TRUSTS & ESTATES
Terms:
Inter vivos – transmission of property between the living. Gifts, trusts, estate conveyances
Intestacy – provides for the transfer of property at death when the deceased has no will
Heir – refers to someone who receives through intestacy. Using “heirs” in a will may exhibit an intent to incorporate the laws of intestacy. Defined by statute
Using “descendants” is largely independent of state law, but may mean blood-relatives only (not adoption).
· Will – Devisees are persons receiving through wills.
· Will substitutes:
Trusts – A trust owns the property and an executor manages it for the purposes set forth by the trust. The financial advantage of setting up a trust is that you avoid probate which can take a long time. Trusts are not subject to the estate tax.
Joint Tenancies – contain a right of survivorship
Why retain an inheritance?
Savings argument – allowing inheritance gives people an incentive to create capital with which to invest, b/c people making money will want to protect those they love in the future and will save in order to create wealth.
Work argument – Work entitles you to control what happens with the fruits of your labor.
Dignity / personhood – Personal dignity is tied up to some extent with things we own and control. This reflects an entitlement of free control over our property.
Part of our dignity is in our ability to plan for ourselves. We must be allowed to employ them in ways that will reinforce our ability to plan for our families and selves in old age.
· Family argument – T&E system reinforces the family unit.
o Bentham – Children will take better care of parents if they think they are going to get something out of it.
o Locke – Correct legal system strives to produce a society where parents and kids will be friends and care for each other’s well being. Wrong system = wait for the parents to die in order to collect inheritance.
Why might we wish to do away with inheritance?
· Concentrates wealth, which is bad socially and politically b/c it creates an aristocracy and fails to distribute wealth evenly through society.
· Rewards people who happened to be born to rich families. Luck rather than merit.
Is the Right to Inheritance a hard property right?
Minority view: The right to property includes every penumbra that is bound up in it. This includes the right to use, dispose, etc…
Majority view – The right of property is bound up in the statutes and common law decisions. Inheritance is created by law; not a moral right but rather a legal right.
Irving Trust – If the state, it could create a system that does not respect wills. People only have the right to control and dispose property after death by permission of the state.
Hodel – Congressional law required a certain class of inheritable land owned by Indians to escheat to the tribe if the amount inherited is below a certain value.
Minor exception to Irving: A law cannot completely wipe out the right to inherit. Such a law inflicts a taking upon the people who hold those inheritable interests.
The state may limit, but not abolish the rules of testamentary disposition.
How much control should the dead be given over the interests of the living?
· Presumption is that people who create
resence of a gift over – if son fails to meet condition, the inheritance goes to the state of Israle. This confirms the provision is in commitment to the Jewish faith and not a punishment.
· Possible ways to re-write the statement to cure all ambiguities?
o Include a statement of intent that the will wants to uphold the Jewish faith, continue Jewish lineage, and this is the purpose of the following provisions.
o Reverse the clause: “The money goes to Israel unless….” Rather than “To my son so long as…”
PROBATE
· Probate property is property that passes under the decedent’s will or by intestacy.
· Nonprobate property passes under an instrument other than a will.
o Joint tenancy – passes immediately on death through ROS
o Life insurance – the company cuts the check to the beneficiary upon death.
o K’s with payable on death provisions do the same
o Trusts – A trust keeps running even after its creators have died.
Functions of probate
· Large estates might have several possible claimants. Probate provides a housekeeping function designating the rightful owners of property from the estate.
· Protect the interests of creditors – pay off debts before passing to heirs/devisees
Provides certainty to interested parties – claims are adjudicated