ESTATES & TRUSTS OUTLINE
I. Introduction to Estates and Trusts (4)
A. What’s the Difference Between an Estate and a Trust?
B. Probate/Non-Probate Dichotomy
C. Ethical Considerations. (5)
II. The Federal Transfer Tax System. (5)
A. Policy
B. Federal Estate Tax (7)
C. Federal Gift Tax
D. A Somewhat Unified System.
E. Federal Generation-Skipping Transfer Tax
F. Applicable Credit Amount
G. Marital and Charitable Deductions (8)
III. Testamentary Freedom – Public Policy. (8)
A. The Principal of Testamentary Freedom.
B. The Problem of the “Dead Hand”. (9)
IV. Limitations on Testamentary Freedom. (9)
A. Rights of the Surviving Spouse
1. Marital Property Systems
2. Misc. Rights of Surviving Spouse to Support (10)
3. Intentional Disinheritance – Elective/Forced Share.
a. Theory and policy of the Elective Share.
b. Property Subject to the Elective Share. (12)
c. Waiver. (13)
d. UPC Calculating Elective Share.
4. Unintentional – “Pretermitted” Spouse. (14)
B. Rights of the Surviving Children
1. Intentional Disinheritance.
a. The American Approach
b. The English Commonwealth (15)
2. Unintentional Disinheritance – “Pretermitted Child”
V. Intestate Succession – Estate Planning by Default. (16)
A. Statutes of Descent and Distribution.
1. Introduction.
B. General Patterns of Intestate Succession. (17)
1. Surviving Spouse’s Share.
a. Domestic Partners.
b. Simultaneous Death. (18)
2. Descendants’ Shares.
3. Shares of Ancestors and Collaterals. (20)
4. Worksheet
C. Succession Problems Regarding Children. (21)
1. Meaning of Children – Adopted, Posthumous, etc.
2. Transfers to Children – Advancements. (23)
3. Guardianship/Conservator. (24)
D. Altering Intestate Succession.
1. Opting Out – Negative Wills.
2. Disclaimer.
E. Bars to Succession.
1. Slayer Statutes.
VI. Wills – Express Estate Planning. (25)
A. Formalities and Forms.
1. Execution of Wills.
a. Attested Wills.
i. The Function of Formalities.
ii. Wills Act Formalities in Action. (26)
a. Age Requirement/Mental Requirement
b. Writing Requirement
c. Signature/Acknowledgment Requirement
d. Attestation Requirement
iii. Curative Doctrines. (27)
iv. Sample Will.
b. Holographic Wills. (28)
2. Revocation of Wills. (29)
a. Writings or Physical Act.
b. Dependent Relative Revocation and Revival. (30)
c. Operation of Law. (31)
3. Components of a Will.
a. Integration of Wills.
b. Republication by Codicil.
c. Incorporation by Reference. (32)
d. Compare with Separate Writing.
e. Acts of Independent Significance
4. Contracts Relating to Wills.
B. Will Capacity and Will Contests. (33)
1. Testamentary Capacity and Insane Delusion.
2. Undue Influence; In Terrorem Provisions. (34)
3. Fraud.
4. Duress.
5. Tortious Interference with Expectancy.
C. Problems of Interpretation (Will Construction). (35)
1. Mistaken or Ambiguous Language in Wills.
a. Plain Meaning/No Extrinsic Evidence.
b. Correcting Mistakes Without Reformation.
c. Openly Reforming Wills for Mistake.
2. Passage of Time and Changed Circumstances. (36)
a. Death of Beneficiaries.
i. Lapse and Antilapse
ii. Class Gifts.
b. Changes in Property.
i. Ademption. (37)
ii. Abatement. (28)
VII. Trusts (Will Substitutes?). (38)
A. Introduction – Testamentary and Inter Vivos.
B. The Required Elements of Trust Creation.
1. Intent. (39)
2. Trust Property (The Res).
3. A Beneficiary.
4. A Writing? (40)
5. Lawful Purpose (41)
C. Rights of the Beneficiary to Distributions.
D. Rights of the Beneficiary’s Creditors.
1. Discretionary (and Protective) Trusts. (42)
2. Spendthrift Trusts.
3. Self-Settled Asset Protection Trusts.
E. Modification and Termination.
F. Flexibility – Powers of Appointment. (43)
1. Powers of Appointment.
G. Charitable Trusts.
1. Nature of Charitable Purposes.
2. Modification of Charitable Trusts – Cy Pres.
3. Supervision of Charitable Trusts.
VIII. Other Will Substitutes and Non-Probate Transfers. (44)
A. Introduction.
B. RevocableTrusts (and Pour-Over Wills).
I. Introduction to Estates and Trusts
a. What’s the Difference Between an Estate and a Trust?
