Andrea McDowell
Trust & Estates
Fall 2015
Introduction:
T&E court is about estate planning
· Spousal rights
· Non-probate
o Trusts
o Other transfers
· Probate
o Intestacy
o Wills
Two Views on Testamentary Rights
1. Wills and testaments, rights of inheritance are creatures of civil laws (not a natural right) Land used to belong to the King. Blackstone & Jefferson
2. Right to property is a natural right, and right to inherit possessions is therefore also a natural right. Locke
I. Intestacy
A. Dead Hand
To what extent should a person be able to use wealth to influence behavior after death? Problem- the more the hand reaches into the future, the more out of touch it is with reality.
Generally: American law doesn’t grant courts authority to question the wisdom, fairness, or reasonableness about how donor allocates property. See Restatement
Restatement §10.1:
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.
Exceptions:
1. Spousal Rights (She didn’t mention in outline)
2. Creditors Rights ( “ )
3. Total or unreasonable prohibition on a first marriage
i. In re Shapria v. United National Bank- Ct upheld a restrictive condition to marry Jewish girl.
Rule: conditions regarding marriage will be enforced, unless they amount to an unreasonable restriction on a first marriage, i.e., the donee has little prospect of marrying (partial
Broader lesson: The decedent can impose whatever conditions he wants, with few restrictions
Shapira court says the marriage requirement was not in terrorem
In terrorem: A “provision designed to threaten one into action or inaction; esp., a testamentary provision that threatens to dispossess any beneficiary who challenges the terms of the will.” Black’s Law Dictionary (2004).
A clause in terrorem is not necessarily invalid. The court means rather that the father had a positive intent (to promote Judaism) rather than a negative intent (he hated David’s girlfriend).
What is unreasonable?
a. Restatement-if a marriage permitted by the restraint is not likely to occur. Likeliness is answered from the circumstances from the particular case.
b. Public Policy- should be meant to enable the beneficiaries rather than to spite them. (look at intent)
· H's will creates a trust for his wife, W, providing her with the trust income for her life but if she remarries, the income is to go to H’s and W’s then living children. ß not against public policy
· Jack left the bulk of his estate in trust to pay tickets issued to drivers caught speeding on the Garden State Parkway. ß yes against public policy
ii. 2nd Restraint is OK- eg income for life, but if marries someone else, it stops
4. Undermining family relationships: encouraging divorce, break off contact with siblings
Conditions on marriage or divorce may be valid if meant to enable the beneficiaries rather than to spite them. Court looks to intent. COMPARE:
· $100K to Joan on condition that she divorces her rotten, imbecile husband by 2020. If she does not divorce him, the money goes to SHU.” Valid? No, intent to leave husband in terrorem
· “If Joan divorces her husband before 2020, my executor shall give her $100K to tide her over until she can support herself. If she is not divorced by 2020, the money goes to SHU.” Valid? Yes, intent to help her get on her feet
If a condition is invalid, the beneficiary gets the gift free of the condition:
· “$100K to Joan on condition that she divorces that imbecile husband of hers by 2020. If she does not divorce him, the money goes to SHU.” Joan does not divorce her husband. The $100K goes to Joan ß invalid condition
· “If Joan divorces her husband before 2020, she gets $100K to tide her over until she can support herself. Otherwise, the money goes to SHU.” Joan does not divorce her husband. The $100K per year goes to SHU ß valid condition
5. Waste (destruction of property)
During life it’s okay to destroy property, but after death? Society may benefit from not destroying property.
The Countess of Grantham ordered her executor to destroy her spectacular tiara after her death. It is worth $100K. Will the court enforce the instruction? No
6. Encourage Unlawful activity
7. Vague Condition: A court may void a condition that is vague.
Mary should maintain her piano playing skills vagueness of what level of skills ßinvalid
What about a bequest to “my daughter Jane, but if she marries someone who is not her social equal, then to my son Joe.” Vagueness bc how do you manage this ßinvalid
8. She’s not testing on restraints on donnee’s religion.
How is A different from B? Rule: Condition that is met (or not) at testator’s death is always upheld
A. “To Mary: if she is still married to Jim at my death, $5K. If she is divorced from Jim, $500K.” yes
B. To Mary, $100K, on condition that she divorces Jim. no
Trusts: *Restatement § 29- invalidates trusts that are contrary to public policy. Frowns on restraints on beneficiary behavior, including restraints on marriage or religious freedom, and those that disrupt family relationships, and choice of careers, but calls for balancing of conflicting social values.
Incentive Trusts: Focus on ensuring the beneficiary does not adopt slothful or waste less existence.
3 Categories:
1. Pursuing education
2. Moral incentives: moral or religious outlook or promote a certain way of living.
3. Productive career
*Note- only allowed if it doesn’t violate public policy.
Historically:
Donor would gift to third party, who promised to give the property back to the owners heirs after his death. (circumvented prohibition on leaving land to someone at death)
B. Probate
Probate property:
Property that passes by will or intestacy (and so through the probate court)
1. An estate doesn’t have to go through probate if:
· All traditional forms of property: real estate, personal property, cash, copyrights, life estates.
1. The descendant had only non-probate property and personal property
2. And/Or small bank accounts, wage claims & cars (statute permitting)
3. After all debts are paid- the remaining estate is small enough to qualify fo
ome courts say where the personal property is located or habitually stays.
I. Surviving Spouse: Surviving Spouse’s share is dependent on whether the decendent also left surviving parents/ or children.
He/She will get:
a. Entire Estate
i. If there is no kid or parent of the decedent survives the decedent.
OR
ii. MODERN RULE: UPC If the decedent’s surviving kids are also kids of the surviving spouse. SE NJ 3B:5-3
b. Portion of the Estate
i. OLD RULE: Spouse gets one half, if there are kids.
OR
ii. MODERN RULE: If decendent is survived by parent, but NO kids then
first 25% to spouse (but not less than 50K or more than 200K) + ¾ of the balance
OR
iii. MODERN RULE: If decendent or surviving spouse have other children, then first 25% of estate (not les than 50K or more than 200K) + ½ balance
· In most cases, the progressive/ modern statutes are more complex and nuanced; and more generous to the surviving spouse
· While the older statutes tend to be one-size-fits-all. They were also drafted in an age when men were the bread winners and saw their wives as dependents.
1. Same Sex Marriage:
a. NJ STATUTE 3B-53:
Includes DOMESTIC PARTNER
b.UPC
REMAINS SILENT on Domestic partners
* Public opinion is changing legal landscape- heading more toward allowing same-sex marriage.
2. Simultaneous Death:
A person succeeds to the property only if the person survives the descendant for a certain amount of time.
a. Old Rule: If there is no sufficient evidence that a party survived the decedent, he or she is deemed to have predeceased the decendent.
AKA- if a beneficiary who survives the testator or intestate by even a second, inherits.
b. New rule UPC/120 Rule: Unless there is clear and convincing evidence that a party survived the decedent by 120 hours, he or she is deemed to have predeceased the decedent
i. Janus v. Tarasewicz- (tylenol case)
-When drafting a will- you might want to specify an amount of time.
c. NJ Rule: 3B:3-32:
1. 120 hour requirement
2. For Co-owners if no C&C evidence;
-> ½ as if one had survived by 120 hours
and ½ as if the other had survived by 120 hours.
3. Other exceptions: if in agreement, invalid under RAP, unintended failure or duplication of a disposition
4. Applies to any beneficiary in the will- no simultaneous accident required
5. Standard of evidence: check on this again?? is this for NJ or everyone?