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

Fall 2015: Weisbord: Trusts & Estates

Part A-1: Freedom of Disposition and the Dead Hand

Introduction to Theories

1) Freedom of Disposition: The American law allows an owner of property to control the disposition of her property at death.

a. Unrestricted Power: Generally, property owners have the nearly unrestricted right to dispose of their property as they please

2) Theories of Law:

a. Positive Law: Positive law is created by individuals in a statute or decision based on what man believes is right law

i. Power of Testation: The power of testation arises out of positive law and never natural law. Individuals have the right because a law gives them that right, not because they are born with it

b. Natural Law: Natural law is a right innate to mankind in which every individual is born with.

3) Public Policy Arguments for Right of Testation:

a. Supporting Argument: A society based on private property is the least objectionable arrangement for dealing with property at an owner’s death. Inheritance is the natural and proper reinforcement of familial ties, which in turn are important to a health society.

b. Contrary Argument: The transmission of wealth perpetuates wide disparities in the distribution of wealth by concentrating the inherited economic power in the hands of a few and denies equality of opportunity to the poor.

4) Reasons Decedents Die Intestate:

a. Procrastination

b. Assumptions: Assumptions that the property will go to children automatically

c. Lack of Assets: The decedent has no assets to pass

d. Superstition: Decedents do not want to think about dying

e. Expense and Cost: Lawyers are too expensive and decedents cannot afford to create a will.

5) Dead Hand Control: Dead hand control arises where a decedent conditions a gift to a beneficiary upon a beneficiary behaving in a certain way.

a. Decedent’s Exercise of Control: By qualifying the testamentary gift, the decedent is attempting to exercise control over the beneficiary even after the transferor’s death.

i. Incentive Trusts: Such conditional gifts are typically made in an incentive trust.

Testamentary Conditional Gifts

1) Donor’s Intent – Restatement (Third) of Property: The Restatement (Third) of Property favors freedom of disposition. The donor’s intent is given to the maximum intent allowed by law

a. Exception: A donor’s intent is invalid where it is prohibited or restricted by an overridden rule of law

2) Validity of Testamentary Conditional Gifts: Testamentary conditional gifts are valid unless:

a. Violation of Public Policy: They violate public policy or

b. Unconstitutional: Judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights

3) Conditions Violating Public Policy: Absolute restraints. See below.

a. Encouraging Separation or Divorce: Gifts that require a beneficiary to separate or divorce before receiving the gift generally are deemed against public policy and are void

i. Exception: Gifts that provide for a beneficiary only in the event of separation and/or divorce are not necessarily deemed to encourage divorce

ii. Controlling Factor: The controlling factor is the decedent’s dominant intent: to encourage separation/divorce or merely provide support in the event of separation or divorce

b. Religion Requirement: Gifts that require a beneficiary to remain faithful to a particular religion violate public policy.

c. Promoting Family Strife: Gifts conditioned upon family members ostracizing and/or not communication with other family members have been held to violate public policy

i. Restriction on Husband’s Use of Alcohol/Tobacco (Holmes Connecticut Trust): A trust provision for the testator’s granddaughters requiring that they and their husbands refrain from using tobacco or drinking alcohol is invalid as to their husbands but not themselves

1. Inability to Control: Since the granddaughters could not control the behavior of their husbands, the condition could disrupt family harmony

d. Criminal/Torts: A condition that encourages or requires the beneficiary to commit a crime or tortious act is contrary to public policy

e. Property Destructive Directive: While individuals are free to destroy property while they are alive, individuals generally are not free to destroy property upon their death and such directives are invalid.

4) Conditions Not Violating Public Policy: Partial restraints. See below

a. Partial Restraints: Partial restraints on marriage that impose only reasonable restrictions generally are not contrary to public policy and are valid.

b. Temporal/Religious Requirement: Gifts requiring a beneficiary to marry within a reasonable time period, even to someone of a particular religious background are valid.

5) Conditional Restraint on Marriages (Shapira v Union National Bank): The Court can uphold and enforce the provisions of a testator’s will which conditions the bequests to his sons upon the marrying of Jewish girls with Jewish parents and this does not offend the state or US Constitutions.

a. Constitutional Protection of Right to Marry: Under the 14th Amendment of the US Constitution, the right to marry is protected.

i. State Action Requirement: The action of the states to which the Fourteenth Amendment has reference includes action of state courts, state judicial officials, and state legislatures.

1. Protection from State Legislative Restrictions: The right to marry is constitutionally protected from state legislative action.

a. Prohibition of Antimiscegenation Statutes: Anti-miscegenation statutes, which prohibits blacks and whites from marrying, violates the Equal Protection Clause and Due Process Clause.