i. Estate
A. A legal entity
B. Not a dead person’s property
C. It has its own taxpayer id number for paying taxes, etc.
D. Liquidation is the primary goal (want to wrap it up as soon as possible)
E. Personal representative is the liquidator
ii. Trust
A. Trust agreement different than a trust
B. Trust agreement is a document that creates the entity, which is a trust
C. No difference between a trust and a corporation
D. Is an entity and also has a taxpayer ID number
E. Separate from the person who sets it up
F. Not trying to liquidate (asking someone to manage property)
G. Trustee is a manager
b. Probate/Non-Probate Dichotomy
i. Reasons to Probate:
A. Inventory, collect, and manage the assets of the decedent
B. Satisfy creditors and clear titles
C. Resolve conflicts among beneficiaries
D. Distribute what is left to the appropriate persons or institutions
ii. Not all property is subject to probate
A. Probate Property
a. In decedent’s name
b. Through probate of Will or Intestacy
c. Designated survivors
d. Trust HAS BEEN revoked… but, if it’s in the trust still, it’s non-probate
B. Non-probate Property
a. Life Insurance
b. Joint Property (with right of survivorship)
c. Property in Trusts (if in a trust, not probate, because not in her name… trust owns it)
d. Retirement benefits
e. P.O.D. accounts
f. Designated survivors
g. If the property is a life estate
iii. Probate estate is different than taxable estate
A. Probate estate is everything that is probate-able
B. But even non-probate estates are taxable
C. Not a matter of tax savings
iv. GOAL is to minimize property that goes through probate
v. Proving a will – want to verity that it is a valid will (having the will declared valid or invalid)
vi. Probate Process:
A. Need a personal representative or executor to probate the will
B. An administrator is appointed if you die intestate
C. Every state (except FL) has a probate court – In FL, Circuit Court
D. Venue is the domicile of the decedent (district where the decedent was domiciled)
E. Ancillary: Would have to probate property outside the jurisdiction in the jurisdiction where the property resides
a. But the assets inside the property that lies outside the jurisdiction would still be probated in the domicile jurisdiction of the decedent
F. Federal exception to probate: Federal courts cannot look at probate cases (nothing gives them jurisdiction)
G. When the validity of the instrument is determined/proved, then its directions are carried out
H. Liquidation function: Job in probate is to get rid of the property
I. In the case of intestacy, default statutory succession rules are carried out
c. Ethical Considerations—MRCP 1.6
i. The Duty of the Lawyer
A. Malpractice
a. Simpson v Caliveras (NH 1994 – p59):
b. Court finds Lawyer has duty to Beneficiary despite no privity of Contract
c. Probate Exception to the Privity R
ow $3M
iv. **Most important tax credit to take advantage of, as well as the $12,000 per year (annual exclusion)
g. Marital and Charitable Deductions
i. Marital Deductions
A. One spouse can transfer an unlimited amount of property to the other spouse without any gift or estate tax consequences as long as the transfer meets the requirements for the marital deduction.
B. The key requirement being that the interest must be something other than a life estate or other terminable interest.
C. Most efficient way to pass an estate is to take advantage of both exemptions available to the spouse [want to sacrifice the deduction to take advantage of the credit] by setting up a bypass trust [one spouse’s money goes into the trust to take advantage of the credit, an then the trust pays out to the other spouse]
D. Not necessarily a true freebie, because just deferring the tax
E. Unlimited deduction, but comes before the Unified Tax Credit, so if you give all to your spouse, you won’t get to use the credit (which you want to use!)
ii. Charitable Deductions
III. Testamentary Freedom
a. The Power of Testamentary Freedom
i. Why do we allow testamentary freedom?
A. Provides an incentive for hard work and for people to earn and save money
B. Reinforces family ties
C. Provides a social safety net for those who would otherwise have to be provided for by the state [such as disabled children]
D. Promotes a happier life
E. Wasteful consumption otherwise
ii. Limitations on Testamentary Freedom
A. Spousal Rights/Protections (elective share, etc.)
B. Creditor Rights
C. Unreasonable restraints on alienation or marriage
D. Encouragement of Divorce
E. Impermissible racial or other categorical restrictions
F. Provisions requiring conversion/faithfulness to religious belief
G. Provisions encouraging illegal activity
H. Rules against Perpetuities
I. Judicial enforcement of the condition would constitute “state action” violating constitutionally protected fundamental rights.
iii. Is the right to bequeath property a right and is it protected?
A. Right to property is not a fundamental right
B. May have it, but it’s not recognized Kelo decision is moving towards a fundamental right, because don’t like the idea of gov’t taking property for private use]
C. Hodel v. Irving
a. Rights of succession to property of a deceased, whether by will or intestacy, are of statutory creation, and the dead hand rules succession only by sufferance. Nothing in the Federal Constitution forbids the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction.
b. Right to bequeath, not inherit.
c. Can be limited by the state with Statutory takings
D. Shriner’s Case
a. Have a constitutional right to bequeath in FL
b. The Problem of the “Dead Hand”
Dead Hand control: A decedent may condition a beneficiary’s gift on the beneficiary behaving in a certain manner as long as (1) the condition does not violate public policy, or (2) judicial enforcement would not constitute state action violating a constitutionally protected fundamental right. **Trying to influence people after you are dead **
i. Donative intent is the key [give effort to maximize the effect of intent to the extent allowed by the law]
ii. Shapira v Union National Bank
iii. Father leaves $ to son contingent on him marrying a Jewish Girl of Jewish Parentage.
iv. Court upholds will stating that: Not unconstitutional where state does not step in between two willing actors. Not against Public Policy, there is a reasonable chance to marry Jewish girls.
v. No constitutional issue and no state action
vi. Private discrimination is okay (as long as not implicating a state action)
vii. RULE FROM SHAPIRA: “A PARTIAL RESTRAINT OF MARRIAGE WHICH IMPOSES ONLY A RESONABLE RESTRICTIONS IS VALID, AND NOT CONTRARY TO PUBLIC POLICY.”
viii. Courts support FOT in most situations.
ix. Void for public policy when:
A. Total restrain on the first marriage
B. Remain faithful to particular religion
C. Conditions that encourage divorce
D. Promotion of family strife
E. Destruction of property
