Estates and Trusts Outline

ESTATES & TRUSTS – PROFESSOR WALDECK
I.                   CHAPTER 1—INTRODUCTION TO ESTATE PLANNING
a.       SECTION A: THE POWER TO TRANSMIT PROPERTY AT DEATH: ITS JUSTIFICATION AND LIMITATIONS
                                                    i.      Disposal of one’s property by testament—by written or oral instruction, properly witnessed and authenticated, according to the pleasure of the deceased (his will)
b.      The Right to Inherit and the Right to Convey
                                                    i.      Hodel v. Irving—
c.       The Policy of Passing Wealth at Death
                                                    i.      Kristol says it encourages private distribution of wealth to essentially ban inheritance, rather than a huge bequest to state
                                                  ii.      Halbach (pro deadhand)—encourages saving, not consumption
1.      Provides for family’s economic security and gives testator sense of happiness
2.      Productivity for testator
3.      Organized around system of private property and upon death, must go somewhere; this is as good as any
                                                iii.      Bentham (pro deadhand)—provides an incentive for children to take care of their parents in old age
                                                iv.      Blum (against)—anti-American, because it unlevels the playing field
1.      Unequal investment in human capital; encourages inequality and concentrates wealth
2.      Risks—impedes economic growth in the long term, leads to underinvestment in human capital and physical capital (i.e. inner cities), undermines democracy because wealthier have better access to power
a.       Against saving argumentànever know ho long you’re going to live or how much you’ll need
b.      Status (wealth, power, prestige) is enough to keep high-income earners in the game
d.      An Introduction to the Problem of the Dead Hand
                                                    i.      Using wealth to influence behavior after death
                                                  ii.      Restatement § 10.1—donor’s intent controls in meaning of the donative document
1.      Rationale—American law places premium on freedom of property disposition
2.      Effect—Donot’s intent controls meaning and effect; only curtailed if prohibited or restricted by overriding law
                                                iii.      Shapira v. Union National Bank—testator may validly impose a restraint on the religion of the spouse of a beneficiary as a condition precedent to inheriting under the will (here, required son to marry Jew in order to claim inheritance)
1.      If complete disinheritance is enforceable (it is), then conditional disinheritance must be as well
2.      Constitutional argument—courts not asked to enforce covenants, so while right to marry is constitutionally protected, nothing here triggers due process/equal protection clause
a.       This is also not state action (under Shelley, marriage protected from restrictive state action) save for probate of the will
                                                                                                                            i.      Otherwise could never leave money to church, as would cause a 1st Amendment problem
3.      Public policy—partial restraint of marriage, which imposes only reasonable restrictions is not void as violative of public policy
a.       Does not amount to virtual prohibition, as in the Society of Friends case
b.      Note—restriction requiring beneficiary not to marry member of religion is also valid, but no one requiring him not to marry altogether
4.      Creating a trust with a trustee with discretion is probably a better idea to deal with unforeseen circumstances or problems
a.       Reasonableness conditioned on likelihood of occurrence; if son were gay or already converted to Catholicism?
e.       SECTION B: TRANSFER OF THE DECEDENT’S ESTATE
f.       Probate and Nonprobate Property
                                                    i.      Probate—property that passes under decedent’s will
1.      3 Relevant Meaning of Probate
a.       In narrowest form, proving to a court that a will is a valid document and enforceable
b.      In common usage, administration valid will present, now must collect monies, pay bills and distribute assets
c.       Property that can be collected; in contrast to non-probate property that passes under non-will (deed, etc.)àmost important for us
                                                                                                                            i.      Distinguishing how property is passed (will or otherwise)
                                                  ii.      Non-probate—property passing under an instrument other than a will
1.      Example—joint tenancy; decedent’s interest vanishes at death; applied often to bank accounts, brokerage accounts and mutual funds
2.      Life insurance—paid to beneficiary
3.      Payable-on-death contract provisions—often found with banks or pension plans, tax-deferred investment plans, joint custodian accounts
4.      Interests in trust—distributed directly to beneficiaries
g.       Administration of Probate Estates
                                                    i.      First, appoint an executor to oversee the winding up (if not mentioned in will, called an administrator); executor or administrator appointed by or under control of probate court
