WILLS & ESTATES OUTLINE
Prof. Steven Goode – Summer 1997
This outline is e-mailware! While there is no cost for using the outline, you must drop me a line at dfalgoust@mail.utexas.edu to tell me what you think, if it helped you, etc; it’d also be nice if you dropped by my web page at http://www.geocities.com/NapaValley/3578/ and signed my guest book.
Feel free to redistribute this outline unmodified to anyone who may find it useful. This outline is provided “as is” and I make no promises as to its accuracy (it worked for me, your mileage may vary). Good Luck on exams!
Damien Falgoust
University of Texas School of Law
I. Introductory Material
A. Theoretical Issues
1. Is the right to pass property at death a good thing?
a) Halbach argues that it is because it makes the donor happy, reinforces family ties, and (most importantly) provides an incentive to work and earn beyond what just one person can consume
b) Bentham argues it is because it encourages the young to care for the old
c) Ascher argues that it is not; that if the government took all property at death, it could wipe out the deficit (but he would provide for exceptions, notably surviving spouses and minor children
d) Blum argues that inheritances don’t make much of a difference in inequality among economic classes; rather, it is day-to-day income and cultural experience that causes the wealth gap
e) Langbein says inheritances today aren’t as important as they were in the day of the family farm; more important today are things like educational expenses for children and other inter vivos transfers; thus, parents today save less and consume more
2. Does the ability to pass property at death encourage saving by the testator, or discourage work by the donees?
3. Today, the law is in flux because:
a) Types of property are changing – unlike the past, when land was the most important family asset, today personal property accounts for most wealth
b) Marriage is changing (½ end in divorce; 83% and 78% of women remarry)
c) The family is changing (kids born out of wedlock, people live together instead of marrying, same-sex marriages are under consideration)
d) The financial relationship between spouses has changed
e) People are living longer
f) Today there are many will substitutes – ways to dispose of property without a will
(1) Thus, there is a “dual system,” but there is a movement to integrate the two (e.g., the Uniform Probate Code [UPC])
B. What limitations on bequests are permissible?
1. There is very little a testator can’t do – the general attitude is it’s the testator’s property and he can do what he wishes
a) The basis behind this rationale is that the testator could place conditions on devises while alive, so why not at death? However, this ignores the fact that you can change your mind while alive
2. Thus, in Shapira, a bequest requiring a son to marry a Jewish girl by a certain age is perfectly acceptable as a condition on the will
a) Contrast with wills that are a total restraint on marriage – a will with a marriage requirement is only valid if it does not “unreasonably limit the ability to marry, where reasonableness is equal to “likelihood of occurrence”
b) Thus, the marriage requirement in Shapira is OK (there were lots of Jewish girls around) while one placed on a woman in the Circle of Friends religious order isn’t
c) Restraints on remarriage are virtually always permissible
3. State action can sometimes limit what a testator can do, but the cases are all over the board on what state action means
a) For example, Shelley v. Kraemer said a racially restrictive covenant was void because it required state action (e.g., the court) to enforce it
b) Similarly, in Evans land devised for a white-only park is invalid because park maintenance was a government function (e.g., state action); also, Penn dealt with an endowment for a white orphanage/college – court says board was an “agent of the state” and thus there was state action
c) Generally, though, we allow testators to do with their wills what we wouldn’t let the government do.
C. Malpractice
1. The key to success in estate planning is to avoid the pitfalls (and there are many!) A wills practice is probably the easiest type to practice in and get sued for malpractice
2. Privity
a) This is the key to determining if a will beneficiary can sue
(1) Most states have removed the privity barrier for beneficiaries to sue (e.g., Lucas v. Hamm in California and Ogle v. Fuiten in Illinois)
(a) Problems with this approach: are damages just equal to the bequest, or can consequential damages be had? Also, potential conflict if lawyer has to worry about beneficiaries suing
(2) 5 states have not removed this barrier (including New York and Texas)
(a) In these states, only the client (e.g., the decedent) can sue – thus, a wills practice is much safer in Texas
3. The law of wills is becoming less rigid, largely because malpractice has become such a problem
D. Basic Estate Planning
1. Probate and Nonprobate Property
a) Probate property is anything passed via a will or intestacy
b) Nonprobate property is anything passed by an instrument that isn’t a will which became effective upon death. Ex.:
(1) Joint Tenancies
(2) Life Insurance
(3) Contracts with “payable on death” provisions (e.g., IRA’s)
(4) Property passing via power of appointment
c) Thus, it is important to know not just what property is held, but how that property is held
2. Estate Administration (Duties of executor/administrator)
a) Inventory and collect decedent’s estate
b) Manage assets during administration
c) Receive and pay claims of creditors and tax collectors
(1) Some states assume that if you pass burdened property, that the estate pays any liens and the property passes unburdened (but other states don’t)
(2) If the statute of limitations has run on the debt on a piece of property, the executor may not pay the debt
