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

Wills, Trusts & Estates Outline
Wills
 
 
Wealth Transfer Upon Death: The Fundamentals
 
I.       The Economics Of Inheritance
 
Justifications for passing wealth at death
Arguments against passing wealth at death
Society based on private property – this is least objectionable way to deal with property at owner’s death
Transfer of fortunes perpetuates wide disparities in the distribution of wealth, concentrates inherited economic power in the hands of a few, and denies equality of opportunity to the poor.
Incentive for recipients to do certain things (take care of parents, grandparents, so they will get)
Danger – inherited wealth becoming the basis of enduring privilege
Allows for the taking care of dependents (rather than State having to)
 
Encourages productivity and control (work hard so children can have better life)
Tends to reward chance of fortunate birth, rather than merit or productivity
Encourages earnings and savings (b/c you know it will pass to children, so no wasting)
Accumulation of wealth, rather than consuming it (which is better for society)
 
II.       Freedom of Testation: Limited
a)      Rest. (3d) Prop. Donative Transfers § 10.1. The controlling consideration in determining the meaning of a donative document is the donor’s intention, which is given effect to the maximum extent allowed by law.
i)       Rationale: freedom of disposition – property owners have the nearly unrestricted right to dispose of their property as they please.
ii)      Effect: donor’s intention not only determines the meaning, but also the effect of a donative document
b)      The right to dispose of property by will is conferred and regulated by statute.
i)        Wescott v. Robbins (1946)
(1)   Facts: Soldier sent letter to bank saying he wanted to open an account to deposit money, and made it “in trust” so only he could withdraw. Also said if he died, he wanted grandpa to be beneficiary. Letter to grandpa he planned on using money for business when he got back from war. Letters typewritten and signed only by soldier.
(2)   Holding: The right to dispose of property by will is conferred and regulated by statute; the letters did not conform to what statute prescribed as to constitute a valid disposition of the property. Proper form is for will to be signed, witnessed, notarized, or holographic – otherwise, could be fraud. Not a trust b/c no trust property created – never set it up.
c)      The Dead Hand Limit: Restrictions on inheritance permitted if not illegal, and in accordance with public policy.
i)        Rest. (2d) of Prop. Donative Transfers § 6.2: 
(1)   Restraint on marriage must be reasonable and must not interfere with marriage (i.e., last name provisions, encourage divorce)
(2)   Restraints may not promote destruction of property.
ii)    Shapira v. Union National Bank (1974)
(1)   Facts: Will disposes property to son only if he marries a Jewish girls whose both parents are Jewish within 7 yrs of testator’s death; otherwise goes to state of Israel.
(2)   Holding: will provision held valid & enforceable – must honor testator’s intent within the limits of law and public policy.
(a)    Constitutionality – right to marry, protected by 14th amendment, being violated? No. No restriction on marriage here; Court only asked to enforce the restriction on the inheritance.
(i)     Note: Cannot restrict ability to get married.
(b)   Public policy violated?
(i)     violated b/c free choice of religious practice? No. Son won’t be in contempt for failing to marry a Jewish girl. Just won’t get $.
(ii)   Violated b/c would encourage marriage just for $, then divorce? No. possibility too remote, & assumption that son’s motive for marriage is proper.
1.     Note: Cannot condition bequest on getting a divorce.
(c)    Unreasonableness – pressure to marry in 7 yrs w/o opportunity for mature reflection & jeopardizes college education? No. 7 yrs reasonable time for exhaustive reflection & fulfillment of condition w/o constraint or oppression.
 
