Rutgers – WEISBORD
TRUSTS AND ESTATES
I. Power to Transmit Property at Death
A. Justifications & Limitations
Ø Hodel v. Irving: A law passed by Congress to fix the problem of Indian fractured l& ownership forbade property transfer at death if certain conditions were met. ROL: The 5th A of the Const. restricts Congresses power to limit the right to convey property after death. (The first case to suggest that there is a Constitutional right to transfer property at death) (Hodel protects the power to transmit wealth at death, not the power to receive an inheritance. The power to receive is not protected by the Constitution.)
Ø Shaw Family Archives v. CMG Worldwide: Monroe’s state sued a company which distributed Monroe’s images, claiming the company violated her right of publicity which according to a local statute survives 100 years after her death, however, the statute wasn’t enacted only after her death. ROL: One cannot dispose of property after death which he didn’t own at the time of death.
Ø R3rd of Property: Wills & Other Donative Transfers (2003)
§ §10.1: Donor’s Intent Determines the Meaning of a Donative Document & Is Given Effect To The Maximum Extent Allowed By Law.
§ Controlling consideration in determining the meaning of a donative document is the donor’s intent. The donor’s intention is given effect to the maximum extent allowed by law
v Rational: The organizing principle of the US law of donative transfers is Freedom of Disposition. Property owners have the nearly unrestricted right to dispose of their property as they please.
v Effect of Donative Document: Unless disallowed by law, the donor’s intention not only determines the meaning but also the effect of donative document
Ø Cts don’t have the power to question the wisdom, fairness, etc of donor’s decision. The main function is to facilitate rather than regulate. The law serves this function by establishing rules under which sufficiently reliable determination can be made regarding the content of the donor’s intention.
Ø US law curtails freedom of disposition only to the extent that the donor attempts to make a disposition or achieve a purpose that is prohibited or restricted by an overriding law.
Ø Among the rules of law that prohibit or restrict freedom of disposition in certain cases are those relating to spousal rights; unreasonable restraint on alienation or marriage; provision promoting separation or divorce; impermissible racial or other categorical restrictions; provision encouraging illegal activity; & the RAP & accumulation.
B. Conditional Restraint – Family & Marriage
Ø Shapira v. Union National Bank: Testator conditions his son’s inheritance upon him marrying a Jewish girl within 7 years of his death. ROL: A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable.
§ This case is different from Loving & Shelly b/c here its btw private parties while in those cases it was the Gov’t that was placing a restriction. Also here the son can still marry who he wants he just won’t get the $.
Ø Rest2nd of Property: Donative Transfers 6.2 – REASONABLENESS TEST-Restrain doesn’t unreasonably limit the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur. The likelihood of marriage is a factual question, to be answered from the circumstances of a particular case. (not all Cts follow this test)
v FACTORS TO DETERMINE REASONABLENESS
i. The size of the pool
ii. Duration (time given to fulfill the restraint) is reasonable.
v A Will or Trust provision is ordinary invalid if it is intended or tends to encourage disruption of a family relationship. EXCEPTION: Unless to provide support.
Ø Rest 3rd of Trusts 29(c) (2003) – Invalidates Trusts That Are Contrary Public Policy. In general, the Rest 3rd of Trusts frowns on restraints on beneficiary behavior, including restraints on marriage or religious freedom, & those that disrupt family relationship & choices of career, but calls for balancing of conflicting social values.
v If the condition offends us (b/c its illegal or a right is restricted which is protected under the Const) than we are not gonna enforce the donor’s restrictions.
II. TRANSFER OF THE DECEDENT’S ESTATE
A. Probate & Non-Probate Property
v Probate Property: Is property that passes through probate under the decedent’s WILL or by Intestacy.
v The Purpose Of Probate: To clear titles, distribute property,
v The Purpose If Estate Tax: To raise revenue.
v Nonprobate Property: Is property that passes outside of probate under an instrument other than a WILL, they are called WILL substitutes. (Most property transfers at death pass through nonprobate transfers).
Ø Administration of Probate Estate
§ The Function of Probate
i. It provides evidence of transfers of title to the new owner
ii. It protects creditors by providing a procedure for payment of debts
iii. It distributes the decedent’s property to those intended after the decedent’s creditors are paid.
Ø Probate Terminology
v Opening Probate
i. Primary / Domiciliary Jurisdiction – WILLs should be probated or Letters of Administration should be first sought, in the jurisdiction where the decedent was domiciled at death.
ii. Ancillary Administration – Is required if the property is located in another jurisdiction at decedent’s death. The purpose is to provide title to real property in recording system & to subject those assets to probate for protection of creditors. (The Law of the State where Property is located will govern Probate)
iii. Probating a WILL in Common Form (aka Ex Parte Probate) – Is an Ex Parte proceeding in which no notice or process was issued to any person. Due execution of the WILL was proved by the oath of the executor or such other witness as might be required. The WILL was admitted to probate at once, letters of testamentary were granted, & the executor began administration of estate. If no question were raised, this procedure was good.
iv. Probate of the WILL in Solemn Form (aka Notice Probate) – However, if questions were raised within a number of years (called filling a caveat) this form was required. Notice to interested parties was given by citation, due execution of the WILL was proved by the testimony of the attesting witness, & ad
§3B:22-4 – Creditors of the Decedent must present their claims to the Personal Representative within 9 months after the Decedent’s death. Must be done in writing & under oath. If presented after 9 months, then Personal Representative won’t be liable for any distribution he made prior to claim being presented.
III. PFORESSIONAL RESPONSIBILITY
Ø Simpson v. Calivas – The intended beneficiary brought an action for negligence & breach of K alleging that his father’s lawyer failed to draft a will that incorporated the father’s actual intent to leave all his l& to the intended beneficiary in fee simple. ROL: Lawyers drafting a WILL owns a Duty of Care to Intended Beneficiaries; Probate Cts are always permitted to consider the “surrounding circumstances” of the Testator; Direct Declaration of Testator’s Intent are Inadmissible in all Probate Proceeding. Reasoning: The obvious foreseeability on Injury to the Beneficiary dem&ed an Exception to the Privity Rule & that an Identified Beneficiary had a third-party beneficiary status.
v It’s appropriate to have a PRIVITY EXCEPTION b/c we want to make sure the lawyers are careful in their work.
v Process of Probating is to Authenticate the WILL; it is what the Testator Intended to be his WILL.
v Probate Ct can admit extrinsic evidence in two cases
1. To determine if the WILL submitted was actually Decedent’s WILL, &
2. To determine the actual intent of the WILL when there are ambiguities in the WILL. We will not admit extrinsic evidence to determine what the testator might have wanted in his WILL.
IV. INTESTATCY: AN ESTATE PLAN BY DEFAULT
A. WHY DO MOST PEOPLE DIE INTESTATE
Ø Lack of Property
Ø Unaware of Importance
Ø Time & Effort
Ø Admission of Mortality
Ø Reluctance to Reveal Private Acts
Ø THE GUIDING PRINCIPLE OF ALL INTESTACY STATUTES IS TO CARRY OUT THE PROBABLE INTENT OF THE AVERAGE DECEDENT
v Intestacy & Personal Property: The law of the state where the decedent was domiciled at death governs the disposition of personal property.
v Intestacy & Real Property: The law of the state where the decedent’s real property is located governs the disposition of real property.
Ø Basic Order of Getting Inheritance
5. Siblings & their decedents (nieces & nephews)
7. Collateral Relatives (cousins) & Stepchildren
8. Escheats to state