Select Page

Trusts and Estates
University of Toledo School of Law
Rapp, Geoffrey C.

Trusts and Estates
I.         Introduction
A.        Terminology
Testator – person who makes a will
Settlor – person who makes a trust
Escheat – to die w/o heirs, property goes to the state
Revocable living trust – instr to avoid probate. Settlor makes an inter vivos transfer of property. On death, trustee has title & can hand out property at will
                                                                        -a good idea b/c any terms can be set forth in the trust – how to distribute to settlor during life, who gets property at death, etc.
                                                                        -can be revoked (obviously)
                                                Probate – process by which an estates is dispensed
                                                                        -creditors need to come forward during probate or be forever barred
Constructive trust – an equitable remedy when the person w/ legal title to property should not have it. Goal is to prevent unjust enrichment when property is obtained by fraud, misrepresentation, misconduct, undue influence, concealment, duress etc.
                        -extrinsic evidence is generally admissible to prove the circumstances that may justify a constructive trust
                                                (1) confidential relationship
                                                (2) fraud, misrepresentation, misconduct, undue influence, concealment, duress etc.
B.        Policies of our Wealth Transmission System:
1.        Respect for the decedant’s intent
The “Dead Hand” – the idea of respecting the decedant’s intent is respecting the dead hand.
-the only time we really don’t like to follow intent is when it conflicts with our policy of providing family support
2.        Spousal (or family) protection
3.        Testamentary freedom – we respect private property rights & individualism, so encourage freedom of testamentary transfers
C.        “Against Public Policy” Eyerman – crt may prevent destruction of property when no one benefits & everyone is harmed by its destruction
-Note: If decedant had stated her reasons for the razing, the court might have been more likely to uphold
-If person had wanted to raze during life, that’d been ok.
            Rat: Desire to continue to benefit from your property is enough discouragement from destruction
Rat: Testamentary transfers are a privilege not a right, courts can limit if they want
-there’s a slippery slope to declaring things as against public policy
D.       “The Dead Hand”
1.        General rule: Testator may place restraints on beneficiary’s conduct before testator’s death, even if the conduct is blameless.
                                    Ex: My estate goes to all my children equally. Any child that w                       as raised by my first wife, though, gets only a dollar.
2.        The dead hand can go too far by unduly restricting the free will of the beneficiary
3.        Conditions such as requiring the beneficiary to marry, say, a Jewish girl, are usually upheld
-but look to the reach of the restraint. Does the B still have a reasonable opportunity to get married? If the nbr of potentially qualifying spouses is too small, it will still be struck down as against public policy.
4.        Total restraints on marriage, or conditions that the person get divorced, are struck down
5.        But a restriction that the spouse not remarry is upheld (& occurs often)
-so long as the will also provides for the spouse’s elective share
6.        Race / ethnicity restrictions are also often struck down as against public policy
II.        Lifetime Transfers
A.        Why give?
-personal satisfaction; donor relieved of responsibilities; avoid taxes; creditor protection; estate planning (reduce spouse’s forced share)
B.        General Rules
1.        Gratuitous – if for consideration, follow the law of Ks
-a living trust can be a gift
2.        Interest – any interest can be transferred, doesn’t need to be the total interest
Ex: “I give you this painting but I reserve a life estate” = ok Gruen.
3.        Conditional Gifts – are not gifts until the completion of the condition 
-the condition vitiates present donative intent
-E.g., “I will give you $10,000 if you quit smoking within a year”
a.        Equitable exception for Engagement rings Fierro v Hoel – (perhaps sui generis)
 Some courts have said there’s an implicit condition in an engagement ring; others say any condition must be explicit
-of the ones that favor implicit condition, a majority says it doesn’t matter who’s at fault when engagement ends, but ring goes back to donor b/c condition failed
                        -other courts consider fault
                                                4. Ordinarily, lifetime transfers are irrevocable
C.        Inter vivos transfers
1.        Present Donative Intent
-must be voluntary
-Present: “I promise to give you $$ when you graduate from law school” – doesn’t count, must be right now
-Conditional gifts are not gifts b/c the condition vitiates the present donative intent
NOTE: The giving of a check is not a gift, b/c donor can cancel the check. It’s constructive delivery, not present donative intent
NOTE: Promissory estoppel issues (detrimental reliance) isn’t a gift isssue, it’s a K issue, but might come up when a conditional gift fails
2.        Delivery
                        P: A

, either in life or in a will
Rule: A person must understand the nature and extent of her property & the natural objects of your bounty (your friends & relatives)
                                                -you must know what you have and the normal people who’d get it.
            -someone who goes in and out can transfer during a period of lucidity
Presumption: Adults have the capacity to make decisions, are not usually undue influenced
2.        Undue influence. Pascale v. Pascale (NJ law)
Def: the sort of influence where the dominant person exerts influence that prevents the donor from following the dictates of his own mind
a.        Baseline rule: An adult donor is generally considered competant to make a gift
b.        Contestant has the burden of proving undue influence (by clear & convincing evidence)
c.        in many states, is presumed where donee sits in a confidential relationship w/ the donor.
-confidential relationship – where trust & confidence actually exist
            Ex: parent/child; principal / agent; other fiduciary relationships; maybe even friends
                        -otherwise, burden is on the contestant to show undue influence
                        -if this is the case, donee must prove that 1) there was no deception, and 2) that the donor understood the consequences
d.        Where donor gives most or all of estate away, or where there’s a physically or mentally weak donor giving to a caregiver, also presumed
                                                                        -the donee must show that the donor had the benefit of independent and competent counsel
F.        Gift & Estate Taxes (pgs 87-90)
1.        Gift Taxes
a.        Any transfer for less than the full consideration in money or money’s worth is a gift (for tax purposes)
b.        Medical and tuition expenses are tax-free gifts in unlimited amount
c.        $11k / calendar year – persons can give up this much, free of tax, every year
-22k if you use your spouse’s share
-gifts are valued at the time of giving them
d.        Gifts of less than an entire interest are included entirely in the decedant’s estate at death, for estate tax purposes