II.            Transfer And Decedent’s Estate
a)      Probate v. Nonprobate
i)        Probate – property that passes under the decedent’s will or by intestacy
(1)   Distribution of probate assets under a will or intestacy may require a court proceeding involving probate of a will or a finding of intestacy followed by appointment of a personal representative to settle the probate estate.
ii)      Nonprobate – property passing under an instrument other than a will
(1)   Nonprobate property includes the following:
(a)    Joint Tenancy property – decedent’s interests vanishes at death; survivor has the whole.
(b)   Life Insurance – proceeds on decedent’s life paid to beneficiary named in policy.
(c)    Contracts with payable-on-death provisions – Contract can be with employer, bank, etc., to distribute property to name beneficiary upon death (ex: pension plans)
(d)   Interests in Trust – trustee holds the property for the benefit of the named beneficiaries, then distributed per terms of trust.
(2)   No court proceedings – distribution determined by the nonprobate document
b)      Terminology
i)        “go through probate” –  to have the estate administered through probate courts
ii)      Proper to use the word “will” to refer to an instrument disposing of both real and personal property
iii)    A person dying testate devises real property to devisees; bequeaths personal property to legatees. “I give” effectively does the job in all circumstances
iv)    Real property descends to heirs; personal property is distributed to next-of-kin.
c)      Administration of Probate Estate
i)        Personal Representative – appointment of personal rep necessary to oversee winding of decedent’s affairs. Appointed by, under control of, and accountable to probate court.
(1)   Executor – If the will names the person who is to execute the will & administer probate estate, the personal rep is called an executor
(2)   Administrator- if will doesn’t name the personal rep, then called administrator
(a)    Selected from a statutory list of persons given preference (usually heirs or creditors)
(b)   Administrator must give bond
ii)      Four functions of probate:
(1)   Collection of assets
(2)   Notifying and paying creditors
(3)   Paying estate taxes
(4)   Title clearing & distribution of the assets
iii)    Jurisdiction: Primary or domiciliary jurisdiction – jurisdiction where decedent domiciled at time of death. If real property in another jurisdiction, then ancillary administration in the jurisdiction is required.
iv)    Probating will in common form
(1)   Ex parte proceeding in which no notice or process issued to any person. Execution of will proved by oath of executor or other witnesses is required. Will admitted to probate at once, letters of testamentary granted, and executor began administration of the estate. If no one raised objection, then fine. Otherwise, one might compel in solemn form
(2)   Maj of states don’t permit ex part proceedings, but require prior notice to interested parties before appointment of a personal rep or probate of a will.
v)      Probating will in solemn form
(1)   Notice to interested parties given by citation, due execution of will proved by testimony of attesting witnesses, and administration of estate involved more court participation
vi)    UPC (Uniform Probate Code) – adopted in many states, so representative if statutes regulating probate procedures. Provides for both ex parte probate (informal probate) and notice probate (formal probate)
(1)   Informal Probate requirements
(a)    w/o giving notice, rep petitions for appt
(b)   Petitions contains info on decedent & names/addresses of spouse, children, other heirs; if will, also info on devisees
(c)    If petition is for probate of a will – original will must be with the petition
(d)   Executor swears that to best of knowled

ance of law rests upon a belief that legal institutions, including inheritance, are legitimate, and legitimacy cannot exist unless decisions are reasoned.
v)      Assures a sane person that the disposition the person desires will be carried out even if the person later becomes insane and makes another will.
vi)    May protect society at large from irrational acts. (but doesn’t protect society from a sane person acting irrationally)
vii) May protect a senile or incompetent testator from exploitation by cunning persons.
d)     Mental Capacity can be defective due to an insane delusion
i)        A person may have sufficient mental capacity generally to execute a will but may be suffering from an insane delusion so as to cause a particular provision in a will (or the whole will) to fail for lack of testamentary capacity (depending on how much of the will was caused by the insane delusion).
(1)   An insane delusion which impairs testamentary capacity is one to which the testator adheres against all evidence and reason to the contrary. 
ii)      In re Strittmater
(1)   Facts: Will gave everything to the National Woman’s party (NWP); decedent had worked as volunteer for NWP for long time, it was her whole life. Doctor testified that she had schizophrenia. She never married, and lived with her parents until they died. She was devoted to her parents when they were alive, but after they died, she wrote nasty things about her parents, especially her father. She hated men, wished they would all be killed and looked forward for the day when women could bear children without men. However, her dealings with people such as male lawyer & male banker were entirely reasonable and normal. 
(2)   Holding:   found that the evidence showed “incontrovertibly her morbid aversion to men,” and “feminism to a neurotic extreme.” Therefore, her mental state of paranoia about how evil men were led her to leave her estate to the NWP. 
(a)    Note: Court makes assumptions. Assumes b/c she hates all men, then she is insane. But even if she was insane, does that mean she cannot dispose of her property the way she wants to?
e)      A will is invalid if the insane delusion caused or affected, or might have caused or affected, the disposition of the property.
i)        In re Honigman
(1)   Facts: Will leaves wife only a life use of her min statutory share, plus $2500, while giving other members of his family a lot more. Wife objected to probate b/c he was not of sound mind when will made. Wife said he was obsessed with the incorrect belief that his wife was cheating on him.
(2)   Holding: Court denied probate. It doesn’t matter if there existed other reasons why he might have disposed of his property in a specific way – the will is bad if the insane delusion did or might have affected the disposition.
(a)    Insane delusion vs. Mistake – An insane delusion is a belief not susceptible to correction by presenting the testator with evidence indicating the falsity of the belief. A mistake is susceptible to correction if the testator is told the truth. As a general rule, courts do not reform or invalidate wills because of mistake (although this rule is changing).