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Wills, Trusts, and Estates
University of South Carolina School of Law
Medlin, S. Alan

Wills, Trusts & Estates—Summer 2014, Medlin

1-Intestacy

2-Creating Wills

3-Construing Wills

4-Creating Trusts

5-Construing Trusts

6-Power of Appointment

I. Background and Policy

A. The foundations of Wills, Trusts, & Estates

1. Property and Contracts for the foundation

2. Estate a gift taxes are particularly important

(i) As of January 2, 2013, there is no estate and gift tax on an estate of less than $5.25 million ($10.5 million for married couples)

(ii) As a result of the hike, very few people are affected

3. South Carolina follows the 1969 Version of the Uniform Probate Code

B. Policy

1. Power to Transmit Property at Death–Limits/Restraints & Justifications

(i) NOTE: SC has this Elective share (requirement that one-third of probate estate goes to spouse regardless of what you want)— policy behind the elective share:

(a) “Ward of the State”

(1) Don’t want a spouse to be uprooted when the other spouse dies –wife who stayed at home caretaking her whole life shouldn’t be destitute

(2) Both spouses contribute to the wealth creation (whether by working or keeping up the home), so both are entitled to a share of the wealth that they helped create

(b) Against

(1) It is my personal property

· Interference with right to use and enjoy

· Who are we as the state to make a better judgment about what people ought to do with their property than the people themselves

(2) Discourage savings, productivity, etc.

(ii) Estate Taxes (also called the death tax)

(a) What if estate taxes were set at 90%?

(1) Encourage waste today so that the government doesn’t get it at death

(2) Discourage savings and earnings

(3) Private property and productivity dampened

2. Dead Hand Control

(i) To what extent should we let the deceased control property beyond the grave?

(a) One cannot change one’s mind after death if circumstances change

(b) Key Concern: The deceased does not bear the loss or consequences

(ii) Restatement §10.1—The controlling consideration in determining the meaning of a donative document is the donor’s intention. The donor’s intention is given effect to the maximum extent allowed by law

(iii) Instructions to destroy property after death?

(a) There has to be some sort of dead hand control – that’s what this class is all about.. but there is a line as to how much control

(b) We might be ok allowing someone to destroy a Cadillac at death, but not the Mona Lisa or their dog

(c) Professor Shavell argues for a conditional right to destroy property after death:

(1) If during the lifetime of the testator, she put the future interest in the property up for sale and

· The government declined to condemn

· The owner turned down the highest bid for the future interest

(2) Then, the direction to destroy would be valid

(iv) Other restrictions—Shapira v. Union National Bank

(a) Father restricted his son’s inheritance unless he married a Jewish girl. Should he not marry a Jewish girl, the property is to pass to the state of Israel

(b) The son contests the devise as unconstitutional and against public policy

(1) He says that the freedom to marry is a constitutionally protected right of the 14th amendment

(2) The devise is a restraint on marriage

(c) The court upholds the devise

(1) The restriction is not really on the right to marry, but is on the son’s inheritance—he can still marry whomever he chooses, but may or may not take under the will

(2) The court acknowledges that the devise is a restraint on the right to marry, but says that it is only partial, and is therefore valid

· Gift conditions requiring a devisee to marry a particular religious class or faith are reasonable

· Such may not be the case if the right to marry were restricted to one of a few people

(3) The fact that the father provided for a contingency is important (goes to Israel if not the son)

· This distinguishes a devise from a bear forfeiture (which most states assume that the testator would not want)

· Demonstrates that the father’s true purpose is to further the interests of the Jewish State

(d) NOTE: Restrictions based on divorce are generally NOT valid unless the motive is to provide support in the event of separation

(v) Incentive trusts and the dead hand

(a) It is completely enforceable for a person testator to set up a conditional gift after death.

