Trusts and Estates Outline

I. Introduction to Estate Planning
a. The Power to Transmit Property at Death
i. We give a maximum amount of freedom to the testator/testatrix, though this could cause economic waste.
ii. You are allowed to devise estate to anyone. You may disinherit your children or anyone you want; except the spouse.
iii. Hodel: Congress passed the Indian Land Conservation Act to correct the problem of fractioned ownership of Indian lands. The statute provided that tribal land would not descend by intestacy or devise but instead shall escheat to the tribe. Rests on the assumption that the right to transmit property at death is a separate and identifiable amongst the bundle called Property Rights and if this right is taken away there must be compensation. There may be a constitutional protection from confiscation. Estate tax has a max of 46%, which is high but not confiscatory.
iv. There is a Policy of Passing Wealth at Death and this may occur by: 1) destroying it; (2) burying it; (3) treating it as unowned and allowing a free-for-all in which the first person to grab it is the new owner; (4) confiscation by the government; (5) honoring the deceased’s wishes
v. The Dead Hand Problem – To what extent should a person be able to use wealth to influence behavior after death?
1. Shapira – There was a condition in decedents will that conditioned inheritance on his son marrying a Jewish girl whose parents were Jewish. Public Policy does not preclude the fulfillment of restrictions upon marriage as a condition of inheritance.
2. A person may choose to destroy his/her property, but this promotes economic waste. One argument is that before death the living does internalize some of the future costs of excessive or seemingly wasteful dead-hand control.
b. Transfer of the Decedent’s Estate
i. Probate and No probate Property – Probate Property is property that passes under the decedent’s will or intestacy. Nonprobate property is property passing under an instrument other than a will.
1. Non Probate Property: Joint Tenancy property, both real and personal (decedent’s interest vanishes at death and the survivor has the whole property relieved of the decedent’s participation); Life insurance (proceeds are paid to the beneficiary); Contracts with payable-on-death provisions (Pension Plans, Tax-deferred investments); Interests in trust (When property is transferred in trust, the trustee holds the property for the benefit of the named beneficiaries, who may have life estates or remainders or other types of interests).
ii. Administration of Probate Estates:
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