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Trusts and Estates
University of Georgia School of Law
Milot, Lisa

Trust and Estates I –
University of Georgia
Professor Milot
Fall 2010

Chapter 1: Introduction
o Background: Trust and Estates
o Trust: Legal way to divide up ownership
§ Trustee: Legal ownership àHas right to sell asset, buy new assets
§ Beneficiary: Gets benefit of assets, incomeàBut can’t use contents of trust
§ Decedents are more frequently using trusts to provide incentives to their designated beneficiaries
· Three categories:
o Condition to pursue education
o Condition with moral incentives
o Condition to encourage productive career
o Estates: Legal successor to a decedent
§ Estate is distributed out to beneficiaries
o Both are forms of ownership of property involving gratuitous transfers
§ There are no Ks in which things are bargained for
§ B/c we give Ks legal enforceability to protect benefit of the bargain, GTs are in a much different category
o Why protect gratuitous transfers?
§ Wealth maximization: Encourages people to earn more while they’re alive
§ Estates: Good because don’t know when people are going to die
o Three reasons for assets in estate:
§ Don’t know when going to die so keep producing more to protect against
· People are eternally optimistic
· If don’t enforce estates, then miscalculation could cause opposite effect where people run out of money and government ends up supporting them
§ People want to leave specific amount of assets to certain people
§ Some people want to be productive
§ If argue that enforce GTs so that people will be more productive and produce more assets, there is theory that some just want to be productive
o Terminology
o Probate:
§ Often terms administration & probate used interchangeably.
§ Technically, probate is only the process of establishing the validity of the will. Everything else is the administration of the estate.
§ When there is no will, there is no probate, just administration.
o Probate property passes through probate
§ In GA, relatively efficient and cheap
§ Other places expensive, so lawyers telling clients to create trusts to pass property
o Non-probate property passes without probate
§ Joint tenancy (real and personal); contracts with payable on death provisions, interests in trusts, life insurance.
o GA Probate System – Two-tiered:
§ Larger counties (90,000 and above) – probate judge is attorney and has additional jurisdictions and responsibilities.
§ Smaller counties – probate judges don’t have to be lawyers
o Testator = person who has a written will
§ Devisees (legatees) = persons designated to take property in testator’s will
§ Devise (real property), legacy (money), bequest (personal property than money) = clause directing disposition of property
o Intestate = person who dies without a will
§ Heirs = parties to whom intestate decedent’s property passes
o Types of probate:
§ Common form / informal probate – ex parte proceeding in which no notice or process issued to any person.
· Downside: not final until 4 years go by
§ Solemn form / formal probate – notice to interested parties give by citation, due execution of the will proved by testimony of attesting witnesses, administration of estate involves greater court participation.
· Any interested party can demand formal probate
§ UPC: allows for both forms of probate.
o Barring Creditors:
§ There are statutes that require creditors to file claims within a specified time period and claims filed after are barred.
§ Georgia does not have a non-claim statute that bars creditors that don’t announce themselves, but the consequence is that you lose your priority to other creditors.
§ OCGA § 53-7-43: There is pass-through liability that passes to heirs and beneficiaries (not personally liable like in LA), but this hasn’t been used much and probably shows that c/ors don’t have a big problem being left short b/c of a d/or’s death.
o The Living and the Dead: Whose Money Is It? (Page 1)
o Shapira v. National Bank: Son contesting condition deceased father put on his inheritance. Condition requires that son marry a Jewish woman with Jewish parents within 7 years of father’s death.
§ HELD: Condition is enforceable since it is neither unconstitutional nor against public policy
§ Constitutional Argument:
· Not being asked to enforce restriction on P’s right to marry but to enforce testator’s restriction upon his son’s inheritance
· No const. argument even if restriction required P to get divorced
§ Public Policy:
· Great weight of authority in US is that gifts conditioned upon beneficiary’s marrying within a particular religious class or faith are reasonable
o What was the father’s intent?
§ Think it was to keep the assets within the Jewish bloodline
· Courts are more apt to enforce a condition if there is a gift over upon default and not just forfeiture
· So important there was a gift over
o Why do we allow the son to bring this claim?
