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Trusts and Estates
University of Georgia School of Law
Hall, Matthew I.

TRUSTS AND ESTATES HALL SPRING 2017

INTRODUCTION

Power to Transmit Property at Death – Justifications and Limitations

Testamentary freedom: individual choice vs. public policy

Generally, if condition in will is found to be void as against PP, court will invalidate condition and still allow gift

Waste, racial restrictions, sham marriages – generally not accepted

Ex. of waste – D leaves valuable art collection to P as long as P burns it all

Shapira – dad left $ to sons if married Jewish girls w/in 7 years of his death – court finds enforceable – state didn’t create condition, dad did

Introduction to Probate Process

Probate (default) – courts in every state that deal with property at person’s death

Purposes of probate: divvy up stuff after death, provides clear evidence of title, protects creditors (have certain amount of time to make claims for payment)
You generally don’t need probate process if you don’t need help with creditors (there aren’t possible creditors who need notice) or getting clear title

Then it would be intestate, other heirs can sign saying they will not contest (or don’t sign & contest it)
Wait to distribute property until it’s settled who gets what & what process

Non-probate succession can be: trusts, life insurance, transferrable account at bank, joint tenancy (real estate)

INTESTACY

Basic Scheme

Intro

Property passes in absence of a will, determined by state statute

Governing state = place of T’s residence, EXCEPT in real estate in other states (then that state law governs)

Scope – applies to all probate property not disposed of by will/trust
Rules

Requirement of survival – inheritor must succeed T to get property
Most statutes say spouse comes first and gets the most
A person who takes intestate has standing to challenge a will

Reasons to know about intestate succession

A lot of people die intestate
Many people die with wills that only cover parts of property (rest of property covered by statute)
Need to know statutory interpretation

Spouses

no

ALL

Is D survived by a parent?

Share? UPC 2-102 – generally gets everything (entire estate of no descendants or parents)

Is the decedent survived by one or more descendants?

Does D have surviving descendants who are NOT spouse’s?

Does spouse have descendants who are NOT D’s?

yes

no

300K + 3/4

150K + 1/2

225K + 1/2

yes

yes

yes

no

no

< >Spouses get 1/3 no matter what (that’s the least they can get)If no spouse, heirs shall be relatives in nearest degree (kids=1st, parents=2nd, siblings=3rd, then grandparents & GPs’ descendants)If no one in these categories, “escheats” to stateLaughing heirs – distant relatives who gets your estate because no closer ascertainable heirs (may be more efficient to escheat here)Most states bend over backwards to find someone to inherit“Surviving” Spouse, Child, etc.“Survive” – defined by statuteMost wills account for this (generally 30-60 days) – these statutes apply for wills as well as intestacySurvival matters when determining who the estate will go to Ex. if H&W both in plane crash – who takes: H or W’s heirs – if no kids, parentsNo problem if heirs are same people (like common descendants)3 options if simultaneous death (when each is 1st heir, die at roughly same time, secondary heirs not same people)CL rule – “split second rule” – if you live even a moment longer, you inheritUniform Simultaneous Death Act – if time of death debatable, it’s a tie, so treat each as having predeceased the other (can discover who died first)This is the elevated evidence standard120 hour rule – must show beneficiary lived 5 days longer or court will treat spouse as predeceasing Janus – cyanide laced Tylenol kills couple (no kids) – life insurance – did one of spouses live longer than other? Both basically dead, but H pronounced dead earlier – W’s pupil dilated, EEG showed activity, heart still pumping (on life support) – held that only W’s family gets life insurance (not fair since both dead)Only official death counts, not brain deathDescendantsKids are 2nd to take after spouse Simplest if all potential heirs are still alive (2 kids – both get ½)“Representation” – Generally if child dies, we want child’s children to get portionLaw provides for this in every state

D —– S

< >TypesTraditional English Per Stirpes – splits at kids’ generationTreat each line separately (vert. equality > horiz.)Modern Per Stirpes – splits at first living generationPer Capita at Each Generation (UPC) – equally near, equally dearOnly one that treats GKs equally

Eng. PS

Modern PS

UPC

1

1/6

1/6

2/9

2

1/6

1/6

2/9

3

1/3

1/3

2/9

Modern PS

Eng. PS

UPC

If 3 dies

1

1/4

1/6

1/4

1/4

2

3

1/4

1/3

1/4

4

1/4

1/3

1/4

1/4

X

1/8

1/12

1/8

1/6

Y

1/8

1/12

1/8

ifts – then have sum & divide by number of kidsPossible credit to kids with lifetime gifts or could opt outMore complicated if not liquid – like a home, could auctionAt what point in time do we value the advancement? Time of gift or presentMost people think it should be valued at time gift given – GA rule (unless contrary intent written)Probably best to specify when it is to be valuedWhat if receiver of gift predeceased decedent? Should gifts to kids count against grandkids’ inheritance? (Yes, fair to other heirs; No, GK may never see this $)UPC – share of GKs not diminished as advancementGA law – charges amount against GKsNeither is right – should just make a will to make it clearManaging a Minor’s PropertyGuardianshipAppoint a guardian for kids to handle $ until kids are 18 [If the will doesn’t specify, kids will get $ at 18 (not good idea)]Like a substitute parent who makes all decisions parent would make for kids Court will defer to a will’s naming of guardianConsiders BIC & has ability to choose Expensive and inflexibleConservatorshipPerson appointed by court, lower cost than guardianshipCustodianship TrusteeshipBest option – a lot smoother, easier, less transaction costs, much more flexible (can go any length of time)Leave a trust to your kids with a responsible adult as the trustee (could set age at 25 – when they get $)Trustee has authority to make decisions on dealing with moneyBars to SuccessionHomicide (Slayer Rule)Rule – Some courts say if A kills the testator, he cannot take from T’s estate – Other courts say they must follow statute & cannot judicially legislate (it’s legislature’s job to create a slayer rule)Some states distinguish between type of killing – murder vs. voluntary MS vs. involuntary MSProof varies – some require criminal conviction, some use another standard (like clear & convincing)Mahoney – W convicted of manslaughter of H – court held rule: legal title passes to slayer but equity holds him to be a constructive trustee for the heirs/next of kin of decedentOther options – hands off (no jud. legis.) or treat killer as having predeceased the D & distribute estate accordingly What about killing testator in self-defense (or T was abuser)?Some states say if you cause the death, you cannot receive, others are less strict and might allow inheritance in case of self-defenseDisclaimerAllows someone not predeceased to opt out of inheritance moneyPretends they predeceased the testatorReasons to disclaimMostly used because of tax consequences – disclaiming means you don’t have to pay gift taxes Parents want kids to have that money (like if parents have ample savings and kids are just starting out)Avoiding creditors = totally validEx. C is insolvent – if C got the money, all of it would immediately go to creditors – C would use disclaimer, avoids taking titleDoesn’t work for federal gov’t or IRS – they’ll come after whoever got that money