I The Power to Transmit Property at Death: Justifications and Limits
A) Historical Backdrop
B) 3 ways to pass property at death:
1.
2.
3.
a.
b.
c.
d.
Reserving a life estate, often in a revocable trust, designating a death beneficiary on a contract, pension plan, or bank account.Gift of a remainder interestJoint tenancy Inter vivos revocable trust- perfect because very flexible and doesn’t go to probateWill Substitutes- Today, most property is transferred this wayIntestacyWill- requires probate and is costly and time consuming
C) Dead hand/ Why have wills and inheritance?
1.
2.
3.
4.
POLICY—Disadvantages
a. Wealth gets passed onto children who are born lucky.
b. Concentrates inherited economic power in the hands of the few and denies equality of opportunity to the poorer.
c. Surviving spouse automatically has right to certain portions of property even if dead spouse intentionally disinherits spouse.
of wills- REASONS to Limit Dead HandPOLICY—Advantages
a. Intent of testator
b. Incentive for one to be productive and gather wealth (save $) in lifetime
c. Security for family members, eases their transition into death.
d. Economic stability for descendants—not on welfare, helps maintain family.
e. Property owner is best suited to decide who gets his prop (e.g. small business is better run by one’s son than the gov.)
f. Government gets some- through taxes
of wills:BUT- Dead people don’t have to deal with consequences.GENERALLY, people are the best judges of their own concerns, they should manage their own concerns and it cannot be wrong continually to claim this liberty for every generation of mortal men.
D) Restraints on Wills
E) Who can challenge a will? 2 types of people: Only one can challenge
1.
2.
RULE: If a 2nd will reduces the amount from an original will, you can challenge the reduction. If a 2nd will adds, then can’t challenge.Someone who stands to lose in a revised will can challenge the will.
F) Question p42
1.
a.
b.
Probate propertyBut there is something to be said for not letting wills out and allowing for stolen wills. Also, photocopies are not allowed by statute. The will has already been probated and years have passed. – died in 1951- didn’t’ sign many autographs. Left everything to wife in will. Wife died later and left things to charity. Charity wants the original will that has been signed. They propose switching real signature for photocopy. Are you allowed to? Should you be?Shoeless Joe Jackson
1. What is Not allowed?
2. Partial Restraints on Wills ARE ALLOWED
a. RULE: A testator may validly impose a restraint on the religion of the spouse of a beneficiary as a condition precedent to inheriting under the will.
b. Shapira v. Union National Bank Ohio Court of Common Pleas 1974 p24
1) Testator placed a provision in his will which provided that his two sons would receive a portion of his estate only on the condition that they each marry a Jewish girl whose both parents were Jewish, within seven years of the testator’s death, and if the condition was not fulfilled, the share would pass to the State of Israel.
2) Rationale: In the case at bar, the court is not being asked to enforce any restriction upon Daniel Jacob Shapira’s constitutional right to marry. Rather, this court is being asked to enforce the testator’s restriction upon his inheritance.
3) Rule: The right to receive property by will was a creature of the law, and not a natural right or one guaranteed or protected by either the state or federal constitutions.
4) RS 6.2
(a) Invalid if restraint causes tortious behavior
(b) Typically, restraints are invalid if they cause a disruption of a family relationship, like causing divorce.
– A restraint to induce a person to marry within a religious faith is valid “if and only if under the circumstances, the restraint does not unreasonably limit the transferee’s opportunity to marry.”
a. Banning marriage altogether.
b. Promoting divorce
c.
1)
2)
Not wanting anyone to live in it is not good decision.Won’t be enforced by ct unless there’s a good reason. Having something destroyed- provision won’t be enforced unless there’s a good reason.
II Transfer of The Decedent’s Estate, Planning & Social Responsibility
A) Probate v. Nonprobate property
1.
2.
a.
b.
c.
d.
Interests in trust- trustees hold the property for the benefit of the named beneficiaries, who may have life estates or remainders or other types of interests. Contracts payable on death provisionsLife insurance- payable upon receipt of death certificateJoint tenancy- no interest of decedent passes
3.
a.
1)
2)
3)
4)
Distribute the remaining assets to those entitled. Receive and pay the claims of creditors and tax collectors andManage the assets during the administrationTo inventory and collect the assets of the decedent
b.
c.
1)
2)
3)
4)
5)
(a)
(b)
In CA, property passing solely to surviving spouse is not subject to administration, unless specifically requestedDomestic partners have recently been included in this list (same level as spouse)CreditorsSiblingsParentsChildrenSurviving spouse
d.
