Wills & Trusts—Fall 2013
Chapter 1: Introduction: Freedom of Disposition
A. The Power to Transfer Property at Death
a. Freedom of Disposition and the Dead Hand
i. Dead hand control:
1. Thomas Jefferson: dead hand control should not exist, use it while you’re alive and pass it on to next generation
2. William Blackstone: The right to pass property at death is not a natural right, but a civil right and state can limit them as it sees fit
ii. American law of succession strongly embraces the principle of freedom of disposition and donor’s intent is paramount
iii. Shapira v. Union National Bank (1974)
1. A gift conditioned upon the beneficiary marrying within a particular religious class or faith is reasonable
2. David Shapira, M.D., testator, conditioned his son, Daniel Jacob Shapira , inheritance under his will upon P being married to, or marrying within 7 years of testator’s death, a Jewish girl w/2 Jewish parents. P filed suit alleging that such a condition was unconstitutional based upon the premise that the right to marry is protected by the 14th Amendment, contrary to public policy, and unenforceable because of its unreasonableness
3. 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 P into marriage by the reward of money b/c the 7 year time limit is a reasonable grace period, which would give P ample time for reflection and fulfillment of the condition without constraint or oppression.
4. 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
5. 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 Lawà”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.”
6. General Ruleà Conditional gifts are valid unless the condition falls within one of the well-recognized exceptions
iv. Invalid Conditions of restraint
1. Absolute restraints on marriage
a. See Shapira (partial restraints are NOT invalid)
2. Religion Requirement
3. Encouraging separation or divorce
4. Promoting family strife
5. Property destruction directive
b. Is Freedom of Disposition a Constitutional Imperative?
i. Hodel v. Irving (1987):
1. The States’, and where appropriate, the United States, had broad authority to adjust the rules governing the descent and devise of property without implicating the guarantees of the Just Compensation Clause.
2. Appellees filed suit alleging that the escheat provision of the Indian Land Consolidation Act resulted in a taking of their property without just compensation which was in violation of the 5th Amendment
3. Held: The original version of the escheat provision of the Indian Land Consolidation act of 1983 constituted a taking of appellees’ decedents’ property without just compensation.
a. Since the escheatable rights are not de minimis, nor does the availability of inter vivos transfer obviate the need for descent and devise, a total abrogation of these rights cannot be upheld.
b. The regulation virtually amounts to the abrogation of the right to pass on a certain type of property-a small undivided interest-to one’s heirs.
4. Discussion: In this case, both descent and devise of a particular class of property are abolished and thus may be a taking.
B. Mechanics of Succession
a. Probate and Nonprobate Property:
i. Probate property: Property that passes through probate under the decedent’s will or by intestacy.
ii. Nonprobate property: Property that passes outside of private by way of a will substitute.
1. Nonprobate transfer examples:
a. Inter Vivos Trust
b. Life Insurance
c. Pay-on-death (POD) or Transfer-on-Death (TOD) Contracts
d. Joint Tenancy
b. Probate Terminology
i. Appointment of personal representative to oversee the winding up of the decedent’s affairs
1. Fiduciary who collects an inventories the property of the decedent
2. Manages and protects the property during the administration of the estate
3. Processes the claims of creditors and files federal and state tax returns
4. Distributes the property to those entitled
a. Decedent dies testate and in her will names the person who is to execute the will and administer the probate estate
b. Court will name administrator if named executor is unable or unwilling to serve of if the decedent dies intestate
c. Probate Administration
i. Probate performs 3 core functions:
1. Provides evidence of transfer of title to the new owners, making the property marketable again
2. Protects creditors by providing a procedure for payment of the decedent’s debts
3. Distributes the decedent’s property to those intended after the decedent’s creditors are paid
1. Opening administration
2. Offering of the will, if there is one, for probate (allowance)
3. Formal administration versus informal administration (supervised versus unsupervised)
4. Collecting the decedent’s property
5. Paying the decedent’s bills
a. Statutory obligation
6. Distributing property to beneficiaries
7. Accounting and closing
a. Signifies to the court the estate is not closing
b. Way by which the personal representative is discharged of duties
iii. Wealth Transfer Tax Issues
1. Although not everything in which a decedent has an interest at the time of death is part of the decedent’s estate for purposes of state law administration, state and/or federal death taxes may attach to things not subject to administration
a. JTWROS Property
i. IRC Section 2040 provides that a decedent’s “gross estate” for federal estate tax purposes include join tenancy
b. Life Insurance
i. Nebraska: If life insurance is payable to a person other than a personal representative of the decedent’s estate life insurance benefits are not subject to Nebraska Inheritance Tax
c. Retirement Plans
i. Generally view any amount of death benefit transferred at death as subject to tax
iv. Problems on pg. 50:
C. Professional Responsibility
a. Duties to Intended Beneficiaries
i. Simpson v. Calivas: A duty runs from a drafting attorney to an intended beneficiary, and as such, an identified beneficiary has third party beneficiary status
1. Facts: P appeals from a directed verdict, grant of summary judgment, and dismissal of his claims based on negligence and breach of K against the lawyer who drafted his father’s will.
