ESTATES, WILLS & TRUSTS, WILLBANKS SUMMER 2015
POLICY BEHIND INHERITANCE AND PROBATE PROCESS
Ways Property May Pass after Death:
Forced Succession: property automatically passes to primogeniture or spouse, children, dependents, or escheat to state
Freedom of Disposition: property could pass in accordance with the decedent’s declared wishes. Authorizes dead hand control.
Rest. 3rd Trusts §29: in reckoning what is contrary to public policy, courts should balance the donor’s freedom of disposition “against other social values and the effects of deadhead control on the subsequent conduct or personal freedoms of others.” (Not majority rule)
Rest. 3rd Prop: American law does not grant courts the authority to question the wisdom, fairness, or reasonableness of the donor’s decision about how to allocate his or her property. Law facilitates rather than regulates this area.
Reasonableness of Public Policy: does it restrict race, religion, etc?
Shapira v. Union National Bank, OH 1974 p 5 (Marry Jewish)
A partial restraint on marriage, which imposes only reasonable restrictions is valid, and not contrary to public policy.
The marrying a particular religious class or faith is reasonable, because π has reasonable latitude of choice.
Unreasonable restraint: Maddox v. Maddox: (VA, 1854) when the condition imposes a virtual prohibition on the ability to marry a suitable person.
Confiscated by the State: property rights terminate upon death (Marxist)
Will: the right to specify who gets what when you die.
Posthumously Acquired Property Rights:
Shaw Family Archives Ltd. v. CMG Worldwide, Inc. N.Y., 2007, p 35 (Marilyn Monroe)
Must have testamentary capacity to devise property rights she did not own at the time of her death.
Descendible postmortem publicity rights were not recognized in NY, CA, or Indiana at the time of her death.
The law of the domicile of the testator at his or her death applies to all questions of the will’s construction.
§2-602 Uniform Probate Code: a will may pass “property acquired by the estate after the testator’s death”, BUT neither NY or CA law had codified 2-602, nor recognized the right of publicity in statute.
Must ‘intend’ to devise any rights she may have acquired under the Indiana or California right of publicity statute through the residuary clause of her will.
In the absence of evidence showing intent, look to boilerplate language (which was slim)
WILLS and Testate Property
Probate Property: property passed through probate under the decedent’s will or by intestacy OR property held in a testamentary trust created under the decedent’s will that passes through probate
Provides evidence for transfer of title, making property marketable again.
Protects creditors by providing a procedure for payment of the decedent’s debts
Distributes decedent’s property to those intended after the decedent’s creditors are paid.
Public Proceeding: will, inventory and final order are open to the public
Expensive: Court Filing fees and other costs (Attorney’s and executors’ fees)
Time-Consuming: Delay before assets distributed to beneficiaries, can impede operation of business, etc.
Dictated by state law under primary or domiciliary jurisdiction. If real property is in another state, ancillary probate in the jurisdiction is required.
Process of transferring probate:
Appoint a personal representative, who is a fiduciary that collects and inventories the property of the decedent.
If decedent dies testate, and the will names the person who is to execute the terms, the executor serves as personal representative.
Testate: devised real property to devisees and bequeathed personal property to legatees.
If no executor, or the person dies intestate, the administrator will be named by court as personal representative.
Intestate: real property would descend to heirs and personal property would be distributed to next of kin.
Non-claim Statutes: every state requires creditors to file claims within a specified period of time. UPC 3-803
14 V.S.A. §1203: Limitations on Presentation of Claims, p 63
Creditors must be given reasonable notice before they are barred by statute, running from the commencement of probate proceedings. Tulsa Prof’l Collection Serv. v. Pope.
Types of Probate:
Formal Probate: notice probate
UPS 3-401: A litigated judicial determination after notice to interested parties.
Informal Probate: ex parte probate:
UPC §3-301: petition for appointment, containing pertinent information about the decedent and names and addresses of spouse, children and other heirs.
Duties of Fiduciary Reps:
Provide notice to creditors
§3-801: Notice to Creditors p 39
Publish notice to creditors once a week for three weeks in a circulated newspaper, requesting claims to be submitted within 4 months after publication OR
Give delivered written notice to creditors asking for claims within 4 months of published notice, or within 60 days after mailing of written notice, whichever is later.
Must distribute assets as promptly as possible.
§3-805: Classification of Claims p 39
Prioritizes payment of claims, if insufficient assets in an estate:
Costs and expenses of administration
Reasonable funeral expenses
Debts and taxes with preference under federal law
Reasonable medical and hospital expenses
Debts and taxes with preference under state law
All other claims.
Preference should not be given to payment of any claim over another claim in the same class.
Supervised Administration: personal rep is subject to the continuing authority of the probate court in administering the estate.
UPC 3-504: Cannot make a distribution to beneficiaries without court approval.
UPC 3-502: An interested party can petition for supervised administration at any time.
Unsupervised (the norm): after appointment, the personal rep administers the estate without going back into court. UPC 3-715
14 V.S.A. §1902: Letters of Administration, Small Estates, Notice 64
Upon petition, if judicial determination by probate court finds that decedent left no real estate, and personal estate is valued at nor more that $10,000, then court may grant Unsupervised Administration to the estate of the petitioner or some other suitable person.
