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Estates and Trusts
UMKC School of Law
Cheslik, Julie M.

· Ways to Transfer Property at Death
o Will (testate)
o Inheritance (intestate)
o Living Trust
o Joint Tenancy with Rights of Survivorship (JTWROS)
o Tenancy by the Entirety
o POD/TOD, etc.
· Policy of Inherited Wealth
o This is the idea of money passing to heirs upon death – this is not a natural or a civil right, it was established through case law.
o Why Tax Death Transfers?
§ Incentive to earn the money
§ Disincentive to work if there is no inheritance.
§ Good revenue source
§ Goes against the idea of earning your own money (free money)
§ Accident of birth.
§ Better to spread wealth than keep in a privileged class
· Federal Estate Tax
o Congress is phasing out the federal estate tax which will drop to zero by 2010, then be reinstated fully by 2011. Mainly the exemptions are changing. Congress has upped the amount of money exempt from federal estate tax to $2M for a single person, anything over that is taxed at 50% rate.
§ The point is, there’s some tension in our society about inherited wealth. On one hand, we allow it, but then we tax the hell out of it.
§ Why did some of the wealthiest people oppose doing away with the estate tax? If we have no estate tax, wealthy people will be able to leave assets tax free.
o No constitutional right to pass/receive property upon death recognized until 1980’s.
o Hodel v. Irving
§ O’Connor for a unanimous court! This is the only unanimous decision EVER in a takings case.
§ ONLY decedent’s have right to dispose of property upon death, heirs have no right to receive property from a decedent.

Federal Constitutional right to transfer property at death but no Federal Constitutional right to inherit/receive property at death

Mere expectancy to inherit property = prayer and hope

o Facts:
§ Native American property was becoming fractionalized, so the US passed a law that prevented the NA from transferring their property at death through descent or devise, and the property would go back to the tribe.
§ This was found to be a taking under the Penn Central test because the law completely abrogates the decedent’s right to transfer the property.
· Penn Central Test
o Investment Backed Expectations (of the decedent).
§ Are they sufficient that this act amounts to a taking of their property – court says it’s highly doubtful that this was present. Does not help P’s at all. Statute wins.
o Reciprocity of Advantage (benefit v. burdens)
§ Who benefits from the statute v. who is hurt by it. The heir is hurt and the tribe is helped because their shares are no longer fractionalized, therefore they are wealthier. You are part of the tribe so statute wins
o The character of the Government Action (Complete Abrogation).
§ Court says that it completely abrogates the ability to transfer property at death only when there is a small interest, BUT it only affected transfer at death by inheritance or will.
§ Court’s Reasoning

Supreme Court found that the “escheat” provision of Indian Consolidation Act an unconstitutional taking of decedent’s property – Court was bothered that statute virtually abrogated right to transfer property at death (through descent and devise)
This case sets the standard that a State could abolish either devise or descent, but not both.
“Conceptual Severance”

Defining a property right broadly or narrowly to determine whether an actual taking has occurred”

To have a taking- property right must be “taken”
Right in this case was “right to pass property at death” – hence, devise and descent.

§ Cheslik thinks this is a ridiculous unanimous decision because there are other ways to transfer property at death (trust, POD, etc.) – all the law did was restrict the right to pass by inheritance or will, they could still pick from any other options so how is that “abrogating” their property right? It’s not like the law says Indians can’t pass property anymore.
· Will Restrictions
o The Dead Hand – Decedent conditions gift to a beneficiary upon the beneficiary behaving in a certain way.

Decedent is attempting to exercise control over beneficiary, even after his death.
Problem is that it prevents change

o Invalid Conditions:
§ Absolute Restraint on Marriage: Gifts conditioned on beneficiary not marrying anyone generally considered to violate fundamental right to marry – invalid condition.
· Exception
· Partial Restraint on Marriage: Not contrary to public policy and valid as long as imposes reasonable restriction.
o Courts look at the age of the beneficiary, time limit, likeliness permitted marriage would occur (pool size) and other circumstances.
o Test: Reasonableness
· Shapira v. United National Bank
o Court must honor testator’s intention provided through a condition within limitations of law and public policy.
o Father placed a restriction on the will requiring his son to marry a Jewish girl w/ 2 Jewish parents within 7 years of his death.
o No constitutional issue
§ Mere probation and enforcement of a will does not constitute State Action.
o Partial Restraint was held valid b/c it was reasonable at the time.