1.      Inventory and collect assets
2.      Manage assets during administration
3.      Clear titles to car, real estate, etc.
4.      Distribute remaining assets to entitled
h.      Summary of probate procedure
                                                    i.      Opening probate performs 3 functions:
1.      Provides evidence of transfer of title to new owners by probated will or decree or intestate succession
2.      Protects creditors by requiring payment of debts
3.      Distributes decedent’s property to those intended after creditors paid
                                                  ii.      Informal and formal probate
1.      Informal—representative petitions for appointment; will and petition submitted together and sworn to legitimacy
a.       Then mail notice within 30 days to all interested parties, including those apparently disinherited
                                                iii.      Non-claim statutes—requires creditors to file claims within specific time period or risk bar
                                                iv.      Supervising representative actions—can be costly and time-consuming, particularly if court orders involved (sale, minor children, etc.)
                                                  v.      Closing the estate—msut do all above and then apply for discharge
i.        SECTION C: AN ESTATE PLANNING PROBLEM
j.        The Client’s Latter and Its Enclosures
k.      Some Preliminary Questions Raised by Brown’s Letter
l.        Additional Data on the Browns’ Family and Assets
m.    SECTION D: PROFESSIONAL RESPONSIBILITY
n.      Duties to Intended Beneficiaries
                                                    i.      Simpson v. Calivas—
o.      Conflicts of Interest
                                                    i.      Hotz v. Minyard—
                                                  ii.      A. v. B.—
II.                CHAPTER 2—INTESTACY: AN ESTATE PLAN BY DEFAULT
a.       SECTION A: THE BASIC SCHEME
b.      Introduction
                                                    i.      Intestacy—default rule; people who do not makes wills or transfer all of their property are governed by intestacy law
1.      Partial intestacy—will disposes of only a part of the probate estate
a.       Domicile at death governs disposition of personal property, but location of real property governs its disposition
                                                  ii.      UPC § 2-101—Intestate share
1.      2-101(a)—all parts of estate are not disposed of to heirs
2.      2-101(b)—may limit or exclude; estate passes then as if the excluded or limited person had disclaimed this share
c.       Share of Surviving Spouse
                                                    i.      UPC § 2-102—spouse’s share
1.      2-102(1)(i)—entire estate if not descendent or parent
2.      2-102(1)(ii)—all surviving descendents also descendents of spouse and no other descendent or spouse surviving…
3.      2-102(2)—$200,000 (first) and ¾ of estate balance if no descendent, but surviving parent
4.      2-102(3)—first $150,000 and ½ of estate balance, if descendent who are not also those of the decedent
5.      2-102(4)—first $100,000 and ½ of estate balance, if one or more of decedent’s surviving descendents are not those of the spouse as well
                                                  ii.      Share of Surviving Spouse—usually receives about half of the decedent’s estate; more popular to give spouse everything
1.      Some states consider statutory minimums, in spite of contrary will, for purpose of preserving economic health of the spouse.
2.      Some disqualify spouse for abandonment or refusal to support
                                                iii.      Domestic partners—most domestic partners want other to have the full share of estate, particularly gays
1.      California gives full rights to gays and straights if one of the partners is over 62
                                                iv.      Simultaneous death
                                                  v.      Janus v. Tarasewicz—determination of legal death must be made in accordance with the usual and customary standards of medical practice
1.      Insurance paid proceeds of husband’s life insurance policy to administrator of Theresa’s estate
2.      Survivorship (right to have property of deceased pass to survivor) must be proven by preponderance of evidence by party whose claim depends on survivorship
3.      120 Hour Rule—in situations