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Trusts and Estates
Temple University School of Law
Baron, Jane B.

Jane Baron, trust and estates fall 2011

I. INTRODUCTION

A. INHERITANCE AND TESTATION- OVERVIEW

1. What is the “value” of inheritance to an individual or to society?

Does inheritance encourage the production of wealth or does it

preserve unequal wealth distribution?

–Assignment #1: CB 1-10, 16-27

1. FREEDOM OF TESTATION-

I. People should be able to dispose of their wealth the way they want to

– not doing so would create disincintive to create wealth

– people should be able to enjoy fruits of labor and control distribution of those fruits

II. Problem with Testation-

– concentrates wealth in the hands of the few

– creation of trust fund ding dongs (ex: trustafarians)

– undeserving get money (who is deserving anyway?)

III. If freedom of testation was taken away, people would just get around it other ways

Ex: joint tenancies, life estate in self with remainder in ___ would have been the devisee.

2. FORMALISM OF TESTATION-

I. gov. does not regulate what people get at death (freedom) but it does regulate how they describe what it is that they want

i. must talk before you die- and make it legally binding

ii. a valid will must be executed in a specific way

II. REQUIREMENTS of 1. Witnesses & 2. Formalities

i. If you do not do this according to the State’s rules, you are not given a say (they do not regulate what you can give, just how you do it)

a. some of this is judicial efficiency- not efficient to have a debate after death.

b. some is to protect the testator to make sure their wishes are carried out

ii. the requirements are PICKY & ABSOLUTE

HODEL V. IRVING- 481 US 704 (1987)- appeal from jgmt finding the act unconstitutional

FACTS- congress passed law prohibiting testation of fractionalized Indian land (not robbed of land, robbed of power to dispose of the land)

RULE- taking the power of testation was a taking triggering compensation clause and violating owners rights under the 5th amendment. States can no longer abolish the privilege (one stick in bundle of sticks that is property right) to dispose of property.

2. Inheritance as power (the dead over the living): under what

circumstances, and on what rationale, may the state intervene?

–Assignment #2: CB 27-38

SHAPIRA V. UNION NATIONAL BANK- Ohio misc. 28, 315 N.E.2d 825 (1974)-Dec. jgmt.

FACTS- Crazy dad says you get your inheritance only if you marry a Jewish girl

(son’s argument was that it restricted his right to marry or the clause violated public policy)

RULE- Testator (crazy dad) may validly impose a restraint on the religion of the spouse of a beneficiary as a condition precedent to inheriting under the will.

REASONING- receiving an inheritance is not a fundamental right (right to marry isn’t being infringed on, he can choose who he wants, he just may not get an inheritance)

NOTES: this is considered a reasonable restriction in a majority of jurisdictions, a total restraint Ex: do not marry anyone would be unreasonable.

B. THE PROBATE PROCESS

1. How does probate work, when is it required, and what is its

function?

–Assignment #3: CB 38-49, 58-70

1. The steps

1. Collect up assets

2. Pay off debts

3. Take out what doesn’t get probated

i. ex: joint tenancies, etc

4. Pay beneficiaries

5. Get probate order

2. Terminology

Probate- a judicially supervised procedure designed to do the above. It is a judicially supervised procedure where the executor or administrator receives authority from the court as well as a ‘piece of paper’ showing they have authority. (most states require probate within 3 years of death) DON’T NEED TO PROBATE EVERY WILL

1. executor- person named in the will to administer the will

2. Administrator- person appointed by the court to administer will when executor is not named.

3. Testate- when a person dies with a will

4. Intestate- when a person dies without a will

5. Devise- when real property is transferred to a devisee

6. Bequeaths- transfers personal property to legatees

7. Intestate real property (ex:) descends to heirs

8. Intestate personal property (ex:) is distributed to next of kin

9. residue- what is left after payment of debts, funeral expenses, executors fees, taxes, legal and other expenses incurred in the administration of the estate, and after any gifts of specific assets or specific sums of cash

10. Issue- all of one’s children and their children through the generations

3. Non probate Revolution-

1. this is promoted by creditors (they don’t want to go into probate)

2. Probate can be avoidable (joint tenancies, life insurance, contracts with POD provisions, interests in trust, testamentary trust and inter vivos trust )

3. Probate is mostly needed when there is large land titles that need written transfer

Husband dies and leaves wife with few assets, probably don’t need to probate

– If she is executor she will collect assets and give them to herself

– She will need 1. Death cerificate 2. Copy of will 3. Title 4. Marriage license and that is all it will take (in most states to transfer stuff into her name ex: car title)

– some states have summary procedures

4. Probate is useful when

1. taking care of minor kids (choose who has custody of your kids)

2. unanticipated changes in fortune

3. changes in family relations

4. Expensive property, etc. (need probate court to give you FINAL ORDER so she can get title)

SIMPSON V. CALIVAS- Sup. Ct. of New Hampshire, 1994- Appeal from summary judgment

TOPIC- evil step mom & homestead

FACTS- lawyer who wrote homestead in a will, caused confusion about wheter that referred to house only or property around the house as well- Simpson had to pay his stepmother $400,000 for the life estate even though it was his late father’s intention to leave it to him. He sued Calivas for malpractice. (even if he wins- his mother in law is unjustly enriched)

RULE- Attorneys drafting wills owe a duty of reasonable care to the intended beneficiaries (rule in majority of jurisdictions)

REASONING- in order to recover for negligence a π must show that ∆ owed a duty of care. (does the lawyer owe a duty not only to his client {deceased father} but to the beneficiaries as well?)