1)
2)
Probate performs 3 functions:One dying intestate, allows for real property to descend to heirs, and personal property to be distributed to next-of-kin. One dying testate devises real property to devisees and bequeaths personal property to legatees. There are two different sets of terminology usedAdministrator- If the will does not, or if person dies intestate, the court appoints the administrator. The administrator is typically selected in this order: Executor- if the will names a personal representative, they are the executor
4.
a.
1)
2)
3)
Distributes the decedent’s property to those intended after the creditors are paid. Protects creditors by requiring payment of debtsProvides evidence of transfer of title to the new owners by a probated will or decree of intestate succession
b.
1)
2)
(a)
(i)
(ii)
(iii)
The person asking for letters can choose which one to use. Notice is formal probate Ex parte is informal probateThe Uniform Probate Code provides for both ex parte probate and notice probate.
3)
4)
(a)
If you do probate, it is cut back to 4 months. In some states, notice has to be given to creditors. SOL: If you go through probate- only a 1 year statute of limitation for creditors- even if you don’t do probate. When: No proceeding, formal or informal, may be initiated more than 3 years from the date of death- if no will is probated, intestacy is assumed. Who: Letters testamentary to an executor or letters of administration- authorize a person to act on behalf of the estate- to distribute money, sign name- as if you have title to estate. Where: The will should be probated in the primary or domiciliary jurisdiction- where the decedent was domiciled. If real property is in another location, ancillary administration is necessary.
c.
1)
2)
3)
4)
The representative is not removed from fiduciary duty until the court grants discharge.Judicial approval of all of the administration is required to relieve the representative from liability, unless some SOL runs upon a cause of action on the representative.Taxes paid, real estate sold. Creditors must be paid. Closing the estate-Many things must be done before the estate has been completely administrated. Requirements of ProbateProbate ProcedureAdministration of probate estatesPersonal representative- when person dies, first step is to appoint one to wind up the decedent’s affairs. Their responsibilities are:- property passing under an instrument other than a will which became effective before death- (inter vivos transfers)Nonprobate property- property that passes under the decedent’s will or by intestacy.
B) Do you need probate? It is expensive!
1.
a.
b.
1)
A family allowance- or certain exempt properties, or ‘homesteading’, all make it so you can get your estate to under $100,000 to get a summary proceeding. In CA- anything under $100,000. In most states, it is anything under $10,000.
2.
3. Problem #2 pg. 47
4. Problem #3 pg. 47
5. Problem # 4 pg. 47
6.
a.
b.
c. UPC §3212 and §3222
1)
These, though have not been adopted in US, except for in CA.
d. CPC §13500-§13650-
1)
If the surviving spouse chooses to not have the property administered then he/she takes title to the property and assumes personal liability for the decedent’s debts chargeable against the property. in CA, property that passes to the surviving spouse by intestacy or by will is not subject to administration unless the surviving spouse elects to have it administered. Allows for heirs to receive universal succession. The heirs or the residuary devisees step into the shoes of the decedent at the decedent’s death and assume all liabilities and the obligation of paying legacies according to the will. They immediately get title to the property and the liabilities. On the continent of Europe and Louisiana, universal succession is used- meaning that the heirs or residuary devisees succeed to the title of all the decedent’s property; there is no personal representative appointed by a court. No need for probate. Universal Succession
a. Mr. Green comes to you with assets in number 1 and asks should he make a will?
b. The issue here is about the future, which we couldn’t look at in Problem 1. If he dies intestate, and the children are minors, they may not reach a settlement. One of Green’s sons may predecease him, meaning his grandchild may take- so he is stuck with intestacy laws, and things may change. Also his wife may predecease him.
c. Certainly, there should be some instrument to take care of the contingencies.
a. Same facts, but Green also owned a house and lot worth $85,000 and another lot worth $8000. The deeds to both name Aaron Green as grantee. The residential property is subject to mortgage with a balance of $42,000; title to the other lot is free of encumbrances.
1) Answer: The will should be probated and formally administered
2) Why? To protect heirs because there will be creditors because of mortgage
a. Green dies intestate and the state’s statute of descent and distribution provides that where a decedent is survived by a spouse and children, one-half of his real and personal property shall descend to the spouse, and the remaining one-half shall descend to the children.
