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Trusts and Estates
University of Iowa School of Law
Gallanis, Thomas P.

Gallanis, Trust and Estates, Fall 2013
Note: This outline includes all in class problems with detailed answers
I)       Definitions
a)      Intestate: Dying without a will
b)      Testate: Dying with a valid will. Person who died is Testator or Testatrix
c)      Partially Intestate: Person who died with will that disposes only some of her property
d)     Devise UPC §1-201: Testamentary disposition of real or personal property (p. 8)
e)      Probate: Legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will
i)        Probate Performs 3 Essential Functions:
(1)   Title Clearing – makes property marketable again
(2)   Protects Creditors – pay debt of decedent 1st and then remainder gets passed on
(a)    Even though most law recognizes that in will substitutes, creditors still take precedent over beneficiaries, probate is still much more favorable to creditors
(3)   This is because probate is very centralized and official
(a)    Distribution – distribute the remaining property according to testator’s intent
f)       Non-Probate: Property that passes outside of the will either because of no will, will substitute (ex: trust), or because of invalid will
i)        Examples: Life insurance, pension accounts, joint accounts, revocable trusts
ii)      Some want to avoid probate because it’s expensive, delays, and annoying
g)      Intestate Succession: If there is no will or there’s an invalid will, any property not distributed passes through intestate succession according to the state’s laws
i)        GOALS: mirror testamentary intent; protect surviving family; efficient distribution
h)     Problem Chapter 1 Pg 8
i)        Of the following assets which would be subject to probate if G dies first survived by A?
(1)   Car: Title in G; savings account: title in G; Pass inside probate b/c no other mechanism that allows it to pass outside
(2)   Checking account: joint title in G and A;  passes outside; b/c mechanism is right of survivorship
(3)   Home: Title in G and A as joints tenants and Cert. of Dep: title in G and A; both of these pass outside of probate since G does not have total control when he dies; Impure Will Substitutes
(a)    A pure will substitute would savings bonds, pension plans, life insurance
ii)      What if A predeceases G?
(1)   Nothing will pass outside probate b/c must have a non-probate mechanism and beneficiary must outlive the testator
 
 
II)    Donative Freedom
a)      Freedom of Transferability: The US uses common law so we can choose how to transfer our property at death; civil law countries tell you where wealth must go      
i)        Estate tax: limits us from donating exclusively w/out restrictions
b)      Irving Trust Co. v. Day (Donative Freedom: 1985)
i)        States can regulate the disposition of assets (like giving wife an elective share) but the regulation cannot amount to a taking
(1)   Constitutional right: nothing forbids states from limiting, conditioning, or abolishing testamentary powers
c)      Hodel v Irving (Donative Freedom: 1987)
i)        Indian Land Consolidation Act deemed Unconstitutional
(1)   Act forbid Indians from passing trivial portions of land to heirs
ii)      SC rules that core methods of transfer interests at death should be protected
d)     Arguments FOR DF
i)        Promotes charity
ii)      Rewards hardwork/effort
iii)    Transferors know best/make right decisions of wealth transfer
e)      Arguments AGAINST DF
i)        Allows perpetuation of inequality
ii)      Promotes misallocation
iii)    Bad incentives—stifles otivation/innovation
iv)    No natural right
f)       ALTERNATIVES
i)        Confiscation
ii)      Fixed rule—primogeniture
iii)    Liquidation after death
iv)    Highest bidder
g)      In General—power of state to restrict is HIGH but NOT absolute
i)        Not practical
h)      Reach of Dead Hand
i)        Shapira v Union National Bank (1974)
(1)   Father leaves $$ to son contingent on his marrying a Jewish Girl of Jewish Parentage.  This is a perfect example of the Dead Hand.
(2)   Son makes arguments of grounds of (i) state interference with € right to marry; and (ii) public policy argument as against state interest in having citizens marry and procreate.
(3)   Court upholds will stating that:
(a)    Not Unconstitutional where state does not step in between two willing actors.
(b)   Not against Pub Policy where there is a reasonable chance to marry
(i)     Will deemed a partial restraint
(ii)   RST 2d of Prop § 6.2 (p. 17 in tb): if it was TOTAL restraint then it would be Un€
1.      If marriage was unlikely to occur than Will was invalid—if he was gay
(c)    Here, plenty of Jewish girls in area; likewise 7 yrs in courts opinion is sufficient to get married
III) Intestate Succession
a)      UPC §1-202: Share of Spouse (p. 22)
b)      UPC §1-203: Share of Heirs other than Surviving Spouse (p. 25)
c)      Primogeniture: Oldest son used to inherit the property from the dead dad and the mother and other kids were out of luck
d)     Ancestors: Father, Grandfather
e)      Descendants: Daughter, Grand daughter
f)       Collateral Heirs: Aunts, Uncles, Cousins
g)      Rights of Survivorship:
i)        UPC §2-104: When H & W died almost at the same time, families would fight over who died first to get the property; now there is 120 hour survival requirement (p. 26)
h)     Problem Chapter 2 pg 31 (Spouse)
i)        D marries S; have 3 children: A, B, C
(1)   Under UPC who are the heirs? Cannot have heirs while alive. S is an heir apparent—has an expectancy NOT a legal property interest
(2)   D dies; survived by S, A, B, and C. Under UPC who are heirs?
(a)   UPC § 1-201(20): defines heir; all are heirs (p. 9)
(b)   UPC § 2-102: Provides S standing to contest will that  provides all to kids
(3)   D’s net probate estate: $350,000
(a)    Survived by S and three joint kids A, B, C
(i)     UPC § 2-102(B)(1): S gets ALL
(b)   S is not A’s mother
(i)     UPC § 2-102(B)(4): S gets $250,000  (first $150,000 and ½ of remaining $200,000); the balance of $100,000 is then split three ways
(b)   S had an additional 3 kids not w/ D
(i)      UPC § 2-102(B)(3): S gets $287,500 (first $225,000 and ½ of remaining $135,000); the balance of $62,500 is then split 3 ways)
ii)      WHY does S get more in 3c than 3b? We reasonably believe that S will take care of decedents kids; in 3b larger amount passes to kids since S has less obligation to A
b)      Intestate Succession Systems:
i)        Strict Per-Stirpes: Start dividing the shares equally at the children’s level even if all children are dead
ii)      Modified Per-Stirpes: Don’t start breaking it up into equal shares until you’re at a level in which there is at least 1 living person in it (skip to GC if children are dead)
iii)    Former UPC: Pay very specific attention to the primary share guy (the 1st generation of children). Each time a 1st generation primary share guy dies, he is treated as a decedent himself.
(1)   So, if A has 3 kids named B, C, and D, and B dies, then B’s 1/3rd share is treated like B is a decedent and is split among the 1st generation below him to have at least 1 living member of that group. So if B has 3 kids, since B is now a decedent basically, his 1/3rd gets split between them 3. If C also died and had only 1 kid, C is now a separate decedent and his 1/3rd share goes straight to C’s 1 kid.
iv)    Current UPC: Divide shares equally at each generation level and ignore everything else; so all children get equal shares to each other, GCs get equal shares, etc—see Problem Ch. 2 p. 40(iv) below
c)      Guardians/Conservators: they handle assets passed to minors/incapacitated heirs
d)     Parentelic System:
i)        Spouse always gets a share
ii)      1st Parentelic – decedent’s own surviving descendants
iii)    2nd Parentelic – decedent’s parents and then their descendants
iv)    3rd

