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Trusts and Estates
Rutgers University, Newark School of Law
Weisbord, Reid Kress

Wills, Trusts, & Estates – Fall 2014 Outline

Professor Reid K. Weisbord

PLENARY LECTURE

o Gratuitous transfer of wealth: you give something of value and don’t receive anything in return.

o Things that have to happen before the transfer of wealth occurs (before you transfer the persons assets):

§ Have to be sure that the decedent is in fact dead; if yes, then

§ Have to dispose of the person’s bodily remains.

o Introduction to Mortality

§ How do we determine whether a person is dead?

· If you are no longer breathing and your heart is no longer beating, you are considered dead.

· N.J. Stat. 26:6A-2: Declaration of death based on cardio-respiratory criteria

o An individual who has sustained irreversible cessation of all circulatory and respiratory functions, as determined in accordance with currently accepted medical standards, shall be declared dead.

· N.J. Stat. 26:6A-3: Declaration of death based on neurological criteria

o An individual whose circulatory and respiratory functions can be maintained solely by artificial means, and who has sustained irreversible cessation of all functions of the entire brain, including the brain stem, shall be declared dead [by a physician].

· Is Natalee Holloway dead (girl who vacationed in Aruba and was never found-May 2005)?

o N.J. Stat. 3B:27-1(a): Death of a resident or nonresident is presumed after 5 years’ absence or exposure to specific catastrophic event

§ A resident or nonresident of this State who absents himself from the place of his last known residence for a continuous period of 5 years, during which he has not been heard from, and whose absence is not satisfactorily explained after diligent search or inquiry, is presumed to be dead. His death is presumed to have occurred at the end of the period unless there is sufficient evidence for determining that death occurred earlier.

o She is presumed to be dead because it has been over 5 years and there was a diligent search for her.

o When do we presume her to have been dead?

§ May 30 2010, likely, because there is probably enough circumstantial evidence to show that her death occurred in May 30 2010.

o Primary Objectives:

§ Health and safety in the disposal of dead bodies;

§ Documentation and process of who died; and

§ Registration of deceased veterans

POWER TO TRANSMIT PROPERTY AT DEATH AND DEAD HAND CONTROL

· CHAPTER 1: INTRODUCTION-FREEDOM OF DISPOSITION

o Succession: the passing of property at death

o The American law of succession, both probate and non-probate, is organized around the principle of freedom of disposition.

o The right of a property owner to dispose of her property on terms that she chooses has come to be recognized as a separate stick in the bundle of rights called property

§ There are some limits on freedom of disposition à The law protects a decedent’s creditors and surviving spouse, and it imposes a handful of other policy limitations, such as the Rule Against Perpetuities.

o Most of the law of succession is concerned with enabling posthumous enforcement of the actual intent of the decedent or, failing this, giving effect to the decedent’s probable intent.

o Intestate Estates

§ An estate left behind by a decedent who did not have a will (a document that governs the transfer of property at death)

§ Someone who dies WITH a will dies TESTATE

§ Someone who dies WITHOUT a will DIES INTESTATE

§ Heirs are people who take by intestacy

§ A beneficiary is someone who inherits under a will

§ Why should you have a will? à Because it allows you to determine who will get your property; if you don’t determine that yourself, the state will determine it for you through the statutes of intestacy

§ Why do most people not make a will? à Procrastination; money issues

§ If most people die without a will, how should we distribute the estate? à If there is a surviving spouse, that is the first heir because it is presumed that that is what the decedent would want (if they don’t want that, they should make a will!!)

o Issue: another word for children

o What if you die in debt? à Creditors always get paid first; If there is more debt than estate money, the creditors get paid and no money gets to the estate; We distribute to creditors before the net estate gets distributed to beneficiaries

o Wills

§ A will is a document that expresses your intent with respect to the disposition of your assets at death

§ We care about the decedent’s wishes because it may be an incentive for the person to work hard for the future generations of their family and in turn for the family to work hard and care for their family knowing that they will get something later on.

