Wills & Trusts
Guzman
Spring 2014
I. Introduction
A. Property Review
1. Property is the legal relationship between and among persons or entities with respect to a thing. The “legal relationship” is just, at bottom, a series of correlative but independent, divisible, and non-absolute series of rights.
(a) Rights/interest in tangible or intangible things.
(b)Property does not equal the thing, but the rights therein. It is relational. Property is not static it is changing.
(c) Some other person or entity may have a greater right. Property is never really absolute.
2. Six distinct property rights:
(a) Possession
(b)Construction/consumption/destroy
(c) Use
(d)Exclude
(e) Enjoy the fruits and profits of
(f) Transfer (wills and trusts focus)
(i) Lifetime transaction not the focus here, rather death-time transfers/transactions.
o Donative transfers (gifts)
o Death transfers (wills)
(ii) It’s like one half of one sixth of property.
(iii)Is the ability to transfer property at death a good thing?
o Can possess during life, for whole life.
o Safety measure to allow for transfer if unplanned.
o Allows continued control after death.
o Encourages saving and accumulation of wealth.
o At the sufferance of the state we have the right to transfer property at death. Not constitutional, but near constitutional.
3. All of these rights are not necessary, they are all different and distinct rights.
(a) Not absolute – all limited to some extent. Has boundaries, generally driven by law.
(b)Property is divisible. Do not need all six rights to have interest/right in property.
4. Deed: “To A and his heirs”
(a) Language “and his heirs” conveys a fee simple absolute.
(b)FSA is presumed now, but before modern interpretations “to A” alone would only convey a life estate. Modernly, A has everything, heirs have nothing.
(c) FSA alienable, descendable, devisible, A has all the sticks.
(d)Heirloom: word developed to describe personal property that was so much a fixture in the estate that it went with the estate. Treated like real property. EG portraits, things with emotional/historical tie to the real estate.
5. Real property descends based on the law where it is. Personal property looks to the domiciliary state.
B. Gifts & Wills
1. Gift
(a) Elements:
(i) Donative Intent: intent to give completely, to make a gift, not the intent to contract. Must have at the time of delivery, present, donative intent.
(ii) Delivery: physically confirms/reinforces donative intent.
(iii)Acceptance: done accepts; presumed if the thing has any value at all.
(b)Donor/Donee Rights
(i) Without more information, assume donee has all six rights.
(ii) Gifts often zero-sum things – once the gift is effectuated donor loses all rights, and done gets all the fights. Donor retains no rights.
2. Will
(a) Elements:
(i) Testamentary Intent: intent to make a death-time transfer.
(ii) Writing: signature, witness helps strengthen veracity. (takes place of delivery) **KEY
(b)Testator/Beneficiary Rights
(i) Big difference between a will and a gift is that nothing is transferred until after the will is effectuated. The testator remains the owner until death or revocation.
o Beneficiary has NO legally enforceable rights. Putative testator begins and ends with 6 rights in property, and putative beneficiary begins and ends with 0. UNTIL THE WILL IS EFFECTUATED.
o Flawed to say that when you revoke a will you revoke a gift.
3. Gifts vs Wills
(a) Two big distinctions:
(i) Wills do not require delivery
(ii) Wills are revocable (until death or loss of testamentary capacity)
(b)Tax efficiencies of wills
(c) Age of party receiving gift
(d)More assurance for a life-time transfer, more control with death-time transfer
(e) Avoid will contest – life-time gifts are much harder to contest than death-time transfers
(f) Wills are more public than gifts – only two people need to know about a will, but at least three or more have to know about a will (and wills become public upon death and it goes into probate).
4. Will Substitutes
(a) Some characteristics of lifetime transfers, some of death-time transfers.
(b)Life insurance (passes to beneficiary you denote at death) is a good example. Although similar to a will, they are a contract with your insurance company.
(c) Future interests can be a will substitute, but not always “pure”
(d)Joint tenancy with rights of survivorship (JTROS)/tenancy in entirety
(e) Certain retirement accounts
(f) TRUSTS (most popular)
(i) Can be pure lifetime OR pure death-time transfers (lifetime transfer is not revocable, whereas testamentary trusts set up in wills are revocable; also hybrid revocable trust)
(ii) We will examine:
o Creation
o Administration
o Termination
C. Introduction to Intestate Succession (Dying Without a Will)
1. Where could/should someone’s property go at death?
(a) Should go to whomever that person wants the property to go to, but default should be relatives (next of kin). However, next of kin could present tricky and difficult problem of assessing heirs.
