Trusts and Estates Outline

TRUST AND ESTATE CLASS NOTES
SPRING 2008
 
CHAPTER 1: Introduction to Estate Planning
 
Why take this class?
On bar exams
Likely to practice in this area
 
Introduction: (start pg 1)
2 things changed will practices (from basic practice that every lawyer worked with for a statutory fee to a more complex practice area where lawyers charge there regular hourly fees)
1. Estate Tax – This used to not touch/hurt anyone, but soon it began to effect more and more people (created 3 types of people):
1. Never going to be subject to tax.
2. Bill Gates (people who will clearly be subject to estate tax).
3. Huge group of middle class = people who may be subject to estate tax but with planning they can avoid the tax.
 
NOTE – current rules call for a forced share in either a will or trust to be given to the decedent’s spouse
 
Is there an inherent right to transfer your stuff?
Do the heirs have a right to claim and does an individual have a right to give their property to anyone they want.
 
Blackstone quote (p. 1): Inheritance is not Constitutionally based (it is statutory).
 
Terminology
Right of Devise = tell the executor who should get the property.
Right of Dissent = for property to automatically go to someone by statute.
 
Common Elements Between Trusts and Estates
Stuff (Estate = Estate (stuff in the estate); Trust = Corpus)
Original Owner (Estate = Decedent; Trust = Grantor, Trustor, or Settlor)
New Owner: Devisee, heir or beneficiary
Fiduciary: Executor, Personal Representative or Trustee
Purpose: Getting the property to the new owner and maybe more
 
GENERAL RULE = Person does not have a general right to pass their property however they want
 
Hodel v. Irving (1987):
Facts:
Deals with Sioux Land (1889 act which called for the land to be put in trust) any devise had to be to other members of the Sioux tribe.
Congress had a plan to divide the land into individual parcels. In 1934 Congress realized this plan wasn’t working well and stopped adding land to the trust. In 1983, Congress passed a law essentially stating that any interest below 2% of the total land value would pass to the tribe upon the death of the owner.
Members of the tribe who would have inherited the land below 2% are challenging this law.
Issue:
Was there an unlawful taking?
Held:
Court analysis: Takings can occur (for example when investors invest their money and do not receive a return on their investment or suffer a loss).
Two Factors that made this a taking:
1. There is a right to pass property (this is a significant separate stick) = when congress took this right away they took away 100% of that right which made it a taking.
This is separate from all other rights associated with property.
The Court took issue with the fact that the Act completely took away the land if it met the 2% total value element (You can make some restrictions but you can not take it away completely) Big mistake was to take away any right to Devise or Descend the property.
Notes:
The constitutional right that the court focuses on is based on the Decedents rights (There is no constitutional right to receive the property, these requirements are completely statutory and not constitutionally based).
 
Introduction to the problem of the Dead Hand (p. 20)
UPC § 10.1: You are supposed to enforce the decedents intent (donor’s intention is given effect to the maximum extent allowed by law).
 
Shapira v. Union National Bank (1974):
Facts:
Fathers will required his sons to marry a woman who is Jewish (who’s parents are also Jewish).    
            Son Argues
            CONSTITUTIONAL Argument
                        – restrictions on different race/religions right to marry are Constitutional violations
                        Why doesn’t that count here? = Cases like Loving, etc were about laws (which this case does not involve)
                        Shelley v. Kraemer = Court said they will not allow these types of restrictions to exist because the Courts will not enforce them (the purposes of the agreement were secured only by judicial enforcement by state courts of the restrictive terms of the agreements)
                        COURT SAYS = Will is more of a private action so we don’t see the type of public effect as in the restrictive covenant cases
                        – COURT MORE IMPORTANTLY = The son can marry whoever he wants (if he wants to marry the person bad enough he should not care about losing his fathers inheritance because of it)
 
            Public Policy Argument
                        – Court said that this was not unreasonable (In a strange justification they noted in FN6 that about 540 jewish females between 15-24 where living in Youngstown and therefore the Son had a reasonable choice)
 
Examples in Note 6 pg 28-29
            (a) Testators will directs the testator to tear down the house? Should a court order the house destroyed
                        – In Eyerman, the court held the provision invalid since razing the house would harm the community in the loss of real property tax revenues, leave an unnatural gap in the pattern of residential development, and would harm the beneficiaries by destroying the value of the devise.
 
            (b) Photographer wants his executory to destroy all of his negatives because he fears that they will be used to create cheap copies of his best photos, thus diminishing the value of the genuine prints that he created in his darkroom. (If we will not enforce these conditions will the photographer be encouraged to destroy his negatives if he becomes ill/close to death??)
 
            (c) Justice Hugo Black (former US Sup Court Justice) wanted his notes destroyed when he died because their public release could effect the inner workings of the court. Should this be enforced??
                        – A possibility in this case would be to seal the notes for 50 years (by that time the opinions will all have aged and the other Justices will be gone). This would be a balancing act between the historical value of the documents and Justice Black’s concerns
 
            (d) Essentially the same question as (c) above
                        – The answer here is that a court probably would not issue an order. The difference is the fact that the reason for destruction is not persuasive when weighed against the public interest.
 
           
Section B Transfer of Decedent’s Estate (Start pg 30)
1. Probate and Nonprobate Property
            Probate Property = passes through a will
            Nonprobate Property = passes through other instruments
                        – Life Insurance
                        – Joint Property
                        – Retirement Benefits
                        –