tial mis-direction then the attempt to escape tax liability was ok: Nothing wrong if law allows it
(5)   Partial Disclaimers are allowed: taking $600,000 was ok
ii)      Chapter 2 Problem p. 52 (Qualified Disclaimer)
(2)   G dies intestate survived by son A and 3 granddaughters X, Y, Z. X and Y are A’s kids. Z is child of predeceased son B. A disclaims all interest in G’s estate. If no disclaimer than A and Z would each gets ½ share. If the disclaimer provides the “estate” will devolve as if A predeceased G then then X, Y, and Z each get 1/3 share (best to advice A to disclaim o/wise her kids only get ¼ shares to Z’s ½ share); BUT if the disclaimer provides the “disclaimed interest” will devolve as if A predeceased G then A’s share is split three ways, X and Y each get 1/6 and Z gets the ½ and A’s other 1/6 (would NOT advice A to disclaim); UPC § 2-1106(b)(3)(C): under the UPC only X and Y would get A’s share, so X and Y get ¼ share and Z would get ½  p. 195
iii)    Releases and Assignments
(1)   Assumed heirs can release their expected interest back to the testator and can also assign the interest to a 3rd party
(a)   Release: given back to devisor; Assignment: given to a 3rd party
(b)   Under circumstances transaction and consideration MUST ne fair
iv)    Advancements and Related Doctrines §2-109 p. 30
(1)   Advancement: gift made before testator’s death, to a family member, which will reduce how much he’ll get intestate once the testator finally does die
(a)   This reducing effect insures that all the children receive assets equally
(2)   Chapter 2 Problem p. 55 (Advancements)
(a)   G paid for D to attend medical school. G died intestate survived by D and other daughter E.
(i)     Did G make an advancement to D? CL: all large gifts treated as advancements (p. 54 in tb);  UPC § 2-109: must be in writing SO NOT an advancement (keep intention forefront)
(b)   Assume G paid with check that stated advancement to my estate. Later G dies survived by only E and D’s son, X. UPC § 2-109(a) and (c): money treated as advancement if D survived; E gets ½ share and D would have gotten ½ share -$100,000, but under UPC § 2-109(c) X gets full ½ share; o/wise we are penalizing X who did not see the benefit of the $100,000 (see comment on p. 34)
(c)    Same facts as b, but G is survived by D and E and estate is worth $500,000. Who gets what? Hotchpot Method (p. 30): 1st find value of estate: $500,000 + $100,000 = $600,000; D gets $300,000 – $100,000 = $200,000 and E gets $300,000
v)      Negative Wills
(1)   Will that direct all or some assets to NOT go to someone
(2)   Waring v Loring (Mass SC 1982)
(a)   Will provisions failed in trust set forth by A; under statute then G receives 1/3 share as surviving spouse
(b)   However Will provides a clause that states all benefits were to be in lieu of her statutory rights in or to any part of the estates (thus the trust should all go to A’s estate)
(c)    CT rules that intestacy rights are NOT stator rights and she should collect
(d)   UPC § 2-101(b): will did not expressly exclude or limit G; p. 21
(i)     “statutory rights” ambiguous
(ii)   To avoid this should have had a clause that expressly defined what statutory rights