Wills, Trusts, & Estates: Hall Spring 2016
Freedom of Disposition: Justifications & Limitations (Pg 1-21):
Justification:
Society places high value on private prop & this is least objectionable arrangement for dealing with prop.
Traditional view, testator created the wealth & they have the natural right to dispose of it as they please.
Would be costly & difficult to curtail
Alternatives to freedom of disposition:
Forced Succession to Spouse, Children, Dependent or state if decedent has none
Confiscation by the State: all of the decedent’s prop goes to the state upon death.
Problem of the Dead Hand:
Hobhouse: Dead cannot Foresee upcoming events & therefore shouldn’t be able to influence conduct after death. Living Rights > Dead Rights.
RST §10.1: Donor’s intention determines the meaning of a donative doc & is given effect to the maximum extent allowed by law.
i. Controlling consideration in determining the meaning of doc is the donor’s intent.
ii. Rationale: freedom of disposition prop owner should have nearly unrestricted right to dispose of their prop as they please.
1. RST 3 Prop: “Main function of the law in this field is to facilitate rather than regulate… the freedom is only curtailed if the disposition is made to achieve a purpose that is prohibited or restricted by overriding rule of law”
2. Note: Generally CT's won't enforce if will encourages waste, e.x. Bulldoze house b/c it would be funny.
Shapira: π inheritance from father was conditional on π marrying a Jewish woman with Jewish parents. π claimed violation of public policy & enforcement by a state judicial proceeding of a restraint on marriage is unconstitutional via 14th amend/Loving.
i. CT: Here not being asked to enforce a restriction upon π right to marry, but to enforce a restriction on π inheritance, π still free to marry whomever he wants.
ii. RoL: A Condition on an inheritance requiring the beneficiary to marry w/in a particular faith is a Reasonable Restriction.
1. (Un)Reasonable in light of public policy? Look to:
a. Time period, Ease to comply with condition, Demographics of the surrounding area, & Purpose of condition.
b. “Latitude of Choice” the > amount of choice the beneficiary is given, > chance the condition is reasonable in light of pub policy.
Categorically Contrary to PP: Spouse never remarries, requires divorce, requires to commit crime/tort. See note 4 on pg 12.
INTESTACY: AN ESTATE PLAN BY DEFAULT:
1. Introduction to Probate Process (pg. 41-51 skim)
Probate property passes through the probate system in accordance with the decedent’s will or by intestacy
Probate: proceeding in CT to handle a decedent’s assets and debts.
i. Purposes:
1. Provides evidence of transfer of title to new owners
2. Protects creditors by providing procedure for payment
3. Distributes the decedent’s property to those intended after creditors are paid
ii. Process: complex; expensive (fees + spends estate’s asset)
1. Personal representative (named in will—executor; unnamed or intestate—administrator) is appointed to oversee the winding up of decedent’s affairs. Fiduciary; owed fees out of the estate.
2. Can be initiated by anyone who can take under the will OR under the intestacy statute.
iii. Serves as a backup function catching property not disposed of by will; property overlooked in nonprobate modes of transfers.
Nonprobate property passes pursuant to the terms of the instrument in question to the transferees identified in the instrument without passing through probate system. Most property is transferred this way.
Ex: Inter vivos trusts; life insurance policies; joint tenancy property; pay-on-death/transfer-on-death contracts (provisions found in many bank, pension and retirement accounts under which account custodian distributes property upon decedent’s death to named beneficiary)
Problem 1: Aaron Green died 3 wks ago. Will devises Grant’s entire estate to “my wife Martha, if she survives me; otherwise to my children in equal shares.” The will names wife as executor. Family consists of 2 adult sons, several grandchildren. Property is as follows: car (15K), furniture (20K), mutual fund ($10K), and life insurance policy naming wife as beneficiary (50K). Green also had a pension plan naming Martha for survivor’s benefits. He has no real property and his wife and him live in rented apartment. His debts are utility bills ($80), visa card ($600), local store ($250), funeral bill ($8000) and lot ($600). Mrs. Green wants your advice.
(a) She has a lot of nonprobate assets (LI, mutual fund, pension). The only things probate here are the car and furniture.
i. Does she need probate to get access? No because already in her possession. So access not a problem
ii. What about creditors? Here not such a problem because small debts. What about small business issues? Debts she may not know about so a non-claim might be appealing.
iii. Estate taxes? Not an issue.
iv. Other tax issues? IRS will tax.
v. Title Issues? Does she need probate to get proof of title? Not to furniture. Some jdx’s might allow car title to pass. Maybe with mutual fund, but not likely. At this point. Probate not needed b/c joint checking and pensions are in her name, life insurance in her name.
vi. If a savings account, there maybe an issue as to CT’s help. Sometimes state statute will allow access OR you may need probate.
