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Trusts and Estates
University of Florida School of Law
Tritt, Lee-Ford

Trusts & Estates Fall 2016 – Tritt
 
 
I. General Definitions & Information
 
Why do people give property?
Altruism – joy of giving
Protection
Precautionary savings – over-saved & have extra at death
Exchange motive – rewarding those who will care for the giver
 
Definitions:
Donative Freedom: just as one should have the right to control the transfer of property during life, one should have the right to control the transfer at death
Testator: a person who has written a will
Testate: one who dies with a duly recorded will dies testate
Intestate: one who dies without a duly recorded will dies intestate
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
Gifts: lifetime giving, generally done through trusts
Devise: a gift of land
Probating a Will: proving the validity of a will to dispose of probate property
 
 
 
 
I. Introduction to Trusts & Estates
 
A. What is the Difference Between an Estate & a Trust?
 
Estate v. Trust:
separate legal entity after a person has died; personal representative gets rid of the property
created entities like a corporation; trustee administers ongoing affairs for the beneficiaries
 
B. Probate/Nonprobate Dichotomy 
 
Probate & Nonprobate Property:
Probate Property: property that passes trough probate under the decedent’s will or by intestacy
Anything in the decedent’s name at their death
Anything that passes through probate of will or intestacy
Designate survivors
Nonprobate Property: property that passes outside of probate under an instrument other than a will; it is very easy to shift property out of probate (it is possible to take everything) — this is a growing trend in the T&E world
Joint Tenancy Property, Both Real & 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 decedent’s death, but once the death certificate is filed
The same goes for property, bank accounts, brokerage, and mutual fund accounts
Life Insurance: paid by the insurance company to the beneficiary named in the insurance contract upon receipt of a death certificate
Contracts Payable-on-Death Provisions: beneficiary gets property held under POD contract upon filing a death certificate with the custodian holding the property
Retirement Benefits
Interests in Trust
Designated Survivors
FLORIDA Probate:
Florida Statutes:
F.S. §§731.201(33) & (35); 26.012; 733.103; 735.201; 735.301
Formal Probate: normal, full blown probate
Summary Probate: when your probate estate is worth less than $75,000
Disposition of Personal Property without Administration: if client only has personal property (things in a home), and no case, no debt, no credit, you can dispose of their personal property without going through probate
Jurisdiction: circuit courts have jurisdiction over probate in FL (in other jurisdictions, there are specified probate courts)
Once you validate or invalidate the will, a Personal Representative will be appointed (FL calls PR, others call Executor)
Sometimes PRs can be named in wills
PRs are entitled to legal fees, statutorily mandated, and usually a % of the estate; attorney’s can double dip in attorney fees and PR fees
Note on Taxable Estate:
Probate Estate does NOT equal the Taxable Estate
The IRS taxes everything
EVEN things in revocable trusts (not irrevocable)
The decedent died in an automobile crash caused by the negligence of Jack Daniels. Which assets are included in the decedent’s probate estate?
Wedding Ring –Yes, probate
Contents of Decedent’s Wallet – Yes, probate
Property Decedent Received in LE under Parent’s Will – No, because the life estate ended when the decedent died
Decedent’s Home Owned in Tenancy in Entirety with Decedent’s Wife – No, because it passes automatically to the wife
Contents of the Marital Home – Depends
FL is a separate property state
Policy Policy Argument: Conflicting Goals
We might want to reduce the estate to non-probate property
We might want the wife to claim a lot of property in the home
What someone buys is theirs
Vacation Home Owned with Brother as Tenants in Common – Yes, probate because it is shared
Action Against Jack for Negligence – Yes, PR would bring this claim
Assets Held in Revocable Trust – No, if it’s dead, it’s irrevocable, and out of the estate
 
Is Probate Necessary?
Reasons for Probate System:
Created a process for smooth transition of property upon one’s death
Probate Resolves Issues Surrounding:
Inventory, collect and manage the assets of the decedent
Must inventory everything – even the money left under the mattress
Collect – could have debts
Manage assets – secure them
Satisfy creditors and clear titles – since it’s not the beneficiaries property yet, creditors must be satisfied before the property can transfer
Resolve conflicts among beneficiaries (will challenges, etc.)
Distribute what is left to the appropriate persons or institutions
Reasons to Avoid Probate:
When a person dies, their assets are frozen; probate can take a long time, so it could be very ling before property is distributed
Probate property is all public
Probate property is subject to the court system – the judges decides how to carry out the client’s wishes
 
