Decedents’ Estates and Trusts Outline

Decedents’ Estates and Trusts

Ross

Spring 2013

Section 1: Power to Transmit Property at Death: Justifications & Limitations

Policy of Passing Wealth at Death

Basic Principles (Goals of Trusts/Estates Law)

1. Protection of the family

a. Favoritism for spouse and children

b. Interpretative principles favoring families

2. Promote speed and certainty in the transmission of wealth

a. Favor the use of standardized instruments (certain documents)

b. More that the structures are standardized, the faster the transmission occurs

3. Fairness among claimants to estates

a. A gives Blackacre to X

b. A tells Y he will make trust of Blackacre for her

i. Will is written; trust is oral

c. Creditor or family?? à Another tension area

4. Favor freedom of disposition (power of testator to do what he or she wants to do with property)

a. Testator loathes spouse and wants to disinherit the spouse

b. But law says protection of the family (surviving spouse) trumps goal of freedom of disposition

5. Favor free alienability of property

a. Disfavors tying up property for a long period of time

b. Free alienability = beneficiaries and freedom to what it wants with property

c. Usually conflicts with freedom of disposition

d. Dead Hand Control = Dead person trying to control uses of property many generations into the future (one or two generations OK, more than that RAP comes in)

i. Dead Hand should not be able to control property indefinitely into the future

Tensions in Interpretations of Trusts/Estates Law

1. The scope of evidence problem:

a. On one hand, we want the right result by admitting as much relevant evidence as possible (want information to achieve the right result)

b. On the other side, we want the testator’s intent by

2. Construction of donative instruments problem

a. Trouble arises because testator wasn’t clear, so must find intent of testator

b. Failure of intent/clarity of intent which makes this a dispute

c. What did the donor intend when the donor did not intent anything on the particular question being fought?

3. Long-Term Relationships

a. Implications of trusts/wills can be present for decades

b. What if testator makes will that makes sense in 2020, but the property uses set up increasingly does not make sense as time goes on?

i. Economy changes

ii. Someone becomes a millionaire

iii. Someone gets cancer

c. Trusts/wills set up statistic property uses

d. To what extent do you stay faithful to the intent?

e. To what extent do you change?

4. Challenge of the fiduciary?

a. Want to be fair to the beneficiaries (requires a lot of flexibility)

b. Want to be faithful to the creator of the trust’s vision

c. The more you stay true to the vision of the creator, the less flexibility you will have to be fair to the beneficiaries

PRO-Policy Reasons for Testator Choosing Where Property Goes

State-Supported Testation Power

1. People would, in the alternative, give away property though gifts or inter vivos

2. Provision of social services market

a. Encourages close familiar ties to keep strong unit to prevent disinheritance

b. Prospective of inheritance will make some fraction of spouses/children more attentive and less in need of social services from the state

c. However, this encourages feigning affection to maintain social services

3. Encourage hard work

a. People obtain satisfaction from giving property to whom they want

b. If no choice, less incentive to obtain property, less innovation and society would be poorer

c. People have incentive to work for grounds other than maximizing future wealth (some work interest)

d. Generation 1 might be hardworking, but Generation 2 might not be motivated to work

i. 3-Generation Model: (1) Makes fortune; (2) Public service; (3) Euro trash

e. Most population needs to work just to make ends meet, not concerned with what they leave through inheritance

4. Conspicuous consumption

a. If people couldn’t give property (or state determined where property went), then people would be tempted to use up all property

i. Grand mansion instead of nice house

ii. Vacation to Vegas

iii. Buy a yacht

b. Less value for the economy

c. Unsavory moral argument

5. Relative “earning”

a. Why does a person accumulate a lot of property during life?

i. Family helps create an environment for the person to thrive, thus the relatives can earn the property in a colloquial sense

b. If we think that spouse/siblings helped you, then want a mandatory distribution system would better achieve to make sure they are compensated

6. Consistent with a system of private property

CON-Policy Reasons for Testator Choosing Where Property Goes

1. Perpetuates economic disparity

2. Unearned windfall to those to just happen to have wealthy relatives

3. Unearned wealth results in powers/privileges to those that are undeserved

4. Denies equal opportunity to all children

REBUTTAL-Policy Reasons for Testator Choosing Where Property Goes

1. Arguable that inter vivos gifts (health, education, culture and connections) account for more of the disparity in opportunities and wealth than inherited wealth

Uniform Probate Code

· Promulgated in 1969

· All states have been influenced by pieces of the UPC (1/3 have adopted it in whole)

· 1990 UPC was revised substantially for three key reasons:

1. US has become a multiple-marriage country (divorce rate close