Select Page

Wills, Trusts, and Estates
University of North Carolina School of Law
Brophy, Alfred L.

 
TRUST & ESTATES
SPRING 2014 – Brophy
 
 
I                      INTRODUCTION TO WILLS, TRUST, AND ESTATES
A.      The Power To Transfer Property At Death
                                                   i.      Introduction
1.       Ones power to transfer at death is generally considered to be a matter of civil law as opposed to a natural right
2.       States vary on property transfer rights
                                                  ii.      Right v. Privilege
1.       The government has power to regulate death transfers
a.       Irving Trust v. Day: nothing in the constitution forbids the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction.
2.       However, they cannot completely abolish the power
a.       Hodel v. Irving: Government cannot abrogate completely the right to transfer property at death
3.       Right to transfer and right to receive property are two separate ideologies and only the first is recognized as constitutionally protected.
4.       Publicity Rights: are devisable at death, even to be included in residuary clauses
                                                iii.      Public Policy Rationales
1.       Pro: consistent with system of private property, encourages individuals to accumulate wealth and protect others
2.       Con: promotes economic disparity and discrimination, and promotes undeserved windfalls
B.      Dead Hand Control
                                                   i.      Dead hand control arises where a decedent conditions a gift to a beneficiary upon a beneficiary behaving in a certain way.
                                                  ii.      R3P: favors freedom of disposition and protects donor’s intent however will be held invalid where it is ‘prohibited or restricted by an overriding rule of law’
                                                iii.      Validity:
1.       They are valid unless they violate public policy, or judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights.
                                                iv.      Invalid Conditions:
1.       Absolute Restraints on Marriage: they are held to violate the fundamental right to marry
a.       Partial Restraints on Marriage: if they impose only reasonable restrictions that are not contrary to public policy they are valid. [factors to be looked at are age and time frames of restrictions] b.       Religion Requirements for Marriage: have been held valid [factors again are reasonableness and time frame] they don’t actually restrict the right to marry, just incentives to choose. [Shapira v. Union National Bank] 2.        Restraints on Religion: gifts that require a beneficiary to remain faithful to a particular religion generally are held to violate public policy regarding freedom of religion and are invalid
3.       Encouragements of Divorce: gifts that require a beneficiary to separate or divorce before receiving a gift generally are deemed void, BUT gifts that only occur in the event of a divorce are not invalid if they are determined to be the intent of the donor to support the beneficiary during that time
4.       Promoting Family Strife: gifts requiring family members to ostracize others are void under public policy
5.       Property Destruction Directive: although allowed when alive, cant do it after death because of meaningless economic cost
                                                 v.      Remedies for Invalid Conditions:
1.       Gift Over Clause: a clause in the instrument that provides where it should go if determined that the restriction/condition is not satisfied
2.       No Clause: permit the beneficiary subject to the restrictive clause to take as if no condition
C.      Who takes the Decedent’s Property?
                                                   i.      Probate v. Nonprobate
1.        A will disposes of the decedent’s probate property only and probate is the default
                                                  ii.      Nonprobate Property
1.       The decedent has to take affirmative steps for the property to qualify as nonprobate property.
2.       Joint Tenancy: JT’s hold the property concurrently and upon the death of one joint tenant, his or her share is extinguished and the shares of the surviving joint tenant are recalculated, so no property interest passes upon the death of a joint tenant.
3.       Life Insurance: payment of death agreement between the insured and the insurance company that upon death, benefits will be paid to the beneficiary. These proceeds are not probate property and aren’t subject to probate process.
4.       Legal Life Estates and Remainders: when a party who holds a legal life estate dies and there is a listed remainder, there is not a property interest transferred that occurred on death because it was the original grantor of that life estate who determined who the remainder was, not the life estate holder.
a.       Transfer on death deeds do the same thing and are not probate property interests
5.       Intervivos Trusts: an artificial legal entity that holds and manages the property placed in the trust. Property in an intervivos trust do not pass through probate
                                                iii.      Probate Property
1.       Property not subject to a non probate instrument goes through probate process as default
2.       Will v. Intestacy:
a.       A properly executed will constitutes an expression of a person’s intent to who should take their property upon death
b.       If NO will, the property passes via intestacy to the decedent’s heirs.
D.      The Probate Process: An Overview
                                                   i.      Probate = default
                                                  ii.      Importance:
1.       Provides for an orderly transfer of title for the decedent’s property
2.       Ensures that creditors receive notice, an opportunity to present claims, and payment
3.       Extinguishes claims of creditors who do not present their claims to the probate court
4.       Ensures that the decedent’s property is properly distributed to those who are entitled to it
                                                iii.      Opening Probate:
1.       Opened when the court is presented with the decedent’s death certificate
2.       An administrator or personal representative is appointed and notice given to interested parties
a.       Personal Reps Duties:
                                                                                                                           i.      Inventory decedent’s assets
                                                                                                                          ii.      Give notice to and pay creditors (including estate taxes if necessary)
                                                                                                                        iii.      Distribute decedent’s probate property
                                                iv.      Avoiding Probate:
1.       Use nonprobate instruments
2.       Some states have ‘small estate’ exceptions that don’t require probate
3.       Nontitle personal property doesn’t need probate
E.       Professional Responsibility of Lawyers in Estate Planning
                                                   i.      Traditional common law was only duty to client (decedent)
                                                  ii.      Under the majority modern approach, the attorney client relationship is construed broadly such that intended beneficiaries have standing to sue the testator’s attorney for malpractice.
1.       Under Tort- reasonable foreseeability of injury to the intended beneficiaries if the attorney fails to exercise due care
2.       Under Contract- third party beneficiary status is deemed to be in privity of contract
3.       Simpson v. Calivas: there was reasonably foreseeable harm to the son of the testator when the attorney failed to designate property identified under a ‘life estate’ of a ‘homestead’ given to stepmother, and reasonable care was not exercised so they are justified in extending the duty of care to include intended beneficiaries (basically adopts the modern trend above)
                                                iii.      Some states concerned with the broadness of the modern rule limit to beneficiaries identified in estate planning instruments
                                                iv.      Conflicts of Interest and Duty to Disclose:
1.       The testator’s attorney may owe a duty of care to another party if the attorney has an ongoing attorney client relationship with that party (A v. B)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II                   INTESTACY: THE DEFAULT DISTRIBUTION SCHEME
A.      UPC Approach
                                                   i.      UPC 2-102 through 2-105:
1. Surviving Spouse
·         100% if no issue or parents; OR
·         100% if all decedent’s issue are also issue of surviving spouse and surviving spouse has no other issue; OR
·         $200,000 + 75% of rest if no issue but surviving parent; or
·         $150,000 + 50% is all issue are also issue of surviving spouse and surviving spouse has other issue;
·         $100,000 + 50% of rest if one or more issue not issue of surviving spouse.
Any property not passing to a surviving spouse passes as follows:
2. Issue
Equally
3. Parents
Equally, or all to the survivor
4. Issue of Parents
Equally
5. Grandparents/Issue
·         50% to paternal grandparents or survivor otherwise to their issue equally
·         50% to maternal grandparents or survivor; otherwise to their issue equally;
·         If no surviving grandparents or issue on one side, all to the other side
6. Escheat to the State
100%
 