2. Protection from State Judicial Action

a. Restrictions on Race: The Court cannot enjoin blacks from occupying properties which they had bought and were subject to privately executed restrictions against use or occupation by only whites.

ii. Determination of Unconstitutional Restriction:

1. Enforcement of Testator’s Intent Permitted: The Court can be asked to enforce the testator’s restriction upon his son’s inheritance.

a. Testator’s Right to Disinherit: Since a testator may legally entirely disinherit his children, a testator may restrict a child’s inheritance

2. Court Injunctions on Marriage Prohibited: The Court cannot enjoin a party from marrying a non-Jewish girl

b. Public Policy Determination: To determine whether a conditional gift violates public policy, the court must determine whether it was a partial or absolute restraint.

i. Types of Restraints:

1. Absolute Restraint: Gifts conditioned on the beneficiary not marrying anyone, at least as to first marriages, are generally considered to violate the fundamental right to marry and are void

2. Partial Restraints: Partial restraints on marriage that impose only reasonable restrictions generally are not contrary to public policy and are valid.

ii. Determination of Reasonable Restraint: A restraint unreasonably limits the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur and if the condition affects the faith of the beneficiary.

1. Fact-Specific: The likelihood of marriage is a factual question, to be answered from the circumstances of a particular case.

2. Non-Coercive Conditions – Reasonable: If the condition is too remote to be regarded as coercive of religious faith, the condition is reasonable.

a. Lack of Census Figures: The court will take into account the lack of census figures of the total population in upholding a restraints reasonableness.

b. Reasonable Grace Period: A 7 year time limit for marriage is a reasonable grace period and would give a beneficiary ample opportunity to fulfill the marriage without coercion.

3. Uncertain or Indefinite Provisions – Unreasonable: The Court will invalidate provisions that are uncertain or indefinite to occur

a. Small Proportion of Eligible Bachelors: If the small number of eligible bachelors in the area would have made the condition as a virtual prohibition of a party’s right to marry and if the party cannot go abroad in search of a party, the restraint is unreasonable

b. Remote Possibility of Divorce: The fact that a condition would encourage the beneficiary to marry then divorce her afterwards is a possibility too remote to be seen as unreasonable

iii. Conditional Gifts Based on Religion: The court distinguishes between testamentary gifts conditioned upon the religious faith of the beneficiary and the marriage to persons

inequality in wealth, income and opportunity.

a. Progressive Taxation: Progressive taxation can’t really help cultural inheritance but it can aid income inequality problems

b. Cultural Inheritance: The gravest source of inequality for opportunity is cultural inheritance.

Part A–3: Freedom of Disposition as Constitutional Imperative

1) Theories on the Nature of Freedom of Disposition:

a. Blackstone’s Theory: The permanent right of property, vested in the ancestor himself, was not a natural right but a civil right created by civil or municipal laws. See page 26-27

i. Prevailing View: Until the 1980s, Blackstone’s view prevailed over Locke and the right to transmit property at death was generally not a natural right and not one constitutionally protected.

b. Locke’s Theory: Since God gave Man a strong desire to propagate their kind and continuing themselves in their posterity, children thus have a title to share in the property of their possessions and to inherit the property. See page 27-28.

2) Government Power to Regulate (Irving Trust Co v Day – 1942):

a. Statutory Rights: Rights of succession to the property of a deceased, whether by will or by intestacy are of statutory creation.

b. No Constitutional Protection: Nothing in the Federal Constitution prohibits the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction

3) History of Inheritance Right as Constitutional Right

a. 1942 – 1980: The power to pass one’s property at death was not a constitutionally protected right

b. 1980 Onward: In the 1980s, the Court revived its interest in protecting private property through the Takings Clause of the Fifth Amendment.

4) Right to Transfer – Government Cannot Abrogate Completely: A statute that virtually abrogates the power to transfer at death is unconstitutional because the government cannot abrogate the right to transfer completely.

a. Right to Transfer v Right to Receive: To the extent constitutional protections apply to property transfers at death, the protections arguably apply only to the decedent’s power to dispose of his property at death, not necessarily to a particular heir’s or beneficiary’s right to receive property from a decedent

5) Total Abrogation of Power to Transfer – Unconstitutional (Hodel v Irving – 1987): The 5th Amendment curtails the power of the government to limit the right to pass property at death

a. Facts In the 19th Century, Congress enacted land Acts which divided communal reservations of Indian tribes into individual allotments for Indians and unallotted lands for non-Indian settlemens.. To protect the allottees from the improvident disposition of their land, the Sioux allotment statute provided that the allotted lands were to be held in trust by the US. Until 1910, the deceased allottees passed to the heirs according to the laws of the state where the land was located and they were permitted to dispose of their interests by will. The parcels of land became splintered into multiple undivided interests in land with the parcels having from dozens to 100s of owners. Since the land was held in trust and could not be alienated, the problem became worse. So Congress ended further allotment of lands. Section 207 provided that the land will not descend by intestacy or devise but instead shall escheat to the tribe. The statute permitted the owners to convey the land at time of death through non-probate arrangements