Wills & Trusts
Wills, Trusts, and Estates by Dukeminier, Sitkoff,& Lindgren – Prof. Lyons — Spring 2012
Chapter 1: Introduction to Estate Planning
Inheritance and its Limitation
Taking Property without Just Compensation
i) The right to transfer property at death is a property right
ii) The state cannot completely eliminate the power transfer of property at death. Hodel v. Irvin
iii) If the state completely removes the ability to transfer property at death, it constitutes a taking that requires just compensation. Hodel.
b) Hodel v. Irving (1987)
i) Designated heirs and devisees of 3 deceased members of Oglala Sioux Tribe brought action seeking declaration that section of Indian Land Consolidation Act was unconstitutional as authorizing a seizure of property w/out “just compensation”. Gov. set up a system holding Indian lands in trust Gov. set up a statute that said that if the Native Americans subdivided the ownership of a parcel of property into too many interests of ownership, the property would escheat to the tribe.
ii) Indian Land Consolidation Act, p. 5 — Statute applies to: Interests descended by intestacy OR devise
iii) Held (1) Πs had standing to challenge provision, and (2) provision effected a “taking” of Πs' decedents' property without just compensation.
c) The Constitution itself does not grant the right to transfer or receive property
i) The state may limit the power to transfer property
ii) The right to receive property is a creature of statute
Restraints on Marriage
iii) Total restraints on marriage are void as against public policy
(1) Promote marriage
(2) Promote reproduction
(3) Society benefits from marriages
iv) Partial restraints must be reasonable
(1) Limiting the amount of inheritance if child gets married is reasonable (ex. Married daughter gets less; single daughter gets more; rationale that married daughter does not need more is a reasonable restriction)
(2) If a will requires that a beneficiary marry within a certain religion, courts have held that such restriction is reasonable.
Introduction to the Problem of the Dead Hand
v) Shapira v. Union National Bank (1974) – A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable.
(1) David Shapira, M.D., testator, conditioned his son, Daniel Jacob Shapira, Π, inheritance under his will upon Π being married to, or marrying within 7 years of testator’s death, a Jewish girl w/2 Jewish parents. Π filed suit alleging that such a condition was unconstitutional based upon the premise that the right to marry is protected by the 14 Amendment
(2) Held. Upholding and enforcing the provisions of the decedent’s will conditioning the bequests to his sons upon their marrying Jewish girls does not offend the Constitution of Ohio or the United States.
(a) The conditions contained in decedent’s will are reasonable restrictions. His unmistakable testamentary plan was for his possessions to be used to encourage the preservation of the Jewish faith.
(b) The condition did not pressure Π into marriage by the reward of money b/c the 7 year time limit is a reasonable grace period, which would give Π ample time for reflection and fulfillment of the condition without constraint or oppression.
(3) Discussion. It is a fundamental rule of law in Ohio that a testator may legally disinherit his children. This seems to demonstrate that from a constitutional standpoint, a testator may restrict a child’s inheritance.
(4) 3d Restatement of Property § 10.1, p. 27 – Donor's Intention Determines the Meaning of a Donative Document and is Given Effect to the Maximum Extent Allowed by Law. — “The controlling consideration in determining the meaning of a donative document is the donor's intention. The donor’s intention is given effect to the maximum extent allowed by law.”