(b) Now, what if intestate and statute says ½ to kids ½ to wife. Most famiies can still work this out w/o probate. What if minor children involved? In probate, good to have guardian appointed for kids-but downside is the cost. There is a risk she opens herself up to suit by kids if not guardian through probate process. But how big a risk?
(c) What if real estate involved? Now things change. To get title, some states might have small estate provisions but perhaps would have to go through probate. It depends on the jdx and whether alternate means allowed to establish title w/o probate.
(d) What if Green comes to you and say he has no will? Does he need one? Depends on if he wants al to W or to be split. Will is a catch-all if anything overlooked.
i. Never a good idea to tell someone not to get a will b/c circumstances are uncertain. If he wants W to get it all→execute a will
Intestacy: state statutes that control what happens when a person dies intestate—without a will. See below.
5. Intestacy: Default Estate Plan (pg. 63—72; 75—91)
Majoritarian default rules for property succession (probable intent)
ASK:
i. 1. Who gets what? Who is first in line?
1. Requirement of survival, always
2. UPC and GA: ask is there is a spouse?
UPC § 2-101 Intestate Estate
i. (a) any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this code, except as modified by the decedent’s will.
ii. (b) A decedent by will may expressly exclude or limit the right of an individual or class to succeed to property of the decedent passing by intestate succession. If that individual or member of that class survives the decedent, the share of the decedent’s estate to which that individual or class would have succeeded passes as if that individual or each member of that class had dislaimed his or her intestate share.
UPC § 2-102 Share of Spouse: The intestate share of a decedent’s surviving spouse is:
i. (1) the entire estate
nephew taking, per stirpes, the share that niece or nephew would have taken if in life;
6. (6) Grandparents of the decedent are in the 4th degree, and those who survive the decedent shall share the estate equally
7. (7) Uncles & aunts of the decedent are in the 5th degree, and those who survive the decedent shall share the estate equally; with the children of any deceased aunt or uncle taking, per stirpes, the share that unle or aunt would have taken if in life; provided however, that subject to 53-1-20(f)(1), if no uncle or aunt of the decedent survives the decedent, the first cousins who survive the decedent shall share of the estate equally; and
8. (8) The more remote degrees of kinship shall be determined by counting the number of steps in the chain from the relative to the closest common ancestor of the relative and decedent and the number of steps in the chain from the common ancestor to the decedent. The sum of the steps in the two chains shall be the degree of kinship, and the surviving relatives of the lowest sum shall be in the nearest degree and shall share the estate equally (“degree-of-relationship system”)
UPC § 2-105 No Taker: If there is no taker under the provisions of this Article, the intestate estate passes to the state.
h. Intestate Distribution Scheme: Spouse→issue→parents→issue of parents→g-parents/issue of g-parents→next of kin→state
Surviving Spouse’s Share: S always comes first, but variations depending on whether decedent is survived by other family members
i. UPC 2-102
1. No Complications:
a. 1(A) S gets everything if no descendent or parent survives or 1(B) all of decedent’s children and all S’s children are the same
2. Certain Complications
a. (2) 300k + 75% of the rest of the estate if no descendent survives, but a parent of decedent survives
b. (3) 225k + 50% of the rest of the estate if surviving spouse has kids outside of marriage
c. (4) 150k + 50% of the rest of the estate if decedent had kids outside of marriage
3. 4 possible endpoints
Spouse gets everything
Spouse gets 300k + ¾
Spouse gets 225k + ½
Spouse gets 150k + ½
4. EX: E and F have one daughter, G. E dies, F remarries. F’s new S has 2 kids of her own. F dies leaving estate of 500k:
a. 2-202(4): F’s S gets 325, G gets 175
i. 150 + (500-150)( x .5) = 325
5. Policy: typical intestate decedent would want to provide financial security to S; S will pass any remainder to couple’s children.
Ga. Code 53-2-1
i. 1. Is there a surviving S?
ii. 2. Are there surviving descendants?
1. No→S gets ALL
2. Yes→S shares EQUALLY w/ children, but in no event shall S get less than 1/3
iii. 3. If no surviving descendants, goes to nearest kin
1. 53-2-1(2—5)
iv. NOTE: GA less protective of S than UPC. S shares equally w/ children ensuring kids get something and in some cases the majority (if multiple)
Qualifying as a Spouse
