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Trusts and Estates
Wayne State University Law School
Cancelosi, Susan Evans

Trusts & Decedents’ Estates
Cancelosi, Fall 2012
 
I. Introduction to Estate Planning
 
A. Introduction (1-38)
 
Section in book about the pros and cons of transferring property upon death and various proposed systems
Benefits of transmission of wealth upon death
Productivity
Take care of elderly
Should have the right to pass on your property that you accumulated
Natural – part of human experience to leave money to the next generation
Taxes?
Arguments against transmission of wealth upon death
Doesn’t have to be earned
French and Russian revolutions – gap between top and bottom
Wealth capture
Paris Hilton
American law
For most of our history – the right to pass property at death was created by law and therefore as a creation of law, could be abolished
Irving Trust Co. v. Day, 314 U.S. 556 (1942) – “Rights of succession to the property of a deceased, whether by will or by intestacy, are of statutory creation, and the dead hand rules succession only by sufferance. Nothing in the Federal Constitution forbids the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction”
This changed in mid-1980s – Hodel v. Irving
Supreme Court – opposite of Irving Trust Co. v. Day
Hodel v. Irving, 481 U.S. 704 (1987)
Congress passed a statute providing that highly fractionized land owned by the Sioux would not pass by intestacy or devise, but instead would escheat to the Tribe
In sum, only a few thousand dollars was at issue
District court – found that statute was constitutional – appellees had no vested interest in the property prior to the decedant’s death
District court was right – can’t sue parents before death for leaving out of will – no vested interest – doesn’t matter if told that you were going to inherit – no vested interest, at best an expectancy
Congress had plenary power to regulate Indian descent
Court of Appeals reversed – taking without compensation
Supreme Court
Fractionation is a problem but the solution was not alright
What would have been alright?
Could have designated an heir
Could have limited, but not abolished
Could have done an inter vivos transfer or revocable trust
Can write “I hold this property in trust” – would create trust
Statute was too broad – did too much
Why is this case important?
You have a right to write a will
Have a right to do nothing and have property pass by intestacy
You have right that cannot be taken away from you to transmit property at death through a will or through heirs at law
Valuable right – bundle of sticks – can’t take away – can modify or curtail
Rule – Decedents have a right to control disposition of their property at death, and the “escheat” provision of the Indian Consolidation Act of 1983
Take away – the right to pass on valuable property to one’s heirs is itself a valuable right
U.S. law accords an incredible freedom to transmit property
In theory, almost no limitations – freedom of disposition
Caveats
1) Lip service given to theory and judges turn around and invalidate wills
Are we moving closer or farther away to this freedom?
2) Our approach is not the only approach
Ex: Europe – can’t disinherit children
The Dead Hand
How the deceased controls disposition of property after death
Why would we not want the dead hand to control?
Circumstances that decedent doesn’t foresee
Why should the dead hand control?
It made the money, it should be able to control it
Individual control
Giving the dead hand free reign is the ultimate in individual control – controlling after you’re gone
Organizing principle
Courts give loose level of oversight
Some limits
Spousal rights – protect rights of surviving spouse even if try to disinherit in will
Creditor’s rights
Limits on unreasonable restraint – marriage, divorce, illegal activity
Traditional rule against perpetuities
Dead hand gets about 90 years
This limit is falling away
Shaw Family Archives v. CMG Worldwide, 486 F. Supp. 2d 309 (S.D.N.Y. 2007)
Marilyn Monroe died testate in California in 1962.  Her domicile was in New York.  The residuary clause of her will devised “all property of which I shall die seized or possessed or to which I shall in any way be entitled…”  Monroe’s estate was closed in 2001, and the remaining assets were conveyed to MMLLC (Δ), a holding company formed to hold the intellectual property assets of the Monroe estate.
Shaw Family Archives was a company that owned the intellectual property rights to photographs taken by Sam Shaw.  Among those photographs was a series of photographs of Marilyn Monroe.  A picture of Marilyn Monroe owned by SFG (π) was used on a t-shirt that was sold in a store in Indiana.  MMLLC claimed that the use of the pircture on the t-shirt violated Monroe’s post-mortem right to publicity.  The Indiana statute that granted the post-mortem right to publicity was enacted in 1994.  When Monroe died, neither New York nor California recognized a post-mortem right of publicity. 
The residuary clause of Monroe’s will devised “all property of which I shall die seized or possessed or to which I shall in any way be entitled…”
Residuary clause
Bucket that comes along and scoops up whatever you left out
Go through specific devises and once all of those are given away, whatever’s left – “remainder of estate”
Marilyn Monroe’s will
Who gets what
“SIXTH” – residuary clause
Reis, Kris…remainder to Lee Strasberg
What is the property at issue
Post-mortem right to publicity in Indiana
Who’s fighting
Everybody’s dead
Indiana – right of publicity – gave right to pass down publicity rights – image, name, likeness
Who wins?
Shaw family
Why do they win?
Indiana law doesn’t apply
Neither New York of California had a law at the time of Monroe’s death that recognized publicity rights
1) Law we look to is law in effect when die
Possible to make something retroactive – California
a) certainty
b) new suits could go on forever – will could be in limbo forever
1) Don’t clog up courts
2) We care about the individuals – if you inherit money, you want to get that money
2) You cannot transfer property that you do not own
Some exceptions – what you own or what you may someday own
Uniform Probate Code – what you may someday own
Depends on jurisdiction
Court does away with argument that Monroe intended to devise publicity rights – “to which I shall be in any way entitled”
Court – stopping point is death
What did Monroe intend?
If what we care about is a testator’s intent, then is the court making the right decision
This case – up in the air
Shapira v. Union National Bank, 315 N.E.2d 825 (Ohio Court of Common Pleas, Mahoning County, 1974)
A college student’s father died and conditioned his son’s inheritance upon his marrying a Jewish girl of Jewish parentage within seven years of the father’s death
Whose estate is at issue?
Father – David
What did the will say
Son had to marry Jewish girl whose both parents were Jewish within 7 years or else his inheritance would go to the State of Israel
What’s the problem?
What’s the father’s goal?
Wants soon to marry Jewish girl so that grandchildren will be Jewish
Wants to make sure that his son stays in same religion and marries someone of that religion
Is this a good way to do it?
Nothing to prevent Daniel from marrying Jewish girl and then immediately get divorced
Provision could have been drafted better
What were Daniel’s arguments?
Unconstitutional and against Public Policy
Restraint on marriage
Court – Daniel doesn’t have to marry
Is this a partial restraint on marriage?
Maybe it is, but not an unreasonable one – can marry whoever he wants, but won’t get the money
Court – lots of cases allow a will provision to be conditioned on who you marry – on choosing to marry someone of a particular faith
Certain provisions no allowed
Overtly or covertly encourage separation or divorce
Interfere in existing family relationship – ex: siblings not talking to each other
But can make bequests contingent
Incentive Trusts
In modern practice conditional gifts such as in Shapira tend to be