Universal Succession: In Europe and LA – the heirs or residuary devisees step into the shoes of the decedent upon death, take title and assume all decedent’s liabilities and the obligation of paying legacies according the decedent’s will.
Nonprobate Property: Property that passes outside of probate by way of a will or will substitute.
Requires an affidavit of the successor in summary administration.
Inter Vivos Trust: property put in true, and held for the benefit of one or more beneficiaries.
Life Insurance: a pay-on-death contract that operated independently of probate administration
Pay-on-Death Contracts: Transfer-on-Death Contract: To collect property, the beneficiary needs to file a death certificate with the custodian.
Joint Tenancy: Right of Survivorship, Need to file a death certificate with the local registrar of deeds.
BEST REMEDIES A COURT COULD IMPOSE TO PREVENT AMBIGUITIES IN A WILL
Reform the will
Admitting evidence extrinsic to understand the will
An equitable remedy
Court will allow when (1) legally someone is entitled to property BUT (2) there is unjust enrichment or wrongdoing.
Hieble v. Heible CT 1972 p 434 (cancer- joint tenancy – remission, wanted it back)
Court found a Constructive trust – and trustee required to return property if it can be proven that there was (1) an agreement/promise to reconvey property upon a condition, (2) the settlor relied on that promise, (3) the trustee failed to honor the promise.
Duties to Intended Beneficiaries under a Will:
Simpson v. Calivas, NH 1994, p 52
Though there is no privity between a drafting attorney and an intended beneficiary, the foreseeability of injury demands an exception to the privity rule.
Duty arises out of protection of foreseeable harm.
The scope of duty is limited to those in privy of contract with each other.
A majority of courts hold that duty runs from an attorney to an intended beneficiary.
3rd party beneficiary status exist where the contract is so expressed as to give the promisor reason to know that a benefit to a third party is contemplated by the promisee as one of the motivating causes of his making the contract.
Conflicts of Interest:
A v. B., NJ 1999, p 57
RPC 1.6: attorney-client privilege.
(c)(1): permits, but does not require a lawyer to reveal confidential info to the extent the lawyer reasonabl
. See Table of Consanguinity:
UPC §2-114(b): Adopted children are children of adopted parents and not natural parents. Adoption of a child by the spouse of either natural parent has no effect on (1) the relationship between child and natural parent (2) the right of child to inherit from or through natural parent.
An adopted Child is entitled to take under the will or trust of the adoptive parent just like a biological child
UPC 2-116: If a parent-child relationship exists, the parent is a parent of the child and child is a child of the parent for the purpose of intestate succession.
UPC §2-119: In stepparent adoption, children can inherit from their genetic relatives, but genetic relatives cannot inherit from the children.
VT 1-104: In VT, only if adopted children are minors, may they inherit from and through the other parent.
The UPC makes no reference to adoption as a minor.
The only people who have standing to challenge the validity of a will are those who would take if the will were denied probate.
Hall v. Vallandingham: MD, 1988, p 92
Stranger-to-adoption rule: The adopted child is presumptively barred if the donor was not the adoptive parent.
Whether an adopted child is included may depend on what the law was at the testator’s death.
The only persons who have validity to challenge a will are those who would take if the will were denied probate
The decedent’s collateral relatives must first overturn any adoption by the decedent
Restrictions: can’t adopt persons whom you have a sexual relationship with, or for the purpose of making them heirs to a trust.
Minary v. Citizens Fidelity Bank & Trust Co. Ky, 1967, p 98
No adult adoption if the purpose is to entitle someone to share in a pre-existing trust.
Equitable adoption: Promise or intention to adopt must be proved by clear and convincing evidence.
O’neal v. Wilkes, GA 1994 p 104
Majority says Estelle had no legal right to give Hattie up for adoption. There must be an implied contract to adopt — which entails that one party has the legal capacity to give a child up for adoption.
Estelle had physical custody, but not legal guardianship.
Child not a step child
Child not a foster child.
Dissent: equitable adoption should have been allowed considering the situation. Those who should have adopted were estopped from adopting
Non-marital Children: Most states permit paternity to be established by evidence of the subsequent marriage of the parents, acknowledgement of the father, and adjudication during the life of the father, or clear and convincing proof after his death.
Posthumously Conceived Child: born and conceived after the death of one or both genetic parents – A non-marital child.
Woodward v. Commissioner of Social Security: MA 2002, p 112. (Cryogenic sperm)
In limited circumstances, a child resulting from posthumous reproduction may enjoy the inheritance rights of ‘issue’ under the MA intestacy statute
Look to the genetic connection, consent/intent of decedent, and the time that has past to determine inheritance rights and parentage interest.
In Re Martin B. NYSD, 2008, p. 120
Husband assumed that any children born as a result of the use of his preserved semen would share in trust.
Rule: A lot depends on what the trust settler would have intended.
UPC 2-121: in the absence of a court order to the contrary, the surrogate does not have a parent-child relationship with the child unless no one else does.