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Wills and Trusts
Santa Clara University School of Law
Cain, Patricia A.

Wills and Trusts Outline

INTRODUCTORY MATTERS

General Concepts

Donative Trusts – a trust where one person, the donor/settlor, gives property to another, the trustee, to manage for the benefit of a 3rd party, the beneficiary.

i. Concerns – agency problems and costs, the benefits and detriments of 3rd party control and trust governance
1. Controlled by fiduciary duties – very high standard

Intestate Estates – an estate without a will

i. Concern – need to craft default rules for people who don’t draft wills.
ii. Majoritarian Default Rules – structure the laws to reflect what people would generally want to expect.
iii. Penalty Default Rules – make the default something people won’t want in order to force them to contract around them, affirmative structure the relationship.

Testate Estate – a estate with a will,

i. Concern – unlike other contracts, there isn’t necessarily consideration for a will
1. Need to substitute with other formalities à witness, writing, ceremonies.
2. But formalities need to be kept as a means, not an end
ii. Will Contests – why and when do we allow people to contest a will?
1. Need to be able to deal with interpretive problems or changed circumstances between will execution and T’s death.
iii. Limitations on the right to devise – freedom of testamentary intent v. need to protect spouses and children.

Non-Probate Transfer – property that transfers upon death without going through the probate court.

i. Free market competitors to the probate system – a motivation for probate changes.

Policy of Passing Wealth at Death

Arguments in favor of Inheritance:

i. Private security system, safety net – you can take care of your family, or reward them for taking care of you
ii. Protection of the private property earned and accumulated during your lifetime.
iii. Encourages savings
iv. Provides an incentive to work and accumulate
v. Reinforces family ties

Arguments Against Inheritance:

i. Passing of wealth concentrates wealth in the hands of the few – incompatible w/ democracy.
ii. Preserves inequality of opportunity, perpetuates wide disparities in the distribution of wealth society-wide
1. Why we now have estate and gift tax levied primarily on the rich.
2. Except that inheritance isn’t the only thing that factors into this – lifetime expenditures on future generations as well
iii. Allow laziness, complacency, etc.

Striking a balance – allow the transfer of wealth at death but tax the estates.
Determining the passing of wealth – T’s decedent’s intent is the critical factor, need to try and give effect to decedent’s intent.
Limitations? Can’t really let people do whatever they want in their wills

i. They are not around to feel the effects

Problem of the “Dead Hand”: 20-30

General Issue – to what extent should a person be able to use wealth to influence behavior after death?
Restatement 3d § 10.1 – Donor’s Intention determines the meaning of a donative document and is given effect to the maximum extent allowed by law.

i. Controlling consideration in determining the meaning of a donative document is the donor’s intention.
ii. Basic Principle – Freedom of disposition
1. Curtailed only to the extent that donor attempts to make a disposition or achieve a purpose that is prohibited or restricted by an overriding rule of law.
iii. Courts can’t generally question the authority, wisdom, fairness, or reasonableness of disposition decisions.
iv. What might limit Freedom of Disposition
1. Spousal Rights
2. Creditor Rights
3. Unreasonable Restraints on Alienation or Marriage
4. Provisions promoting separation or divorce
5. Impermissible racial or other suspect categoric restrictions
6. Provisions encouraging illegal activity
7. Rules against perpetuities and accumulations

General Concepts

i. Reasonableness Standard used to evaluate transfers via will but not for inter vivos transfers.
1. Factors Determining Reasonableness – time, place, duration
ii. Restatement 2nd § 6.2 – restraints to induce marriage within a religious faith are valid “if and only if under the circumstances the restraint does not unreasonably limit the transferee’s opportunity to marry.”
1. A problem if a marriage permitted by the restraint is not likely to occur.

Probate and Non-Probate Property

Non-Probate Property Includes:

i. Joint tenancy property, both real and persona. à decedent’s interest vanish at death leaving the whole property to the survivor.
ii. Life Insurance à proceeds from the decedent’s policy are paid to the beneficiary upon the receipt of a death certificate of the insured.
iii. Contracts with payable on death provisions
iv. Interests in Trusts à property is distributed according to the terms of the trust instead

Is Probate Necessary?

i. There are administrative costs to the system
ii. Going through probate imposes delay on disposition and distribution
iii. The system can be avoided by those who know how, but it might still

spouse to then be given to the children eventually.
b. Decedent Intent – likely to match what decedent would have wanted.
c. Recognition of marriage as an economic partnership.
ii. Different amounts for different Family Situations
1. Surviving Spouse, no descendents, no parents à all goes to the spouse.
2. Surviving Spouse, surviving parents, no descendent à S gets first 200K and ¾ of the rest, the remainder goes to the parents.
a. Skim off the top for support
3. Surviving Spouse, Surviving descendents à S gets all in certain situations, not in others.
a. If all children are marital children à spouse takes all
i. Problem – fails to anticipate changes to the family after death, when spouse takes most and has later non-marital children.
b. If not all children marital children
iii. California — §6401
1. Spouse or Domestic Partner = 1/3 if decedent is survived by more than 1 child, one child and issue of one or more deceased children, or issue of two or more deceased children.
2. S or DP = ½ if one child or issue of deceased child, or no issue but a parent.
3. S or DP = all if not surviving issue, parent, brother, sister, or issue of deceased brother or sister.

Simultaneous Death – UPC §2-104, §2-702, CPC §220, §103, §224, §222

i. Policy Concern – beneficiary can only take through succession if he really survived the decedent.
ii. USDA – there is not sufficient evidence of survivorship, the beneficiary is deemed to have predeceased the donor.
1. Property goes to next contingent beneficiary.
2. Advantage – property goes where donor would have wanted it in the end
3. Advantage – avoid expenses and taxes of double probate
4. Problem – defining “sufficient evidence of survivorship”
a. Do not want to assume survivorship too easily b/c then have to death with double transfer.
iii. UPC §2-104, §2-702
1. Need clear and convincing evidence of survivorship for 5 days to be a taker.
2. Increases both period of survivorship and evidentiary standard.
iv. California — §220
1. Must survive by clear and convincing evidence for 120 hrs (§6403).