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Trusts and Estates
University of North Carolina School of Law
Orth, John V.

Trusts and Estates
Fall 2013
Roughly half the population dies intestate
Takes time
Expensive to get a lawyer
Don’t want to think about their own mortality
Basic Vocabulary
Heir: Taker through intestate succession
Can only be ID’d at death (so living ppl don’t have them)
If living, someone who will theoretically take is an “heir apparent”
General rule is that this “expectancy” is a not a property interest, and is therefore not transferable.
Devisee: Person who takes by will (not an “heir”)
Partial Intestacy: Will only covers part of the estate
Rest of the estate is passed through intestacy provisions of state
Share of Spouse
Policy is to carry out probable intent of average decedent, and studies show that when there are no children from a prior marriage, most studies show people want to leave everything to their spouse.
Uniform Probate Code 2-102:
The entire estate if:
No issue or parents
All decedent’s issue are also issue of surviving spouse and surviving spouse has no other issue surviving decedent
RATIONALE: Most spouses trust the surviving spouse to determine how to best use the property for the benefit of the surviving issue, as opposed to giving the surviving issue their shares outright and incurring administrative hassles if any of them are minors.
First $300,000 plus 75% of remaining balance if no issue but has a surviving parent.
First $225000 plus 50% of remaining balance if all descendant’s issue are descendants of surviving spouse but surviving spouse has other kids.
RATIONALE: Fears about “Cinderella” evil step-parent situations where surviving spouse supports herself and her other kids with the property instead of supporting the decedent’s kids with it.
First $150,000 plus 50% of any balance if one or more of the decedent’s issue are not descendents of the surviving spouse.
Note that the UPC gives a much larger share to the surviving spouse than do most state statutes.
Also note that the UPC does not factor in issue of decedent’s parents (decedent’s siblings) when determining spouse’s share.
Survival Requirements: How long must the taker survive the decedent in simultaneous death situations? What is the burden of proof?
Common Law Rule: Had to show by preponderance of the evidence that survived spouse by just a millisecond.
Janus v. Tarasewicz (IL 1985) p. 80 Husband and wife each tike cyanide-laced Tylenol. Both collapse. Husband arguably loses all vital signs on ride to hospital, while wife arguably still had pulse and blood pressure when got to hospital and was put on respirator for two days. Wife was primary beneficiary of husband’s life insurance policy. Husband’s mother was contingent beneficiary. Insurance Co. awards to wife’s estate because she technically “survived” husband, and therefore her parents, and husband’s parents challenge. Applying IL version of Uniform Simultaneous Death Act (USDA), court found there was sufficient evidence to support finding that wife outlived husband.
Both the USDA and the UPC were amended following this case so that taked must prove by “clear and convincing evidence” that he or she survived the decedent by 120 hours (5 days).
NC follows this rule
Policy is to aim to do what decedent would have wanted in cases like Janus (i.e. provide for support of parents instead of in-laws if spouse is no longer around).
If the claimant fails to meet the survival requirement, they are treated like they predeceased the spouse for purposes of intestate succession.
Shares of Descendants/Issue:
If there is no surviving spouse, or there is a surviving spouse who does not take all, remaining property goes to decedent’s issue equally.
Issue of predeceased children take in their parents’ place by representation
If a person takes, his or her issue do not
Absent adoption, only blood relatives qualify as heirs (no in-laws)
So, for example, if C predeceases decedent, and is survived by his wife, his wife does not take and C’s children take by representation.
Calculating Shares of Decedent’s Issue
English/Classical/Strict Per Stirpes: Treat each line separately
Divide decedent’s property at the first generation, even if everyone in that generation is dead.
One share is given to each party that is alive, and one share given to each party who is dead but survived by issue.
So E gets B’s 1/2 share, F & G’s issue split C’s 1/2 share, so I and J get 1/8 and K gets 1/4.
Modern/American Per Stirpes: Treat each line equally beginning at the closest living generation.
Divide equally at first generation where there is a live taker
E’s generation here
One share given to each party who is alive, one share given to each party who is dead with surviving issue.
So E gets a 1/3 share, K gets G’s 1/3 share, and I and J split F’s 1/3 share (1/6 each)
Per Capita at Each Generation (1990 UPC):
Make the first division at first generation where there is a live taker
The shares of the deceased at line of distribution are dropped and split equally among eligible takers at next generation.
So E gets 1/3, remaining 2/3 are dropped and pooled and split equally at next generation.
