TRUSTS and ESTATES – Professor Parella
THE POWER TO TRANSMIT PROPERTY AT DEATH
1. Justifications of the Right to Convey
a. Blackstone characterized the right to pass property at death as a creation of and under the control of CIVIL and MUNICIPAL LAWS.
b. John Locke and the US Supreme Court in Hodel v. Irving characterize the right to convey property at death, either through intestacy or will, as a NATURAL RIGHT that cannot be COMPLETELY RESTRICTED without just compensation.
i. The Constitution does NOT allow the government to COMPLETELY ABSOLISH even one stick (the right to convey property at death) in the bundle of rights.
2. Limitations on the Right to Convey
a. GENERAL RULE: Donative INTENT should be given FULL EFFECT, except where such disposition is against the LAW or PUBLIC POLICY.
b. Conditioned Dispositions:
i. A condition to marry within the faith is generally VALID if it is a partial restraint on marriage which imposes only reasonable restrictions on one’s opportunity to marry (i.e., the pool of eligible brides in community is large, the time frame for marriage is reasonable).
1. In Shapiro the court UPHELD a condition in a will requiring a son to marry a Jewish girl born to Jewish parents within 7 years of the testator’s death to get the inheritance.
ii. A condition to get a divorce is INVALID as against public policy.
iii. A condition not to speak to another member of the family is INVALID as against public policy.
iv. A condition to destroy property is generally INVALID as against public policy because it promotes waste and decedent could have destroyed the property during her lifetime and borne the cost rather than forcing the descendants to bear the costs.
1. BUT, in Matter of Beck, where an old woman made a deal with the city to purchase her land for urban renewal on the condition that they destroy her house when she dies, the court upheld the destruction of her house because otherwise the city would get a windfall.
c. If a condition is INVALID the gift is void. If there is no GIFT-OVER clause, the gift falls into the residuary or intestacy.
i. NY EPTL 3-3.5(a): “A condition qualifying a disposition of property is operative despite the failure of the testator to provide for an alternative gift to take effect upon the breach or non-occurrence of such condition.”
3. Fiduciary Duties of Drafting Attorney
a. Malpractice Suits:
i. In NY, a drafting attorney has NO DUTY to a named beneficiary in a will; privity is required to bring a malpractice suit.
1. HOWEVER, in NY, the ESTATE may bring a claim against the drafting attorney for malpractice.
a. Damages are limited to legal and administrative costs for drafting the faulty instrument.
ii. In other states, privity is NOT required and an intended beneficiary can bring a claim for breach of fiduciary duty under a contract theory (Intended Third Party Beneficiary) or tort theory (malpractice).
1. In Simpson v. Claivas, a son brought suit against a lawyer who drafted his father’s will under theories of negligence, third party beneficiary and breach of contract, alleging that the lawyer failed to draft a will which incorporated the actual intent of his father to leave all his land to the son. The court held that the lawyer owed a duty to the son, as intended beneficiary, because of the foreseeability of injury to the intended beneficiary.
2. The negligence that makes up the claim for breach of fiduciary duty does not need to appear on the face of the will (is NOT limited to illegality of terms of the will).
b. Conflict of Interest
i. When a drafting attorney has an independent fiduciary relationship with a beneficiary as a result of an ongoing attorney-client relationship, the attorney owes the beneficiary a duty to deal with him in good faith and not actively misrepresent the terms of a will.
1. In Hotz v. Minyard, the court held that that where a drafting attorney represented both the testator father (in drafting his will) and the beneficiary daughter (in other business and personal matters) the attorney had NO duty to disclose the existence of a second will against the wishes of the testator BUT owed the beneficiary a duty to deal with her in good faith and not actively misrepresent the first will.
ii. Conflicts of interests most often arise in situations where the attorney represents both the husband and the wife.
1. In such a situation the attorney should give both a letter telling his joint clients that the attorney cannot keep things from the other client.
THE PROBATE ESTATE
1. Probate v. Non-Probate Property
a. Probate Property: Property that passes under the decedent’s will or by intestacy.
b. Non-Probate Property: Property passing under an instrument other than a will (i.e., joint tenancy property, life insurance, contracts with payable on death provisions, trusts).
2. Administration of Probate
a. Appointment of a Personal Representative
i. If a person dies with a will the personal representative is called an EXECUTOR.
ii. If a person dies intestate the court appoints a personal representative called an ADMINISTRATOR.
1. The administrator is appointed by the surrogate’s court from a statutory list (spouses, children, parents, siblings, creditors) and must POST BOND.
b. Principle Duties of a Personal Representative
i. 1) To inventory and collect the assets of the decedent;
ii. 2) To manage the assets during a
hich Intestacy Statute Governs?
i. The manner in which REAL PROPERTY descends when not disposed of by will is determined by the law of the jurisdiction in which the land is situated (EPTL § 3-5.1(b)(1)).
ii. The manner in which PERSONAL PROPERTY devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death (EPTL § 3-5.1(b)(2)).
b. Order of Distribution – EPTL § 4-1.1
i. If a decedent is survived by:
1. A SPOUSE and ISSUE
a. RULE: The first $50,000 to the SPOUSE and ½ of the residue to the spouse and ½ to the issue by representation.
b. Taking by Representation (EPTL § 1-2.16)
i. ONE: Start the distribution in the generation nearest to the deceased ancestor with one or more surviving issue.
ii. TWO: Allocate ONE share to each surviving issue AND each deceased issue leaving issue in such nearest generation.
1. If a deceased issue has left NO ISSUE then they are not factored into the equation for purposes of determining the distribution of shares.
iii. THREE: The shares of the deceased issue leaving issue are COMBINED and then divided equally among the surviving issue of the deceased issue.
iv. HYPOS:
1. If the decedent dies leaving 3 children and 2 predecease, 1 with issue and 1 without issue, the estate will only be divided among the living child and the predeceased child leaving issue.
2. If a decedent dies leaving 3 children and 2 of them predecease leaving issue, the estate is divided equally among the three children, then the 2 shares of the predeceased children are combined and then distributed equally among their issue.
2. A SPOUSE and NO ISSUE
a. RULE: ALL to the spouse.
i. This was a dramatic change to the EPTL in 1992 because it eliminated the parents from taking along with the surviving spouse.
b. Who is a Spouse?
i. EPTL § 5-1.2: “A husband or wife is a surviving spouse for the purpose of intestate UNLESS:
1. A final decree or judgment of divorce or annulment, recognized as valid under the law of NY, was in effect when the deceased spouse died;
2. The marriage was void as incestuous, bigamous, or a prohibited remarriage;
