ESTATES & TRUSTS
CH. 1 – INTRODUCTION: FREEDOM OF DISPOSITION
Succession – the passing of property at death.
Probate Succession – by will & intestacy.
Nonprobate Succession – by inter vivos trust, pay-on-death contract, & other will substitutes.
Escheat – the reversion of the property of a deceased person to the state when there are no legal heirs.
Residuary Clause – a clause in a will that disposes of any estate property that remains after satisfaction of all other gifts.
A. THE POWER TO TRANSMIT PROPERTY AT DEATH
1. Freedom of Disposition & the Dead Hand
Shapira v. Union National Bank (1974) – Provision in T’s will requiring son to marry a Jewish girl w/in 7 years of T’s death was valid & not against public policy, b/c the condition didn’t violate son's constitutional right to marry & was reasonable.
Incentive Trust – conditional gifts to encourage the beneficiary to do or not do something.
2. Justifying Freedom of Disposition
a. The Donor’s Prerogative
Possibilities for orderly succession:
· Forced Succession – the decedent’s property could pass by simple rule of mandatory or forced succession, such as primogeniture (first-born’s right of inheritance) or to the spouse, children, or other dependents, or if the decedent has no dependents, then the property would escheat to the state.
o Most other countries follow this, honoring the decedent’s wishes only w/respect to property that remains after the forced shares are satisfied.
· Freedom of Disposition – the decedent’s property could pass in accordance w/the decedent’s declared wishes if they are reliably preserved, or if not, then in accordance w/a default system of succession that tracks the probable intent of a typical decedent. Wealth transfer taxation.
o American law generally follows this, tempered by certain mandatory succession rights for spouses & by
· Confiscation by the State – the decedent’s property could be confiscated by the state on the theory that the decedent’s property rights terminate on death.
b. Concentrations of Wealth
Arguments against freedom of disposition:
· It perpetuates inequalities in the distribution of wealth
· It concentrates economic power in the hands of a few, distorting politics & markets
· It denies equal opportunity to the poor
Estate Taxes – estates in excess of $5 million (indexed for inflation) are taxed at a rate of 40%.
c. Human & Cultural Capital
3. Is Freedom of Disposition a Constitutional Imperative?
Hodel v. Irving (1987) – SC held that the 5th Am curtailed the power of the govt to limit the right to pass property at death.
· Substantive due process test -> does it do what it was intended to do?
2004 American Indian Probate Reform Act – takes a new approach to resolving the problem of fractionation.
· Supplants state probate law w/a federal probate code for most reservations, though tribes are permitted to enact their own probate codes if they want.
· Trust land may be conveyed by will to other Native Ams or to the tribe.
· W/o a will, decedent’s spouse generally receives only a life estate in 1/3, w/the rest going to decedent’s descendants.
o If an intestate decedent owns < a 5% interest in a parcel, interest isn’t divided further, & oldest child/grandchild takes all of it, subject to the right of a surviving spouse to remain on the land. o Tribe or the other co-owners may buy decedent’s interest during probate w/heir’s consent, unless decedent owns < a 5% interest, in which event consent isn’t required unless heirs live on the land. 4. Posthumously Acquired Property Rights Shaw Family Archives Ltd. V. CMG Worldwide, Inc. (2007) - ∆s’ right of publicity claims were dismissed. Regardless of public figure's domicile at time of her death, & regardless of any rights purportedly conferred after her death by IN Right of Publicity Act or by Cal. Civil Code § 3344.1, the public figure could not devise by will a property right she did not own at the time of her death. Residuary Beneficiary – after all fees & taxes have been paid & all distributions in the will have been made, the beneficiary named in the residuary clause gets whatever’s left over. Example: T dies owning Blackacre. T has 1 intestate heir, X, but before dying, T executed a will giving all of T’s property to Y. Blackacre will pass under the will to Y. T -----(will)-----> Y
2 years later, A dies, leaving Whiteacre “to T if T survives me, but if T does not survive me, then to T’s estate.”
· Who takes Whiteacre, X or Y?
o Issue is whether T’s will controls the disposition of ppy not owned by T at death but subsequently acquired by T’s estate.
§ If T’s will controls, Y takes as the residuary beneficiary under the will.
§ If not, X takes as T’s intestate heir.
· UPC provides that all property owned at death as well as “all property acquired by the estate after the testator’s death” may pass under the testator’s will.
B. THE MECHANICS OF SUCCESSION
1. Probate & Nonprobate Property
All the decedent’s property at death can be divided into probate & nonprobate property.
Probate property – passes through probate under the decedent’s will or by intestacy.
Nonprobate property – passes outside of probate by way of a will substitute.
Examples of nonprobate transfer:
· Inter Vivos Trust
· Life Insurance
· Pay-on-Death (POD) & Transfer-on-Death (TOD) Contracts
· Joint Tenancy
2. Probate Terminology:
Personal Representative – a fiduciary who collects & inventories the property of the decedent; manages & protects the property during the administration of the estate; processes the claims of creditors & files federal & state tax returns; & distributes the property to those entitled.
· The powers of the PR relate back to actions undertaken prior
D; no P; BorS
All to BorS (per capita at each generation)
No S; no D; no P; no BorS; G or GD
If both pat & mat G or GD, ½ to paternal G/GD & ½ to maternal G/GD (all to G or, if none, per capita at each GD generation); or
If survivors on one side only, all to G or GD on that side (all to G or, if none, per capita at each GD generation)
No S; no D; no P; no BorS; no G or GD
§ 2-103(b); § 2-105
Stepchildren or, if none, then escheat to state; therefore, no laughing heirs
S = Surviving Spouse
D = Surviving Descendants
BorS = Surviving Sibs; Surviving Descendants of Decedent’s Parents
P = Surviving Parents
G = Surviving Grandparents
GD = Surviving Descendants of Grandparents
No living person has heirs.
· A’s heirs can be identified only by reference to the applicable statute of descent & distribution at the moment of A’s death.
The persons who would inherit the property of A, a living person, if A died w/in the next hour, are A’s heirs apparent.
· They have a mere expectancy that is contingent on their surviving A & defeasible by A’s contrary disposition by will, will substitute, or lifetime gift.
o An expectancy of an inheritance is not a legal interest. It cannot be transferred at law.
A person named in a will is a devisee, legatee, or beneficiary, not an heir.
B. The Basic Structure of Intestate Succession
· In all states, after the spouse’s share, descendants take to the exclusions of ancestors & collaterals.
· In nearly all states, intestacy favors only spouses & blood relations (encompasses adopted persons & those born of assisted reproductive technology).
1. Surviving Spouse
a. The Spouse’s Share
o If no surviving issue of decedent: entire intestate estate.
o If surviving issue, all of whom are also issue of the SS: first $20k of the estate + ½ of the remaining balance.
o If surviving issue, 1 or more of whom are NOT issue of SS: ½ of the intestate estate.
c. The Problem of Simultaneous Death
Janus v. Tarasewicz (1985) – held that there was sufficient evidence to find that wife placed on respirator survived husband, & that determination of legal death must be made in accordance with usual & customary standards of medical practice.