Trusts and Estates
Professor Margaret Turano
Fall 2011
Introduction to Estate Planning
1) Inheritance and its Limitation
a) Taking Property without Just Compensation
i) The right to transfer property at death is a property right
ii) The state cannot completely eliminate the power transfer of property at death. Hodel v. Irvin
iii) If the state completely removes the ability to transfer property at death, it constitutes a taking that requires just compensation. Hodel.
b) The Constitution itself does not grant the right to transfer or receive property
i) The state may limit the power to transfer property
ii) The right to receive property is a creature of statute
c) Restraints on Marriage
i) Total restraints on marriage are void as against public policy
(1) Promote marriage
(2) Promote reproduction
(3) Society benefits from marriages
ii) Partial restraints must be reasonable
(1) Limiting the amount of inheritance if child gets married is reasonable (ex. Married daughter gets less; single daughter gets more; rationale that married daughter does not need more is a reasonable restriction)
iii) If a will requires that a beneficiary marry within a certain religion, courts have held that such restriction is reasonable.
2) The Probate Process
a) Probate v. Non-probate
i) Probate requires court proceedings before the beneficiaries are entitled to take
ii) In non-probate transfers, the beneficiary is immediately entitled to take without going through probate
b) Functions of Probate
i) Transfer Wealth
ii) Clear Title
iii) Protection from Creditors; paying taxes
iv) Fulfilling the testamentary intent of the decedent (*arguably the most important function*)
c) Process
i) Offer the will for probate
ii) Collecting assets
iii) Paying family allowance and setting aside homestead and exempt personal property
iv) Paying creditors' claims and taxes
v) Distributing the assets of the estate upon the probate court entering decree of distribution
d) Terminology
i) Executor: Personal representative named in a will
ii) Administrator: personal representative appointed by the court
iii) Succession: beneficial entitlement to the property of the decedent
iv) Heir: person entitled by statute to the land of the intestate
(1) Expected: takes by inheritance
(2) Prospective: may inherit but may be excluded
(a) Heir presumptive: will inherit if the intestate dies immediately but who will be excluded if other relatives of closer relationship are born
(b) Heir apparent: one who is certain to inherit unless excluded by a valid will
v) Ascendant or Ancestor: person related to an intestate or to a claimant to an intestate share in the ascending lineal line
vi) Descendant: person related to an intestate or to a claimant to an intestate share in the descending lineal line
vii) Collateral: relative who traces relationship to an intestate through a common ancestor but who is not in his lineal line of ascent or descent
viii) Affinity: relationship by marriage
ix) Consanguinity: relationship by blood
x) Escheat: property escheats to the state if no relatives of the intestate are entitled to take
xi) Devise: clause directing the disposition of real property in a will
xii) Devisee: person who is named to take real property
xiii) Legacy: clause in a will directing the disposition of money
xiv) Bequest: clause directing the disposition of personal property other than money
xv) Res or Corpus: property to which the trustee is responsible to administer in a trust
e) Avoiding Probate
i) Take title in joint tenancy
ii) Create an intervivos trust
iii) Designate a payable-on-death beneficiary in a life insurance contract or other contract
iv) Where the amount is small, states may permit heirs to avoid probate
v) PA § 3102 provides that an estate valued at less than $25,000 need not go through probate
f) Probate Procedure
i) Opening probate
(1) Determining jurisdiction
(2) Notifying creditors by publication in newspaper for a period of time
ii) Supervising the Representative's Actions
(1) Court supervision
(2) Approval of inventory and appraisal
(3) Payment of debts
(4) Allowances
(5) Options on real estate
(6) Borrowing funds
(7) Other fees payable (attorneys etc.)
iii) Closing the estate
(1) Representative is under a fiduciary duty to the estate until the court grants discharge
3) Professional Responsibility
a) A lawyer should not prepare a will unless the lawyer is competent to do so
b) Lawyers owe fiduciary duties to their clients
c) Lawyers also owe a duty of care to foreseeable third party beneficiaries of wills
d) Claims against lawyers may arise out of contract or negligence
Intestacy: Estate Plan by Default
1) Definition and Jurisdiction
a) Estate plan by default where Decedent dies without a will, the will is invalid, or property is not disposed of by will
b) Jurisdiction: generally where the decedent was domiciled at the time of his or her death
c) Entire intestacy or partial intestacy is permissible
2) Determining Probate v. Non-Probate Property
a) Probate v. Non-Probate Property
i) Probate property is any property passing under the decedent’s will or by intestacy.
ii) Non-Probate Property passes outside the will or the Intestacy Statute.
