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

Trusts and Estates
I.       Introduction – Themes (p. 1)
A.    Freedom of Testation:
                        1.      Definition: Functionally the right to disinherit your family, to determine the post- death disposition of your property instead of having it pass by universal default rules.
                        2.      Origin: 1540 Statute of Wills – Previously all property passed by primogeniture with significant incidents to the Lord.
                        3.      Concept: As one of the sticks in the bundle of property rights:
a.       A € protected right
i.        Hodel v Irving (US 1987 – p3): A complete abrogation of Indian’s right to pass property by devise or descent is Un€ as a taking.
·         Note: previous Irving case held that states may make laws changing the rules of inheritance and intestacy, Hodel says no abrogation.
b.      Positive law: due process
c.       Right belongs to testator, generally decedent (D), thus in Hodel, Π’s got standing by standing in shoes of Indian testators.
i.        It was not the right of the Indians to inherit for which they sued.
ii.      Rather the right of the Indians to dispose after death.
d.      If T can give property inter vivos, he should be able to do so post-mortem
e.       Why?
i.        Encourages productivity and saving inasmuch as we recognize a motive to provide for future generations.
ii.      Society supports taking care of kids so they will take care of you.
iii.    True Paternalism (father knows best \ state supports father).
                        4.      In Tension With Minimalist Approach (non-enforcement of testamentary restraints):
a.       The social investment in the Free Alienability of Land (and Personalty). Called the “Dead Hand Problem.”
i.        What if T would have new info that changes his mind
ii.      Cuts into individual freedom.
iii.    Mitigated by Rule against Perpetuities: Puts an effective limit on the dead hand of 100yrs or so.
b.      Formalism: if freedom of Testation is indeed important, than why make people jump through hoops. In other areas of law, (e.g. Ks) courts will enforce property rights and have moved away from forms.
c.       Social Investment in Family: why allow people to disinherit?
i.        Mitigated by Forced Succession Laws.
d.      Expensive Administrative Procedure (judges must use balancing tests, ascertain T’s intent, ensuring B’s are fulfilling conditions, etc.)
e.       Social cost: esp. free marketability and alienability of land
                        5.      Case: Shapira v Union National Bank
a.       Father leaves $$ to son contingent on his marrying a Jewish Girl of Jewish Parentage. This is a perfect example of the Dead Hand.
b.      Son makes arguments of grounds of (i) state interference with € right to marry; and (ii) public policy argument as against state interest in having citizens marry and procreate.
c.       Court upholds will stating that:
i.        Not Un€ where state does not step in between two willing actors.
ii.      Not against Pub Policy where there is a reasonable chance to marry
·         Here, plenty of Jewish girls in area
                        6.      Courts support FOT in most situations.
a.       Restraints on Marriage:
i.        Total restraints on marriage are always Struck Down.
ii.      Total restraints on 2d marriages are Upheld by ½ the states and Struck Down by the other ½. Judges tend to uphold so sometimes ß by statute.
iii.    Partial Restraints on Marriage: Upheld if:
·         Clear (i.e. what is a member in good standing); and
○       Appoint 3d party to determine standing, and this saves clarity always.
·         Reasonable: not really a total restraint masquerading as a partial one.
○       I.e. marry a Mormon if only 10 Mormons not OK.
b.      Religious Restraints (In General – EX: so long as he remains a member in good standing of the Church of England): Almost always upheld, unless divisive of families (i.e. raise your daughter in a faith not your own).
c.       Inducements to Divorce: Near universally Struck Down, Unless:
i.        Economic Motive for support of woman in case of divorce.
·         Question is factual one as to Intent of the testator
d.      Vague Restraints on Personal Habits: Upheld, Unless
i.        Too Vague: cured by 3rd party arbiter again
e.       Charitable Restraints: Upheld universally.
                        7.      Effects of Struck Down Wills
a.       Escheat to estate and pass by intestacy; OR
b.      Void only the clause in question and uphold the will
i.        Look to specific jurisdiction
c.       Savings Clause can overcome jurisdictional habit of total voiding of will.
