Trusts and Estates Outline

Trusts and Estates
Hellwig
 
I. Introduction
1. Historical Background; Modern Role of Succession
 
Right v. Privilege
§         It was generally presumed that the power to pass one’s property at death was not a constitutionally protected right, but a statutory privilege (Irving Trust v. Day) – Hodel changes this:
§         Hodel v. Irving: The complete abolition of the rights of an owner to dispose of property rights is a taking without just compensation, violating the owner’s rights guaranteed under the Fifth Amendment
§         The constitutional protections only apply to decedent’s power to dispose of property at death, not to particular heir/beneficiary’s right to receive property from a decedent
 
Arguments For/Against Allowing People to Transfer Property at Death
For:
§         Consistent with a System of Private Property
§         Encourage Familial Responsibility – we want to encourage people to take care of their own (theoretically, we don’t want the state to take care of everybody)
§         Incentive to be Productive – let people accumulate wealth and be able to keep it in their family or have it “work for them”
§         Hodel v. Irving
Against:
§         Dead Hand Control Problems:  We worry about allowing people to make decisions from the grave because (1) the decedent can’t change their mind and (2) they don’t feel the “sting”
§         Avoid Concentration of Wealth: Great accumulation of wealth rails against our sense of fairness because there’s a correlation between money and power—attempt at avoiding a permanent aristocratic class
§         Tends NOT to Reward Productivity (dampens entrepreneurial spirit) but instead rewards the chance of fortunate birth (so less incentive to create wealth)
§         Inefficiency of Estate Tax
 
2. Terminology; Planning the Estate
Heirs refer to people that would take under the laws of intestate succession
July 1, 1987: date of enactment of the SCPC—only governs estates after this date
 
Arguments For/Against Allowing the Client to Keep the Will
Attorney keeps it:
If it is destroyed and the client now has Alzheimer’s; you have no original to probate and the client will die intestate (copies may not be able to be probated);
Also if you have the originals you may have problems terminating the representation – client may think you still represent them; malpractice issues
Best to have a letter concluding your representation so kids down the road can’t bring an action against you 
Client keeps it:
May hide it where no one else can find it – so tell them either to put it in a safe deposit box that everyone knows where it is
The client may make changes on his own; generally, just striking out and changing parts of the will is not an effective revocation—the document must be re-executed to make any changes
May want to include a letter that any changes made on his own won’t be effective
 
3. Ethical Considerations in Estate Planning
A. v. B. v. Hill Wallack
Another woman brought paternity action against H; the law firm representing the mother is also representing H and W in planning their estates. If W predeceases H, her entire estate passes to him outright; if H dies and doesn’t change his will at all, his illegitimate child would take a portion, so a portion of W’s estate would pass indirectly to the bastard
Conflict of interest between duty of confidentiality (to H) and duty to inform clients of material facts (to W); should W be told about the child’s existence?
Rule: In dual representation, need to have a disclosure agreement to make it clear that if the attorney learns information from one client, he will disclose it to the other
Sample Letter (p. 287)
Define scope; informed consent (all info disclosed to both clients); options as to what happens upon disagreement (withdrawal); provides a way to continue representing the most lucrative client (if you’ve known him longer); define termination of representation (if not, client may think you have an obligation to advise them upon any change in the law; this exposes you to lawsuits down the road)
Tip: Probably not a good idea to represent both clients in a second marriage planning their estates where both have children from a prior marriage
For example, if H dies first and leaves entire estate to W she may write C1 and C2 out of the will so it is almost per se malpractice to leave it to W outright; to avoid this, leave it to W in a trust so that when she dies there will be equal distribution to all their kids
 
II. Intestate Succession
1. Intestate Succession: Basic Statutory Scheme
§62-2-101: Intestate succession
“Any part of the estate of a decedent not effectively disposed of by his will passes to his heirs as prescribed in the following sections of this Code”
This is someone who dies without a valid will; but it is possible for part of an estate to pass intestate even if they have executed a will if the will doesn’t validly dispose of all property (partial intestacy)
Outside of probate estate: joint tenancy with right of survivorship; joint accounts; life insurance with named beneficiary; 401K with named beneficiary
Share of Surviving Spouse
§62-2-102: Share of the spouse
The intestate share of the surviving spouse is: (1) if there is no surviving issue (any lineal descendant: children, grandchildren, etc.) of the decedent, the entire intestate estate; (2) if there are surviving issue, ½ of the intestate estate
Domestic Partners
Unless the jurisdiction recognizes common-law marriage, a domestic partner is usually unprotected if the decedent failed to execute a will (SC still recognizes CL marriage)
Massachusetts is the only state that grants same-sex couples same privileges as marriage
Share of Issue
§62-2-103: Share of heirs other than surviving spouse
Whatever property remains after the spouse’s share, or the entire net estate if no surviving spouse, passes to the descendants of the intestate:
(1) Issue, (2) parent or parents equally, (3) issue of the parents or either of them, (4) grandparents or issue of grandparents, (5) great-grandparents or issue of great-grandparents, (6) stepchildren or issue of stepchildren—SEE Table of Consanguinity 
If we go up to grandparents, half to paternal side and half to maternal side; if both grandparents on that side are dead, go to first generation with living issue; if there are no surviving issue on that side, the other side gets the entire estate
§62-1-201(40): Stepchild means “one who is the child, natural or adopted, of such person’s spouse but who is not the child, natural or adopted, of such person”
§62-2-106: Representation; disclaimer by intestate beneficiary
If representation is called for by this Code, the estate is divided into as many equal shares as there are surviving heirs in the nearest degree of kinship and deceased persons in t