The court is more likely to enforce a “must restriction” than a “can’t restriction”

§ Religion Requirement: Gifts requiring beneficiary to remain faithful to a particular religion are generally a violation of public policy concerning religious freedom – invalid.
§ Encouragement of Divorce: Gifts requiring beneficiary to separate or divorce before receiving a gift are against public policy – invalid
· Exception – Unless testator’s motive is to provide support in the event of the separation or divorce.
§ Destruction of Property: Although individuals are free to destroy property during life, not free to destroy upon their death – invalid.
· Destruction or property at death carries no meaningful economic cost for decedent and deprives society of opportunity to use – can’t be wasteful.

o MO § 472
o Process by which the State deals with dead people’s property – court controls administration of the estate.
§ Probate in the state where domiciled.
§ Probate takes place when a person dies w/ or without a will.
§ Probate is very expensive and attorneys will generally want to do some sort of estate planning to avoid probate.
§ Small estates can avoid probate (under $40,000)
o Non-Probate Property:
§ Joint tenancy property with ROS – both real and personal
§ Life insurance (with named beneficiaries)
§ POD – payable on death – Decedent has K with a bank, employer or some other person or corporation to distribute the property held under the K to a named beneficiary. Often done with pension plans.
§ Trusts
o Purposes
§ Gives new title to the executor
§ Protects creditors of the decedent
§ Distributes the decedent’s property to the intended beneficiaries
o Personal Representative
§ This person winds up the decedent’s affairs
§ If a person dies with a will – the PR is an executor
§ If a person dies w/out a will – the PR is an administrator.
§ When person in charge of administering estate is not named in the will, they are appointed by the court from a statutory list, usually in the following order: surviving spouse, children, parents, siblings, creditors. When this happens they are referred to as an administrator.
§ Principal duties of personal representative:
· Inventory and collect the assets of decedent
· Manage assets during administration
· Receive and pay claims of creditors and tax collectors
· Clear any titles to cars, property, other assets
· Distribute the remaining assets to those entitled.
o Terminology
§ A person dying testate devises real property to devisees and bequeaths personal property to legalese. Restatement of property applies devise to both realty and personalty. In drafting wills, “I give” will effectively transfer any kind of property.
§ When intestacy occurs, we say real property descends to heir

before death. The delivery here was to Attorney – that’s not sufficient. He’s the agent of the donee, so it’s like donor delivered it to himself. He has to deliver it to the donee or the donee’s agent.
· Conflicts of Interest
o Hotz v. Minyard
§ Testator’s attorney may owe a duty of care to 3rd parties if the attorney has an ongoing attorney-client privilege with the 3rd party and the 3rd party has special confidence in the attorney.
§ Attorney represents both father and daughter. Daughter sues lawyer for breach of fiduciary duty.
§ Attorney should have recused himself in this situation OR tell her that she can’t see a copy of the new will.
§ He has a duty to both parties and can’t represent both if they have a conflict. He owes her a fiduciary duty to deal w/ her in good faith and not to actively misrepresent nature of the first will.
§ Remedy
· The will contester will not get specific performance, they will only get the value of the services or the property.
· Policy of Malpractice Claims
o Pros
§ Makes lawyers accountable for error and makes other cognizant
§ Theoretically makes practice of law better
§ Second best solution to following decedent’s true intent
o Cons
§ Increase insurance premiums

· What is intestacy?
o Intestacy is the estate plan by default
o ½ of people will die w/out a will or trust (other non-probate transfers)
o Takers under Intestacy
§ Remember – a person does not have heirs until they are dead.
§ Surviving Spouse
· The first preferred taker under both MO and UPC rules.
· They were not an heir at common law because you had to be an heir at birth.
· Elective Share
o MO – ½ or 1/3 if there are children (§ 474.160)
o KS and UPC – sliding scale (3% to 50% depending on length of marriage).
o You can’t negatively disinherit a spouse – they can always elect to take this share.
· Domestic Partner – Only 4 states allow a domestic partner to take through intestacy
o Estate of Gardiner:Always remain the gender you were born with, even if birth certificate is changed and regardless of whether entire life was lived as opposite sex.
§ Children and descendants (issue)
§ Lineal heirs (parents, grandparents – diagonal line on chart)
§ Collateral heirs (aunts, uncles, etc.)
§ Laughing Heirs
· These are heirs that are so far away from the decedent that it is likely that they have never met this person.
· Most states have a cut off line at some degree.
o MO – 9th degree – great-grandparent line.
o UPC – Draws a line at the grandparent line.
§ In-Laws are not Heirs!
· MO Intestacy Statute § 474.010
o Notice that this statute mentions “any property.” You can die intestate, or just partially intestate. Just remember it applies to any property, doesn’t have to be all, that doesn’t pass under the will of decedent.
o Surviving Spouse is preferred
o (1) The surviving spouse will receive:
§ All if there is no issue
§ $20,000 plus ½ of the balance if there are surviving issue, all of whom are the SS children.
§ ½ of the estate if there are surviving issue, one or more whom are not the issue of the surviving spouse.
o (2) If there is no surviving spouse – the property shall descend as follows
§ To the children (descendants) in equal parts
§ If there are no children or descendants, then to the father, mother, brother, sister or their descendants in equal parts.