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Trusts and Estates
Southern Illinois University School of Law
Hoke, Patricia A.

Trusts and Estates
Hoke
Fall 2011
 
 
5:42 PM
Ch 1.  Intro
·         Freedom of Testation
·         Definition:  Functionally the right to disinherit your family, to determine the post-death disposition of your property instead of having it pass by universal default rules.
·         Origin:  1540 Statute of Wills – Previously all property passed by primogeniture with significant incidents to the ruling Lord.
 
·         Hodel v. Irving
·   Rule:  The States’, and where appropriate, the United States, has broad authority to adjust the rules governing the descent and devise of property without implicating the guarantees of the Just Compensation Clause.
Appellees filed suit alleging that the escheat provision of the Indian Land Consolidation Act resulted in a taking of their property without just compensation which was in violation of the Fifth Amendment
·         Postmortem Right of Publicity
 
·         Shaw Family Archives v. CMG Worldwide
·   Rule:  At the time of her death in 1962, a celebrity had no descendible postmortem publicity rights under the law of either New York or California, her only possible domiciles at the time of her death, and thus, she lacked testamentary capacity to devise such rights, despite claim that her will should have been construed as devising postmortem publicity rights that were later conferred on her by an Indiana or California statute; only property she actually owned at the time of her death could be devised by will. 
 
·         Dead Hand Problem
·         Restatement (3rd) Property
·         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.
·         Restrictions on Donor
·         Spousal rights
·         Creditor’s rights
·         Unreasonable restraints on marriage
·         Impermissible racial or other categoric restrictions
·         Provisions encouraging illegal activity
·         Rule against perpetuities
 
·         Restatement (2nd) of Property (1983) Donative Transfer §6.2
·   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.”
·         Restatement (3rd) of Trusts (2003) sec 29(c)
·   Invalidates trusts that are contrary to public policy
Restraints on beneficiary behavior
Restraints on marriage
Restrains on religious freedom
Disruption of family relationships
Disruption of choice of careers
·          
·         Shapira v. Union National Bank
·   Rule:  A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable. 
The condition did not pressure plaintiff into marriage by the reward of money because the seven year time limit is a reasonable grace period, which would give plaintiff ample time for reflection and fulfillment of the condition without constraint or oppression. 
·         Incentive Trusts
·   Encourage education
·   Moral incentives
No smoking
No drinking
Give to charity
·   Encourage a productive career
·         Transfer of Decedent's Estate
·         Probate Property
·         Property that passes through probate under the
   decedent’s will or by intestacy.
 
·         Nonprobate Property
·   Property that passes outside of probate through a nonprobate mode of transfer.
Joint tenancy (real and personal)
Life insurance
Contracts with payable-on-death (POD) provisions
Inter vivos trust
 
·         Probate
·   3 Functions of Probate
1) Provide evidence of transfer of title to the new owners;
2) Protect creditors by providing a procedure for payment
    of debts; and
3) Distribute the decedent’s property to those intended after the decedent’s creditors are paid.
 
·         Formal Probate
o    The court supervises the actions of the personal  representative in administering the estate through a potentially costly and time consuming process.
·         Informal Probate
o    The personal representative may administer the estate without court supervision unless an interested party asks for court review
 
·         Simpson v. Calivas
o    Lawyer has duty to intended beneficiaries in writing the will
o    No privity of contract/legal relationship argument no longer allowed
·         Previously argument was that only testator and lawyer had privity of contract and therefore lawyer only liable to testator for bad work.  Testator dead when bad work discovered so no one to sue lawyer.
·         Dual Representations
 
·         A v. B
o    Rule:  A firm that represents a husband and wife may only disclose to the wife the fact that the husband had fathered another child but may not disclose the identity of the other woman or the child.
The Court will allow the firm to tell the wife that her husband has a child by another woman because it is crucial to her needs in her won estate planning. However it must protect the confidentiality of its client, the other woman, because it also owes her a duty because they had formerly represented her.
·         Ethical Rules (MR 1.7)
o    A lawyer shall not represent a client if there is a concurrent conflict of interest – i.e., if
·         the representation of one client will be directly adverse to another client; or
·         there is a significant risk that the representation will be materially limited by the lawyer’s responsibilities to another client, a former client, a third person or a personal interest of the lawyer.
o    Notwithstanding the existence of a concurrent conflict, a lawyer may represent a client if:
·         The lawyer reasonably believes he/she can competently & diligently represent each client;
·         The representation is not prohibited by law;
·         The representation does not involve a claim by one client against the other in the same litigation/proceeding before a tribunal; and
·         Each affected client gives informed consent, confirmed in writing.
 
