Fogel_Trusts & Estates Outline_2014 (I got an A in the class, if that adds any credibility)
*note-can email when not prepared (tell him and he wont call on you) and may or may not give him a reason
*2.5 hrs for MC (35 or so questions)-average correct will be about 50% (to get a B+ need to get about 50%) so if used to average of 80% it might feel uncomfortable
MC has def. right and wrong answers-not testing the subtle grey area
*1.5 hrs for essay portion-1 or 2 essays (1 last couple of years and plans that again)
Unlimited open book (calculators as well-might want to bring that for easy math to check yourself) –it is open laptop mode so could use computer
*limited amount of space/words-but not really a limit that we need to worry about—1500 words (9 or 10 pages)
I. INTRODUCTION: Trusts and Estates:
· Scope of Course
o we mostly discuss death time gifts-through a will (estates part) or through a trust
o Should be called family property law since usually about giving property to family at death
o Estates=stuff you own when you die, has nothing to do with fee tails etc from property
§ Rule against perpetuities does not apply etc.
o Wills occupy a huge portion of the course, despite the fact that less of estate planning is done with wills as opposed to dying intestate or leaving it in trust
· Testamentary Freedom: is unfettered testamentary freedom a good idea?
o Testamentary freedom: (should be called donative freedom since applies with lifetime gift as well)
o Elective Share:
§ free to give property to anyone you want to or exclude anyone you want (except have to give it to a surviving spouse)
§ the number of possible exceptions vary enormously by state
o Forced Heirs: Only in Louisiana or outside US
§ LA civil code state—following French law (rather than CL-English) very common outside US
· Have 2 separate rules of law. Civil law has emph. on statutes instead of cases (CL)
· it is the only ex. in the US of a child or someone other than the spouse that has a right to decedents property
§ Art. 1493: Forced Heirs are: (have right to their legitime) You Have to give property to them
· Children 23 or under
· Dependent for mental reasons of physical infirmity
§ LA=very unique, typically only one person you can’t disinherit
o Testamentary freedom as a concept:
§ Note: legal oblig. to support kid while alive, but no obligation, if you die, to leave him anything.
§ Note: If try to do anything unconventional, there is de facto bias against it (based upon established law going against it). Generally, it is easier to find not sound of mind than it is to give credit to the weird will (He lacked capacity because no person in his sane mind would do X)
§ Testator can be anything
· ex: not uncommon to say upon my death euthanize the animal—for example, woman put in her will that they would kill her kitty when she died and we did not do it
o Issues: 1) what should the bank have done? 2) ?
o Bank had to go to court to get permission, which meant attorney’s fees etc., money which came from estate.
· Note: not supposed to destroy things of value and technically an animal is a chattel-but there is no fiduciary issue really since it is of such low value
· ex: Leona Helmsley left 12$M to her dog trouble-common except for the amount of $, here it was cut by the court to $1M
§ Note: problem comes up when it is something you disagree with, comes up a lot in ethical discussion
· Estate Planning practice
o Questions You Might Want to Ask When Drafting a Will: (problem 1)
§ Do you have a partner or are you married? Do you have kids? Their age (someone will need to take care of the money until she is old enough)?
§ What age? You never give property outright before age 18. Besides that, you can do whatever you want. Who do you want to be guardian of the kid? (most difficult question)
§ Any other dependents?
§ Anybody you don’t want to get anything?
§ Do the kids get along? That becomes significant.
§ Special needs kids?
§ Incapacity? Does the client know what he is doing?
§ What if client says, I only want to give money to Institute for Studies for Cures for Baldness? Well their might be a problem with forced heirs – someone might have a right by law to a specific portion of the estate
§ Any prior wills or powers of attorneys?
§ Assets? (estate tax might be an issue if they are very wealthy, 5.2 M this year)
· Issues: 1) Americans don’t like telling people about this 2) attorneys need to know if property is from illicit activity 3) don’t know how they hold their assets often (look at deed)
· Includes: debt, life insurance
§ How they want to distribute it (what state they live in as well since where real property is governed by the law where it is located)
o Frequent Planning Issues:
§ Have to consider the future
· what if your money doesn’t keep up (first kid get it all or give equal amounts to all till it runs out)?
· what do you mean by college (undergrad, MBA, etc.?),
· what if in class forever but not degree?
· what if you don’t like your kids spouse?
§ Things that are reasonable at the time are unreasonable later in interpretation
· Note: Deadman’s control: you have the power to put conditions on property going forward.
· Can decide to keep property for your family for forever (what is forever?)
o Ex: Often common to define “descendants” and boiler plate language often includes adopted kids (which is the law) but not non-marital kids
§ 1950s idea that non-marital children are not really the children of whoever youre claiming they are or secondly the result of a fling.