So I,J, and K each take a 1/3 share of the remaining 2/3 (2/9 each).
UPC 2-103(b): Include stepchildren only if there is nobody else to take (p. 74)
Who Qualifies as Descedants/Issue
To qualify as a descendant, must establish a parent-child relationship
If a child is born and parents are married, parent-child relationship exists
An individual is also the child of their genetic parents in most situations, unless they have been adopted or abandoned.
If abandoned, child can inherit from parent, but parent can’t inherit from child.
This relationship allows child to inherit from parents and parents to inherit from child.
Some jurisdictions require parents and their relatives to hold the child out as a part of the family before they can inherit from them, even if parents are married.
Adoption: The general rule is that the adopting parents step into the shoes of the natural parents, and the parent-child relationship is established between the adoptive parents and the child. AND ADOPTION SEVERS PARENT-CHILD RELATIONSHIP WITH NATURAL PARENTS.
So can’t “double inherit” from adoptive parents and natural parents and natural parents can’t inherit from child given up for adoption
Step-parent adoption exception: The UPC and many jurisdictions modify this rule so that:
Adoption does not sever the parent-child relationship between the adopted child and parent married to adopting step-parent. (p. 101 N3)
Adoption establishes parent-child relationship b/w adopted child and adopting step-parent (p. 101 N3)
Adoption does not completely sever parent-child relationship b/w child and natural parent not married to adopting step parent. (p. 101 N3)
Parent can’t inherit from child now, but child can still inherit from that natural parent.
RATIONALE: Parent consenting to that adoption constitutes their waiving of the right to inherit from that child. But the child doesn’t have to consent, and had no say in the matter, so should still be able to inherit from natural parent.
BUT SEE Hall v. Vallandingham (MD 1988) p. 97: Ear dies, leaving spouse and 4 kids. Wife remarries and husband adopts kids. 25 years later Earl’s bro dies and kids want their share. Applied the general adoption rule to step-parent adoptions, holding that absent proof of legislative intent, adopted children should be no better off than non-adopted children and should only have two parents through whom they can inherit.
Adult Adoption: As a general rule, adopted adults are treated the same as adopted children for inheritance purposes.
BUT SEE Minary v. Citizens Fidelity Bank & Trust Co. (KY 1967) p. 103 Testator’s will devised her estate in trust to husband and three children for life, and upon death of last surviving beneficiary, distribute to testator’s then-surviving heirs according to descent and distribution laws then in force. Her first child died with no children. Her second child did with two children. The third child adopted his wife and then died with no other issue.Even though the adoption technically fell within statute, because the child’s wife was adopted solely to take from remote ancestor’s estate, the adoption thwarted the ancestor’s intent and should not be permitted.
NC: Adult adoption is permitted, but cannot adopt spouse.
Equitable Adoption: Applies where natural parents transfer custody of their child to a couple/individual who promises to adopt but doesn’t complete necessary paperwork.
Agreement between natural parents and adoptive parents to adopt the child
Natural parents fully perform by giving up custody of child
Child fully performs by moving in and living with adoptive parents
Adoptive parents partially perform and take the child in and raise as their own. (Partial b/c they don’t adopt)
Adoptive parents die intestate
O’Neal v. Wilkes (GA 1994) p. 109 Young girl born out of wedlock. Mother dies and father doesn’t recognize her. Aunt gives her to couple at age 12, who raise her as their own but never actually adopt her. 30 years later the parents die intestate. Very technical application of equitable adoption. Denied claim because aunt who gave her to couple lacked legal custody and authority to enter the agreement.
Dissent: Should remember the equitable nature of the remedy, and the doctrine therefore should apply whenever it is clear that the child thought they were adopted.
Note: equitable adoption does not allow parents to take from child b/c didn’t fully perform on agreement by formalizing adoption.
Equitable adoption will at times allow foster children to inherit.
Nonmarital Children:
At common law, were considered “children of no one” and could not inherit from anyone.
MODERN TREND/UPC 2-117: Child has parent-child relationship with both genetic parents regardless of their marital status.
Can automatically inherit through mother
Inheriting through father generally requires proof (p. 116):
Acknowledgement of the child by the father during life
Subsequent marriage of parents
Clear and convincing proof in paternity adjudication after death or during lifetime
Posthumously Born Children: Conceived while father is alive, but born after father’s death.
If parents are married and child is born within 280 days of father’s death, there is rebuttable presumption that the child is the decedent’s child.