(b)Want to honor person and their accumulated assets after death, sense of the American dream and that your property shouldn’t just go to the government or some other entity outside of your control.
2. Three components we will examine:
(a) Scheme: “who gets what” in intestacy; usually statutory but occasional common law modification.
(b)Alteration: change of “who gets what” by either decedent or would-be heirs, and either pre- or post-death of decedent.
(c) Status: who fits the “who” in the “who gets what” of the scheme; usually common law but occasional statutory rule.
3. Average intestate decedent:
(a) Average person (most people die intestate)
(b)Young (older people more likely to foresee/plan for death)
(c) Poor (without assets to pass on it is not worth hiring an attorney, just takes away from what have to give)
(d)Unmarried
(e) Without children
(f) Uneducated (more education, more likely to write a will)
(g) Healthy (more likely to compensate death with illness)
II. Intestate Succession: Statutes of Descent and Distribution
A. Scheme
1. Basic Rules
(a) Intestate succession is common but not mandatory. It is the default, and can be altered via a valid will.
(i) Remember, statutes are written in order to give effect to what the legislature thinks most people would want to happen to their property if they had prepared w ill.
(ii) We don’t care at all about what the individual decedent wanted; we are concerned with how a “normal” person would want their property to be disposed of.
(iii)This is a completely impossible task for the legislature. Also, the legislature tends to target the demographic that is most likely to die intestate, so if you do not fit into that demographic the statutes may not work well for you.
(iv)Intestacy is the default rule or presumption.
o People can get out of intestacy by simply writing a will.
o However, children and those lacking capacity do not have that option.
(b)Survival: You must survive the decedent to take.
(i) Husband dies intestate 1/9/14. W dies the next day. Might W take from H’s estate? Yes because
1)(A)
Spouse will take EVERYTHING.
Spouse + all joint issue with no “other” issue of either decedent or surviving spouse.
Spouse will take EVERYTHING. §2-102(1)(B)
Spouse will take ½ of decedent’s estate.
Spouse + any issue solely of decedent (surviving spouse’s steps) irrespective of whether there are also joint issue or issue of solely surviving spouse.
Spouse will take 150k plus ½ remaining balance. §2-102(4)
Spouse will take ½ joint industry property (JIP) + an “undivided equal part” of the non-JIP with the decedent’s descendants.
Spouse + any issue solely of surviving spouse (decedent’s steps) and joint issue. (Note: need joint issue to kick rule in – why?)
Spouse will take 225k plus ½ remaining balance. §2-102(3)
Spouse will take ½ JIP + an “undivided equal part” in the non-JIP with the decedent’s descendants.
Spouse + parent(s)
Spouse will take 300k plus ¾ remaining balance. §2-102(2)
Spouse will take all JIP plus 1/3 non-JIP.
Spouse + sibling(s)
Spouse will take EVERYTHING.
Spouse will take all JIP plus 1/3 non-JIP.
(b)Recall that property held by a couple in JROS or TE automatically passes to the surviving spouse upon the death of the other. Therefore, this property is NOT included in the decedent’s estate!
(c) Because intestate estates often have less wealth, quite common for the spouse to take all under the UPC scheme.
(d)UPC scheme clearly more protective of the surviving spouse. Efficient because children will still benefit from $$ under UPC, spouse always get at least ½, sometimes more, often all.
(i) Intestate estates tend to be smaller, and as opposed to dividing an already small estate further and further, the UPC simply gives a larger chunk to the spouse and assumes they will use that portion to tend to the children as opposed to giving them each a share.
(ii) UNLESS there is issue of the decedent only, then the spouse only gets $150k plus half of what’s left in order to protect the step.
(iii)Also, poorer families tend to have more kids and broken families.
(e) Joint Industry Property (JIP)
(i) Property acquired together during marriage, subject to exceptions
o Excludes things one party received by a gift, a will, intestate succession
(ii) Coverture synonym
(iii)The rationale is that the marriage is a joint venture and the fruits of that venture belong to the husband and wife together.
(iv)Not always easy to determine what is JIP.
o Increased evidentiary burdens, which decrease efficiency
o BIG burden à can argue costs outweigh benefits, why we have the presumption
(v) PRESUMPTION: All property JIP UNLESS can prove to the contrary. Have to prove that the property was not acquired during the marriage by showing either:
o The property was acquired before the marriage, or
o The property was received by decedent individually through gift, inheritance, or will.
