Trusts and Estates Outline

Trusts and Estates

Antognini

Spring 2015

I. Introduction and Freedom of Disposition

A. The Power to Transmit Property at Death

1) Definitions to know

a. Income: Compensation of services

b. Wealth: What you own—total amount of your assets

c. Freedom of Disposition: You can do what you want with your money in life and in death

i. Courts facilitate rather than regulate the will of the testator

ii. You can’t leave something that goes against the law—there are limits to disposition

iii. In American law, freedom of disposition at death is subject only to wealth transfer, taxation, and a handful of policy limitations [Organized around the donor’s freedom of disposition, not the donee’s]

d. Succession: Property moving from generation to generation and to the living from the dead [social process]

2) Public Policy Debate: Some argue the power to transfer wealth at death is natural and good in that it encourages one to save and promotes family values, while others argue the power to transfer wealth at death perpetuates economic disparity and unfairly rewards those lucky enough to have been born to rich parents.

3) Right v. Privilege: A decedent has the right to dispose of his or her property at death. Although the states have broad authority to regulate the process, the states cannot completely abrogate the right.

a. No right to receive property—right to dispose of it

4) Freedom of Disposition and the Dead Hand

a. Dead Hand Control: A decedent may condition a beneficiary’s gift on the beneficiary behaving in a certain manner as long as the condition does not violate public policy

b. Validity: Dead hand control is generally upheld unless the condition constitutes a complete restraint on marriage, requires a beneficiary to practice a certain religion, encourages divorce or family strife, or directs the destruction of property.

c. Shapira v. Union National Bank (Ohio Com. Pl 1974).

i. P must marry Jewish woman within 7 years or his inheritance goes to Israel.

1. No mention of divorce or remarriage

ii. P challenged the constitutionality of the will (14th Due Process right to marry) and that it violated public policy (Limit on testamentary freedom)

1. Public policy in favor of marriage—couldn’t make gift conditional on P staying single

2. Partial restraint is allowed if reasonable and not contrary to public policy

iii. 2 Principles:

1. Public policy difficult to determine

2. Testator’s have a lot of power in determining what to do with their money.

iv. Court honored the will

d. Hypos:

i. Give you $10,000 unless you join Catholic Church, then nothing: Void. Restriction

ii. $10 million if you never marry: Void. Against public policy

iii. $10 million if you marry opposite sex (and you’re a homosexual): Depends on the state’s public policy [argument that it encourages sham marriages which courts do not like]

iv. $10 million if you marry a non-latina: Not allowed under Shapira’s reasoningàif African American said son must marry African-American women—it would be allowed.

v. Spouse not allowed to remarry: depends on the motive behind it. If just against it—NO. If because next spouse could support—OK

vi. Will says to destroy property: Not allowed—don’t want waste.

B. The Mechanics of Succession—Who gets the decedent’s property?

1) Probate Property—passes pursuant to the terms of the decedent’s will;

a. Not a mandatory process, and not the norm—but it is useful especially for things in dispute/inconsistencies in the will

i. Check on executor

ii. Make sure property properly goes to the right people [clear title]

iii. Creditors taken care of—put on notice [SoL triggered]

1. Non-claim statutes—bars 2 different types of claims) Typically shorter time period than normal

2. Have priority over beneficiaries

iv. Useful when 3rd parties are involved [like banks and other financial institutions]

v. May not be required for small estates [each state has its own rule]

b. Terminology

i. Testate: Will

ii. Intestate: No will

iii. Heir/Next of kin: Person who receives real property from someone who dies intestate

iv. Devisee: Receives real property from person who dies testate

v. Bequeath: Personal property

-Devisee used for both now…

c. Examples:

i. Real Property and intestate: descend to heirs

ii. Personal Property and intestate: Distribute to next-of-kin

iii. Real Property and testate: Devised to devisees

iv. Personal Property and testate: Bequeathed to legatees