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

Trusts and Estates, Weisbord, Fall 2017
 
Chapter 1: Overview
 
Introduction to Theories
Freedom of Disposition: The American law allows an owner of property to control the disposition of her property at death.
Unrestricted Power: Generally, property owners have the nearly unrestricted right to dispose of their property as they please
Theories of Law:
Positive Law: Positive law is created by individuals in a statute or decision based on what man believes is right law
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
Natural Law: Natural law is a right innate to mankind in which every individual is born with.
Public Policy Arguments for Right of Testation:
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.
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.
Reasons Decedents Die Intestate:
Procrastination
Assumptions: Assumptions that the property will go to children automatically
Lack of Assets: The decedent has no assets to pass
Superstition: Decedents do not want to think about dying
Expense and Cost: Lawyers are too expensive and decedents cannot afford to create a will.
Dead Hand Control: Dead hand control arises where a decedent conditions a gift to a beneficiary upon a beneficiary behaving in a certain way.
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.
Incentive Trusts: Such conditional gifts are typically made in an incentive trust.
Testamentary Conditional Gifts
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
Exception: A donor’s intent is invalid where it is prohibited or restricted by an overridden rule of law
Validity of Testamentary Conditional Gifts: Testamentary conditional gifts are valid unless:
Violation of Public Policy: They violate public policy or
Unconstitutional: Judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights
Conditions Violating Public Policy: Absolute restraints. See below.
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
Exception: Gifts that provide for a beneficiary only in the event of separation and/or divorce are not necessarily deemed to encourage divorce
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
Religion Requirement: Gifts that require a beneficiary to remain faithful to a particular religion violate public policy.
Promoting Family Strife: Gifts conditioned upon family members ostracizing and/or not communication with other family members have been held to violate public policy
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
Inability to Control: Since the granddaughters could not control the behavior of their husbands, the condition could disrupt family harmony
Criminal/Torts: A condition that encourages or requires the beneficiary to commit a crime or tortious act is contrary to public policy
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.
Conditions Not Violating Public Policy: Partial restraints. See below
Partial Restraints: Partial restraints on marriage that impose only reasonable restrictions generally are not contrary to public policy and are valid.
Temporal/Religious Requirement: Gifts requiring a beneficiary to marry within a reasonable time period, even to someone of a particular religious background are valid.
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.
Constitutional Protection of Right to Marry: Under the 14th Amendment of the US Constitution, the right to marry is protected.
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.
Protection from State Legislative Restrictions: The right to marry is constitutionally protected from state legislative action.
Prohibition of Antimiscegenation Statutes: Anti-miscegenation statutes, which prohibits blacks and whites from marrying, violates the Equal Protection Clause and Due Process Clause.
Protection from State Judicial Action
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.
Determination of Unconstitutional Restriction:
Enforcement of Testator’s Intent Permitted: The Court can be asked to enforce the testator’s restriction upon his son’s inheritance.
Testator’s Right to Disinherit: Since a testator may legally entirely disinherit his children, a testator may restrict a child’s inheritance
Court Injunctions on Marriage Prohibited: The Court cannot enjoin a party from marrying a non-Jewish girl
Public Policy Determination: To determine whether a conditional gift violates public policy, the court must determine whether it was a partial or absolute restraint.
Types of Restraints:
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
Partial Restraints: Partial restraints on marriage that impose only reasonable restrictions generally are not contrary to public policy and are valid.
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.
Fact-Specific: The likelihood of marriage is a factual question, to be answered from the circumstances of a particular case.
Non-Coercive Conditions – Reasonable: If the condition is too remote to be regarded as coercive of religious faith, the condition is reasonable.
Lack of Census Figures: The court will take into account the lack of census figures of the total population in upholding a restraints reasonableness.
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.
Uncertain or Indefinite Provisions – Unreasonable: The Court will invalidate provisions that are uncertain or indefinite to occur
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
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
Conditional Gifts Based on Religion: The court distinguishes between testamentary gifts conditioned upon the religious faith of the beneficiary and the marriage to persons of particular religious faith
Religious Faith of Beneficiary – Invalid: Since the free choice of religion cannot be circumscribed or controlled by contract, a testamentary gift conditioned upon the religious faith of the beneficiary is invalid.
Separation Agreement Controlling Faith: A covenant that required a mother to raise a children in a certain religion is unenforceable
Requirement to Follow Religion: A life estate willed to grandchildren, provided they remain fait

ory took for facilitating donor intent
The default rules that apply are the rules of intestacy
Accounting for the passage of time
For example, someone forgets to change a will after a nasty divorce. Is that what they really want?
Regulating agency costs
Other people have to facilitate the gratuitous transfer of property
 
 
State Law
 
Testamentary freedom consists of two components:
Dispositional control: the privilege of saying who gets your property and how much they get
Dead Hand Control: when people try and impose terms and conditions on their estates that effect their beneficiaries or that last long after their death
 
Why would the law impose any restraint on the ability to make post death decisions?
 
Eyerman v Mercantile Trust
Had a home located in a well-planned neighborhood
Louise Johnson left a will directing her executory to demolish her residence, sell the land, and deposit proceeds into the estate
Value of property would decrease from $40,000 to $650
Would also decrease the value of the entire neighborhood
Almost like a missing tooth
The neighbors are the ones complaining and they contest the will on grounds of public policy
Easily argued that it doesn’t make sense to demolish the house for financial reason
But also its her house, and no one contesting the will really has any real legal power
NOTE
Capacity is presumed
So if you do something during your lifetime, you have to bear the brunt of that harm
But if you wait until youre dead, then you are not the one to feel the issue
So  maybe death is a demarcation between decision
Negative Externality
When someone engages in activity that generates costs that are felt by external people or parties
Note
In order to contest the will you have to have legal standing
An intestate heir, an beneficiary of the current will, or a beneficiary of a previous will that would take if the current will was set aside
Dissent
Is concerned with opening up the door to disregarding people's wills and ability to decide on what to do with their property
 
Constitutional Law
 
The Constitution does not prevent state or federal government from regulating testation by adding or subtracting rights from the power to transmit property at death
Ex: in Eisner the court held that the estate tax is constitional even though it impaired the freedom of disposition
PROF: very old idea, but it wasn’t really suggested as a natural born rt. 
2.) Blackstone: Rights of inheritance are all creatures of civil or municipal laws. NOT a natural right. 
3.) Locke: God gave man a strong desire to care for his kind, and this gives children a right to inheritance. 
4.) CASE: Hodel v. Irving (US 1987)
(Takings Clause Case): There was a continuous problem in the native community bc land was becoming so fractionalized. Congress passed legislation that took away inheritance rts of Indians and left land held by deceased to the respective tribes they belonged to. As people died, some of those interests would go to the tribe- could not be passed down. Some Indians who ordinarily would have inherited land appealed the Act, arguing that it constituted a taking. 
a.) Holding: This is an unconstitutional taking. The right to pass on property has been part of the US since feudal times, and this is a total abrogation of the ability to pass on certain types of property. 
b.) Rule of Law/Takeaway: the ability to TRANSFER property at death is protected under the 5th Amendment.