 
Definitions:
Testamentary Transfers: a gift that takes effect at death of transferor
Inter Vivos Transfers: transfer between living, transferor is still alive when gift takes effect
Succession: passing of property at death, short hand way of summing up social process or institutions and their legal echoes, which govern the way property moves from generation to generation & to the living from the dead
Includes the law of wills, intestacy, trusts (mostly), charitable foundations, “death taxes” and come aspects of future interests
Forced Succession: the decedent’s property could pass by simple rule of mandatory or forced succession, such as primogeniture or to the spouse, children, or other dependents, or if the decedent has no dependents, the property would escheat to the state
Primogeniture: the right go succession belonging to the first born child, especially the feudal; rule by which the whole real estate of an intestate passed to the eldest son
Testamentary Freedom/ Freedom of Disposition: extent to which America Law allows an owner of property to control the disposition of her property at death, property passes in accordance with the decedent’s declared wishes if they are reliably preserved, or if not, then in accordance with a default system of succession that tracks the probable intent of a typical decedent
Alternatives: countries that do not use this system have systems of forced succession or diverge power to the courts, or confiscation by the state on the theory that the property rights terminate on death
Freedom of Disposition is subject only to wealth transfer taxation and a handful or policy limitations (limitations triggered by donor’s lifetime conducts of public policies)
Intestacy/ Intestate: without a will; when there is no will, a body of intestate succession laws gives a default plan for the estate
Intestate: distribution of probate prop to those people who dies without a will
Testate/ Will: simplest form of post-mortem control in which one has the right to specify who gets what when you die and certain formalities are followed
Testate: a person who dies with a will
Trust: relationship whereby property is held by ne party for the benefit of another; created by the settlor who transfers to a trustee; CL
Bequeath/ Bequest (legatees): a gift of personal property in a will or life (to bequeath means to give)
Devise (devisee): a gift of land
A person dying testate was said to devise real prop to devisees and to bequeath personal prop to legatees
Residuary Estate: property that remains in a deceased person’s estate after all specific gifts are made, and all debts, taxes, admin fees, probate costs, and court costs are paid; also includes any specific gifts under a will that will fail or lapse
Gift: is the voluntary transfer of property from one person, donor, to another, done, without full valuable consideration; transfer must be made during life
Decedent: an individual who has died
Testator/ Testatrix: one who makes a will, especially one who dies and leaves a will
Personal Representative: Executor/Executrix; Administrator/Administratix: person who administers the estate of a deceased person as the executor or the Court-appointed administer
Duti

Encourages maintenance of families – this is an incentive to get children to take care of their elders
Administratively simple – MOST IMPORTANT, 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
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
Owner can distribute according to the needs of the beneficiaries – people who know better than the government who in their family needs what
Promotes happier life by allowing the satisfaction of the property owner to care for his loved ones after death
Halbach argues that even if inheritance is unearned by the recipient, the transferor has earned the right to leave an inheritance; these regards are required by the ideals of social justice as the fruits of ones labor
Reasons for Limiting Testamentary Freedom:
Potential for dead hand control
Discourages work of older citizens
Reduces Savings and GDP
Creates inequality of wealth – permitting the transfer of great fortunes perpetuates wide disparities in the distribution of wealth – opposed to wealth distribution MOST IMPORTANT
Concentrated inheritances put economic power in the hands of few
Denied equality of opportunity to the power – allowing the acquisition of great wealth by birth may be difficult to reconcile with the commitment to equality -rich get richer
Creates unearned windfalls for those with wealthy families
Flip Side —- inter vivos investment in human capital – health, education, and culture – arguable account for disparity in opportunities / wealth than inherited wealth
Note: this is not an objection to capitalism – you can spend what you earn and enjoy the luxuries of life; what is wrong is from this perspective is not market differentials, but the fact that those differentials are transferred from people who earned them to people who didn’t
Human Capital Analysis:
Progressive Taxation: economic differences in children are huge; by progressive income tax, allows for the closing of the gap of parents spending money on their children
Family Wealth Taxation: parental investment in their children’s education can lead to ultimately more successful children that don’t need the inheritance as much; essentially, this could be considered an inter vivos inheritance through lifetime educational benefits
 
2. The Right to Inherit & Convey
Unique to the USA – the right to inherit is unique to American Law; most countries do not have testamentary freedom
Should one have the right to control the gratuitous transfer of property at death as one has the power to control the gratuitous transfer of property during life?
Jefferson: the dead have no right to property; the dead have no rights
Blackstone: the right to inheritance isn’t a natural (inalienable) right, but a civil right (government created)
Note: IF the right to bequeath truly is a civil right, we could have a government with a 100% confiscation theory
Another view – property and the right to bequeath are natural rights
Loche (Minority View): children have the natural right to inherit their parents property, but adults do not
Note: not the right to bequeath; in fact, the right to inherit undermines the right to bequeath, because if children have a right to it, you can’t give it away
The right to inherit is not recognized in the USA (except in LA)