Ch 2.  Intestacy: Estate Plan by Default
·         Testacy
·         Decedent leaves a will that provides for the disposition    
   of her property at death.
·         Intestacy
·         Decedent leaves no will. The probate estate passes by
   intestacy.
·         Partial Intestacy
·         Decedent leaves a will that disposes of only part of the
   probate estate; the part of the estate not disposed of by
   the will passes by intestacy.
 
·         UPC §2-101 – Intestate Estate
·         If the decedent has no will
·         Estate go to heirs by intestate succession
 
·         Illinois: 755 ILCS 5/2-1
·         Surviving spouse/descendants
·         Half to spouse, half to descendants
·         Spouse/no descendants
·         All to spouse
·         No spouse/descendants
·         All to descendants
 
·         Goals of Intestate Distribution Schemes
·         To reflect the presumed desires of the decedent
·         To protect dependent family members
·         To keep property within the nuclear family
·         To encourage individuals to accumulate property
 
·         UPC §2-102 – Share of Spouse
·   No descendants who are not descendants of surviving spouse or parent = 100%
·   No descendant but parent = $300,000 plus ¾
·   Descendants and surviving spouse has descendant who is not descendant of decedent = $225,000 plus ½
·   Descendants who are not descendants of surviving spouse = $150,000 plus ½
 
·         Illinois: 750 ILCS 75/20  Civil Union Act
·       A party to a civil union is entitled to the same legal obligations, responsibilities, protections, and benefits as are afforded or recognized by the law of Illinois to spouses, whether they derive from statute, administrative rule, policy, common law, or any other source of civil or criminal law.
·         Janus v. Tarasewicz
·   Rule:  In action challenging disposition of proceeds of husband's life insurance policy as between his estate and estate of his wife after both died when they ingested cyanide-laced pain relief capsules, trial court's finding that wife, who was placed on life support systems for almost two days before being pronounced dead, survived husband, who was pronounced dead shortly after he was admitted to hospital, was not against manifest weight of the evidence.
 
·         Simultaneous Death
·   Uniform Simultaneous Death Act (1

ILCS 5/11-5
·         Standby Guardian – 755 ILCS 5/11-5.3
·         Person appointed by the court to become guardian upon death/disability of parent
·         Short-term Guardian – 755 ILCS 5/11-5.4
Person appointed by the parent to become guardian for period up to 365 days
·         Bars to Succession
·         Homicide
·         In re Estate of Mahoney
·         Rule:  Legal title passes to the slayer but equity holds him to be a constructive trustee for the heirs or next of kin of the decedent.
 
·         UPC 2-803
·         (b)     An individual who feloniously and intentionally kills the decedent forfeits all benefits under this Article with respect to the decedent's estate, including an intestate share, an elective share, an omitted spouse's or child's share, a homestead allowance, exempt property, and a family allowance. If the decedent died intestate, the decedent's intestate estate passes as if the killer disclaimed his [or her] intestate share.
 
·         Person Causing Death 755 ILCS 5/2-6
·         A person who intentionally and unjustifiably causes the death of another
·         Shall not receive any property, benefit, or other interest by reason of the death
·         Whether as heir, legatee, beneficiary, joint tenant, survivor, appointee or in any other capacity and whether the property, benefit, or other interest passes pursuant to any form of title registration, testamentary or nontestamentary instrument, intestacy, renunciation, or any other circumstance
 
·         Parent Neglecting Child 755 ILCS 5/2-6.5
·         A parent who, for a period of one year or more immediately before the death of the parent’s minor or dependent child
·         Has willfully neglected or failed to perform any duty of support owed to the minor or dependent child, or
·         Who for a period of one year or more, has willfully deserted the minor or dependent child
·         Shall not receive any property, benefit, or other interest by reason of the death
 
·         Disclaimer
 
·         755 ILCS 5/2-7
·         Disclaimer is treated as if the disclaimant predeceased decedent
 
·         UPC Sec 2-1106 Interest in Property
·         Disclaimer takes effect when
·         The instrument creating the interest becomes irrevocable or
·         Under intestate succession, as of the time of death
·         Disclaimed interest passes under the terms of the instrument or by heirship
 
·         Drye v. United States
·         Rule:  held that taxpayer's interest as heir in his mother's estate was “property” or “right to property” subject to federal tax lien statute
 
The important consideration is the breadth of the control the taxpayer could exercise over the property.
 
Taxpayer's interest as heir in his mother's estate was “property” or “right to property” subject to federal tax lien statute, and, thus, federal tax liens against his property were not defeated when he disclaimed his interest in his mother's estate pursuant to Arkansas law, proceeds of estate then passed by operation of state law to his daughter, and proceeds then were used to fund trust of which taxpayer, his wife, and his daughter were beneficiaries; taxpayer had control rein over estate under state law, in form of unqualified right to receive entire value of estate, less administrative expenses, or to channel that value to his daughter