Trusts and Estates Outline – Weisbord – Fall 2014
Plenary Remarks and Introduction
Determination of Death Under New Jersey Law
1) Determination of Death Generally
a. N.J. Stat. 26:6A-2 – Declaration of death based on cardio-respiratory criteria
i. 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
b. N.J. Stat. 26:6A-3 – Declaration of death based on neurological criteria
i. 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
2) Determination of Death: Absentees
a. N.J. Stat. 3B:27-1(a): Death of resident or nonresident presumed after 5 years absence or exposure to specific catastrophic event
i. A resident or non-resident of this state who absents himself from the place of his last known residence for a continuous period of five 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.
3) N.J. Stat 3B:27-6(a) Action to be brought in Superior Court
a. The Superior Court may declare the absentee dead, if it is satisfied that the absentee should be presumed dead under the provisions of N.J. Stat. 3:27-1. The Superior Court may, if it concludes from a review of the evidence, both direct and circumstantial, that the earlier death of the absentee has been established and that the death occurred prior to the institution of the proceeding before the court.
4) Disposition of Human Remains
a. Common Law Principle: The body is not a property and belongs to no one.
b. Purpose of Modern Law:
i. Health and Safety: The health and safety of human remains involving burial and cremation requirements
ii. Procedural Aspects: The documentation and process, such as death certifications, registration of the deceased
c. New Jersey Law on Dispositional Preferences
i. Public Funeral Prohibition – NJSA 26:6-3: You cannot have a public funeral if the person had communicable or transferable diseases. If a person has a disease, a doctor may prohibit a public funeral
ii. Cemeteries and Burials Dangerous to Public Health – NJSA 26:6-5: Cemeteries cannot be dangerous to public health. If a cemetery or burial is dangerous to the public, it would be inadvisable to attend the funeral. The state department of a local board may institute an action in Superior Court to either shut down or limit the burial.
iii. Burials – NJSA 26:6-36: A buried coffin has to be buried at least 4 feet below the ground, immediately covered by earth or soil.
iv. Death Certificates – NJSA 26:6-6: Funeral Director responsible for death certificate to be in legible manner and has to report it within 24 hours of getting funeral permit if burial is not in jurisdiction where death was or body found. We do NOT need a doctor to declare death in every case.
v. Duty to Furnish Particulars – NJSA 26:6-8: The particulars of how a person died have to be supplied by either the attending doctor, attending registered professional nurse, or county medical examiner within a reasonable time, which is not to exceed 24 hours.
vi. Deceased Veterans – NJSA 26:6-4.2: Registration of deceased veterans. Undertaker to make inquiry, report, penalty for failure to report. We make it known when deceased is a veteran. When body transported into country, undertaker has to make inquiry into how they died and determine whether this body is a soldier’s and if so, determine what war.
Chapter 1: Introduction – Freedom of Disposition
Part A: The Power to Transmit Property at Death and Dead Hand Control
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
b. State Regulation: States have broad authority to regulate that process but they cannot completely abrogate that right.
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:
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
Controlling Faith: A covenant that required a mother to raise a children in a certain religion is unenforceable
b. Requirement to Follow Religion: A life estate willed to grandchildren, provided they remain faithful to a particular religion is invalid.
c. Order of Contempt: The court cannot be asked to hold the plaintiff in contempt for failing to marry a Jewish girl.
2. Marrying Within Particular Religion – Valid: Gifts conditioned upon the beneficiary’s marrying within a particular religious class or faith are reasonable.
a. Condition to Marry: The court upheld a gift of a life estate conditioned upon the beneficiary’s not marrying a woman of Catholic faith.
6) Incentive Trusts: Conditional gifts are more typically made in trust, sometimes called incentive trusts
a. Purpose of Incentive Trusts: Incentive trusts are focused on ensuring that a beneficiary does not adopt a slothful or frivolous lifestyle, rather than encouraging religious observation or marriage to a preferred mate.
b. Changed Circumstances: Changed circumstances can frustrate the settlor’s purpose if the trust is drafted to be inflexible
c. Poorly Drafted Trust: Sometimes a poorly drafted conditional bequest backfires, producing perverse results never intended by the donor.
7) Restatement (Third) of Trusts – Section 29: To determine what is contrary to public policy, the courts should balance the donor’s freedom of disposition against other social values and the effects of dead hand control on the subsequent conduct or personal freedom of others
a. Determination: If a provision is unnecessarily punitive or unreasonably intrusive into significant personal decisions or interests, the provision may be invalid
i. Example: A provision is invalid if it would terminate a trust beneficiary’s interest upon marriage to someone not of a particular religious faith
b. Contrary to Shapira: This provision is contrary to Shapira.
c. Rejection of Restatement (In re Estate of Feinberg): The court upheld a testamentary trust in which a beneficiary who married outside of the Jewish faith would be treated as if the beneficiary had died on the day of the marriage.
i. Family Strife Irrelevant: While the beneficiary restriction clause results in family strife, it is not so capable of producing harm that its enforcement would be contrary to the public interest.
8) Remedies for Invalid Conditional Gifts: Where there is a conditional gift that violates public policy, the critical variable is whether there is a gift-over clause
a. Gift Over Clause Definition: A clause in the instrument that provides where the gift is to go if the condition or restriction is not satisfied
b. Existence of Gift-Over Clause: Where a gift-over clause exists and the conditional gift violates public policy, generally courts will strike the condition as void as against public policy but the courts will not give the property to the beneficiary subject to the condition. Instead, he property will be distributed to the alternative beneficiary under the express gift-over clause
c. No Gift-Over Clause: Where no express gift-over clause exists, if there is a conditional gift that violates public policy, generally courts will simply strike the void condition/restriction and permit the beneficiary subject to the condition to take the property free and clear of any conditions.