Wills, Trusts & Estates – Fall 2011, Weisbord
Intro
A decedent has the power to transfer property at death
Hodel – SCOTUS case that affirms the passing of wealth though no right to inherit exists.
· The states can regulate this but cannot abrogate it
Rationale: encourages one to save & promotes family value vs. perpetuation of wealthy family who were lucky enough to be born as such
EXCEPTION: Shaw – only property owned prior to death can be passed. If no right existed previously, then it follows intestacy rules.
· EX. A owns Whiteacre>to T if he survives, if not to T’s estate. But T with X as intestate heir & a will says Y gets everything. T predeceases A. A dies, then X gets Whiteacre, not Y.
Restatement (“RS”) of Prop. 10.1 = donor’s intent is given maximum effect allowed by law.
Dead Hand control = a decedent may condition a beneficiary’s gift on certain behavior or conditions occurring so long as it does not violate public policy {a balancing game}.
· Invalid restraints include restraints on marriage, practicing religion, encourages divorce/family strife or destruction of property
· Conditional gifts, if invalid per public policy, can be saved by a “gift-over” provision. EX. To A for invalid reasons but if not to A, then to charity X.
· Now incentive trusts do the same thing
Nonprobate = (1) property held in joint tenancy (2) life insurance & P.O.D. Ks (3) legal life estates and remainders (4) inter vivos trusts
· Nonprobate property passes via the nonprobate instrument
Probate = everything else.
· Probate property passes via a Will or through intestacy
· Probate-intestacy is the default method
· NJ Probate Procedures: a will must be admitted to probate; proof by an attesting witness or someone familiar with the will’s execution; must wait 10 days after death; Creditors must present claims in writing to estate w/in 9 months. Then w/in 60 days after probate, a notice in writing must be sent to all interested parties (not creditors) of the probate.
CAVEAT = a challenge to the will + transfer to Superior Court.
Three KEYS to estate planning (from lawyer perspective):
1. Honor the decedent’s intent
2. Avoid estate taxes
3. Avoid probate
3rd party standing:
Common Law [“CL”]: beneficiaries have no standing to sue an attorney for malpractice if a Will is screwed up
Modern Trend [“MT”]: beneficiaries are 3rd parties to a K and have standing to sue for malpractice. Simpson (NH) – duty owned to beneficiary & then can sue for malpractice.
Terminology: Testate = has a will. Real property is devised; personal property is bequeathed. Intestate = no will. Real property descends to heirs; personal property is distributed to next-of-kin.
Intestacy NJ Stat. 3B:5-2
· This is the default distribution scheme; specifics differ by State
1. surviving spouse – *marriage requirement or DP
2. issue = children and grandchildren
3. parents
4. issue of parents (decedent’s siblings)
5. grandparents/issue of grandparents (cousins)
6. next of kin, aka collateral relatives
7. escheats to the State (very bad!)
Spousal survival
CL: preponderance of the evidence standard that heir survived decedent by 1 millisecond
MT: clear & convincing standard, time varies from 1 millisecond to 120 hours
Jurisdictional Splits: on the types of property this applies to as well as probate or nonprobate
NJ: N.J.S. §3B:5-1: survival must be 120 hours; not applied if estate would escheat.
Query: how to determine death (1) brain death or (2) heart failure. Need “clear and convincing” evidence in NJ. Or written into will/medical directive.
Spousal share & domestic partner (in NJ)
Typical decent & distribution statute: SS gets 100% if no issue, parents or siblings; 50% if decedent has 1 child (alive or dead w/issue) or no issue but parents or siblings; 33% if more than 1 child
NJS §3B:5-3 – (a) 100% if (i) no issue or parents OR (ii) descendant’s are same for SS & no other descendant’s of SS surviving (b) The first 25% (50-200k) plus ¾ of balance of intestate estate if no descendants but parent/s alive (c) first 25% (50-200k) plus ½ of balance if (i) all descendant’s same as SS & SS has 1 or more surviving descendants OR (ii) decedent has 1+ descendants not same as
ares as there are living descendants and deceased descendants with living issue at that generation.
3. Distribute the shares of living descendants at that generation.
4. Combine the shares of deceased descendants at that generation into a pot.
5. Locate the next generation with a living descendant.
6. Divide the pot into as many shares are there are living descendants and deceased descendants with living issue.
7. Distribute the shares of living descendants at that generation. [and repeat pooling and distribution, so on, and so forth.]
*The big difference is the English always starts inheritance division at children regardless if they’re dead or alive, whereas the modern system starts at the first generation of living descendants.
*The split between Modern and UPC is that after the first generation that inherits, the inherited money is pooled before being split.
Posthumous children
· Typically heirs are determined at time of death; policy is good b/c it allows for finality
MT: allows 280-300 days after decedent’s death for a child to be born
· Posthumous conception brings about a plethora of other troubles Pgs. 117-132
Advancements
CL: inter vivos gifts to a child are irrefutably presumed to count against the child’s share.
MT: inter vivos gifts do not count against the child’s share except if a writing, made contemporaneously with gift, left by donor indicated the gift to count against the child’s share
NJ Stat. §3B:5-13: if property passed via intestate by all or portion of estate, must have writing declaring gift was advancement or meant to be similar.
Hotchpot = add back into entire estate the value of the advancement, then distribute while subtracting that gift from that child’s take