2. Robert H. Simpson Sr., decedent, executed a will that was drafted by his lawyer, D, in which testator left all real estate to his son, Robert H. Simpson, Jr., P, except for a life estate in “our homestead located at Piscataquis Road, Dover, New Hampshire,” which was left to decedent’s second wife P’s stepmother. P and his stepmother filed a joint petition in Strafford County Probate Court seeking a determination of whether the term “homestead” referred to all the decedent’s real property on Piscataquis Road (including a house, one hundred acres of land and other buildings.)
3. The probate court found the term ‘homestead” ambiguous and thus admitted extrinsic evidence of the decedent’s surrounding circumstances.
4. The court did not admit notes taken by Defendant during consultations with decedent that read “house to wife as a life estate remainder to son, Robert H. Simpson, Jr. …
b. Conflicts of Interest
i. A v. B (1999): 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. Facts: Hill Wallace, a new mid-size Jew 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 Wallace to prevent them from disclosure
2. Held: Where a firm represents a husband and wife that 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.
3. 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 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. Professional Responsibility
1. A lawyer should not prepare a will unless the lawyer is competent to do so
2. Lawyers also owe fiduciary duties to their clients
3. Lawyers also owe
trusts, deeds, or contract of insurance wherein provision has been made for distribution of property different from the provisions of sections 30-121 to 30-128
b. Authority to draft over the statutes
3. Janus v. Taraasewicz: Survivorship is a fact that must be proven by a preponderance of the evidence by the party’s whose claim depends on survivorship.
a. Facts: Plaintiff, Husband’s mother, appeals from a declaratory judgment wherein the trial court found there was sufficient evidence to conclude that the primary beneficiary (wife) under the insured’s life insurance policy, survived the insured, and therefore was entitled to the proceeds of the life insurance policy.
b. Held: The record clearly established that the treating physicians’ diagnoses’ of death with respect to Stanley and Theresa Janus were made in accordance with the usual and customary standards of medical practice. It was not necessary to determine by how long Theresa survived Stanley. After viewing the record in its entirety, the trial court’s finding of sufficient evidence of Theresa’s survivorship was not against the manifest weight of the evidence
c. Discussion: IN Illinois, if the title to property depends on the priority of death and there’s no sufficient evidence that the persons have died otherwise than simultaneously and there are no other provisions in testamentary or other governing instruments for distribution of the property, the property of each person shall be disposed of as if he had survived.
i. Neb. Rev. Stat. §30-2303: Share of heirs other than surviving spouse.
ii. “Issue” or “Descendants”
1. In all states, any property that does not pass to the surviving spouse passes first to the decedent’s surviving “Descendants” (UPC)
2. Only if the decedent leaves no surviving “descendants” (UPC) or issue do collateral relatives (brother, sister, nieces, nephews, etc.) or ancestors (lineal ascendants) take
3. In all states, if there are no statutory takers, a decedent’s property “escheats” to the state UPC §2-105
iii. General Rules:
1. The threshold requirement for taking property from a decedent is that a potential taker must “survive” the decedent
2. “Consanguinity”: Relationship by blood (lineal and collateral relatives)
3. “Affinity”: Relationship by marriage
iv. Competing Systems of Representation
1. English Per Stirpes
a. Typical family tree outline
b. Vertical equalityàeach line of the descent treated equality
c. Divide the decedent’s estate at the generational level
2. Modern Per Stirpes
a. Each line of descendent treated equally beginning at the first generation with a living taker
b. Starts division at first generation where there is at least one person living
c. Early version of the UPC adopted this system
d. A decedent’s property is divided at the first generation in which there are survivors
e. Example: Mother died, no surviving spouse. Three children, all deceased. Each child had two children. Mother’s estate is divided into 6 equal shares
f. Neb UPC: Neb. Rev. Stat. §30-2303(1): The Part of the intestate estate not passing to the surviving spouse under §30-2302 or the entire intestate estate if there is no surviving spouse, passes as follows: (1) to the issue of the decedent; if they are all of the same degree of kinship to the decedent they take equally, but if of unequal degree, then those of more remote degree take by representation
3. 1990 UPC
a. Horizontal equalityàeach taker at each generation treated equally (“Equally near, equally dear”)
b. A decedent’s property is divided at the first generation in which there are survivors, then redivided at subsequent generations so each person at each generation gets an equal share
c. UPC 2-103 pg. 68
i. Anything that the surviving spouse doesn’t take will go to the descendants by representation