wills, trusts & estates outline
fall 2008 – PROFESSOR waldeck
CHAPTER 1 – INTRODUCTION TO ESTATE PLANNING
A. Problem of Dead-Hand Control
To what extent should a person be able to use wealth to influence behavior after death?
Restatement (Third) of Property: Wills & Other Donative Transfers
§ 10.1 – Donor’s Intention
Meaning of a donative document is donor’s intention
Donor’s intention not only determines the meaning but also the effect of a donative document
Pro Dead-Hand Control Arguments
(1) Comfort that even after death those loved ones will be taken care of
(2) Promotes saving rather than consuming in individuals (pro-economy)
(3) Encourages productivity
(4) Encourages children to take care of their parents in old age à knowing that an inheritance awaits
Anti Dead-Hand Control Arguments
(1) Anti-American à inheritance ban would level the playing field/equal opportunity
(2) Inheritance comes from dumb-luck (Paris Hilton)
(3) Wealthy families make an investment in “human capital” à education, other opportunities are more available for wealthy families
(4) Concentration of wealth à impedes economic growth over the long term and leads to under-investment in both human capital and physical capital
Underminds democracy b/c wealthy have greater access to government
(5) Never know how much you’re gonna need / how long you are going to live
(6) If children know they wont inherit, promotes children saving à “savings across generations”
Shapira v. Union National Bank
David Shapira’s will conditioned Daniel Jacobs (son) inheritance on his marrying a Jewish girl whose both parents are Jewish, within seven years of David’s death. If he does not fulfill this condition, inheritance goes to the State of Israel. Daniel argues the condition is unenforceable because contrary to public policy and unconstititional
Decision:
Constitutionality:
Court is not enforcing any restriction upon the son’s constitutional right to marry; rather it is enforcing a testator’s restriction upon his son’s inheritance
Rule: Parent is legally allowed to disinherit their children completey à no constitutional right to inherit
Public Policy
Rule: A partial restraint of marriage which imposes only reasonable restrictions is valid, and not contrary to public policy
Permissible:
Restrictions upon the beneficiary’s marrying within a particular religious class or faith are reasonable (usually)
Impermissible
However, a total restraint (“You can’t marry anyone”) = illegal
Limiting marriage pool to an unreasonably small portion of society = illegal (Maddox v. Maddox)
Gift conditioned upon faithfulness to a religion
Gift conditioned upon not talking to other sibling for rest of life
Here, court is not persuaded that small number of Jewish women for son to choose (travel & technology today)
Court also strikes down argument that this condition would force Daniel to marry a Jewish girl and immediately divorce her just to get the inheritance
Also, provision giving inheritance to Israel demonstreates the depth of the testator’s conviction à his purpose was not merely a negative one designed to punish his son for not carrying out his wishes; rather, to preserve the Jewish faith
Shapira Revisited
Posner – possibility for modification à recontracting is impossible once you make the will
Solution à give the money to a trustee who has the discretion to decide whether the son complies with the terms or if they are subject to modification
B. Transfer of the Decedent’s Estate
Probate & Nonprobate Property
Probate Property
Property that passes under decedent’s will or by intestacy
Distribution of probate assets under a will or by intestacy may require a court proceeding involving probate of a will or a finding of intestacy followed by appointment of a personal representative to settle the probate estate
Nonprobate Property
Property that passes outside of probate, through nonprobate transfers
Distribution of nonprobate assets do not involve a court proceeding, but is in accordance with the terms of a contract or trust or deed.