ate Estates
A. The Functions of Probate
Probate performs three core functions:
1) it provides evidence of transfer of title to the new owners (i.e., it clears title and makes property marketable again)
2) it protects creditors by providing a procedure for payment of debts
3) it distributes the decedent’s property to those intended after the decedent’s creditors are paid
B. Probate Terminology and History
When a person dies and probate is necessary, the first step is the appointment of a personal representative to oversee the winding up of the decedent’s affairs.  The personal representative is a fiduciary who inventories and collects the property of the decedent; manages and protects the property during the administration of the decedent’s estate, possesses the claims of creditors and tax collectors; and distributes the property to those entitled
The court that supervises the administration of the probate estate is usually referred to as a probate court
Court names vary
“to go through probate” means to have an estate administered in one of these courts
Personal representative
Executor – decedent dies testate and in the will names the person who is to execute (i.e., carry out the terms of) the will and administer the probate estate
Administrator – will does not name an executor, the named executor is unable or unwilling to serve, or the decedent dies intestate
Usually selected from a statutory list – see pg. 40
Must give bond
Also required in most states for executing a will unless the will waives the bond requirement, which is common
Different legal vocabulary for real and personal property – today, it is perfectly proper to use the single word will (instead of last will and testament) to refer to an instrument disposing of both real and personal property
A person dying testate devises real property to devisees
A person dying testate bequeaths personal property to legatees
When a person dies intestate, real property descends to heirs
When a person dies intestate, personal property is distributed to next-of-kin
Toady, in almost all states, a single statute of descent and distribution governs intestacy
Thus, today the word heirs usually means those person designated by the applicable statute to take a decedent’s intestate property, both real and personal.  Next-of-kin usually means exactly the same thing
C. A Summary of Probate Procedure
1) Opening probate
Though the general pattern of administering probate estates is quite similar in all jurisdictions, there are widespread variations in the procedural details
The will should first be probated, or letters of administration should first be sought, in the jurisdiction where the decedent was domiciled at death.  This is known as the primary or domiciliary jurisdiction.  If real property is located in another jurisdiction, ancillary administration in the jurisdiction is required
The purpose of requiring ancillary administration is to prove title to real property in the situs state’s recording system and to subject those assets to probate for the protection of local creditors.  Ancillary administration may be costly because the state may require that a resident be appointed personal representative, with a local attorney.  Executor’s commissions and attorney’s fees will be paid to them for handling the ancillary assets.