NOTES – lawyer does have duty where there is reasonably foreseeable harm & beneficiaries are in privity as third party beneficiaries

-In probate court extrinsic evidence of testator’s intent is irrelevant

-In negligence suit the testator’s intent is relevant and the actual issue

A v. B- Sup. Ct. of New Jersey,726 A.2d 924 (1999)-

FACTS- husband and wife represented by same lawyer in making will; he has a mistress with a child she hires the H&W law firm to represent her in paternity action against the father. When law firm discovers this they want to disclose to wife b/c if wife dies first there is the possibility of her property going to his illegitimate child. Husband hires Fox-Rothschield, they file a motion to prevent disclosure… So, may a law firm disclose confidential information of one co-client to another co-client?

RULE- Rule of professional conduct 1.6 permits lawyer to disclose a confidential communication to the extent the lawyer believes necessary ‘to rectify the consequences of the client’s criminal, illegal or fraudulent act in furtherance of which the lawyer’s services had been used.

REASONING

NOTES – also 1.4b(RPC) require that there is a duty to inform clients of material facts (not criminal, not illegal, but fraudulent)

* the atty that is jointly representing co-clients should first expressly agree with the sharing of confidential information* THIS IS NOT REALISTIC

MASSIVE AMOUNTS OF POSSIBILITIES FOR CONFLICTS IN INTEREST WHEN DEALING WITH 2 OR MORE PERSONS DESIRES.

II. INTESTACY

I. Happens when: 1. No will or 2. Invalid will

A. Statutory Schemes- PG. 73 INTESTATE STATUTE (tabbed)

1. Basic concepts

–Assignment #4 (Part 1): CB 71-80, 91-97, 136-41

1. The Law of Intestacy governs the distribution of an intestate decedent’s probate property.

a. Intestacy statutes or intent and distribution statutes govern the law of intestacy.

i. Statutes- these statutes will distribute the decedents property to their relatives in roughly the order of closeness to their relatives.

ii. what will you get?- It is good to know what you will receive under the intestacy statute if you plan on challenging a will.

iii. vary by state- we will use the UPC which about 1/3 of the states follow

iv. Overview: Below is a typical intestat

l remaindermen get. (Bowles would get 6.6)

B. Modern/American 1969 version- start with 7 shares, living get 1/7 each and nina and john get ½ of that. Each get 5.7 million under this one

1. IT MAKES A DIFFERENCE

2. If you will use a term like per stirpes- it has 3 meanings and you should write in which interpretation you are going to use.

1990 UPC is different from 1969

they both start to give share to each of the living takers of the generation

a. under 69 upc Amy’s 1/7th goes to fred, but nina and john have to split the 1/7 and each receive 1/14.

b. 1990 UPC says take amy, fred and nina’s total and divide it equally

B. FAMILY LAW AND INHERITANCE-

1. Unanticipated aspects of adoption law

–Assignment #5: CB 97-117

HALL v. VALLANDINGHAM- court of special appeals of Maryland, 1988

FACTS- child adopted by mother’s new husband. Can this child inherit form biological uncle by representation?

RULE- An adopted child is no longer considered a child of either natural parent and loses on adoption all rights of inheritance from his natural parents (here, it was only father whose rights were severed)

REASONING- confusing about how intestate statutes should deal with adoption b/c there is

One statute for intesteses & a separate statute for adoption

NOTES- Maryland statute §1-207- An adopted child shall be treated as a natural child of his adopted parent or parents. On adoption, a child no longer shall be considered a child of either natural parent, except that upon adoption by the spouse of a natural parent. The child shall be considered the child of that natural parent.

The court here does not want to give adopted children more rights than ordinary biological children have (they don’t want to give them the opportunity to take from more than 2 parents)

RULE- an adopted child can inherit through their adoptive parent

RULE- an adopted adult can inherit from their adoptive parent

Adopted kids can inherit pg. 100-02

Rstmt- §2.5- parent and child relationship

UPC- §2-119(b)(2)-

MINERY v. CITIZENS FIDELITY BANK & TRUST CO.- court of appeals of KY (1967)

FACTS-Amelia died in 1932 leaving a will deivising her residuary estate in trust to pay the income to her husband and three sons, james, Thomas, and Alfred for their respetive lives. The trust was to terminate when the last surviving beneficiary died, then the courpus was to be distributed to Amelia Minary’s ‘then surviving heirs, according to the laws of the descent and distribution then in force in Ky., and if there were no heirs to the First Christian Church in Louisville Ky. Husband died, James died w/o descendents, Thomas died leaving his 2 children and Alfred married Myra and adopted her as his child in 1959. The trust terminated w/o biological descendants in 1963.

RULE- An adopted adult cannot inherit from their adoptive parent when the adoptor has made the adoptee an heir to an estate created by an existing testamentary instrument executed by an ancestor of the adopter.

REASONING- cannot inherit b/c it was done to thwart testator’s intent.

NOTES- former rule was that adopted children can inherit FROM adoptive parent not through them, now it is changing to permit the adoptee to inherit from the ancestors of his or her adoptive parents but not against the testator’s intent.

WHEN THERE IS A WILL- THEY ARE MUCH MORE LIKELY TO INTERPRET THE TESTATOR’S INTENT. INTESTATE DEATHS ARE STATUTORILY DEFINED AND DON’T NEED AS MUCH THOUGHT ABOUT INTERPRETATION.