§ modern times, nonmarital children are an enormous percentage of children
o Testamentary F. means not only make choices we don’t like, but also choices that seem reasonable at the time they are made, but then through a modern eye they don’t as much
§ Estate planning requires 1) careful planning and 2) deciding things for the client (boiler plate, stuff that they would not think of) (i.e. boiler plate provisions, include adopted children but not include nonmarital kids etc.)
§ Testamentary crap shoot: Another issue estate planning—deciding things that the jury does not like is bad idea
· much easier to get testor declared incompetent when leave all their property to gold-digger / jiggalo or leave one of 3 kids out….testator is supposed to be free to do that but doesn’t always happen
· ex: Leona Helmsley: left $12 M to dog but also gave a substantial amount to each of her grandchildren except for two of them. Has TF but almost immediately those two grandchildren said no and got $
· get testamentary freedom crap shoot
· State (MO) law & Uniform Probate Code
o Governing law of the estate is where the decedent died or resident (that’s the main probate jurisdiction) i.e. “Joe died a resident of the state of Wyoming”
§ UNLESS you have real property in another state. (The law of the other state governs that)
o what state law should we deal with? casebook is geared to most recent UPC (uniform probate code)
§ often different than law in states. only adopted by 8 states (MO law is closer to most states than UPC)
§ Note: T & E – often archaic sounding laws (like MO statute “what to do when woman runs away with her ravisher after being ravished”)
· The Probate Estate (Estate Subject to Administration):
o Operation and Nomenclature: How does an estate work?
§ Person who dies is called a decedent in either case (with or without a will)
§ 1) Probate=the following process (go through probate if die with a will)
· 1. Decedent dies testate (with a will)
o note: called a testate (noun) and died testate (verb)
· 2. A person gathers all the assets into a probate estate
o property called probate estate
· 3. The person who gathers the assets into the probate estate is the executor (or personal representative-this term applies whether die intestate or testate)
· 4. Executor applies for letters testamentary from the probate court (generic name, diff in every jurisdiction)
o The court actually issues letter to the executor appointed in the will
o Executor gathers assets into probate estate. Duties:
Inventory and collects decedent’s assets
Manage assets during administration
To receive and pay claims of creditors and tax collectors
To clear any titles to cars, real estate, or other assets
To distribute the remaining assets to those entitled.
Executor goes to the bank with death certificate (depending on the bank) and letters from court and bank will close out account and give check
· 5. Executor distributes assets out to beneficiaries (whoever is named in will, aka devisees or legitees but NOT HEIRS that is intestate)
· Note: reasons people try to avoid probate 1) it is public (but wills are pretty dull) 2) court fees (but if goes smoothly fees aren’t huge) 3) delay (but if goes smoothly not huge delays)
§ 2) Estate Subject to Administration=the following process (go through if die without a will/intestate)
· 1. Decedent dies intestate (without a will)
· 2. Estate (not called a probate estate, but people do it all the time) is called an “estate subject to admin”)
· 3. Executor is now called the administrator (administrator gathers estate)
· 4. Administrator distributes to heirs (STUDENTS OFTEN MESS THIS UP!)
o cant have heirs until dead. Can say who will heirs be if you died today
o impt. because if statute says heirs it has definite meaning
o heirs are determined by statute
§ *note: same process either way the personal rep collects assets into thing (PE or ESA) to pay of creditors of decedent and distributes out to beneficiaries or heirs
§ *note: First you need a decedent
· At that point, nobody can get to your assets. You need someone with legal authority to do so. If there is a will, the probate court will appoint an executor
§ *Note: Probate Property: property that passes through probate under the decendent’s will or by intestacy
§ *Note: Important terminology
· Male: testator, executor, administrator – testatrix, administratrix, executrix female.
· With a will: letters testamentary
· Without a will: letters of administration
· *note: A person dying testate
§ Devises real property to devisees
§ Bequeaths personal property to legatees
§ Can ALWAYS say “I give” and that effectively transfers any kind of property
o A person dying intestate
§ Property descends to heirs (only time use the word heirs)
§ Real property descends to heirs
§ Personal property distributed to next-of-kin
o The will only controls the probate estate/estate subject to admin. The question is whats in the probate estate? Two Things:
§ 1. Stuff decedent owned at death with no beneficiary listed 2. Backup when a beneficiary dies (If a beneficiary predeceased me, it ends up in my estate)
· Problem 2: Alice died a resident of Missouri on January 1, 2014. She was survived by her husband, Harry, and her children Sam and Donna. She was predeceased by her daughter Muerte. Which of the following assets are in Alice’s probate estate?
o Note: looking for stuff that owned without any beneficiaries name listed
o A) $100,000 in a bank account in Alice’s nameà Probate
o B) $100,000 in a bank account Alice held as joint tenants with HarryàNo, to Harry
§ Joint tenancy: it will pass to spouse
o C) $100,000 in a bank account in Alice’s name “pay on death” to Sam.