§ A codicil is a subsequent amendment to a will (does not replace a will)

§ A will is a matter of public record upon being probated

§ A residuary clause is the “rest, residue, and remainder” à everything that has not been otherwise disposed of by a specific gift or legacy

§ The residuary clause is the most important dispositive provision of the will

§ The words “give,” “devise,” and “bequeath” all mean the same thing

o Trusts

§ A relationship with respect to property that separates legal ownership with equitable ownership

§ Two types of trusts à inter vivos trust and testamentary trust

§ Not a matter of public record

o The Power to Transmit Property at Death

§ Lawrence M. Friedman: Dead Hands: A Social History of Wills, Trusts, and Inheritance Law (2009)

· Having a will gives you the right, if you follow certain formalities, to specify who gets what when you die

· If there is no will, the law of intestate succession, gives you (by default) an estate plan

· Freedom of Disposition and the Dead Hand

o The American law of succession strongly embraces the principle of freedom of disposition.

o In American law, freedom of disposition at death is subject only to wealth transfer taxation and a handful of policy limitations. Some of these limitations are triggered by the donor’s lifetime conduct, such as the forced share for a surviving spouse. The other limitations are for the most part rooted in venerable public policies, such as the RAP, the rule against trusts for capricious purposes, and the rule against restraints on alienation.

o Among the rules of law that prohibit or restrict freedom of disposition in certain instances are those relating to spousal rights; creditors’ rights; unreasonable restraints on alienation or marriage; provisions promoting separation or divorce; impermissible racial or other categorical restrictions; provisions encouraging illegal activity; and the rules against perpetuities and accumulations.

§ Shapira v. Union National Bank (1974)

· **Stands for the proposition that you can disinherit your child; still good law for most part**

· Facts: David Shapira, M.D., testator, conditioned his son’s, Daniel Jacob Shapira, P, inheritance under his will upon P being married to,

ovisions may be invalid.

o Justifying Freedom of Disposition

§ A Qualitative Theory of the Dead Hand (1992)

· Testators have a natural right to bequeath.

· Having created wealth by the sweat of her brow, the testator is naturally free to do with it as she pleases-including passing it along to others.

· Arguments for the freedom of testation:

o Creates an incentive to industry and saving. Persons derive satisfaction out of bequeathing property to others. To the extent that lawmakers deny persons the opportunity to bequeath freely, the subjective value of property will drop, for one of its potential uses will have disappeared.

o Premised upon the goal of wealth enhancement, is that such freedom supports, as it were, a market for the provision of social services.

o The testator’s power to bequeath encourages her beneficiaries to provide her with care and comfort

o It would in practice be difficult to curtail. Were lawmakers to rescind the power of the will, testators would find other, less efficient ways to direct the distribution of their wealth.

o Such freedom permits for intelligent estate planning by allowing the testator to take account of the differing needs of members of her family (“father knows best” hypothesis). For proponents of intelligent estate planning, distribution of the decedent’s resources in response to the particular needs of family members is assumed to be a social virtue, one that freedom of testation promotes.

o The power to bequeath comports with political preferences: “the desire to dispose of property by will is very general, and very strong. A compelling argument in favor of it is that it accords with human wishes.”

§ In considering the possibilities for orderly succession-three options:

· Forced Succession

o The decedent’s property could pass by simple rule of mandatory or forced succession, such as primogeniture or to the spouse, children, or other dependents, or if the decedent has no dependents, then the property would escheat to the state.

· Freedom of Disposition

o The decedent’s property could pass in accordance with the decedent’s declared wishes if they are reliably preserved, or if not, then in accordance with a default system of succession that tracks the probable intent of a typical decedent.

· Confiscation by the State

o The decedent’s property could be confiscated by the state on the theory that the decedent’s property rights terminate on death.

§ American law generally follows option (b), tempered by certain mandatory succession rights for spouses and by wealth transfer taxation.

§ Concentration of Wealth

· Perhaps the most powerful argument against freedom of disposition is that it perpetuates inequalities in the distribution of wealth; concentrates economic power in the hands of a few, distorting politics and markets; and denies equal opportunity to the poor.