(5) General Rule — Conditional gifts are valid unless the condition falls within one of the well-recognized exceptions
Invalid conditions of restraint
vi) Absolute restraints on marriage
1. See Shapira (partial restraints are NOT invalid)
vii) Religion requirement
viii) Encouraging separation or divorce
ix) Promoting family strife
x) Property destruction directive
SECTION B: TRANSFER OF THE DECEDENT'S ESTATE
d) The Probate Process
i) Probate v. Non-probate
(1) Probate requires court proceedings b/f the beneficiaries are entitled to take
(a) Probate property
(i) property that passes under the decedent’s will or by intestacy
(2) In non-probate transfers, the beneficiary is immediately entitled to take without going through probate
(i) passes under an instrument other than a will
(ii) Examples: (None of these things have anything to do w/a will)
1. Joint tenancy w/Right of Survivorship (JTRoS), Life Insurance, Ks w/payable on death provisions
2. Retirement plans, IRA accounts, annuities- You name beneficiaries w/these, and beneficiaries receive property when you die
3. Payable on death (POD) K (bank accounts, securities, management firms – Merrill Lynch)
a. allows you to designate a beneficiary for a bank account
4. Life Interest Remainder
5. TOD (Transfer on Death)- you can sometimes do this w/a piece of real estate
(iii)Non-probate transfers are much more common than probate transfers—90% of property transfers
e) Functions of Probate
i) Transfer Wealth
ii) Clear Title
iii) Protection from Creditors; paying taxes
iv) Fulfilling the testamentary intent of the decedent (*arguably the most important function*)
v) Executor: Personal representative named in a will
vi) Administrator: personal representative appointed by the court
vii) Succession: beneficial entitlement to the property of the decedent
viii) Heir: person entitled by statute to the land of the intestate
(1) Expected: takes by inheritance
(2) Prospective: may inherit but may be excluded
(a) Heir presumptive: will inherit if the intestate dies immediately but who will be excluded if other relatives of closer relationship are born
(b) Heir apparent: one who is certain to inherit unless excluded by a valid will
ix) Ascendant or Ancestor: person related to an intestate or to a claimant to an intestate share in the ascending lineal line
x) Descendant: person related to an intestate or to a claimant to an intestate share in the descending lineal line
xi) Collateral: relative who traces relationship to an intestate through a common ancestor but who is not in his lineal line of ascent or descent
xii) Affinity: relationship by marriage
xiii) Consanguinity: relationship by blood
xiv) Escheat: property escheats to the state if no relatives of the intestate are entitled to take
xv) Devise: clause directing the disposition of real property in a will
xvi) Devisee: person who is named to take real property
xvii) Legacy: clause in a will directing the disposition of money
xviii) Bequest: clause directing the disposition of personal property other than money
xix)Res or Corpus: property to which the trustee is responsible to administer in a trust
f) Avoiding Probate
i) Take title in joint tenancy
ii) Create an intervivos trust
iii) Designate a payable-on-death beneficiary in a life insurance K or other K
iv) Where the amount is small, states may permit heirs to avoid probate
v) Why would people want to avoid probate? – Avoid time consuming and expensive court system, lawyers, etc.
g) Uniform Probate Code (UPC) – 1969
i) most states have adopted some version of the UPC
ii) Nebraska adopted the 1969 version of UPC
(1) There is a 1990 version that Nebraska hasn’t adopted yet
iii) Opening probate
(1) Determining jurisdiction
(2) Notifying creditors by publication in newspaper for a period of time
iv) Supervising the Representative's Actions
(1) Court supervision
(2) Approval of inventory and appraisal
(3) Payment of debts
(5) Options on real estate
(6) Borrowing funds
(7) Other fees payable (attorneys etc.)
v) Closing the estate
(1) Representative is under a fiduciary duty to the estate until the court grants discharge
h) Formal vs. Informal Probate
i) Informal Probate
(1) intended to simplify the probate process
(2) instead of having a court/judge take care of this, an independent administrator is appointed to manage the estate and probate process
(a) ex parte proceeding without judge, hearing, etc.
(3) File application w/will to the court
(a) Present will to court and appoint representative
(i) Court registrar looks at the will and it is presumed valid
(b) Letter of personal representative
(i) Person administrating the state is called a personal representative
(c) Judge never sees it
(d) Each state will have a designated court system that is designated as the probate court
(i) In Nebraska, county courts have exclusive jurisdiction over probate
1. You file in the county in which the decedent was domiciled (NOT necessarily the county the decedent died)
(i) File no sooner than 5 days after death and no later than 3 years after death
1. After 3 years, there is a conclusive presumption of intestacy. If nobody steps forward state will presume there’s no will.