Examples:
Joint Tenancy Property (Real & Personal) – decedent’s interest vanishes at death and no interest passes to the survivor
Life Insurance – proceeds of a policy on the decedent’s life are paid by the insurance company to the beneficiary named in the insurance contract
Contracts with POD provisions – decedent may have a contract with a bank, employer or some other person or corporation to distribute the property held under the contract at the decedent’s death to a named beneficiary
Interests in Trusts – 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
Ex. 1 page 39
Furniture, furnishings and other items of tangible personal property = probate property b/c there is no other instrument to determine where this stuff will go
Prolly does not need to go to probate court for this stuff cuz it is already in her house
Savings account in name of Aaron Green = probate property b/c there is no other instrument to determine whether this stuff will go
Will have to go to probate so she can get an order telling the bank to release that account to her
Joint checking account = non-probate property cuz its already jointly held (once her name is on it, she has access to it)
Employer’s pension plan, naming Martha Green for suvivor’s benefits = non-probate property
Government bonds, payable to “Aaron or Martha Green” = non-probate property
Ordinary lfe insurance policy naming Martha Green as primary beneficiary = non-probate
Ford car = probate property
If she is interested in having clean title, she will have to go to DMV and present death certificate
“For items of personal property for which ownership is evidenced by a document such as an automobile certificate of title or a stock certificate, the transferee need some official recognition of his rights in order to transfer those rights
[INSERT CHART FROM E&E ON PAGE 9]
CHAPTER 2 – INTESTACY: AN ESTATE PLAN BY DEFAULT
A. The Basic Scheme
Basically rules that govern when you fail to make a will
Goal of Legislature is to write statutes that mimic what a person would be doing (want to give deference to Dead-Hand control)
Main issue to define is what rights do we want to give to surviving “spouse” (i.e., does that include same-sex partners?)
States differ on their default rules
Intestacy is not an all-or-nothing idea
Partial Intestacy
Person dies with:
Life Insurance policy
Jewelry (passes under will)
Joint check account (passes under will)
Google stock (could possibly pass under wil)
Vacation home (passes under will)
Househ
tal equity
[A]
[Q] = 1/3
B = 1/3
[C] = 1/3
[E] = 1/6
F = 1/6
G = 1/10
H = 1/10
[X] = 1/6
[Y] = 1/6
O = 1/10
M = 1/10
N = 1/10
Q and C’s shares are pooled first and then divided by the # of potential takers (here, = 4)
So, 2/3 x ¼ = 2/12 = 1/6
1/6 will go to X, Y, E, F
X, Y and E’s shares are then pooled and dropped down
So, 3/6 x 1/5 = 3/30 = 1/10
1/10 will go to O, M, N, G, H
B. Transfers to Children
(1) Meaning of Children & Descendants
(a) Adopted Children
UPC § 2-114 – Parent and Child Relationship
(a) Except as provided in subsections (b) and (c), for purposes of intestate succession by, through, or from a person, an individual is the child of his [or her] natural parents, regardless of their marital status. The parent and child relationship may be established under [the Uniform Parentage Act] [applicable state law] [insert appropriate statutory reference].
(b) An adopted individual is the child of his [or her] adopting parent or parents and not of his [or her] natural parents, but adoption of a child by the spouse of either natural parent has no effect on (i) the relationship between the child and that natural parent or (ii) the right of the child or a descendant of the child to inherit from or through the other natural parent.
(c) Inheritance from or through a child by either natural parent or his [or her] kindred is precluded unless that natural parent has openly treated the child as his [or hers], and has not refused to support the child.
NOTES: (b) still allows adopted children to inherit thru their natural parents
Hall v. Vallandingham
Earl Vallandingham died and was survived by his widow, Elizabeth and their 4 children. Elizabeth then married Jim Killgore, who adopted the 4 children. Earl’s brother, William, then died childless, unmarried and intestate. His sole heirs were his surviving brothers and sisters and the children of brothers and sisters who predeceased him. The 4 children alleged they were entitled to William’s estate. i.e., kids want to inherit from Uncle’s estate by “stepping into the shoes of their father’s interest.” Uncle doesn’t want to give to kids b/c the kids had been adopted by their step-father.
Decision:
Rule: Every state possess the power to regulate the manner or term by which property within its dominion may be trasmitted by will or inheritance and to prescribe who shall or shall not be capable of receiving that property.
Rule: A state may deny the privilege altogether or may impose whatever restrictions or conditions upon the grant it deems appropriate.
Holding:
