court to give the gift to an alternate beneficiary — rare
o   USUALLY the beneficiary subject to the condition can take the property in a “constructive trust” created by the court
 
Probate vs. Non-probate
·         Three Reasons for Probate
o   1- proveices evidence of title transfers
o   2- protects creditors by requiring payment of debts
o   3- directs distribution of decedent’s property after debts are paid.
·         Terms
o   Testator à person who executes a will
o   Beneficiaries à people who take under a will (devisees or legatees)
o   To devise à leaving property through a will (bequeath, give, leave)
o   Executor/trix à personal representative named in will to manage the estate
 
FOR INTESTACY
o   Administrator/trix à personal representative selected by the court to manage an estate
o   Decedent à person who dies without a will
o   Heir à person who takes through intestate succession
 
·         Steps to Probate
o   It is judicially determined that a valid will does or does not exist
§  The very document signed by the decedent is brought to court
§  Court must be satisfied with its authenticity on its face,
§  sufficiently proven by witnesses
§  No one contests its authenticity
o   *NOTE* If no will valid will exists:
§  intestate heirs are determined
§  Administrator is appointed
o   The executor begins his duties, or, if needed, the court appoints an administrator, and both provide letters testamentary
 
o   Intestacyà occurs when a will is not validly executed, there is no will, or there is a successful contestation of the will (dead person is a decedent, taker is an heir)
o   Partial intestacy à when a will doesn’t devise everything in the estate (incomplete disposition)
 
·         Administration Period à time between death and family taking
o   Before beneficiaries can take, Executor must do the following:
§  Pay funeral costs, pay debts, marshall/find/value assets, file a list of assets, pay expenses, file tax returns, interim distributions
 
·         Probate property is any property that passes by intestacy or under a will.
·         Non-probate property is property that passes under instruments other than wills, or by rights of survivorship.
o   Distribution is thus determined by a controlling contract, trust, or deed
o   INCLUDES THE FOLLOWING:
§  Joint tenancy property
·         This is property with right of survivorship; i.e. the decedent’s interests vanish at death and the remaining partner takes
·         Bank accounts, brokerage accounts, mutual funds, real estate
·         Tenants in common: Undivided 50% share in property
o   BUT a Partnership can pass under your will or in intestacy
§  Life insurance
·         Proceeds are paid by ins comp to beneficiary upon receipt of death cert.
§  Contracts with payable-on-death (POD) provisions
·         Pension plans, tax-deferred investment plans (IRA’s, 401k’s, brokerage account with death beneficiary (TOD))
§  Interests in Trust
·         Inter vivos trust à distributed to beneficiaries by trustee in accordance with terms of the trust instrument; no probate
·         Property in testamentary trusts (created under the decedent’s will) do go through probate
o   When distributing property, FIRST, pass the non-probate property to those identified in the non-probate instruments; THEN, determine if the will is valid and determine the probate takers. If there is intestate property, determine the heirs according to the statute.
 
Procedure
·         Mostly governed by state statute, but UPC is the general default:
o   Primary jurisdiction is in the county where the decedent was domiciled at time of his death
o   Notice is usually required to be given to interested parties before the administrator is appointed
o   Ancillary jurisdiction – applies to real property located in another jurisdiction for the purpose of protecting local creditors and local recording procedures
 
·         Fiduciaries
o   Executor – short term – authority from will – guides the terms of the will
o   Administrator – short term – like an executor – will be appointed by the court if the named executor cannot serve, if the decedent dies intestate, or if the will fails probate – must post a bond unless the duty to do so was waived in a will
o   Trustee – potentially perpetual – can be a person, bank, or trust company – acts to protect property for someone else, investing the property, and making distributions in accordance with the terms of the trust
o   Guardian – person who steps in the shoes of a minor or someone without the capacity or competence to represent their own interests in decisions
§  Two Types
·         Guardian of the Property of the Minor
·         Guardian of the Person
o   Conservator – a voluntary arrangement (rather than the appointed guardian) – this other person will do the job, but can revoke at any time (NJ has a revocable arrangement)
o   Custodian – Under the UGMA or the UTMA – the adult who has money or property set aside for a minor until he or she turns 21
 