(b) Usually, the restrictions are focused in three areas: (Social Policy)

(1) Pursue education

(2) Moral incentive

(3) Encourage a productive career

· Wealth gives us power and opportunity

(vi) Policy of letting deceased devise generally:

(a) Custom

(b) Allow man to conform to his natural desires to propagate his kind after he is gone (Locke)

(c) Encourage production today

(d) Incentive for the young to care for the old

(vii) Citing wealth inequality, some commentators argue that the institution of succession should be curtailed and all property should be passed to the government with 6 exceptions:

(a) Marriage

(b) Dependent Children

(c) Disabled

(d) Lineal ascendents

(e) Some portion to charity

(f) Some limited portion to people of the decedent’s choosing ($250K)

(viii) Other argue that an estate should never be able to pass more than $1 million—100% of the rest goes to the government

(ix) There is no way to equalize “cultural inheritance”

(a) Passing of knowledge through families is very valuable, and cannot be taxed or monetized

(b) Some people just have a more favored upbringing than others

3. Hodel v. Irving:

(i) Facts:

(a) Congress passed the Land Consolidation Act that would escheat all land shares that constituted less than 2% of the total tract of Native American Plots of land to the tribe

(b) Several petitioners sued arguing that it was a taking

(c) The court held that it was a taking

(1) The right to pass on valuable property to one’s heirs is itself a valuable right

(2) The law is not all bad—it is aimed at fixing a real problem

· Property was divided between hundreds of owners, making it virtually impossible to know who owned what

· The administrative tasks were extremely burdensome

(3) However, the law limits one’s property right to exclude completely—necessitating a taking

(4) Gov’t can regulate, BUT cannot abolish the right to pass the property on

(ii) Shaw Family Archives v. CMG Worldwide

(a) Background:

(1) Defendants claimed to own the writes to produce and sell a Marilyn Monroe t-shirt

(2) Plaintiffs, residuary takers under Monroe’s will, claimed that a part of the residuary was Monroe’s Publicity rights (the clause said that the plaintiffs were entitled to “anything else which she shall be in any way entitled”)

(b) Testamentary disposition is controlled by the law in effect as of the date of death

(c) On Monroe’s death, there was no statute providing for publicity rights, therefore, she cannot have intended to have passed such a property right in her will

(1) Any publicity rights she owned were extinguished at death

C. Professional Responsibility/Ethics—MALPRACTICE

1. DUTYàSampson v. Calivas

(i) Background:

(a) Father wanted to leave his property to his son.

(b) Fath

he lawyer later and says—“Screw that, I want to leave everything to the pool boy”

(b) The problem:

(1) Duty of confidentiality to the wife as a client

(2) Duty to disclose material information to the husband as your client

(c) Under PR rules – you must believe that you can competently represent both

(d) How to resolve the matter:

(1) Put it in the retainer / engagement letter

· Acts as waiver

· Some states require engagement letters w/ dual rep.

(2) Explain to your clients the potential problems that may arise

(3) After explanation, get their written consent to the double representation

(4) Explain the confidentiality problem during the relationship and agree on a resolution

(5) Two approaches to resolving confidentiality:

· “Conduit Approach” – Reserve the right to share confidential information with either spouse

o If this is the case—the wife would never call the lawyer—would just go execute another will

o This doesn’t really solve anything—the result is the same

· “Priest Approach” – Provide that any communications will remain private; no duty to disclose to the other

(iv) SC §62-1-109:

(a) Fiduciary owes no duty to beneficiaries unless a written agreement says otherwise

(b) This eliminates many issues that would arise to create a conflict

D. Guardians and Conservators ****

1. Guardian a person who takes care of PERSONAL (physical) NEEDS of someone unable to take care of his or her personal needs

(i) Applies to: minor children and physically/mentally disabled

(ii) Typically governs taking care of physical needs

(iii) Parent is automatically the guardian of minor children

2. Conservator is a person appointed by the court to take care of FINANCIAL and PROPERTY needs for someone who cannot take care of their own property

(i) There is no automatic appointment, including parents

(ii) Requires a court proceeding

II. Intestate Succession

A. Background:

1. If someone dies without a will, they are said to die intestate

(i) Intestacy – what happens with probate assets when the owner dies without a will

(a) Rule of Law: Normally state where decedent is domiciled at death governs disposition of personal property

(b) Real property: law of state where RP is located

(ii) Partial Intestacy – where a will only covers a portion of the estate, leaving the laws of intestacy to govern the rest

2. There are two types of estates:

(i) Probate estates—assets that passes through (1) a will or (2) intestate succession

(ii) Nonprobate estates—assets that pass through other means

(a) E.g. joint tenancy with right of survivorship

3. General Rules of intestacy

(i) Spouses typically have a share:

(a) Most commentators think that spouses don’t get enough

(ii) Who is worthy of taking – How to measure “closeness” to the:

(a) Consanguinity – find the closest ancestors