1) Step one: determine that which is a non-probate asset and which is a probate asset
(a) Probate- (Items not listed here pass by means other than a will before death)
(i) furniture
(ii) savings account
(iii) ford car
2) Step two: add up the total value of probate items
(a) Total value; $22,500
3) Step three: divide the value of the items into the parts designated by the statute
(a) Spouse = ½ = $11,250
(b) 1 child = equal share of ½ of the estate = $5,625
(c) 1 child = equal share of ½ of the estate = $5,625
though- If there is no probate, and the family settles it- creditors have the SOL- usually a year to make claims. They just go after the family heirs. One thing to remember, Under most state laws there is a law called Small estate- and a proceeding called a summary administration. This is a compromise between a full administration and n
robate Code provision for the surviving spouse is considerably more generous than are the current provisions for the surviving spouse under most state intestacy laws.
4.
§2-103 Share of Heirs other than Surviving SpouseAny part of the intestate estate not passing to the decedent’s surviving spouse under §2-102 passes in the following order to the individuals designated below who survive the decedent:§2-102 Share of Spouse The intestate share of a decedent’s surviving spouse: is Entire (kids take none) if§2-101 Intestate Estate
C) California Probate Code Provisions
1.
a.
2.
a.
b.
Husband and wife may make an agreement to the contrary to divide community property
3.
a.
b.
Husband and wife may make an agreement to the contrary to divide the quasi community property
4.
a.
1)
2)
3)
(a)
(b)
(c)
NOT accident/life insurance, or pension payable to anotherJoint tenancy agreementInterest created in trust, with income payable to decedentOne of these typesDecedent made transfer for no consideration ANDDecedent died domiciled in CA, AND
5.
a.
b.
If you don’t leave ½ to person other than spouse, (most you can leave), it all goes to the spouse.
c.
d.
e.
1)
The entire the decedent did not leave any surviving HEIRS (issue, parent, brother, sister, or issue of a deceased brother or sister).
2) One-half in the following cases:
(a)
Where the decedent leaves only one child or the issue of one deceased child.
(b)
Where the decedent leaves no issue but leaves a parent or parents or their issue or the issue of either of them.
3) One-third in the following cases:
(a)
(b)
(c)
Where the decedent leaves issue of two or more deceased children.CPC 21610: Share of Spouse Omitted in Previous Testamentary Devices Where the decedent leaves one child and the issue of one or more deceased children. Where the decedent leaves more than one child. of the intestate estate of the intestate estate intestate estate ifAs to separate property, (that which goes to “probate”) the intestate share of the surviving spouse or surviving domestic partner, as defined in subdivision (b) of Section 37, is as follows: As to quasi-community property, the intestate share of the surviving spouse is the one-half of the quasi-community property that belongs to the decedent under Section 101.As to community property, the intestate share of the surviving spouse is the one-half of the community property that belongs to the decedent under Section 100.
6.
a.
Follow 100 and 101(Happens when T marries spouse after execution of will)CPC 6401: Surviving Spouse/Domestic Partner, Quasi/Community PropertyFor Community and Quasi, follow 100 and 101. CPC 102: Transfer and restoration of Quasi Community PropertyIf decedent transfers quasi-community property, surviving spouse can require ½ value/proceeds or property if: CPC 101: Quasi Community Property (acquired in CA while couple was outside CA during term of marriage)When a married person dies, ½ quasi community property goes to spouse and ½ to the decedentCPC 100: Community Property (property acquired during marriage in CA)When a married person dies, ½ community property goes to spouse and ½ to the decedent.CPC 6400: Property for IntestacyAny part of an estate of a decedent not effectively disposed of by will passes by intestacyA third of the states have adopted the Uniform Probate Code (California has not)Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this Code, except as modified by the decedent’s will. a government drafted estate plan. This is what happens to your property if there’s no valid alternative estate plan.
1.
2.
a. Hodel v Irving US Supreme 1987 p3
1) O’Connor on p9 “, the right to pass on property- to one’s family in particular- has been part of the Anglo American legal system since feudal times.”
2) Rule: States do not have the right to completely abolish the right to descent and devise.
3) Schneider- Case is about right to transmit property, not merely receive- Limiting transfer rights would limit people’s power to do anything else.
RULE: Taking away rights of an owner to dispose of property rights is a taking without just compensation and it violates owner’s rights guaranteed under 5th Amendment.Until1987, US Supreme said there was no constitutional right to pass property at death.
b.
Share of the estate equal to that which spouse would have gotten if no device made, but no more than ½
