Trusts & Estates, Summer 2009 – Prof. Kohlhoff
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1 Introduction
     1.1 The Probate Process
           1.1.1 Goals: determine gross estate, taxable estate, and administer proper distribution
                 1.1.1.1 collect assets
                 1.1.1.2 satisfy creditors and the taxman
                 1.1.1.3 resolve beneficiary conflicts
                 1.1.1.4 distribute remainder
           1.1.2 Probate Assets: all individually devisable property
                 1.1.2.1 includes the person’s share of community property
                 1.1.2.2 includes tenants in common rights
                 1.1.2.3 would not include life estate or joint property
           1.1.3 Non-Probate ‘Transfers (“will substitutes”)
                 1.1.3.1 Trusts & Guardianships
                 1.1.3.2 Life Insurance & Retirement (401k) benefits
                 1.1.3.3 POD (payable on death) accounts
                 1.1.3.4 joint property with rights of survivorship
           1.1.4 Administration: state’s rights, formal court process, personal representative
                 1.1.4.1 jurisdiction by state of domicile
                 1.1.4.2 ancillary probate for property in other states
                 1.1.4.3 file petition to admit will, get letters testamentary and administration
                 1.1.4.4 give notice to those who might want to file a credit claim or contest the will
                 1.1.4.5 administration may be supervised by the court, may be paid
     1.2 Federal & State Estate & Gift Taxes: $13K, $1M, $3.5M
           1.2.1 $13K annual gift allowance, $1M cumulative gift allowance (file gift tax return)
           1.2.2 $3.5M personal estate exemption (the “unified credit subject to congressional change)
           1.2.3 Marital 100% deduction
           1.2.4 Will Substitutes: trusts, 401k, life insurance
     1.3 Cases: states rights, administrator qualifications, legal malpractice, duty to beneficiary/ward
           1.3.1 State’s Rights: Marshall v. Marshall, 126 S.Ct. 1735 (2006)
                 1.3.1.1 Petitioner widow filed for bankruptcy and filed a tortious interference counterclaim against respondent, the decedent’s son. The bankruptcy court and the district court entered judgment in favor of the widow. The United States Court of Appeals for the Ninth Circuit reversed, finding that the probate exception barred federal jurisdiction. Certiorari was granted to resolve the apparent confusion concerning the scope of the probate exception.
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The decedent, the widow’s husband, did not include anything for her in his will. While the decedent’s estate was subject to ongoing proceedings in state probate court, the widow filed for bankruptcy in federal court. The widow alleged that the son tortiously interfered with a gift she expected from the decedent. The Court determined that the district court properly asserted jurisdiction over the widow’s counterclaim against the son. The widow’s counterclaim fell outside the bounds of the probate exception because (1) the probate exception reserved to state probate courts the probate or annulment of a will and the administration of a decedent’s estate and precluded federal courts from endeavoring to dispose of property that was in the custody of a state probate court, (2) the widow’s claim did not involve the administration of an estate, the probate of a will, or any other purely probate matter, and (3) the widow did not seek to reach a res in the custody of a state court. In addition, the Court rejected the appellate court’s finding that state-court delineation of a probate court’s exclusive adjudicatory authority could control federal subject-matter jurisdiction.
           1.3.2 Administrator Qualifications: In re Estate of Nagle, 317 NE 2d 242 (1974)
                 1.3.2.1 court may not refuse to appoint testator’s paramour as executor over the objections of spouse – no disqualification based on relationship with testator or her being financially indebted to testator
           1.3.3 Wife as Executor: Kenton’s Estate v. Kenton, 423 So.2d 531 – Florida
                 1.3.3.1 separation agreement’s provision, which stated that decedent and widow had waived and released all rights and claims of every nature whatsoever in the other’s estate, did not, when read in conjunction with certain statute, constitute a renunciation of widow’s right to serve as personal representative of the estate pursuant to decedent’s will naming her as the representative.
           1.3.4 Guardianships and duty to ward: Fickett v. Superior Court, 558 P.2d 988
                 1.3.4.1 attorneys were negligent because they failed to discover that the former guardian had liquidated the ward’s estate, converted the funds to himself, and made improper investments for his own benefit. public policy permitted the imposition on the attorneys of a duty of care to the ward; (2) when the attorneys undertook to represent the former guardian, they also assumed a relationship with the ward; and (3) the attorneys failed to establish the absence of a legal relationship and concomitant duty to the ward such that they could be liable for injuries to the ward’s estate.
           1.3.5 Legal Malpractice: Blair v. Ing, 21 P3d 452 (Hawaii 2001)
                 1.3.5.1 The beneficiaries’ parents retained attorney to create an estate plan, and upon their father’s death, their mother hired accountant to prepare the estate tax forms. Alleged errors resulted in approximately $ 200,000 in taxes. The state supreme court held that attorney had a duty of care toward the beneficiaries, and they were intended beneficiaries of the contract between attorney and the trust settlers, so they had standing, under both negligence and contract theories to proceed against him. The cause of action would not create a conflict of interest, violate attorney-client privilege, prevent the enforcement of the trust document, or vary its terms. Thus, the circuit court erred as the beneficiaries alleged facts sufficient to sustain a legal malpractice action in both tort and contract. The statute of limitations for legal malpractice was subject to the discovery rule, so the claim was not time-barred. The beneficiaries were only incidental beneficiaries of the contract with accountant. Because the complaint alleged ordinary negligence, it did not sufficiently state a cause of action for accountant malpractice, so the lower court did not err in dismissing those claims.