§ Toten trust (aka a bank account that has a beneficiary listed)àgoes to Sam
§ What if it was “pay on death” to Muerteàpay on death – in probate when name is listed but here listed person died first so no named beneficiary so Probate
o D) Blackacre, which Alice owned as tenants by the entirety with HarryàNot –there is ROS
o E) Paisleyacre, which Alice owned as tenants in common with SamàTIC – plain co-ownership no ROSàif own ½ and ½ then ½ is in probate when she died but 1/2 is still Sam’s
o F) The proceeds from a $50,000 life insurance policy which was owned Alice on Alice’s life. The named beneficiary is Donna. What if Muerte was the named beneficiary?
§ not Probate since has a listed beneficiary by but if Muerte:
se gets 20k + ½ — § 474.010(1)(b)
· If Decedent, Spouse, 1kid from both, 1 kid from decedent
o UPC – Surviving Spouse gets $100k($k) + ½ — § 2-102(4)
o MO- Surviving spouse ½ — § 474.010(1)(c)
§ Discussion: is the UPC or the Majority (like MO) better?
· UPC:
o conduit theory-eventually surviving spouse will give everything to the kids
o also avoids some problems with minor children receiving money etc. (if large amount would need guardian for property appointed, might be the spouse if natural parent
· MO makes for non-blended family but UPC might be better for that?
· Fixed Dollar amounts:
o UPC is indexed for inflation (drafters are periodically updated)
o However, the people going to be intestate may get no money at all
o Also if there is other property, such as a home held in tenancy by the entirety, that does not get included in the 20k rather it goes to the surviving spouse automatically. So surviving spouse might get the rest of the home along with 20k (and UPC uses even larger amounts)
o Descendants & Collaterals’ Share
§ Intestacy statutes have fascination with blood lines, the only people who are heirs are blood relatives
· Exceptions to blood lines
o 1. Common à Surviving Spouse
o 2. Occasional à Adopted children (we will discuss in descendants)
o 3. Almost never à 474.010(3) funky rule
· WHY: Intestacy statutes want simple rules
§ What if you do not have a surviving spouse or child? essentially looking for the closest living relatives –making concentric circles bigger gradually until you get to people
· 474.010(2)
· UPC 2-103(2)
§ 474.010(2) The part not distributable to the surviving spouse, or the entire intestate property, if there is no surviving spouse, shall descend and be distributed as follows:
· (a) To the decedent’s children, or their descendants, in equal parts;
· (b) If there are no children, or their descendants, then to the decedent’s father, mother, brothers and sisters or their descendants in equal parts;
o Siblings and Parents
· (c) If there are no children, or their descendants, father, mother, brother or sister, or their descendants, then to the grandfathers, grandmothers, uncles and aunts or their descendants in equal parts;
o if no immediate familyàGrandparents, Aunts, Uncles
· (d) If there are no children or their descendants, father, mother, brother, sister, or their descendants, grandfather, grandmother, uncles, aunts, nor their descendants, then to the great-grandfathers, great-grandmothers, or their descendants, in equal parts; and so on, in other cases without end, passing to the nearest lineal ancestors and their children, or their descendants, in equal parts; provided, however, that collateral relatives, that is, relatives who are neither ancestors nor descendants of the decedent, may not inherit unless they are related to the decedent at least as closely as the ninth degree, the degree of kinship being computed according to the rules of the civil law; that is, by counting upward from the decedent to the nearest common ancestor, and then downward to the relative, the degree of kinship being the sum of these two counts, so that brothers are related in the second degree;
o Ninth Degree Rule. At some point, you have to escheat to the state
o If you do not have anyone within the 9th degree, it escheats to the state
o You count up to the common ancestor, and then out. Look at Problem 5 Example
· *Note students often miss the “or their descendants part” but if have something that is supposed to go to a child but the child dies, then it would go to the childs dec. rather than giving more to the others
§ UPC 2-103: Any part of the intestate estate not passing to the decedent’s surviving spouse under Section 2-102, or the entire intestate estate if there is no surviving spouse, passes in the following order to the individuals designated below who survive the decedent:
· (1) to the decedent’s descendants by representation; (DEFINED IN 2-106)
· (2) if there is no surviving descendant, to the decedent’s parents equally if both survive, or to the surviving parent;
o Parents First
· (3) if there is no surviving descendant or parent, to the descendants of the decedent’s parents or either of them by representation;
o Then Brothers and Sisters
· (4) if there is no surviving descendant, parent, or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, half of the estate passes to the decedent’s paternal grandparents equally if both survive, or to the surviving paternal grandparent, or to the descendants of the decedent’s paternal grandparents or either of them if both are deceased, the descendants taking by representation; and the other half passes to the decedent’s maternal relatives in the same manner; but if there is no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the decedent’s relatives on the other side in the same manner as the half.