§ Absent a will, a child has a legal right to parent’s estate as provided in state intestacy statutes
§ Have to allow challenges to conditions so that we can determine which ones we want to enforce
o NOTE: If this had been an inter vivos gift, it would have violated public policy
o NOTE: If it were a K, it wouldn’t have been legally enforceable until son performed as it is an unilateral K
§ Why would we then enforce this condition upon death but not while father was alive?
· Because one party is dead and thus that party can’t revoke but matter is still out there
· More worried about finality and wrapping up the estate within a reasonable period of time
o Inheritance Rights More Generally
o Before Statute of Wills (1540), real property holders in England could only pass property through descent to heirs
§ After SOW, property holders had say in who got property
o Hodel: Government cannot totally abrogate the right to pass property
o Curtailing Inherited Wealth:
§ Some persons believe to achieve equality of opportunity and raise funds for federal government, federal wealth transfer taxes should be revised to curtail inheritance and raise revenue
§ Children of wealthy parents don’t need any more good fortune such as inheriting parent’s property
§ Others believe good because could encourage children of wealthy parents to be sloth-like
§ What is the benefit of 100% estate tax?
· Would create equal opportunity for people to succeed because lessens disparity
· Not enforcing GTs would comport with American ideal of equality of opportunity
o Reasons to Keep Inheritance:
§ Natural right
§ Incentive to work and maximize wealth (utility argument)
§ Social services: Encourages heirs to take care of testator
§ Difficult to curtail because testators will just find less efficient ways to distribute wealth
§ Consistent with political preferences
o Other effects of not protecting estates:
§ Any money left over could go to the state/government
§ Fairness to all those who contributed to an individual’s productivity
· Very few people are socially isolated
· To extent we are productive in our lifetime, there are usually others who helped contribute to that productivity
o Slayer Statutes
o In every state, the statute of wills permits a decedent to write a will disposing of his property at death but as seen in Riggs v. Palmer, there are circumstances that can cause courts to not give effect to a testator’s intentions
§ In that case, grandson killed his grandfather so that he could get his inheritance
§ Court wouldn’t allow grandson to get share because said that it was never lawmakers intention that donee who murdered the testator to make the will operative should have any benefit under it
§ It went further to say that no one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime
o Effect of Insanity
§ Ford v. Ford: Daughter killed mother. Found guilty but insane. Daughter’s son claims the slayer statute should prevent her from taking under estate.
§ HELD: Slayer statute is not applicable because Pearl, the killer, was not criminally responsible at the time she committed the homicide
· Pearl is not criminally responsible because in order for a homicide to be felonious in context of slayer’s rule, it must be a felony for which killer is criminally responsible under MD’s criminal insanity test.
· Thus, Pearl can inherit
§ Dissent: Killer’s volition has no bearing upon the equitable principle embodied in the slayer’s rule
§ Current slayer’s rule as developed by MD case law:
· Person who kills decedent cannot share in distribution of estate when the homicide is felonious and intentional
· Person who kills decedent can share in estate when homicide is unintentional
· Applies to killer and those claiming through or under him
· Not dispositive that no criminal prosecution was brought against alleged killer
o Can still be decided within civil proceeding whether person was a killer of decedent
o Rationale behind slayer statutes:
§ Deterrence
· Problem: If only focus on deterrence, lose equity of situation because people like Pearl are still profiting from wrong
· Also, losing inheritance isn’t going to sway someone’s intention to murder someone
o Capital punishment or life imprisonment are likely to more effective deterrents
§ Effectuating what the decedent would have wanted to have happened
· Problem: Will never truly know the testator’s intent and facts specific to that person’s life
o Have to use best guess
o Statutes and rules also don’t account for testator’s intent
o Could also lead to parties trying to contract around rule/statute
· Mercy Killing: Jack Kevorkian assists his brother’s death at his request. Can Jack take under will?
o Decedent’s intent: Jack would recover b/c brother wanted him to.
o Slayer’s statute/rules: Jack wouldn’t recover because felonious and intentional and don’t look to decedent’s intent.
