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Wills and Trusts
Santa Clara University School of Law
Spitko, E. Gary

 
Spitko
Wills and Trusts
Fall 2014
 
                                                                                                                                                            I.            INTRODUCTION
 
A.      The Power to Transmit Property at Death
·         The Problem of the Dead Hand
o    Restatement (Third) of Property: Wills and Other Donative Transfers (2003)
§  § 10.9  The controlling consideration in determining the meaning of a donative document is the donor’s intention.  The donor’s intention is given effect to the maximum extent allowed by law.
§  Rationale = property owners have nearly unrestricted right to dispose of property as they please.
o    “dead hand” control
§  Decedent exercises power of beneficiary by conditioning the gift to beneficiary upon beneficiary behaving in a certain way
§  Generally dead hand control is OK
·         Cant be in violation of constitution or public policy
o    Illegal/ Impermissible uses of dead  hand control
§  Absolute restriction on marriage
§  Requiring beneficiary to practice certain religion
§  Gifts that encourage/ require divorce
§  Gifts that direct property to be destroyed
Ø  Shapira v. Union National Bank  (pg. 28)
§  Facts – Father’s will provided that his sons could not inherit unless they married a Jewish girl with two Jewish parents within 7 years of his death.
§  HOLDING
·         Court upholds the will.
·          Father has the absolute right to dispose of the property in the way he wants
·          It wasn’t unconstitutional because it did not limit the right to marry, only the right to inherit. 
·         However, the court also looked into the restriction itself under a reasonableness test and held that it didn’t violate public policy because it was only a partial restraint on marriage and not a total restraint. 
·         If the restriction were unreasonable, then it might be unconstitutional.
o    Restatement (Second) of Property: Donative Transfers
§  § 6.2  a restraint unreasonably limits the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur.
§  Today, most courts apply a reasonableness test to restrictions to marry in wills, but some courts will hold the restrictions invalid without consideration of their reasonableness.
o    Incentive Trusts
§  Conditional gifts like in Shapira are today typically done as incentive trusts
§  People can leave their property in trust and the benefits can terminate if the beneficiary does or does not do certain things.
·         This is useful motivation to encourage beneficiaries to be productive members of society
·         However, it can also backfire and does not account for changed circumstances
From outline:
o    General or total restraint: if condition was not to marry anyone→total or general restraint→contrary to PP and void
o    Partial restraint: condition that imposes only reasonable restriction→valid and not contract to PP.
·   Marrying within a particular religious class or faith are reasonable.
o    Unreasonable restriction: Maddox v. Maddox: Niece marry within the Society of friends. Too few bachelors so unreasonable.
o    Marriage: A provision that encourages separation or divorce is invalid, but a provision that is meant to provide support in the event of separation or divorce is valid.
·   Example: a bequest to a surviving spouse conditioned on the survivor not remarrying is invalid, unless the purpose is to provide support while the survivor is not married.
o    R3 §29: 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 freedoms of others.
·   Restraints on Marriage: [R Shapira] restraint unreasonably limits the transferee's opportunity to marry if a marriage permitted by the restraint is not likely to occur. The likelihood of marriage is a factual question, to be answered from the circumstances of the particular case.
 
 
B.      Transfer of the Decedent Estate
·         Definitions
o    Testate
§  If decedent dies with valid will then he died testate and property will be distributed pursuant to will
o    Intestate
§  If decedent dies w/out valid will decedent died intestate and property will be distributed pursuant to state law
o    Testator
§  Male who executes will
o    Testatrix
§  Female who executes will
o    Devise
§  Gift of real property under a will
o    Devisee
§  Beneficiary receiving real property under a will
o    Bequest
§  Gift of personal property under a will
o    Legacy
§  Gift of money under a will
o    Legatee
§  Beneficiary receiving money under will
o    Personal representative
§  Person appointed by probate court to oversee the administrative process of wrapping up and probating decedent’s affairs
o    Executor
§  What personal representative is called if decedent died testate and will names personal representative
o    Administrator
§  What personal representative is called if decedent died intestate or testate but fails to name personal representative
o    Heirs
§  Under statute decedent’s real property descends to heirs
o    Heirs Apparent
§  When a decedent is still alive, the would-be heirs are called “heirs apparent;” you don’t have heirs until you die
o    Next-of-kin
§  Under statute decedents personal property is distributed to next-of-kin
 
·         Probate Courts
o    Special courts that manage the commencement, administration, and winding up of an estate
o    Purposes = (1) taking property titled in decedent’s name and getting it titled to the living; (2) protecting creditors; (3) distributing property
 
·         Probate and Non-Probate Property
o    Probate Property
§  Property titled in the name of the decedent
§  passes under will or through intestacy
o    Non-Probate Property
§  Property that passes outside of probate under an instrument other than a will
§  property that is not titled in the name of the decedent
§  Examples
·         Joint tenancy property (both real and personal)
o    Joint tenancy with right of survivorship
o    Tenancy by the entireties
·         Life insurance (so long as there is a named beneficiary)
·         Pension funds/retirement funds
o     (payable-on-death POD provisions)
·      

re was no privity, because
·         (1) he was an intended beneficiary and
·         (2) the injury was foreseeable
§  Fiduciary duty runs from drafting attorney to an intended beneficiary
§  The son’s rights are derivative of his father’s reasonable expectations
o    Malpractice suit goes to general jurisdiction court, NOT probate court
o    About 10 states retain the no privity rule and do not allow intended beneficiaries to bring malpractice suits
 
·         Conflict of Interest
o    Any time a couple walks into your office to do estate planning, there IS a conflict of interest
Ø  A v. B (pg. 64)
§  Facts – Law firm represents husband and wife in estate planning and also represents other woman in paternity suit against husband.
§  Issue – Can the law firm disclose confidential facts about one client to another client?
§  HOLDING
·         Yes.  Although firm owes duty of confidentiality to husband, it also owes duty to disclose information to the wife in the course of estate planning, and the existence of a child out of marriage is relevant to the estate planning.
·          Firm has discretion to disclose, but does not have a duty to disclose.
 
                                                                                                              II.            INTESTACY: AN ESTATE PLAN BY DEFAULT
 
A.      The Basic Scheme
·         Introduction
o    Intestacy is common
§   well over half of the population dies without a will
·         People don’t like to think about dying
·         People procrastinate
·         People don’t like dealing with lawyers
o    Intestacy statutes
§  Every state has its own intestacy statute
§  UPC is NOT very widely adopted
§  Older statutes are NOT as mindful of modern higher divorce rates
o    Governing principle = blood relationships
§  Two exceptions  spouses, adopted children
o    Partial intestacy
§  People can die partially intestate if their will fails to dispose of all their property
§  Policy = legislature tries to carry out what would most likely be the intent of the decedent
·         General rules
o    If there is a surviving spouse, no children, and parents
§  Most states = spouse gets everything
§  Some states = spouse would share with parents
o    If there is a surviving spouse and 3 children of the marriage
§  UPC = spouse gets everything (assumption that spouse will benefit children)
§  Some states divide between the spouse and the children, regardless of whether or not the children are of the marriage