Trusts & Estates | Tritt | Fall 2013
I. INTRODUCTION TO TRUSTS & ESTATES and DONATIVE FREEDOM (38-42, Skim 42-46, 46-49)
a. General Intro
i. The right to property is not a fundamental right
ii. Testator: A person who has written a will
iii. Testate: One who dies with a duly recorded will dies testate
iv. Intestate: One who dies without a duly recorded will dies intestate.
v. Bequest: Death-time giving generally done through will or intestacy; Gift of personal property in a will. This may or may not be a fundamental stick in the bundle depending on how you look at property.
vi. Gifts: Lifetime giving, generally done through trusts
vii. Devise: Gift of land
viii. Probating a Will: Proving the validity of a will to dispose of probate property.
b. Transfer of the Decedent’s Estate
i. Probate and Nonprobate Property (Likely not tested)
1. Probate Property is property that passes through probate under the decedent’s will or by intestacy.
a. Anything in the decedent’s name at their death
b. Anything that passes through probate of will or intestacy
c. Designated survivors
2. FLORIDA Probate
a. Florida Statutes (See Statute Supplement)
i. F.S. § 731.201 (33) and (35); F.S. § 26.012; F.S. § 733.103; F.S. § 735.201; and F.S. § 735.301.
b. Formal Probate: Full-Blown
c. Summary Probate: If your probate estate is worth $75,000 or less.
d. Disposition of Personal Property without Administration: If your client only has personal property (e.g. things in home) and no case, no debt, no credit, you can dispose of their personal property without going through probate
e. Jurisdiction – Circuit courts have jurisdiction over probate in Florida. (Note: in other jurisdictions, there are specified probate couts).
f. Once you validate or invalidate the will, a Personal Representative will be appointed (Florida calls it a PR; other states call it executor).
i. Sometimes, PR’s can be named in the will.
ii. PR’s are entitled to legal fees; Statutorily mandated; usually a percentage of the estate; attorneys can double dip in attorney fees and PR fees.
3. Note on Taxable Estate
a. Probate Estate does NOT equal the Taxable Estate
i. The IRS taxes everything
ii. When we’re trying to get out of probate, we’re not trying to get out taxes. These are separate things. We could have the estate down to $0, but we might still have a very large taxable estate
iii. If we put something in revocable trust, it’s still taxable (not irrevocable)
4. Nonprobate property is property that passes outside of probate under an instrument other than a will. It is very easy to shift property out of probate; its possible to take everything out. There is a growing trend in Trusts & Estates to move property out of probate to non-probate.
a. Joint Tenancy Property, Both Real and Personal: The decedent’s interest vanishes at death. The survivor has the whole property relieved of the decedent’s participation. No interest passes to the survivor at the decedents death, but once a death certificate is filed. The same goes for property, bank accounts, brokerage, and mutual fund accounts.
b. Life Insurance: Paid by the insurance company to the beneficiary named in the insurance contract upon receipt of a death certificate.
c. Contracts with Payable-On-Death Provisions: Beneficiary gets property held under POD contract upon filing a death certificate with the custodian holding the property.
d. Interests in Trust
e. Retirement Benefits
f. Designated survivors
5. Hypo: The decedent died in an automobile accident caused by the negligence of Jack Daniels. Which assets are includible in the decedent’s probate estate?
a. Wedding Ring: Yes
b. Contents of Decedent’s Wallet: Yes
c. Property Under Which Decedent Received a Life Estate under Parent’s Will: No, because the life estate ended when the decedent died.
d. Decedent’s Home Owned by Tenancy in Entirety with Wife: No, because it passes automatically to the wife.
e. Contents of the Marital Home: Depends
i. Florida is a separate property state
ii. Public Policy Argument: Conflicting Goals
1. We want to reduce the estate to non-probate property
2. We might want the wife to claim a lot of property in the home
3. What someone buys is theirs
f. Vacation Home Owned with Brother as Tenancy in Common: Yes, since it’s shared
g. Action against Jack for negligence: Yes (The PR would bring the claim)
h. Assets held in revocable trust: No. If it’s dead, it’s irrevocable. It’s out of the estate.
ii. Is Probate Necessary?