(3) Although many wills contain “just debts” clauses, they aren’t necessary since state law requires such debts to be paid (but the clause is useful if it directs how those debts should be paid)
d) Distribute remaining assets to those so entitled
3. Terminology
a) Administration
(1) If a will, the person administering the estate is the executor
(2) If intestate, the person is a court-appointed administrator
b) Types of Property (not important)
(1) Real property is devised to devisees
(2) Personal property is bequeathed to legatees
(3) Also, intestate real property descends to heirs, while personal property is distributed to next-of-kin
c) Abbreviations in this outline: UPC – Uniform Probate Code; TPC – Texas Probate Code; SS – Surviving Spouse; T – Testator
4. Children and Guardians
a) Need a guardian for two purposes: custody and care, and management of assets (can be the same person or two people)
b) Ways to handle kids receiving property via will
(1) Guardianship – worst alternative; guardian doesn’t have title, must safeguard the property until kid reaches majority, and can’t touch the principal without court permission. Heavy court oversight makes this a unwieldy alternative
(2) Custodianship – Uniform Transfers to Minors Act (UTMA) allows custodian to spend for minor’s benefit; must give property to minor upon his/her reaching 21 (or to minor’s estate upon death)
(3) Trust – generally best, most flexible alternative; trustee owns title, trust can be tailored for specific circumstances
II. Intestacy
A. Common Law and Community Property
1. General Notes
a) Eight states (AZ, CA, ID, LA, NV, NM, TX, and WA) are community property states; it applies to married couples
b) Basically, community property means each spouse owns an undivided ½ share in all earnings during the marriage; one spouse can only devise ½ of the property
(1) Contrast with separate property states, which hold all property belongs to the spouse that earned it (but almost all have provisions mandating a surviving spouse get a forced share of the estate)
c) Community property is presumed; most states require proof that property is separate by “clear and convincing evidence
(1) Separate property includes all property held before the marriage, property acquired by gift or inheritance (including purchases made with gift funds)
(2) Capital gains on sale of separate property is still separate property
(3) Dividends or interest on separate property depends on the state (LA, TX, ID,
this, but didn’t directly address the problem. Long story short: for a couple to convert property, a two-step approach was required:
a) Partitioning the property (to characterize the joint tenancy as a future transaction), and then
b) Make the joint tenancy
3. Even this, however, led to problems – in divorce actions, a court can only divide community (e.g., not separate) property
4. Finally, in 1987, the Texas Constitution was amended – now spouses can agree in writing that all or part of the community property becomes property of the SS upon death
a) Note this is a “new genre” of property – it is not a joint tenancy, but rather “community property with a right of survivorship”
(1) Thus, this creates another will substitute
b) Note the agreement must be in writing, and use one of the listed phrases (it actually allows other wordings, but why experiment?) (TPC §452)
c) What if parties change their minds? (TPC §455)
(1) If the parties agree at creation how to revoke, then that procedure may be used
(2) Otherwise, must agree to revoke in writing and signed by both parties
(3) If only one spouse wishes to revoke, they may do so in writing and delivered to the other spouse
D. Multi-Generational Problems
1. In all states, if the kids of the decedent are dead, but they have living kids of their own (e.g., grandkids), then the grandkids take
a) This is called taking by representation (the grandkids “represent” the deceased kids)
b) Be Careful! An in-law does not take by representation
c) When drafting, it is best to clearly define which method you wish used – don’t assume the terms are universal
2. How to handle distribution if all of the decedent’s kids are dead, but have offspring?
a) Classic or Strict Per Stirpes – each child splits his or her parent’s share equally (there are as many shares as there are decedent’s children)
(1) Thus, in Figure 1 (see below), D takes ½; F takes ¼, G and H take 1/8 each
b) Per Capita with Representation or Modern Per Stirpes – Shares are divided at the nearest generational level with a living member
(1) Thus, in Figure 1 (see below), D and F each take 1/3, G and H take 1/6 each
(2) Texas follows this rule (TPC §43)
c) Per Capita by Generation – “equally near, equally dear” – there are as many shares as people in nearest generation to decedent who are either alive or have heirs of their own; all living persons in the same generation get one share; remaining shares are combined and redistributed to next generation as though the previous takers had predeceased the decedent.
(1) Thus, in Figure 1 (see below), the result is the same as modern per stirpes
(a) However, if D had offspring I, then G, H, and I would each take a 1/9 share (1/3 remaining share after D and F take x 1/3)
(2) Remember when computing shares that for a person to count, they must either 1) be alive, or 2) have living offspring
(3) This is the UPC approach (§2-106)
E. Ancestors and Collaterals
1. If there are no kids or parents, the property goes to the decedent’s other relations
2. A collateral kindred is a relative that is neither an ancestor nor a descendant
a) Thus, a 1st line collateral is a descendant of the decedent’s parents other than the decedent or his kids (e.g., it is the decedent’s brothers and sisters)
3. If there are no 1st line collaterals, there are two schemes to determine who takes
