Wills, Trusts, and Estates
DeGraw Fall 2006
Lesson 1: Estate Planning
A. The Power to Transmit Property at Death
i. Holdel [KS1] v. Irving (Taking Property Without Just Compensation)- The government has considerable latitude, under the Just Compensation Clause of the Fifth Amendment, n regulating property rights in a ways that may adversely affect the owners. The right to transmit property at death is a separate, identifiable stick in the bundle of rights called property, and, if this constitutionally protected right is taken away, just compensation must be paid under the 5th amendment. There is no set formula for determining when justice and fairness require the economic injuries caused by public action be compensated by the government, rather than remaining disproportionately concentrated on a few persons.
ii. Will substitutes do not go thru probate
iii. Estate tax is based on what you get, not what is in the will
iv. Probate policy—three functions
1. provides evidence of transfer of title to the new owners or by probates will or decree of intestate succession
2. protects creditors by requiring payment of debts
3. distributes the decedent’s property to those intended after creditors are paid
v. Letters testamentary- authorize a person to act on behalf of the estate
vi. Formal (Dependant) Administration- created the need for continuous trips to the courthouse to get permission to do everything you wanted to do.
vii. Informal [KS2] (Independent) Administration- there are many ways to handle it, but usually, to gain approval for an action, the lawyer just gives an accounting to the court. Note that in distributing property, the court will usually have to come in even in an informal administration.
viii. If it is not included in the will or there is intestacy, there can still be independent administration is all distributes agree and the court finds it is in the best interest of the estate.
ix. Temporary Administration (131a-135): if there is an immediate need for personal representation, a judge may appoint a temp admin for up to 180 days with limited powers as the circumstances require.
x. Small estate Admin: probate admin not necessary where value of the probate estate, not including homestead and exempt personal property, does not exceed $50k; the distributes file an affidavit w/ the court showing the basis upon which they are entitled to distribution- all actions will be done under the authority of the affidavit.
xi. Muniment of title- states that there are no debts or creditors, and there is no reason to administer estate except to clear title on real property and the will is admitted into probate as “muniment of title”
xii. Paying of mortgage- typically you do not have to pay mortgage at death as long as person who takes over is liable for the mortgage. “My just debts” language may trigger payment of debts otherwise cleared by bankruptcy proceedings.
xiii. Probate Estate: amount of the decedent’s property subject to court administration at D’s death. It does not include property that passes outside of probate (ex.-will substitutes).
xiv. Tax Stuff
1. estate tax is based on all the property you get, including will substitutes.
a. Anything you give to spouse is exempt from tax;
b. Things given to charity are exempt from tax;
c. You get credit if you had to pay state tax or in’l tax;
d. Not every gift taxable to recipient
i. Any gift within two years is taxed to D’r;
e. You can give everyone up to $12k/year tax free; does not use u 1mil tax exclusion
f. Can pay tuition and hospital bills without qualifying as a gift. You can also pay directly educational and medical expenses of a person and not have any gift tax apply.
i. TPC §37: the things given is a will vest immediately upon death; if no will, things will vest immediately in
rying typically valid.
iv. Shapira v. Union National (Partial Restraints on Marriage)- The right to marry is constitutionally protected from restrictive state legislative action. However, the right to receive property is a creature of the law and is not a constitutionally guaranteed right. Hence, upholding a partial restraint imposed by the testator will not violate the constitution. Additionally, a partial restraint does not violate public policy. If the condition were that the beneficiary not marry anyone, the restraint would be general or total and would be held contrary to public policy. A partial restraint on marriage that imposes only reasonable restrictions is valid, and not contrary to public policy. The weight of authority in US is that gifts conditioned on the beneficiary’s marrying within a particular religious class or faith are reasonable. (Although saying “you cannot marry a Jewish woman would probably be void).
v. In terrorem clauses that try to limit a persons ability to contest the will are generally void.
Co-Habitation: thus far, restrictions on the right to cohabitate have held up
[KS1]The court does not look at the impact of the state upon the value of the whole bundle or rights, but only the impact of the statute upon the power to transmit property at death
[KS2]Must be specifically stated in the will that the decedent wants an independent administration
[KS3]During probate proceeding, possession of the probate estate goes to a personal representative who manages the assets, ect.