                                                  ii.      UPC favors the surviving spouse
                                                iii.      UPC favors the state a lot quicker than most states recognize their take
B.      Surviving Spouse: Who Qualifies?
                                                   i.      Marriage Requirement: assumes that a couple has gone through a valid marriage ceremony
1.       Cohabitants- non married couples who live together do NOT qualify
2.       Common Law Marriage- If the individuals meet the criteria for their state’s recognition, then they do qualify for inheritance rights upon death of common law spouse [UPC recognizes these as long as they meet the states requirements]                                                   ii.      Same Sex Couples:
1.        Issues arise here and are still unclear on how things will be resolved, 2013 term cases seem to favor allowing them to take
C.      Survival Requirements
                                                   i.      To be eligible to receive property from a decedent, a taker must survive the decedent.
                                                  ii.      Varies by jdx
                                                iii.      Common Law – under the CL approach, to qualify as an heir the party had to prove by preponderance of the evidence that he or she survived the decedent by a millisecond. This is a question of fact.
                                                iv.      Uniform Simultaneous Death Act – as initially adopted, the USDA basically codified the common law rule, but changed the standard to ‘sufficient evidence’
1.       Issues arise when a couple dies with no children ‘spontaneously’ and then it’s a fight of each family for stuff instead of grieving
2.       Janus v. Tarasewicz: Tylenol cyanide case; applied the USDA standard
                                                 v.      Determining Death
1.       CL = irreversible cessation of circulatory and respiratory function
2.       Modern Trend = when artificially maintained, death occurs when total irreversible cessation of brain activity
                                                vi.      Some states have a clear and convincing evidence standard to prove death, which is meant to bar some litigation
                                              vii.      UPC 120-Hour Approach :
1.       UPC §2-104 & 2-702 requires that to qualify as a taker, the taker must prove by clear and convincing, that he or she survived the decedent by 120 hours (5 days)
                                             viii.      Survival Analysis:
1.       Two Steps:
a.       Did the claimant actually survive?
                                   

