Trusts and Wills Outline
I. The Right of Testation
a. Hodel v. Irving (3)
1. Congress passed a statute providing that land owned by the Sioux would not pass by intestacy or devise, but instead would escheat to the Tribe.
ii. Rule – Decedents have a right to control disposition of their property at death.
1. The court finds that the right to transmit property at death is a separate, identifiable stick in the bundle of rights called property, and if this right is taken away, compensation must be paid.
iii. Devisee – The beneficiary of a gift of real property made by a will.
iv. Escheat – The reversion of property to the state or sovereign, as the ultimate proprietor of realty, by reason of the lack of anyone to inherit it, or by reason of a breach of condition.
v. Heir – One whom statutory law would appoint to inherit an estate should the ancestor die without a will.
vi. Inter Vivos – Transactions made while the parties are living, and not upon death or upon contemplation of death.
vii. Remainder Interest – That part of an estate in property which is left upon the termination of the immediately preceding estate and which is not a reversion to the original grantor or the grantor’s heirs.
viii. Vested Interest – A present right or title to a thing, which carries with it an existing right of alienation, even the right to possession or enjoyment may be postponed to some uncertain time in the future.
II. Public Policy
a. Shapira v. Union National Bank (24)
1. A college student’s father died and conditioned his son’s inheritance upon his marrying a Jewish girl within seven years of the father’s death.
ii. Rule – Restrictions upon marriage as a condition of inheritance are constitutional, valid, and enforceable.
1. Partial restraints on marriage are valid. However, total restraints on marriage are invalid (right to marry is a fundamental right).
iii. Restatement 2nd of Property 6.2. (32)
1. Provides that a restraint to induce a person to marry within a religious faith is valid “if, and only if, under the circumstances, the restraint does not unreasonably limit the transferee’s opportunity to marry.”
2. An example of this would be if whether the son was already married. This would probably violate public policy because it would promote divorce.
b. As a matter of public policy, most courts will not allow you to have your property destroyed upon death because it is wasteful.
c. If an inheritance is conditioned on religious notions, it will most often be struck down (right of religion is a fundamental right).
III. Probate and Estate Planning
a. Probate Property – Property that passes under the decedent’s will or by intestacy.
b. Nonprobate Property – Property passing under an instrument other than a will which became effective before death. Examples:
i. Joint Tenancy Property – The decedent’s interest vanishes at death. The survivor has the whole property relieved of the decedent’s participation.
ii. Life Insurance – Paid by the insurance company to the beneficiary named in the insurance contract.
iii. Contracts with Payable-on-Death Provisions – Decedent may have a contract with a bank or employer to distribute the property held under the contract at death to a named beneficiary.
iv. Interests in Trust – 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 o
, the title to that property will be probated by a judge in that jurisdiction or state.
a. This is known as an ancillary probate.
1. Creditors are usually given 2-4 months to make a claim or else it is barred.
2. Due process requires that notice be given to all known or reasonably ascertainable beneficiaries.
a. Sending it is enough; they don’t necessarily have to receive it.
viii. Note à Avoiding probate is a completely different issue from avoiding estate taxes. There are essentially two types of estates: the probate estate (all assets that go through a will) and a taxable estate (all the property the IRS says you own at death).
ix. Contesting a Will:
1. Once the will is admitted into probate, courts set a particular time for a contest to take place (usually 2-3 months).
2. In order to contest a will you must have standing (a pecuniary interest in the outcome of the case).
x. Universal Succession:
1. This is the system used in Europe where the heirs automatically get the decedent’s property as well as all of their debts.
d. Reducing the Estate Tax
i. Avoiding probate does not mean that you necessarily avoid estate taxes.
ii. Strategies of Avoiding Estate Taxes:
1. Give the money away before you die. It is then no longer a part of the estate.
However, the IRS now limits how much you can give away to your kids. The limit i