DECEDENT'S ESTATES AND TRUSTS
Professor Richard J. Ross, Fall 2011
Chapter 1. Introduction________________________________________________________
Section A. The Power to Transmit Property at Death: Justifications and Limitations
1. The Right to Inherit and the Right to Convey
Jefferson, Jefferson’s Works
Locke, Two Treatises of Government
Hodel v. Irving
· The complete abolition of the rights of an owner to dispose of property rights is a taking without just compensation, violating the owner’s rights guaranteed under the Fifth Amendment.
2. The Policy of Passing Wealth at Death
Brittain, Inheritance and the Inequality of Material Wealth
Halbach, An Introduction to Death, Taxes and Family Property
Bentham, The Theory of Legislation
Oliver, Shapiro, and Press, “Them That’s Got Shall Get”: Inheritance and Achievement in Wealth Accumulation
Ascher, Curtailing Inherited Wealth
Kristol, Taxes, Poverty, and Equality
Note: Inheritance in the Erstwhile Soviet Union
Blum and Kalven, The Uneasy Case for Progressive Taxation
Langbein, The Twentieth-Century Revolution in Family Wealth Transmission
3. The Problem of the Dead Hand
Restatement (Third) of Property: Wills and Other Donative Transfers §10.1
Shapira v. Union National Bank
· A testator may validly impose a restraint on the religion of the spouse of a beneficiary as a condition precedent to inheriting under the will.
Note: Incentive Trusts and the Dead Hand
· An incentive trust is a trust that conditions disbursement on something. In Shapira, receipt of the plaintiff's take was conditioned on him marrying a woman of a particular faith.
· Incentive trusts are wholly lawful, provided the condition is reasonable under the circumstances and provided the conditions do not offend sound public policy. In Shapira, the probability of dating women of the particular faith was sufficiently high and did not offend sound public policy.
Note: Destruction of Property at Death
· On the one hand, we want to honor the property interests of individuals in accordance with the theory that a society's total wealth is maximized when each individual is permitted to decide how to use their property.
· On the other hand, when property is ordered to be destroyed post-death, can it really be said that the same types of positive and negative incentives seen pre-death to maximize use are really still in play?
Section B. Transfer of the Decedent’s Estate
1. Probate and Nonprobate Property
a. Probate property is property passing through a will or through intestacy.
b. Nonprobate property is property passing through some other instrument.
· Joint tenancy property, both real and personal
· Life insurance
· Contracts with payable-on-death (POD) provisions
· Interests in trust
o Testamentary trusts are probated
o Inter vivos trusts are not probated
2. Administration of Probate Estates
a. The Functions of Probate
· Evidence of transfer of title (i.e., it clears title and makes property marketable again.
· Protects creditors by providing a procedure for payment of debts
· Distributes the decedent's property to those intended after the decedent's creditors are paid.
b. Probate Terminology and History
· A will devises real property to devisees
· A will bequeaths personal property to legatees
· In intestacy, real property descends to heirs
· In intestacy, personal property is distributed to next-of-kin
c. A Summary of Probate Procedure
1) Opening probate
· The will is probated (letters of administration sought) in the jurisdiction the decedent was domiciled at death.
· For real property in another state, ancillary jurisdiction must be sought.
· Common law approach: probating a will in common form meant that no one else needed to be notified of the proceedings, but that an interested party could file a caveat within a few years' window afterward.
· Common law approach: probating a will in solemn form meant that all interested parties were notified and a more involved process was followed.
2) Formal versus informal probate
· For UPC: Formal probate involves notice to all parties and a formal proceeding in which the judge supervises many aspects of the administrators' responsibilities. Formal probate can be costly and time-consuming. Formal probate orders are final if not appealed.
· For UPC: Informal probate still involves notice to parties, but normally after the property has been distributed by the administrator (creditors are notified from the beginning). Court supervision does not exist. Informal probate is the norm and default rule for UPC jurisdictions. However, an interested party can, at any time, submit a request for formal probate.
3) Barring creditors of the decedent
· Creditors have windows, that differ in size depending on jurisdiction, for filing a claim.
· Creditors may be notified by publication in a newspaper.
4) Closing the estate
· Creditors must be paid
· Titles must be cleared
· Taxes must be paid and tax returns audited and accepted by the tax authorities.
· Real estate or a sole proprietorship may have to be sold.
· Judicial approval must be given to clear the personal representative from liability.
d. The Costs of Probate
· Probate court fees
· Commission of the personal representative
o Percentage of the estate
o If family member, normally no commission
· Attorney's fees
· Appraiser's fees (optional)
· Guardian ad litem fees (optional)
e. Is Probate Necessary?
· Not really
o Nonprobate modes of transfer exist
o Some states permit summary administration for small estates
o Special provisions exist for transferring title of automobiles and other items.
o Increasingly probate is necessary only for very large estates or to clear title to real property.
· Problems on page 47.
f. Universal Successful
CHAPTER 2. Intestacy: An Estate Plan by Default_________________________________
Section A. The Basic Scheme
UPC §§ 2-101, 2-102, 2-103, 2-105
Note: The Meaning of Heirs and the Transfer of an Expectancy
· Heirs do not exist until the decedent is deceased.
· Not sure about the part on Transfer of an Expectancy
2. Share of Surviving Spouse
· The primary policy in designing an intestacy statute is to carry out
t common law, it is not possible for a decedent to disinherit an heir by stating so in a will. If anything were to enter intestacy, that heir could still inherit their share.
· The UPC permits a decedent to affirmatively disinherit an heir through the words of his will.
4. Shares of Ancestors and Collaterals
· Consanguinity table on page 93.
· In all jurisdictions, if a decedent dies with a spouse, descendents, or surviving parents, intestacy moves to the first-line collaterals (siblings).
· If there are no surviving first-line collaterals, some states move on up the line to second-line collaterals and so on (parentela). Other states employ a degree-of-relationship system, counting the number of steps from the decedent the claimant is in order to determine who should inherit. (See degrees of kinship represented in the consanguinity table on page 93.)
· Half the states have refused to recognize a degree-of-relationship system that looks beyond grandparents and their descendents.
· If there are no surviving grandparents (and/or grandparents' descendents), a few states (and the UPC 2008) will recognize stepchildren as a last resort.
· If there are no state-recognized heirs to take, the estate escheats to the state.
· Most states will not discriminate in their intestacy statutes between half-blood and whole-blood relatives.
Section B. Transfers to Children
1. Meaning of Children
· The UPC 2008 asks whether there is a parent-child relationship, and if so, the parent is a parent of the child and the child is the child of the parent for the purpose of intestate succession.
a. Adopted Children
Hall v. Valladingham
o An adopted child is no longer considered a child of either natural parent and loses on adoption all rights of inheritance from his natural parents.
Restatement (Third) of Property: Wills and Other Donative Transfers §2.5
· The UPC 2008 considers adopted children to be the children of the adoptive parents, thereby severing the succession ties between the child and the child's genetic parents (subject to a few exceptions; see § 2-119(b))
· Adult adoptions are generally allowed. However, a few states disallow the adoption of one's lover (New York).
· Today, adopted children are generally treated as the children/issue/heirs/descendents of their adoptive parents for purposes of third-party bequests.
Minary v. Citizens Fidelity Bank & Trust Co.
o One who adopts a spouse or other adult cannot thereby make the adoptee an heir to an estate created by an existing testamentary instrument executed by an ancestor of the adopter.