ant custody of the child
                                                                                                                           i.      Dissent in the case argued the doctrine is not meant to be that technical but protect children that themselves and their natural parents thought would be taken care of
                                              vii.      Children out of Wedlock
1.       Vary by jdx
2.       UPC Approach:
a.       A child has a parent-child relationship with both natural parents regardless of marital status [UPC 2-117] b.       Its very easy to determine natural mother
c.        Natural Father identity brings up issues
                                                                                                                           i.      Requires proof of paternity
                                                                                                                          ii.      Uniform Parentage Act allows standing to sue for paternity test if there is a presumption of paternity
                                             viii.      Nontraditional Parent-Child Relationships
1.       Posthumously conceived Children
a.       Intestacy-
                                                                                                                           i.      Woodward v. Commissioner: mother of two posthumously created children applied for social security benefits. They were rejected. Mass Supreme Court held that as long as 1) a genetic relationship between the child and decedent is established and 2) the decedent affirmatively consented to the posthumous conception and to the support of any resulting child [court also mentioned timeliness] b.       UPC Approach:
                                                                                                                           i.      2-120:  can inherit from the deceased spouse if:
1.       authorization by parent was done when alive in writing or clear and convincing evidence
2.       the child is in utero within 36 months or born within 45 months of the death of parent
c.        Probate and Non-Probate Property
                                                                                                                           i.      Allowed just needs to be in instrument
                                                                                                                          ii.      Again it’s a question of testator’ intent not intestate rules
1.       In re Martin B: where the governing document is silent, children born of this new technology with consent of their parent are entitled to the same rights for all purposes as those of a natural child
2.       UPC 2-705:  provides that a posthumously conceived child is included in class gifts in a trust or will of a third party as long 1) the predeceased parent gave consent in writing or by clear and convincing evidence and 2) the child is living on the distribution date or is in utero within 36 months of or born within 45 months.
2.       Surrogacy:
a.       Under the UPC (2008) surrogate mothers have no rights of parents to the child unless the surrogate mother is the genetic mother and no on else has a parent relationship with the child UPC 2-121
H.      Gifts to Children
                                                   i.      Advancements
1.       CL: if a parent makes an inter vivos gift to a child, a reputable presumption arises that he gift constitutes an advancement that counts against the child’s share of the parent’s intestate share
2.       UPC: Intervivos gifts to not constitute an advancement unless a writing indicates that the donor intended the gift to constitute an advancement [2-109]                                                   ii.      Transfers to Minors
1.       Guardianship: modern trend has made them conservators and they take title as trustee for the minor and the minor is a beneficiary until an adult
I.        Bars to Succession
                                                   i.      Homicide
1.       Where a party who otherwise is entitled to take forma decedent kills the decedent, the equitable principle that one should not profit from one’s wrongdoing argues against permitting the killer from taking
2.       CL: jdx’s split; some refuse to add to statute if absent language, some say equity demands bar to taking, others place the property that would be killers in constructive trust and the court orders it to be given to next in line
a.       In re Estate of Mahoney: CT adopted constructive trust approach
3.       UPC: 2-803: bars killers from taking property and trea1    `               -=09\\ or testate or probate or non probate
4.       Only covers felonious intentional killings
5.       Civil matter, not criminal, so if wrongful death responsible then they are barred under the statute
                                                  ii.      Disclaimers
1.       If a party disclaims a testamentary gift, they are treated as predeceasing the decedent
2.       Each disclaimer statute is different