2 Intestacy
     2.1 Testation is not a personal right, it is provided by state law
           2.1.1 Survivorship: 120 hours
           2.1.2 Choice of Law: real property where located, personal property where domiciled
           2.1.3 Protections for Homestead and Support
     2.2 Qualifying to Take: Heirs, Ancestors, Issue
           2.2.1 Share of Spouse
                 2.2.1.1 Share of Spouse – UPC § 2-102
                       2.2.1.1.1 if no descendants or parents – 100%
                       2.2.1.1.2 if descendants by marriage only – 100%
                       2.2.1.1.3 if no descendants but one parent – $200K + 75%
                       2.2.1.1.4 if spouse has children from 1st marriage + marital children – $150K + 50%
                       2.2.1.1.5 if decedent has children from 1st marriage regardless of marital children – $100K + 50%
                 2.2.1.2 Indiana IC 29-1-2 Share of Spouse
                       2.2.1.2.1 100% if no descendants or parents
                       2.2.1.2.2 3/4 if no children but one parent
                       2.2.1.2.3 1/2 if spouse and one child of marriage
                       2.2.1.2.4 if second marriage with previous children, 25% real estate equity and % of personal property
           2.2.2 Share of Children & Other Relatives
                 2.2.2.1 Share of Heirs – UPC § 2-103
                       2.2.2.1.1 children, parents, grandchildren by representation
                       2.2.2.1.2 if still nothing, then 1/2 to each maternal/paternal side
                 2.2.2.2 Representation – UPC § 2-106
                       2.2.2.2.1 find closest generation with any survivor and allocate shares per capita, distribute to any survivor
                       2.2.2.2.2 combine remaining shares, go to next generation
                 2.2.2.3 Non-marital Children
                       2.2.2.3.1 common law – no rights
                       2.2.2.3.2 can usually inherit from mother
                       2.2.2.3.3 can inherit from father must be recognized
                 2.2.2.4 Non-marital children – UPC § 2-114
                       2.2.2.4.1 non-marital child can inherit from natural parents even if not married
                       2.2.2.4.2 adopted children are no longer related
               3.4.1.1.1 in testator’s handwriting, signed by T
                       3.4.1.1.2 writing must evidence testamentary intent
                       3.4.1.1.3 some states require entire will to be handwritten
                       3.4.1.1.4 witnesses must testify it is T’s handwriting
                       3.4.1.1.5 UPC requires only material portions and signature in T’s handwriting
                       3.4.1.1.6 no witnesses needed except that the handrwiting is T’s
                 3.4.1.2 signature – can be assisted or by proxy, can be a mark instead of name
                       3.4.1.2.1 can be problems if not “at the end” of the document
                       3.4.1.2.2 gives room for error or fraud
                       3.4.1.2.3 some problems with order of signing, publication
                 3.4.1.3 nuncupative – oral wills for soldiers and sailors
                       3.4.1.3.1 witnesses required
                       3.4.1.3.2 may require death to be imminent
                 3.4.1.4 integrated and incorporated documents must be proper
                       3.4.1.4.1 4-corners doctrine – must show intent to incorporate and clear identification
                       3.4.1.4.2 if ambiguous, court may consider extrinsic evidence
                             3.4.1.4.2.1 look for facts with independent non-testamentary significance
                       3.4.1.4.3 goal is to give effect to T’s intent
           3.4.2 Witnesses – disinterested and proper ritual attestation
                 3.4.2.1 Attested in T’s presence (but not always in presence of the other W)
                 3.4.2.2 Don’t have to witness the actual signing, but the acknowledgement will work
                 3.4.2.3 Proper number of witnesses
                 3.4.2.4 need not read the content of the document to witness it
                 3.4.2.5 Competent & Disinterested Witnesses
                       3.4.2.5.1 purging statutes in some states will invalidate gift or force person to take the lesser of two
           3.4.3 Attestation Clause
                 3.4.3.1 recites due performance of statutory requirements
                 3.4.3.2 creates rebuttable presumption that the facts stated are correct
           3.4.4 Self-Proving Affidavit
                 3.4.4.1 serves as substitute for live testimony of witnesses to prove will
                 3.4.4.2 T&W sign will, then sign a notarized affidavit
                 3.4.4.3 provides conclusive presumption that signature requirements are met
           3.4.5 UPC § 2-502 – Will Requirements
                 3.4.5.1 wills must be in writing
                 3.4.5.2 signed (or marked) by the testator
                       3.4.5.2.1 if by proxy, signed in his name in his conscious presence, and at his direction
                 3.4.5.3 signed by two witnesses in a reasonable time
                       3.4.5.3.1 witness to either testator’s signing or testator’s acknowledgement of signature
                       3.4.5.3.2 most states require W’s to sign in T’s presence.
           3.4.6 Effect of Mistakes
                 3.4.6.1 UPC § 2-503 Harmless Error
                       3.4.6.1.1 if proponent of the document establishes by clear and convincing evidence that testator intended this document to be his will.
                       3.4.6.1.2 focus is on T’s intention
                 3.4.6.2 substantial complance – how close to formalities did T come?