(1) Life insurance policies.
(2) Joint tenancies w/ right of survivorship.
(3) Payable on Death Contract
(4) Transfer on Death property under a trust
(5) Intervivos Trusts
i) The instrument creating the non-probate property interest must have been effective before death
b) Cryogenically Preserved Sperm Hecht v. Superior Court
i) Sperm is property subject to devise by will
ii) Donating sperm by will is not void as against public policy
3) Determining Who is Entitled to Take
a) Requirement of Survivorship
i) A person is not entitled to take unless he or she survives the decedent by a specified instance of time.
ii) Under both the UPC § 2-104 and under Pennsylvania § 2104(1), an heir must survive the decedent for 120 hours (five days)
b) Determination of Death (UPC § 1-107)
i) Survivorship must be proved by the preponderance of the evidence. Janus v. Tarasewicz
ii) Lay witnesses—evidence of positive signs of life in one person and not in the other
iii) Medical professionals—must be made in accordance with the usual and customary standards of the medical practice
(1) Cardiopulmonary Standard—heart beat, breathing,
r the decedent’s death, the person is the decedent’s child and child is entitled to take
iii) Children of Assisted Conception Act § 4(b)
(1) Donor of sperm or egg is not considered the parent for post-humous conception of the resulting child
(2) An individual who dies before conception or implantation of the sperm/egg is not a parent
iv) Adoption of Children
(1) PA § 2108: Inheritance by, from and through an adopted person
(a) Child is considered issue of the adopting parent
(b) Shall not be considered child of the natural parent but
(i) Child can inherit from the adopting step-parent who marries the natural parent and can take from both
(ii) Child can take from other natural relatives if natural relatives maintain a familial relationship with the child
(2) UPC § 2-114: Inheritance by, through, or from an adopted person
(a) Adopted child is child of adopting parents, not of birth parents UNLESS
(i) Spouse of the natural parent (Step-parent) adopts the child
(ii) Child can inherit from the step-parent and the natural parent
(3) Common Law:
(a) Adopted children have the same general rights as natural children
(b) Adopted children lose all rights of inheritance from or through their natural parent. Hall
v) Equitable adoption: O’Neal v. Wilkes
(1) P was sent by her aunt to live w/ the Cooks who treated her as their own child but they never adopted her.
(2) When the Cooks died, P argued she was virtually or equitably adopted by the Cooks for purposes of inheritance.
(3) HOLDING: Because the aunt did not have legal authority to consent to an adoption of P by the Cooks, there can be no equitable adoption.
(4) DISSENT: “Equity considers that done which ought to be done.” In equity, the court should carry out the intent of the decedent.
vi) Adult Adoptions at Common Law
(1) Adult adoptions are generally permissible
(2) Exceptions: Adoption of a lover: sexual relationships are not compatible with the parent-child relationship
vii) Persons Born out of Wedlock
(1) PA § 2107(b): person born out of wedlock is considered the child of his or her mother.
(a) PA § 2107(c): person born out of wedlock is considered the child of the father if identity of the father is determined by any of the following three:
(i) Marriage
(ii) Clear and convincing evidence that
1. the father openly holds out the child to be his AND receives the child into his home OR
2. the father openly holds out the child to be his AND provides support
(iii) Court determination of paternity by clear and convincing evidence
f) Persons Entitled to Take Under Two Lines
i) PA § 2104(9): heirs take from the greater of the two lines
