WILLS & TRUSTS
MENSEL
SUMMER 2015
CHAPTER ONE: INTRODUCTION: FREEDOM OF DISPOSITION
A. The Power to Transmit Property At Death – Succession: Governs the way property moves from generation to generation and from the living to the dead. “Succession” includes the law of wills, the law of intestacy, the law of trusts, the law of charitable foundations, the law concerning “death taxes,” and even some aspects of an arcane field of law that lawyers call the law of future interests. If there is no will, the law of intestate succession gives you, by default, an estate plan.
1. Freedom of Disposition and the Dead Hand
a. Succession is the donor’s freedom of disposition. Waste will not be tolerable. For example: the testator putting in his will that he wishes his house be burned down upon his death.
b. The American law of succession strongly embraces the principle of freedom of disposition. In American law, freedom of disposition at death is subject only to wealth transfer taxation and a handful of policy limitations. Some of those limitations are triggered by forced share for a surviving spouse, creditor’s rights, and public policies.
c. American law of succession is organized around the donor’s freedom of disposition. The donee’s interest in a future inheritance is a mere expectancy, one that is a derivative of the donor’s right to dispose of his property as he pleases, and that is defeasible at the whim of the donor.
d. Shapira v. Union National Bank
1) FACTS: David Shapira, M.D., testator, conditioned his son, Daniel Jacob Shapira, Plaintiff, inheritance under his will upon Plaintiff being married to, or marrying within seven years of testator’s death, a Jewish girl with two Jewish parents.
2) PROCEDURE: Action was brought by Plaintiff for a declaratory judgment and the construction of the will of his father, David Shapira, testator. Plaintiff filed suit alleging that such a condition was unconstitutional based upon the premise that the right to marry is protected by the Fourteenth Amendment to the Constitution of the United States.
3) ISSUE: Whether a condition upon inheritance, which is based on marriage, is unconstitutional, contrary to public policy, and unenforceable because of its unreasonableness.
4) HOLDING: No. Public policy should not, and does not preclude the fulfillment of Dr. Shapira’s purpose, and that in accordance with the weight of authority in this country, the conditions contained in his will are reasonable restrictions upon marriage, and valid.
5) RATIONALE: Upholding and enforcing the provisions of the decedent’s will conditioning the bequests to his sons upon their marrying Jewish girls does not offend the Constitution of Ohio or the United States. The conditions contained in decedent’s will are reasonable restrictions. His unmistakable testamentary plan was for his possessions to be used to encourage the preservation of the Jewish faith. 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. It is a fundamental rule of law in Ohio that a testator may legally disinherit his children. This seems to demonstrate that from a constitutional standpoint, a testator may restrict a child’s inheritance.
6) RULE: A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable.
7) PUBLIC POLICY: If the condition were that the beneficiary not marry anyone, the restraint would be general or total and at least in the case of the first marriage, would be held to be contrary to public policy and void. A partial restrain of marriage which imposes only reasonable restrictions is valid and not contrary to public policy. The great weight of authority in the United States is that gifts conditioned upon the beneficiary’s marrying within a particular religious class or faiths is reasonable.
e. ARGUMENT: The right to marry is a fundamental right as protected by the Fourteenth Amendment of the United States to the Constitution of the United States. A three-tier argument was made:
1) Federal Law (Constitutional Argument): The Court says its not about the son’s right to marry, but about his right to inherit. The counterargument should have been that the condition is not a prohibition, but rather a burden. The main points in the argument should be:
a) Loving v. Virginia: Sets forth the fundamental right to marry +
b) Will restricts fundamental right to marry and the court cannot enforce the restriction because of Shelley v. Kramer: It is not unconstitutional for people to put restrictions in writing, but unconstitutional for states to enforce it.
2) Public Policy (State Law Argument): Common law disfavors general restraints on things we enjoy, such as alienation of property, marriage, etc.
3) Me Argument: Requires facts regarding number of available Jewish women in his area, which son failed to do. You can’t assume the Court already knows these things. You need provide evidence, from the Census Bureau for example.
