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

-Cancelosi, Trusts and Decedents’ Estates, Fall 2010
-Wealth Transfer
-This Generation – A Tremendous Transmission of wealth
-As the baby boomers age and die, the book postulates that there will be an enormous wealth transfer. Granted, this book was written 2-3 years ago so much of this might not hold true. A lot of the wealth growth up to this time was during the run up in real property value. The economic downturn of the last 2 years has eroded what many have in their 401k accounts.
-Nevertheless, when you compare it to previous generations it is a lot of money
-Concentration of Wealth
-There is a concentration in the top 10%. Depending on your perspective you might think this is a good thing, or you might think it has ramifications for society.
-Statistically there is a disparity growing between the top 10% and everyone else
-History of Freedom of Testation
We believe in freedom of inheritance in this country: the ability to do with your money what you want. This can be seen when we are talking about trusts, particularly when one compares this to British trust law.
-British Heritage
-As a general matter our wills and trusts law is derived from British heritage so many things date back hundreds of years to feudal England. But we have taken it beyond wherever it was and we believe you have the right to do what you want with your money almost to the exclusion of everything else.
-Therefore, even among the poor there is popularity that everyone gets to control their property after death.
-Reasons for Allowing Wealth Transfer
-For people to support themselves
-We don’t want spouses and dependent children to be disinherited and be put on state assistance
-Family Businesses are a good thing
-We want them to be able to continue after death
-It provides jobs for attorney
-It allows the elderly to force their kids to take care of them
-Problems with Wealth Transfer
-It perpetuates wide disparities in the distribution of wealth
-Concentrates economic power in the hands of the few
-Denies opportunity to the poor
-There is an unearned windfall to the people who get the money
-Government Power to Regulate
-Irving Trust Co v. Day (p3n, Sup Ct – 1942) (short quote)
-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.
-The right to pass property at death was created by law and therefore can be limited by law.
-NOTE: This was the law until the 1980s.
-Hodel v. Irving (p3, Sup Ct – 1987) – The complete abolition of the rights of an owner to dispose of property rights is a TAKING without just compensation, violating the Owner’s rights guaranteed by the Fifth Amendment.
-The Indian Land Acts enacted at the end of the 19th Century provided that each Sioux Indian was allotted reservation land which was held in trust by the US.
-Eventually the lands were splintered into multiple undivided interests, with some parcels having hundreds of fractional owners.
-In 1983, Congress passed the Indian Land Consolidation Act. Section 207 of the act provided that certain fractional interests could not be transferred by intestacy or devise but would ESCHEAT back to the tribe.
-No provision was made for the payment of compensation to the owners of the escheated fractional interests.
-Irving (P), a member of the Sioux Tribe and a prospective recipient of one of the fractional interests affecte by the statute, filed suit, claiming that Section 207 was a taking without just compensation in violation of the Fifth Amendment.
-DST CT: (omitted from text) found that this provision was constitutional. The individuals had no vested interest in the properties before the death of the property owner (until someone dies, other people don’t have a right to their property—they are at best expectant heirs). Secondly, Congress had the plenary power to abolish or alter the rules of intestate succession.
-CT APPLS: (omitted) It was unconstitutional because it took away one of the bundle of rights and was a taking according to the Fifth Amendment.
-ISSUE: Is the complete abolition of the rights of an owner to dispose of property rights a taking without just compensation, violating rights guaranteed under the 5th Amendment?
-HOLDING: Yes. Ct of Appeals decisions upheld. It took away one of the KEY STICKS in the bundle which is the right to devise. The law is welcome to adjust and maneuver that right but CANNOT ABOLISH IT. A right to pass property to one’s family has been a part of the Anglo-Saxon legal system since feudal times. The escheatable interests are not necessarily de minimis. Even though the fractional owners have the right to make inter vivos transfers of the interests, such a retained right does not obviate the total abrogation of the owner’s rights to devise the property.
-NOTE: As O’Connor points out in the majority opinion, there are a lot of other things that the original owners could have done. They could sell the land, transfer it inter vivos. They could set up a complicated trust provision that would avoided probate. It was only at the point of death that if you haven’t done any of that you lose power to do it.
-“Dead Hand” Control
-“Dead Hand” – Control arises when a decedent conditions a gift to a beneficiary upon a beneficiary behaving a certain way. By qualifying the testamentary gift, the decedent is attempting to exercise control over the beneficiary even after the transferor’s death.
-Arguments In Support
-It is the decedent’s property
-There would be no problem with them having done that during life
-A beneficiary has no right to receive the property
-That is of course, there is not law about disinheriting wife in that jurisdiction
-Arguments Against
-Circumstances change
-And where the donor is deceased he or she no longer has the capacity or flexibility to take ever-changing circumstances into consideration in structuring his gifts. One would not be able to approach the decedent and bargain with them, as during life (Sen. Lieberman example)
-There are some conditions that are contrary to fundamental rights or public policy
-RST §3of Property – Favors freedom of disposition. It takes a very protective approach to donor’s intent, providing in pertinent part that a “donor’s intention is given effect to the maximum extent allowed by law.” It also acknowledges, however, that a donor’s intent Is invalid where it is “prohibited or restricted by an overriding rule of law.”
-Courts have been reluctant to find that upholding conditional terms of the gift constitutes sufficient state action to offend the Constitution, and the courts have been very reluctant to hold conditional

h girl in the area and at that age.
-HOLDING:
-(1) it wasn’t enforcing a restriction on his right to marry. It was just enforcing a restriction on his inheritance. A parent is completely free to disinherit a child.
-It also said that (2) it is a partial restraint on marriage, but his father’s will doesn’t make him do anything. He just doesn’t get the money if he doesn’t do what his dad wants.
-You can have all kinds of restrictions including ones that can force you to marry within a particular faith.
-NOTE: If the court required him to marry a blonde, blue-eyed, 6-foot tall Jewish woman who was raised in Tibet, the court would likely see that as being unreasonable. But you have to go pretty far to get to this point.
(3) Finally, the court ruled that unlike Maddox (where there was a requirement to marry within the Society of friends, a very small minority in that area), there were enough Jewish women in the area for him to choose from. Also, in this day and age it is more reasonable for him to be able to find one outside this area. The 7 year period is a reasonable grace period.
-Also, the court says that the P’s argument that could encourage him to divorce “seems too remote.”
-Also, the fact that the D is giving it to the State of Israel in lieu of his son is relevant in that it shows he cares about the preservation of the Jewish faith and blood.
-NOTE: A condition requiring the beneficiary not to marry a member of a specific religion is also deemed valid (In Re Clayton’s Estate 13 Pa 413). Where the restriction on religion limits the beneficiary’s right ot marriage, it will be deemed void (Maddox v. Maddox 52 Va 11).
-Valid and Invalid Dead Hand Controls:
-Testamentary conditional gifts are valid unless they violate public policy or judicial enforcement of the condition would constitute state action violating constitutionally protected fundamental rights. The courts have been reluctant to find that upholding conditional terms of the gift constitutes sufficient state action to offend the Constitution, and the courts have been very reluctant to hold conditional gifts as contrary to public policy.
-Invalid Conditions:
-ABSOLUTE restraints on marriage – Gifts conditioned on the beneficiary not marrying anyone—at least as to first marriages—generally are considered to violate the fundamental right to marry
-Exception: partial restraints. As long as restraints a “reasonable,” which is a very fact sensitive conclusion. The courts pay particular attention to the age of the intended beneficiary and the time frame of the intended restriction or condition.
-Gifts requiring a beneficiary to marry within a reasonable time period, even to someone