Cain – Wills and Trusts – Fall 2011
Introduction
Ø The Power to Transfer Property at Death
i. The scope of one’s power to transfer at death is generally considered to be a matter of civil law as opposed to natural right.
ii. Right vs. privilege
a) Generally presumed that the power to pass one’s property at death was not a constitutionally protected right.
b) Irving v. Day – SC said, “rights of succession to property of a deceased, whether by will or by intestacy, are of statutory creation, and the dead hand rules succession only by sufferance.
o Nothing in the Constitution forbids the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction.”
c) Hodel v. Irving, however, the SC reversed itself from earlier ruling and held that the “escheat” provision of the Indian Land Consolidation Act of 1983 constituted an unconstitutional “taking” of decedent’s property without just compensation.
o ILCA contained an escheat provision which essentially provided that any undivided fractional interest in a tract within a tribe’s reservation or jurisdiction, would escheat to that tribe and could not be passed by intestacy or devise, if the interest represented two percent or less of the total acreage of the tract and it earned its owner less than $100 in the preceding year before it was due to escheat.
(a) Since the escheatable rights are not de minimis, nor does the availability of inter vivos transfer obviate the need for descent and devise, a total abrogation of these rights cannot be upheld.
(i) The regulation virtually amounts to the abrogation of the right to pass on a certain type of property – a small undivided interest – to one’s heirs.
iii. Public Policy debate
a) Pro: A person should have the power to transfer his property at death bc such a policy is consistent with a system of private property; encourages and rewards a life of hard work; is consistent with and promotes family ties; encourages individuals to accumulate wealth for old age and to give to family; and encourages family members to love, serve, and protect their elders.
o Con: A person should not have the power to transfer his property at death bc such a policy perpetuates economic disparity and discrimination and constitutes an unearned windfall to those who happen to have wealthy relatives – and such unearned wealth creates powers and privileges that are undeserved and denies equal opportunity to all children.
Ø Dead Hand Control
i. Arises where a decedent conditions a gift to a beneficiary upon a beneficiary behaving in a certain way.
a) By qualifying the testamentary gift, the decedent is attempting to exercise control over the beneficiary even after the transferor’s death.
b) Restatement (Third) of Property: Wills and Other Donative Transfers (2003)
o §10.1 – Donor’s Intention Determines the Meaning of a Donative Document and is Given Effect to the Maximum extent allowed by law. Freedom of disposition favored.
(a) The controlling consideration in determining the meaning of a donative document is the donor’s intention.
(b) However, donor’s intent is invalid where it is “prohibited or restricted by an overriding rule of law.”
ii. Valid Conditions- testamentary conditional gifts are valid unless they violate public policy, or judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights.
a) Courts have been reluctant to find the upholding conditional terms of the gift constitutes sufficient state action to offend the Constitution, and the courts have been very reluctant to hold conditional gifts as contrary to public policy.
iii. Invalid Conditions – a handful of conditions have been held to be invalid as against public policy.
a) Absolute restraints on marriage – gifts conditioned on the beneficiary not marrying anyone – at least as to first marriages – generally are considered to violate the fundamental right to marry and are void.
o Exceptions to this-
(a) Partial restraints – impose only reasonable restrictions – courts pay particular attention to the age of the intended beneficiary and the time frame of the intended restriction or condition.
(b) Temporal/religion requirement – gifts requiring a beneficiary to marry within a reasonable time period, even to someone of a particular religion, have been held valid.
(i) Such gifts arguably do not restrict an individual’s right to marry; they merely encourage him to marry within a certain time frame and within a particular religion.
(ii) Shapira v. Union National Bank (1974) – A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable.
(a) David Shapira, M.D., testator, conditioned his son, Daniel Jacob Shapira, Plaintiff, inheritance under his will upon Plaintiff being married to, or marrying within seven years of testator’s death, a Jewish girl with two Jewish parents.
(b) The conditions contained in decedent’s will are reasonable restrictions.
(i) His unmistakable testamentary plan was for his possessions to be used to encourage the preservation of the Jewish faith.
(ii) The condition did not pressure plaintiff into marriage by the reward of money because the seven year time limit is a reasonable grace period, which would give plaintiff ample time for reflection and fulfillment of the condition without constraint or oppression.
b) Religion requirement – gifts that require a beneficiary to remain faithful to a particular religion generally are held to violate public policy concerning religious freedom and are invalid.
c) Encouraging separation and divorce – invalid if driving force of testator’s intent is to encourage separation/divorce; perhaps not invalid if intent is merely to provide support in the event of separation/divorce.
d) Promoting Family strife – gifts conditioned on family members ostracizing and/or not communicating with other family members generally have been held to violate public policy and are void.
e) Property destruction directive – testator could destroy something themselves when alive, but gifts that direct destruction after death are invalid.
iv. Remedy
a) Gift over clause – clause in the instrument that provides where the gift will go if the condition is not satisfied.
o If there is a gift over clause and the gift is invalid, the courts will distribute property to the alternative beneficiary under the express gift over clause.
o If there is no clause, the courts will generally strike the void condition and permit the beneficiary who was subject to the condition to take the property free and clear of any conditions.