a. This is a 1990 UPC provision NOT in Nebraska
i. NE therefore doesn’t have this rule
ii. You can still probate after 3 years in NE, except for creditors—they’re out of luck
ii) Formal probate is different
(1) Hearing is held where people attend and can contest the will and the judge decides whether to accept the will into probate
(a) Over 90 % of wills in NE are handled on an informal probate basis
iii) Priority system for registrar to use to determine who the personal representative is
(1) First priority: the person designated in the will; will usually contains a prioritized list of persons appointed to be the personal representative
iv) Court issues a letter of personal representative; This gives PR proof of authority to act on behalf of the decedent’s property
v) Fee- PR is entitled to a fee; But often waives fee b/c they’re family, and in many cases the PR is getting the property anyway
vi) Bond- PR may be required to post a bond as insurance that PR won’t steal money; However
bout it. In January 1985, appellant called respondent requesting a copy of the will her father had signed the morning of October 24, 1984 and w/decedent’s permission, respondent discussed the first will w/appellant in detail. Respondent explained decedent’s intent to provide for appellant as he had for his son when and if she became capable of handling a dealership and respondent made notations to this effect on the copy of the will he discussed w/appellant. Appellant claims respondent told her the will she was shown was in actuality decedents last will and testament and appellant believed the handwritten notes were part of the will. Respondent denies making that express statement but admits that he never told her the will he discussed w/appellant had been revoked. In January 1986 decedent was admitted to the hospital for various health problems and while decedent was ill, appellant and her brother decided appellant would care for decedent while he temporarily ran the Anderson Dealership. Appellant questioned her brother’s financial dealing while he was running the Anderson Dealership and consulted an Anderson law firm regarding her concerns. Respondent was granted summary judgment on the cause of action for breach of fiduciary duty. Appellant appeals.
(3) Held. Reversed in part and affirmed in part. Summary judgment was improperly granted b/c there was a factual issue presented as to whether the attorney breached his fiduciary duty to Appellant. Although the attorney represented the decedent and not the appellant, he did have an on-going attorney/client relationship w/Appellant and there’s evidence that Appellant had a special confidence in him. Although the attorney owed no duty to disclose the existence of decedent’s second will, he owed Appellant the duty to deal w/her in good faith and not actively misrepresent the first will. The grant of summary judgment is reversed on the cause of action for vicarious liability against Law Firm b/c there’s no evidence he was acting in his capacity as an accountant on the occasion in question since he was giving legal advice and not rendering accounting services.
(4) Discussion. An attorney/client relationship is by nature a fiduciary one.
Conflicts Of Interest
i) A v B – A firm that represents a husband and wife may only disclose to the wife the fact that the husband had fathered another child but may not disclose the identity of the other woman or the child.
(1) Brief Fact Summary. Hill Wallack, a new mid-size New Jersey law firm represented a respondent, B, a husband and his wife, W for estate planning services. The respondent had a child by another woman who was also represented by the same firm. The respondent sued Hill Wallack to prevent them from disclosure
(2) The estate planning section of Hill Wallack, a New mid-size New Jersey law firm, represented both husband, B, respondent, and wife, W. Both executed mutual wills transfer all the property to the survivor w/the reasonable expectation that each would provide for their children. Meanwhile, the family law section of Hill Wallack mistakenly took on another client Π, A, a woman who sued B for paternity. The existence of the additional child was vital to the Δ’s and W’s estate plan. The firm withdrew from representation in the paternity suit and ordered the Δ to tell his wife W of his other child or the firm would notify Π. The Δ sued Hill Wallack to prevent disclosure.
(3) Held. Where a firm represents a husband and wife and another woman who has a child by the husband, the firm may disclose to the wife that another child exists, however the firm may not disclose the identity of the other woman or the child.
(4) Discussion. The Court will allow the firm to tell the wife that her husband has a child by another woman b/c it is crucial to her needs in her won estate planning. However, it must protect the confidentiality of its client, the other woman, b/c it also owes her a duty b/c they had formerly represented her.
ii) A lawyer should not prepare a will unless the lawyer is competent to do so
iii) Lawyers owe fiduciary duties to their clients
iv) Lawyers also owe a duty of care to foreseeable third party beneficiaries of wills
v) Claims against lawyers may arise out of K or negligence