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

Trusts and Estates Outline Fall 2013
Themes of Course
1)     Freedom
2)     Form – requirements of how you tell your story and sign your will
3)     Treat will substitutes like wills?
4)     Codification
5)     The Real Story
a.       Relationships change, marriages fail, siblings quarrel
A.     Inheritance and Testation: Overview
a.       “Value” of inheritance to an individual or to society? Does inheritance encourage the production of wealth or does it preserve unequal wealth distribution?
1.      Freedom to tell your own story – dispose
2.      Encourage people to work hard to accumulate assets, part of ownership includes determining who else might receive it
3.      Other side – wealthy people stay wealthy long after they do the things that made them wealthy
4.      Hodel v. Irving – Congress enacted a statute that said if the fractional interest of land is worth a certain low amount that you cannot include it in your will
1.      Held: Statute is unconstitutional; constitutes as a taking
2.      Nothing forbids the legislature from abolishing testamentary disposition entirely – inheritance is not natural, but this statute is unconstitutional under the just compensation clause
3.      Ways to get around the statute
a.       Lifetime transfers
b.      Trusts – remainder or joint tenancy
c.      Will substitutes/nonprobate transfers
b.     Inheritance as power (the dead over the living): under what circumstances, and on what rationale, may the state intervene?
1.      Dead head control: arises when a decedent conditions a gift to a beneficiary upon a beneficiary behaving a certain way. The decedent is attempting to exercise control over the beneficiary even after the transferor’s death
2.      Valid/Invalid Conditions: Testamentary conditional gifts are valid unless they violate public policy, or judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights
1.      A partial restraint on marriage which imposes only reasonable restrictions is valid and not against public policy
2.      Making condition on marrying someone that is virtually impossible to find would be against public policy
3.      A condition on if someone never marries is invalid because the right to marry is a fundamental right
4.      Any conditions making the person do something illegal invalid
3.      Shapira v. Union National Bank –  Father leaves each of his children 1/3 share in his estate but the sons can only inherit if within 7 years of his death they marry a Jewish girl
1.      Son claims the condition violates public policy and the constitution (marriage is a fundamental right and state cannot interfere with that under the 14th amendment)
2.      Court rejects this argument
a.       Court is not being asked to enforce any restriction on Daniel’s constitutional right to marry – just being asked to enforce the testator’s restriction upon his son’s inheritance
b.      Son marry anyone he wants – there is a choice
c.       Not a complete restraint on marriage
d.      Continuing fighting with your dad is not against public policy, but if there really were no Jewish people he might have an argument of impossibility and against public policy
4.      Restatement: Court’s should balance the donor’s freedom of disposition “against other social values and the effects of deadhand control on the subsequent conduct or personal freedom of others”
5.      Shelley v. Kramer –  Covenant that said you could only sell to whites, but they sold to a black family and held that the covenant was unenforceable because property is a fundamental right and the state court’s ruling constitutes state action therefore a 14th amendment violation. Judges are state actors under the 14th amendment.
1.      Shapiro says no state action because judge is not necessary. Not asking court to enforce any restriction on his right to marriage
2.      Could be state action here because probating a will is state action  – reluctant to call this state action because then every time a will was probated = there could be constitutional arguments because of the state action
3.      Shelley was an injunction saying you can’t tell whites vs. Shapiro which was a condition (still a choice)
6.      Incentive Trusts (3 categories)
1.      Beneficiaries to pursue education
2.      Moral incentives – promote a particular way of life
3.      Conditions designed to encourage the beneficiaries to have a productive career
4.      Use of these have been increasing – could reduce possibility of children freeloading off inheritance if they have to achieve these first
B.     The Probate Process
a.      How does probate work, when is it required, and what is its function?
1.      Probate: Process of carrying out the will if there is a will or the process of administrating the estate if the person has died intestate
2.      Probate Process: 3 steps
1.      Person in charge (executor if they have a will, administer if not) has to collect up all the assets – list of all them, get something from the court that you can act on their behalf (to get things from banks, etc.) authority to touch the assets
2.      Pay the debts
3.      Distribute the property to beneficiaries (big thing is clearing title – retitle the property in the beneficiaries’ name)
3.      Probate Property: Property that passes through probate under the decedent’s will or by intestacy. (3) functions
1.      Provides evidence of transfer of title
2.      Protects creditors – provides procedure for payment of debt
3.      Distributes property to those intended
4.      Formal v. Informal Probate
1.      Formal Probate under the Uniform Probate Code (UPC) litigated judicial determination after notice to interested parties
2.      Informal probate happens without going back to the court. Administer is usually a trusted family member and that the typical beneficiary is also a family member
3.      Probate unnecessary for ordinary estates – don’t need probate in every estate and states don’t require it
4.      Need probate with a lot of property and when there is real estate involved
5.      Non Probate Property: Passes outside probate by an instrument other than will – the way most property passes.
1.      Common modes of non-probate transfer:
a.       Joint tenancy property, both real and personal
b.      Life Insurance, Car, Savings Account, Joint Checking, Pension
c.       Contracts with payable-on-death provisions
d.      Interests paid in trust. Property held in a testamentary trust created under the decedent’s will passes through probate, the property put in an inter vivos trust during the decedent’s life does not – preferred inter vivos in most states.
6.      Simpson v. Calivas – Duty to Intended Beneficiaries. Negligence case – breach of contract acti

                                                                                                                        ii.      Conservatorship –(replaced guardianship) the conservator is given the title as trustee as well as investment powers similar to those of a trustee
                                                                                                                                   iii.      Custodianship – Custodian is given the property to hold for the benefit of a minor. Custodianships can invest and manage the property but has a duty of care
                                                                                                                                   iv.      Trusts – the most flexible of all property arrangements
3.      UPC 2-103
b.      The (not very clear) meaning of “representation”
                                                               i.      English per stripes/Strict Per Stirpes: About 1/3 of states follow this system. This system treats each line of descendants equally. UPC doesn’t like this. The children of the deceased descendant represent their deceased parent and are moved into the parents position beginning at the first generation below the designated person. Makes more sense to start with first surviving level of descendants
                                                             ii.      Modern per stirpes: About ½ states follow this system also called per capita with representation
1.      If any children survived the decedent, then the distribution is identical to that under English per stirpes
2.      If not, the estate is divided equally at the first generation in which there are living takers
                                                           iii.      Per Capita at Each Generation: 1990 UPC – The initial division of shares I made at the level where one ore more descendants are alive (as under modern per stirpes) but the shares of deceased persons on that level are treated as one pot and are dropped down and divided equally among the representatives on the next generational level. This treats equally each taker at each generation with the other takers at that generation
                                                           iv.      Notes from review:
1.      1969 and 1990 UPC rules are sometimes called per capita representation or some other names; not pure
2.      Per stirpes – not rule out UPC, meant to rule out pure per capita of counting the heads
3.      Pure per capita – simply counts the number of living issue there are and adds them up and divides
4.      Classic – divide half down two lines
5.      Modern UPC – take the roots at first generation we find takers – level of grandchildren and they are going to take it