B.     Economics of Succession:
                        1.      Historical changes:
a.       Land based economy à security based economy (negotiable instruments constitute wealth)
b.      Major investment in family Firm/Farm which pass at death à Major investments in Children’s human capital; which
c.       Occur during lifetime of Parents (non-saving during life as opposed to saving and passing by will).
                        2.      Social Changes
a.       Blended Families
b.      Access to Private Law: Gay Marriages and succession.
C.     K vs. Property Rights for Wills and, more particularly, Trusts
                        1.      Nature of the right determines its disposition in litigation, and appropriate doctrines and formalism to be applied by courts.
                        2.      Langbein: Billions in commercial trusts.
D.    Will Substitutes
                        1.      Why probate at all?
a.       Allows STATE to protect rights (intention) of decedent where he is “disabled” by death to enforce his own rights (like state protects children and incompetents by appointing a guardian ad litem)
b.      Also supports State goal of clearing any clouds on title.
c.       Protects creditors in an impartial forum.
                        2.      Why different regulatory regimes for Probate and Nonprobate?
E.     The Duty of the Lawyer
                        1.      To Whom: Simpson v Caliveras (NH 1994 – p59):
a.       Court finds Lawyer has duty to Beneficiary despite no privity:
i.        K theory: 3d Pty Beneficiary doctrine; or
ii.      Tort theory: as foreseeably injured party.
                        2.      Scope of Duty: Some states find it to express or disinherited B’s, others to any potential beneficiary. 
                        3.      Fiduciary Duty: Hotz v Minyard (SC 1991 – p66):
a.       Watch out when you are a “family” lawyer, you may have a fiduciary duty to a B and so be held to a higher STD, and thus be conflicted out of writing your client, T’s, will.
b.      Here, guy lied to daughter about existence of father’s will.
F.      Probate Courts
                        1.      Jurisdiction

but who proceeded under a good faith belief that he or she was indeed a legal spouse
b.      Most States and UPC give such putative spouses rights coextensive with those of spouses for the purposes of intestate secession.
                        2.      Pending Divorce:
a.       UPC says until divorce goes through, still legal spouses, and still inherit for purposes of intestate succession.
                        3.      Unmarried Co-Habitors:
a.       Common Law Marriage: live together and hold selves out as spouses à Married at law for purposes of all legal matters including intestate succession. Only 12 states. Others have all abolished it.
b.      Other States: Three Possible ways to deal with this.
i.        Formal: if not married, no rights, bar none.
·         Clear, simple, preserves expectations.
ii.      K-Style: Enforce the parties’ expectations as determined by:
·         Express Written K of sharing in Assets at Death: some states only this will do to have a court enforce expectations, otherwise default to rule (i) above.
·         Implied K of Same: some states are easier about this and will take evidence to determine expectations.
·         Meretricious Ks: Some states will refuse to enforce any such K’s of co-habitation, finding that their primary purpose is sex.
iii.    Create a constructive trust in equity in favor of the Co-Habitor
iv.    ALI Opinion: Treat all people who co-habit and have a common child for 2 yrs with all legal rights of a married person. If no kid à 3 yrs.
                        4.      Transsexuals: Insanity
                        5.      Simultaneous Death: If no evidence of who died first, and died together, assume beneficiary pre-deceased the benefactor.
a.       Janusz Case (IL 1985 – p78)
                        6.      Unborn children: If birth is 280 days (10 months) a/f claimed conception, burden switches to newborn child to rebut the presumption
a.       See Section E
D.    Adoption and Intestacy:
                        1.      Common Law: No recognition of adoption. \ Adoption law is all statutory.
                        2.      All Statutory US Law: Adopted children have same rights to inherit from adoptive parents as biological children.
                        3.      Variations between states on whether they can inherit from their natural parents.
a.       Sole inheritance rule:
i.        Hall v Valladingham (MD App 1988 – p98)
·         Adoptive children should not be any better off than non, so no double inheritance. 
b.      UPC: Same, but exception for stepparent adoptions
i.        So as to avoid any disincentive for stepparents to adopt their spouses children and make then their own.
c.       Free to have 2 lines of inheritance