§ Even if Jack found not guilty of mercy killing, Jack could still lose inheritance under slayer statute
§ Trier of fact in civil proceeding can find that Jack guilty by preponderance of evidence
§ Not as high burden of proof
· Under Ford, do you think mother would want Pearl to be able to recover?
o Probably not even though Pearl was insane (stabbed repeatedly and buried in backyard)
o So in this case, slayer rule didn’t effectuate what decedent would have wanted
o Shows struggle between deterrence and testator’s intent
o UPC Slayer Statute
§ UPC contains the most comprehensive slayer statute
§ UPC 2-803: Effect of homicide on intestate succession, wills, trusts, joint assets, life insurance, beneficiary de

another lawyer
o Representing Husband and Wife:
§ Eva goes to lawyer to draft will and trust. Lawyer has represented husband in another matter. Lawyer thus tells husband to get a different attorney. H says no, do what his wife wants. What should lawyer do?
· Court felt that lawyer had discharged his duty by informing H of potential conflict and getting his permission
· However, minority felt that lawyer should have pushed harder.
§ Potentially relevant model rules of professional responsibility:
· MR 1.6 Duty of confidentiality
o No disclosure unless client consent, EXCEPT those impliedly authorized for representation and A) to prevent criminal act likely to cause death or serious bodily injury, and B) in defense of claim against lawyer by client arising out of representation
· MR 1.7 Concurrent COI
o A) shall not represent client if representation of that client will be directly adverse to another client UNLESS 1) lawyer reasonably believes rep. would affect relationship with other client and each client consent after consultation
o B) lawyer shall not represent client if he will be materially limited by his responsibilities to another client, responsibilities to a third person or his own interest UNLESS 1) lawyer reasonably believes representation will not be adversely affected and 2) client consults after consultation
§ No one argues that a lawyer should routinely refuse to represent H and W when both seek estate planning advice
· Many lawyers who do represent both require H and W to sign engagement letters which deal explicitly with potential COI (CA requires such letters)
· Generally, H and W’s interest coincide and a single lawyer is able to create an estate plan for couple better and more cheaply than two separate lawyers
o Privity of Contract: Barcelo v. Elliott
§ Beneficiaries of trust D atty drafted are suing D for improperly setting up. Court refuses to impose duty of care between P and D
· Therefore, atty retained by testator or settlor to draft a will or trust owes no professional duty of care to persons named as beneficiaries under will or trust
§ Rationale:Even though a majority of states provide at least intended beneficiaries a COA, greater good is served by preserving the bright-line privity rule which denies a COA to all beneficiaries whom the atty didn’t represent
· No privity between beneficiaries and attorney so no fiduciary duty
· Estate has no reason to bring a claim because it wasn’t harmed, the grandchildren were
§ Why doesn’t TX want to hold the attorney liable here?
· Because of possibility for lots of suits from any beneficiary and problems of proof as to what they were allegedly supposed to receive
· Also felt that the fault could be because of intentions of testator
§ If GC had been able to recover, would the children have to return their assets?
· Probably not because GC want damages from attorney
· Not seeking to have the documents effectively enforced
· Shows a potential for a windfall for estate because getting to double assets by recovering from attorney
§ Majority of other states have relaxed the privity barrier in the estate planning context
· Two views (of Majority):
o Broad: Any person claiming to be an intended beneficiary has a COA
§ Would adopt the broad rule because:
· FS of harm is present
· Allowing to sue would provide accountability and thus incentive for estates lawyers in planning
· Broad wouldn’t open floodgates to unlimited class of plaintiffs
o Limited: Only those beneficiaries specifically identified in an invalid will or trust
§ Good: Lets cases in court because less chance of fraud if listed in will and estates lawyers are subject to same standard of care as attorneys generally
§ Bad: Doesn’t let in everyone that might have a valid claim but not listed in the will because of mistake
§ Applying two views:
· (1) No residuary clause. Rice has a letter indicating that will is supposed to leave it residuary of dissent. Rice not named.
o Broad: Could still bring suit as letter would be enough to show that they were an intended beneficiary but not name because of a defect
o Limited: Couldn’t bring suit because not specifically named in the document
· (2) Same as above but Rice has not letter, only oral testimony