Will Substitutes
Wednesday, January 28, 2009
9:10 AM
1. The rise of Will Substitutes
a. Will Subs = Non-Probate property
i. Called this because no will is needed for this type of property to pass ownership to a successor at death
ii. Ex:
1. Joint Tenancy
2. TBE
3. Various forms of Multi=party bank accounts
4. Life insurance
5. Retirement plans
6. Benefits payable under contractual arrangements
7. Revocable/irrevocable living trusts
b. Langbein article-
i. Reiterates that most people transfer most of their property in non-probate transfers;
1. Provides reasons why people want property to be transferred by will:
a. title-clearing, creditor protection
ii. There are many times when the easiest estate plan is to write a will and let it go through probate
iii. Langbein is surprised that Creditors and others whom probate serves, let that slip away
1. Probate Functions
a. Clearing title to property (so that it is marketable again)
b. Creditor protection – paying off the decedent’s debts
c. Distribution – Implementing the decedent’s donative intent respecting the property that remains once the claims of creditors have been discharged
2. Validity of Will Subs
a. State Law Controls
i. State law controls the validity and attributes of will subs in a given jurisdicition
ii. Article VI of UPC – validates a broad variety of will subs
iii. Rest. 3d
1. “…these are non-probate assets … need NOT be executed in compliance with the statutory formalities required for a will”
b. Joint Ownership
i. 3 types Recognized under Common Law
1. TIC
2. JT
3. TBE
ii. Tenancy in Common (TIC)
1. NOT a will sub bc it confers NO ROS on the co-tenants
2. What do the Owners have?
a. Each Co-tenant owns an undivided interest in the underlying property.
i. That undivided interest can be transferred freely during life
ii. and will pass to the co-tenant’s divisees/heirs if retained until death
iii. Joint Tenancy (JT)
1. Is a will sub bc it confers a ROS
2. What do the Owners have?
a. Each JT is considered to own an undivided interest on his own behalf + owns the whole interest as part of a unit (aka “per my et per tout”)
b. JT’s are free to sever their proportionate interest during life
i. Thus creating a TIC
1. Note: they can do this WITHOUT the permission of the other JT
c. But JT’s CANNOT devise their interest to their heirs
i. If they fail to sever the JT during life, then @ the moment of death, the interest automatically terminates under the ROS
1. The surviving JT now owns the whole (free of any interest of the other JT)
2. Notice: NO interest has passed to him
a. BC he already owned the whole interest as part of a unit
iv. Tenancy by the Entirety (TBE)
1. Note: most jurisdictions DO NOT recognize these anymore
2. A form of ROS reserved exclusively for Husbands and Wives
a. Same effect as a JT
i. Except, @ common law,
i. Joint Account – this is the most common MPBA
1. Usually appears (on its face) to be owned by 2+ people w/ ROS
a. These are recognized in ALL STATES
i. But local law may vary the legal attributes
2. Hall v. Superior FED Bank
a. The dispute is over the ownership of funds in an account that was held as JT w/ ROS between 2 women friends. One of them died and the other wanted to get the funds and her estate wanted the $$ (The Bank instituted an interpleader action to decide who should get the funds).
b. Holding:
i. The woman owns the funds in the Superior FED account
1. Because they opened the account together with the language “JT w/ ROS” and according to statute “this was conclusive evidence”
ii. The woman does NOT own the funds in the Merrill Lynch Account
1. The statute does NOT apply to the Merrill Lynch account and the extrinsic establishes that there was NOT a JT for this account
a. Extrinsic evidence was ok because the SOF did NOT apply here and it may be proved by parol evidence.
2. The court creates a constructive trust
a. See below for more on constructive trusts
c. This is the case that we analyzed with the Alabama Banking Laws
