CHAPTER 1: INTRODUCTION TO WILLS, TRUSTS, AND ESTATES:
(1) THE POWER TO TRANSFER PROPERTY AT DEATH.
i. Pre-1540: Succession based on primogeniture.
ii. 1540 Statute of Wills: Established the ability to pass property via will.
iii. Key Thought: There is no inherent right to pass property onto your heirs.
b. American Common Law:
i. An individual has the right to dispose of their property at death. There is a general assumption (in the population as a whole) that it is one stick in the bundle of rights.
ii. States’ have the broad authority to regulate this right – but they cannot abrogate the right.
iii. Example: Hodel v. Irving (created federal protection for testamentary rights).
1. S: Federal law required land to escheat to the tribe.
2. H: Congress has the power to limit freedom of disposition (as it is a civil property right) but they can’t completely abrogate it. (Quasi-constitutional right to give away your property.)
iv. Hypo: Could the state say property over one million dollars may not pass by devise and descend but must be given to charity or government?
1. Possibly, early cases would say yes…but we don’t know the scope of Hodel v. Irving. Politicians won’t raise this idea because it would be very unpopular.
c. Modern Trends:
i. The modern trend is to increase opportunities to transfer wealth and/or provide forced for forced shares for children and spouses.
ii. Estate (Death Tax):
1. Congress has recently been reducing the tax.
2. Current plan -Ten year phasing out 2000-2010. At that point it goes back to old levels. Current tax operates at 34-47% used to be 85%.
(2) THEORY ON INHERITANCE:
a. Arguments in Favor of Inheritance:
i. The power to transfer wealth at death is natural and good in that it encourages one to save and promote family values
b. Arguments Against Inheritance:
i. The power to transfer wealth at death perpetuates economic disparity and unfairly rewards those lucky enough to have been born to rich parents.
c. Hypo (massive changes in inheritance):
i. Congress has a$500,000 exemption policy and above that a 100% estate tax. It is fairly well settled that this sort of policy ‘would’ work constitutionally.
1. Arguments in favor:
a. Raise revenue (decrease the national debt)
b. Inequality (the gap between wealthy – less wealthy – and the very poor.)
2. Arguments against:
a. Decreases incentive to be entrepreneurs
b. Still may not solve the underlying problem
c. Discourages financial responsibility
d. Discourages savings and investment
(3) DEAD HAND CONTROL:
a. “Dead Hand” Control Defined:
i. A decedent may condition a beneficiary’s gift on the beneficiary behaving in a certain manner as long as the condition DOESN’T
1. Constitutes a complete restraint on marriage
2. Require a beneficiary to practice a certain religion
3. Encourage divorce or family strive
4. Directs the destruction of property.
b. Example: Shapira v. Union National Bank: (Partial restraint on inheritance)
i. Son must marry Jewish woman in seven years. Held: Partial restraint on marriage valid. The court is merely enforcing a private restriction placed on
nerally the normal system.
2. Civil Law:
a. Intestate Succession, basically the next member of the family is in charge of taking care of the administration and only goes to the court if there is a legal issue or a controversy.
b. Similar to the European System
c. Now becoming an available option in some states.
d. Ancillary Administration:
i. When there is property in another state, there must be an ancillary property within the jurisdiction where the real property is located. There must be a court record to show where the property went to.
e. Reasons to Avoid Probate:
i. It is quite complicated.
ii. It delays the transfer of property (takes usually 12- 18 months)
iii. It is costly (lawyers, executors, etc.)
1. Iowa has a ceiling- it can only be ~2% of the gross estate for each on ordinary services. (administrator and lawyer)
iv. Publicity- probate is a public matter and it is all public record.
(5) ESTATE PLANNING.
a. Key Objectives: In advising a party about his or her estate plan, the key objectives that an estate planning attorney should keep in mind are
i. (1) honoring the party’s intent,
ii. (2) avoiding estate taxes, and
(3) avoiding probate.