If born after the 280 days, the burden is on the child to prove they are the deceased’s child. (p. 115)
Posthumously Conceived Children: Conceived through medical technology after the parent’s death.
Since death severs a marriage, such children are technically non-marital children.
Woodward v. Commissioner of Social Security (MA 2002) p. 118 Husband w/ leukemia “banked” sperm, concerned that leukemia would leave him sterile. Husband died, and two years after death, wife conceived and gave birth to wtin girls. Applied for surviving child and surviving spouse Social Security benefits. SSA uses definition of “child” as used for intestacy purposes under state law. MA Supreme Ct. said posthumously conceived children may enjoy inheritance rights of “

e the property for the benefit of the minor, as the custodian deems appropriate.
Guided by the Uniform Transfers to Minors Act
No duty to account to the court–only to the minor upon turning 21.
More efficient than guardianship, but best for small or moderate sized gifts.
Trusts: Terms of the trust control the scope of trustee’s power over the property, ability to use principal/income for child’s benefit, trustee’s duty to account, and when trust is to be terminated and property distributed.
Most flexible way to manage property, but has high up-front costs in setting up (pay lawyer) and high administrative costs (trustee’s fees).
Most appropriate for large gifts.
Both trusts and custodianship require written instruments expressly opting for that arrangement. Absent such a writing, the default is either guardianship or custodianship, depending on jurisdiction. HOW DOES INTESTACY FIT INTO TRUSTS AND CUSTODIANSHIP?
Bars to Succession
Three approaches to homicide where party entitled to take kills decedent
Decedent’s property passes to the killer because the statutory probate scheme so instructs.
Killer is barred from taking because equity demands no one profit from wrongdoing
Legal title to decedent’s property passes to the killer, but constructive trust imposed to prevent unjust enrichment, and court orders property be distributed to next in line to take.
In re Estate of Mahoney (VT 1966) p. 145 Wife tried for husband’s murder and convicted of manslaughter. Husband died intestate and wife claimed share. Vermont did not have a homicide probate statute. Court ruled it would be inequitable to permit wife to profit from wrongdoing and adopted constructive trust approach. Told parents to apply for chancery court determination of whether constructive trust should be imposed based on whether wife’s manslaughter involved intent to kill (voluntary or involuntary in most cases, though VT didn’t distinguish).
General rule is that to bar succession, killing must be intentional and felonious.
For manslaughter, need to distinguish between voluntary and involuntary.
General rule is that killer is treated as having predeceased the victim.
Keeps people from aiding their side of the family tree by killing somebody.
EX: O has 2 kids, A and B. A has one kid, B is deceased with two kids. A kills O. Under modern rule, if not treated as dead, A’s branch would get half share, and B’s branch would get one share. If A treated as dead, All three kids get 1/3 share…so don’t want to let A get his branch 1/2 share instead of 1/3 by killing parent.
Some states bar killer’s issue from taking altogether. P. 150
Criminal conviction has res judicata effect on the issue, but acquittal is not dispositive b/c burden of proof in civil case is only preponderance of the evidence, not beyond a reasonable doubt.
Disclaimer: While acceptance of a gift is generally presumed, disclaimer is way to decline acceptance of a gift. (Third element of a valid gift).
If a party disclaims, general rule is to treat them as predeceasing the deceased.
Redistribute property
EX: If kids want all to go to mother and state decrees that mother only gets 50% of estate.
Avoid gift tax consequences
Avoid creditors
As a general rule, creditors can reach any transferable property debtor holds, so can transfer so to keep property in family, etc.
BUT if Federal Government is the creditor (tax, Medicaid reimbursements, etc) the property is often subject to government’s claim. (See Drye p. 155)
Intro to the Power to Transmit Property at Death
Congress cannot completely abrogate one’s power to pass one’s property at death.
Hodel v. Irving (US 1987) p 3 Escheat provision of Indian Land Consolidation Act, where interests smaller than 2% escheated to the tribe, was an Unconstitutional “taking.”
And the government can also increase the property rights that pass as part of a person’s estate.
Shaw Family Archives v. CMG Worldwide (NY 2007) p. 10 Marilyn Monroe’s estate sued to get ppl from printing t-shirts with her photo on it, after states began statutorily recognizing a “right of publicity.” Court ruled that publicity rights were not in existence at time of death, and the will can devise only property owned by testator at time of deat.
BUT NOTE that CA amended its statutes to expressly provide that publicity rights are devisable at death, even by general residuary clauses in a will executed before a right is recognized.