·         Common Form (Simple) Probate vs. Formal (Solemn Form) Probate
o   Common – probate first, ask questions later à NJ and FL do this
§  Fast tracks the probate, can file as early as ten days after the death
§  A “caveat” can stop the simple probate and send it to solemn form
§  Simple probate will not apply if there is:
·         Something wrong with the will on its face
·         The will is handwritten
·         The will is not the original (because then a photocopy is only acceptable if the original is lost for good and you can prove that it wasn’t revoked)
·         There are double-staples or evidence of tampering
o   Solemn Form – used in New York
§  Will is presumed INVALID unless
·         (1) all interested parties consent in advance to its admission to probate OR (2) a judge determines the will is valid
§  Interested parties receive a “citation” saying you must either enter order to show cause consenting or saying why will shouldn’t be probated
§  Consent à sign a “Waiver and Consent” doc, get it notarized, get it probated
§  Who is an “interested party”?
·         Heirs
·         Anyone adversely affected by a codicil to the will
·         Anyone disinherited in an entirely new will may intervene
·         **Creditors are NOT interested parties for validation purposes**
o   Once will is probated, the court doesn’t intervene unless a beneficiary files in the court asking for an “accounting”
o   Avoiding Probate?
§  Use non-probate instruments to pass your property
§  For small estates, states have a “small estate probate process” to minimize cost and time
§  Always at least have a Pour-Over Will – a testamentary device wherein the writer of a will creates a trust and decrees in the will that “the property in my estate at the time of my death shall be distributed to the trustee of the trust”
 
·         The Role of Executors/Estate Adminstrators
o   Duties
§  Provide notice to legatees, heirs, and claimants
§  Inventory and co

       Aunts/uncles/cousins
§  6. Stepchildren
§  7. None of the above? Property escheats (goes to the state).
 
Inheritance Rights
·         Tenants in Common
o   Undivided 50% share in property, like a partnership
o   Passes by will or intestacy
o   TIC is different from Joint Tenant with Right of Survivorship because the 50% would automatically pass from decedent to surviving joint tenant under that regime
 
·         Simultaneous Death
o   Uniform Simultaneous Death Act
§  If parties’ deaths deemed ‘simultaneous,’ each is treated to have predeceased the other
§  Applies if there is no sufficient evidence of the order of deaths
§  Amended in 1991 to require claimant to establish survivorship for 5 days by clear and convincing evidence (120 Hour Rule)
·         Devisee or heir who fails to survive by 120 hours is deemed to have predeceased the decedent
·         Addresses contemporaneous deaths (even if unrelated)
·         120 Hour Rule applies across the board – also applies to wills (
·         anti-lapse statute à _______________________________________
·         Survivorship must be proven by the claimant who depends on it
o   CASE: Janus v. Tarasewicz (Ill App Ct 1985) pg. 80
§  RULEà Determination of legal death must be made in accordance with the usual and customary standards of medical practice.
 
·         Per capita, Per stirpes, By representation
o   Per capita – literally means “by the head,” à by the number of people, one share for each person
§  Count the people and divide, all survivors get an equal share
§  Rarely used
§  Example:
·         “I bequeath my residue to my issue who survive me, per capita.”
·         $1 mil residuary estate
·         4 surviving kids and 6 surviving grandkids à each gets 1/10 ($100K)
o   Per stirpes
§  “Stict Per Stirpes” (by the stocks)
·         Embraces situation where someone has kids who predecease him
·         Shares for each line of descendants are always divided at the first generational level regardless of whether there are any living takers at that level – i.e. “one share for each family line”
§  “Modern Per Stirpes” à NY
·         You cut the shares at the first generational level at which there are living takers and then one share goes to each family line
·         Start counting as soon as you find a living body/living generation
§  Only time that “strict” and “modern” are different is if there are no living children. Strict would start counting there anyway; modern allows you to start at another generation line and split from there.
o   By Representation
§  1) Define shares at initial live generation line à counts even the dead of that line if the dead has a live issue surviving
§  2) At subsequent levels, “By Representation” embraces “Equally Near, Equally Dear” mentality
·         When dropping down an undisposed of share at a generational level, you add up all undisposed of share and divide it equally
·         Persona in the same degree of kinship to the decedent (i.e. first cousins) always take equal shares
·         SEE CHART