2. Notes
a. Incentive Trust: Incentive trusts are more often focused on ensuring that a beneficiary does not adopt a slothful or frivolous lifestyle than encouraging religious observations or marriage to a preferred mate. The condition that incentive trusts might impose can be divided into three broad categories: (1) Conditions that encourage the beneficiaries to pursue an education; (2) Conditions that provide what might be termed moral incentives; (3) Conditions designed to encourage the beneficiaries to have a productive career. Conditional gifts such as in Shapira are more typically made in incentive trust.
b. Lifetime v. Testamentary Conditions:
c. Restraints on Marriage: Restraint unreasonably limits the transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur. The likelihood of marriage is a factual question, to be answered from the circumstances of the particular case.
d. Contrary to Public Policy: The rule against a will or trust provision that imposes an unreasonable restraint on marriage is a specific application of the more general rule against conditions that are contrary to public policy, which includes conditions that disrupt or discourage familial relationships, such as the survivor not remarrying is invalid, unless the purpose is to provide support while the survivor is not married. The court differentiated a valid gift in trust to the testator’s wife “so long as she remains my widow” from an invalid gift in trust that would terminate if the spouse remarries. Some conditions are obviously contrary to public policy, such as one that requires or encourages the beneficiary to commit a crime or a tortious act.
e. The Restatement (Third) of Trusts: If a provision is unnecessarily punitive or unreasonably intrusive into significant personal decisions or interests, the provision may be invalid.
B. The Mechanics of Succession
1. Probate and Nonprobate Property
a. All the decedent’s property at death can be divided into probate and nonprobate property. Probate property is property that passes through probate under the decedent’s will or by intestacy. Nonprobate property is property that passes outside of probate by the way of a will substitute.
b. Nonprobate transfers consist of the following:
1) Inter Vivos Trust: When property is put in trust, the trustee holds it for the benefit of one or more beneficiaries. The trustee distributes the property to the beneficiaries in accordance with the terms of the trust. Property held in a testamentary trust created under the decedent’s will passes through probate, but property put in an inter vivos trust during the decedent’s life passes in accordance with the terms of the trust, avoiding probate administration. In contemporary practice, the inter vivos trust had displaced the testamentary trust as the preferred type of trust.
2) Life Insurance: The proceeds of a life insurance policy on the decedent’s life are paid by the insurance company to the beneficiary named in the insurance contract. The co
lf of the estate.
c. A person appointed as administrator must give bond, which insures against mismanagement or misappropriation. In most states, if the will names an individual rather than a corporate fiduciary as executor, the executor also must give bond unless the will waives the bond requirement.
5. Common Form and Solemn Form Probate
a. Common Form Probate
1) (1) An ex parte proceeding in which no notice or process was issued to any person; (2) Due execution of the will was proved by the oath of the executor or such other witnesses as might be required; (3) The will was admitted to probate at once, letter of testamentary were granted, and the executor began administration of the estate; (4) If no one raised any questions or objections, this procedure sufficed. However, within a period of years thereafter an interest party could file a caveat, compelling probate of the will in solemn form.
b. Solemn Form Probate
1) (1) Notice to interested parties was given by citation; (2) Due execution of the will was proved by the testimony of the attesting witnesses, and (3) Administration of the estate involved greater court participation
c. Ex parte or common form procedure is recognized in many states, sometimes preserving the common form/solemn form terminology.
6. Formal and Informal Probate
a. The Uniform Probate Code (UPC) provides for both notice probate and ex parte probate. Notice probate is called formal probate (rather than solemn form probate) and ex parte probate is called informal probate (rather than common form probate). If the person asking for letters seeks informal probate, the validity of the will or determination of intestacy does not need to be litigated unless an interested party objects.
b. UPC §3-301 sets the requirements for informal probate: (1) Without giving notice to anyone, the representative petitions for appointment; (2) The petitions must contain pertinent information about the decedent and the names and addresses of the spouse, the children or other heirs, and, if the will is involved, the devisees; (3) If the petition is for the probate of a will, the original will must accompany the petition (or an authenticated copy if the proceeding is ancillary); (4) The executor swears that, to the best of her knowledge, the will was validly executed; (5) Proof by the witnesses is not required; (6) A will that appears to have the required signatures and that contains an attestation clause showing that requirements of execution have been met is probated by the registrar without further proof; (7) Within 30 days, however, the personal representative must mail notice to every interested party, including heirs apparently disinherited by the will; (8) Any such party may file a petition for formal probate under UPC § 3-402.
c. Formal probate is a litigated judicial determination after notice to interested parties.
7. Supervised and Unsupervised Administration
a. Supervised administration is the personal representative is subject to the continuing authority of the probate court in administering the estate. Under supervised administration, the personal representative is empowered to act without interim court approvals, but she cannot make a distribution to the beneficiaries without approval from the court.