Ø Who Takes Decedent’s Property?
i. Probate and Nonprobate property
a) “To go through probate” – have estate administered by the court
b) Probate property – passes under the decedent’s will or by intestacy
o Who takes the decedent’s property depends on whether the decedent had a valid will or died intestate.
o Intestacy is the default
(a) Opt out of default by properly executing a valid will.
c) Nonprobate property is property passing under an instrument other than a will. Includes:
o Joint tenancy property, both real and personal
(a) Under joint tenancy, decedent’s interest vanishes at death.
(i) Right of survivorship – upon death of one tenant, his share is extinguished, and the shares of the surviving joint tenants are recalculated.
(b) In order for survivor to perfect title to real estate, all they need to do is file a death cert of the decedent.
o Life insurance
(a) Paid by the insurance company to the beneficiary named in the insurance contract.
(b) Distributed directly to the beneficiaries without being subject to probate
o Contracts with Payable-on-death provisions
(a) A decedent may have a K with a bank, employer, etc., to distribute the property held under the K at the decedent’s death to a named beneficiary.
(b) Pension plans often provide survivor benefits
(c) Tax deferred investment plans (IRAs) often name a death beneficiary
(d) Beneficiary just need to file a death certificate with the custodian of the property on the K.
o Interests in trust
(a) When property is transferred in trust, the trustee holds the property for the benefit of the named beneficiaries, who may have life estates or remainders or other types of interests.
(b) Property distributed to the beneficiaries by the trustee in accordance with the terms of the trust instrument
(c) If created by the decedent, the trust may be revocable or irrevocable
(d) If the decedent has testamentary power of appointment over assets in the trust, the decedent’s will must be admitted to probate, but the trust assets are distributed directly by the trustee to the beneficiaries named in the will and do not go through probate.
ii. Summary – Who takes the
sed on the reasonable foreseeability of injury to the intended beneficiaries if the attorney fails to exercise due care.
b) Contract – most courts have held that a nonparty to a K can sue for breach of K if the nonparty qualifies as a third-party beneficiary.
o Once client identifies to attorney to whom the client wishes his property to go, the intended beneficiary achieves third-party status and is in privity of K with the attorney.
vi. Simpson v. Calivas – P’s father executed a will that had been drafted by Calivas. The will left a life estate in “our homestead located at Piscataqua Road, Dover, New Hampshire”, to father’s second wife (P’s Stepmom). P and his stepmother filed a probate action to determine whether “homestead” referred to all the real property on Piscataqua Rd (which included a house, over one hundred acres of land, and buildings used in the family business), or only to the house.
a) Probate court found the will left all the real property, not just the house and limited amount of land.
b) P sued attorney Calivas, alleging negligence and breach of K.
o Lower court applied the common law approach and dismissed P’s claims.
o NH Supreme Court applied the modern approach and found for P, reasoning that there was a reasonable foreseeability of harm to P, justifying extending the duty of care to include intended beneficiaries.
(a) Evidence in attorney’s notes that father’s will intended life estate to include only the house, with remaining real property to P.
vii. Heyer v. Flaig – when does the statute of limitations begin to run on the malpractice action?
a) At the time of testator’s death
viii. Conflicts of Interest – testator’s attorney may owe a duty of care to another party if the attorney has an ongoing A-C relationship with the party. The lawyer may have a duty to disclose what otherwise would be considered testator’s confidential info to the attorney’s other client.
a) Hotz v. Minyard (1991) – A fiduciary relationship exists when one has a special confidence in another so that the latter, in equity and good conscience, is bound to act in good faith.
o Although the attorney represented the decedent and not the appellant, he did have an on-going attorney/client relationship with Appellant and there’s evidence that Appellant had a special confidence in him.
(a) Although the attorney owed no duty to disclose the existence of decedent’s second will, he owed Appellant the duty to deal with her in good faith and not actively misrepresent the first will.
ix. A v. B (1999) – estate planning section of Hill Wallack represented both husband, B, and his wife, W, who executed wills leaving all the property of each survivor, in the reasonable expectation that the survivor would care for any joint children.
a) Both signed a Waiver of COI form that expressly permitted the firm to disclose confidential info obtained from other sources.
b) During the course of preparing these wills, the family law section of Hill Wallack mistakenly took on another client, woman A, who sued B for paternity of child whom B recently had with her.
o The existence of this child was relevant to W’s estate plan.
c) When firm discovered this conflict, it withdrew from paternity suit and ordered B to tell his wife W of the child, or the firm would tell her. B sued the firm to prevent disclosure.
d) Court held that disclosure to the wife was permitted under NJ’s version of Model Rule 1.6.
o The firm was not permitted to id the child or its mother A; disclosure was limited to the fact that B had fathered a child with another woman.