1. Reasons for Probate System
a. A process for a smooth transition of property upon one’s death.
b. Probate resolves
i. Inventory, collect, and manage the assets of the decedent
1. Must inventory everything – even money left under the mattress
2. Collect – could have debts
3. Manage assets – secure them
ii. Satisfy creditors and clear titles – since it’s not the beneficiaries property yet, creditors must be satisfied before the property can transfer.
iii. Resolve conflicts among beneficiaries (will challenges, etc)
iv. Distribute what is left to the appropriate persons or institutions
2. Reasons to Avoid the Probate System
a. When a person dies, their assets are frozen. Probate can take a long time, so it could be very long before property is distributed.
b. Probate property is all public
c. Probate property is subject to the court system – the judge decides how to carry out the client’s wishes.
d. Expensive
c. The Power to Transmit Property at Death: Justifications & Limitations (1-27)
i. The Policy of Passing Wealth at Death
1. Reasons to Respect Testamentary Freedom, Edward Halbach, An Introduction to Death, Taxes, and Family Property
a. Encourages saving
i. If you don’t provide something for your descendants after your death, they could become wards of the estate
ii. Savings increase our GDP
b. Provides social safety net for those in whom society would otherwise have to provide
c. Might promote productivity, creativity, and hard work – if you can’t give away your property at death, you might retire earlier or stop working because you’ll have all you need for the rest of your life.
d. Promotes and reinforces family ties- children will treat parents better if they know they’re getting an inheritance
e. Encourages maintenance of families – this is an incentive for children to care for their elders
f. Administratively simple – It’s the cheapest, easiest, and most efficient way to do things. There is no government involvement. We don’t need administrative rules and enforcement tools.
g. Wasteful spending = Bad spending – if you know you can’t give away your estate, you will blow all of your money at the end of your life; most likely on bad things
h. Owner can distribute according to the needs of his beneficiaries- people know better than the government who in their family needs what, needs more, etc.
i. Promotes happ
ide for minor children, because we’re saying that the property owner can do whatever he wants with his money, just not his childs money. In this case, the child would be a creditor and the property would belong to the child. We just have to change the way we look at property, but we can still have this view and advocate testamentary freedom.
4. Irving Trust Co. v. Day (1942): “Rights of succession to property of a deceased, whether by will or by 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.”
5. Hodel v. Irving (1987). Cannot abolish right to pass property.
a. Facts: Congress enacted land acts dividing communal reservations of Indian tribes into individual lots. Over the years, the interest in the plot started getting smaller. Soon, the administrative costs far exceeded the total income of the property.
b. Statement: 3 appellees filed suit claiming that the ILCA resulted in a taking of property without just compensation in violation of the Fifth Amendment
c. Indian Land Conservation Act: No undivided fractional interest in any tract of trust or restricted land within a tribe’s reservation or otherwise subjected to a tribe’s jurisdiction shall descendent by intestacy or devise but shall escheat to that tribe if such interest represents 2% of less of the total acreage in such tract and has earned to its owner no less than $100 in the preceding year before it’s due to escheat.
d. Issue: Whether the original version of the escheat provision of the ILSA effected a taking of appellees decedents property without just compensation.
e. Holding:
i. This act abolished the right to pass property, and a total abrogation of these rights cannot be upheld.
ii. What is certainly not appropriate is to take the extraordinary step of abolishing both descent and devise of these property interests even when the passing of the property of the heir might result in a consolidation of the property. The ILCA “goes too far.”
f. Reasoning:
i. There is no question that the right to pass property to ones heirs if a valuable right.
ii. The right to pass on property – to one’s family in particular – has been part of the Anglo American legal system since feudal times. Even the US concedes that the total abrogation of the right to pass property is unprecedented and unconstitutional.
g. Notes:
i. The Hodel court appears to rest on the assumption that the right to transmit property at death is a separate, identifiable stick in the bundle of property rights, and if this right is taken, just compensation must be paid.
ii. Legal scholars don’t know what to do with this case, but it seems to push toward the notion of testamentary freedom.
