Wills, Trusts and Estates Winter 2011-Cancellosi
I. Introduction to Estate Planning
A. The Power to Transmit property at Death: Justifications and Limitation
1. The Right to Inherit and the Right to Convey
a. OVERRIDING THEME: donative intent—what the donor (the decedent) wanted to happen to his property
i. Old View: You didn’t have any natural right to do with your money/property what you wanted…a belief that all of this was based on law…and theoretically the gov’t could eliminate your right to leave money/property how you wanted to
ii. New View: SHIFT: The government cannot completely eliminate the right to transfer property at death Hodel v Irving 
iii. Basic Rule: The right to dispose of property through intestacy or will is a fundamental property right and cannot be abolished. However, some changes/adjustments to the law can be made. (in Hodel, the legislation just went too far) De minimus adjustments are ok.
iv. Blackstone: right to inherit seems to have been allowed much earlier than the right of testament: this could have arisen because a man’s children would be near him on his death bed. “the permanent right of property, vested in the ancestor himself, was not a natural, but merely a civil right.” Wills, testaments, rights of inheritance and successions are all…creatures of the civil or municipal laws.”
1. No willing of lands in England till the time of Henry the 8th; and then only a certain portion.
2. Not until the Restoration that the power of devising real power came to be as it is today.
v. John Locke: Inheritance to children is a natural right
vi. Supreme Court: In Irving Trust Co v Day, the SC held that succession rights to a deceased person’s property are created by statute. The Constitutions does not forbid state legislatures from limiting or abolishing testamentary disposition over property.
b. An heir inherits though intestacy, whereas a devisee inherits by will
c. Hodel v. Irving, p 3 Taking Property without just compensation
i. Facts: Pursuant to a 1889 act of Congress, tracts of land reserved for the Sioux Indian Nation were allotted, to individual Sioux, although held in trust by the US and were allowed to pass to the allottees’ heirs. Succeeding generations of the Sioux divided their predecessors’ tracts into increasingly tiny undivided fractional interest, which often yielded pennies in annual rent. Congress responded by enacting section 207 of the ILCA which provided that any undivided fractional interest representing less than 2% of a tract’s acreage, and which had earned less than $100 in the preceding year, would escheat to the tribe rather than descend by intestacy or devise. Three Sioux who would have inherited such interests but for the operation of section 207 filed an action for injunctive and declaratory relief in federal court, claiming that the section violated the 5th amendment by taking private property without just compensation.
ii. Issue: Does a federal statute barring inheritance of Indian land allotments and providing for escheat to the tribe effect a taking of the decedent’s property without just compensation in violation of the Fifth Amendment?
iii. Rule: ***Main point of case: Made the right to protect private property (and transmit it at death either by intestacy or will) more “natural” under the Just Compensation Clause: 5th AM…no property shall be taken w/o just compensation…A taking of Sioux property, no matter how small the interest (could have transferred an interest)
1. Inheritance becomes a fund right via USSC: can regulate but not abolish
iv. Held: Yes, escheat (reversion to the state) is a taking of the decedent’s (inheritors) property without just compensation bc it entirely abolishes both the descent and devise of these property interests even when the passing of the property to an heir might result in the consolidation of property.
1. SC held that Congress no longer had the plenary power to abolish the power of testamentary disposition of the rules of intestate succession.
a. This signals a fundamental change toward the SC saying that the right to transmit property at death is a right that the legislature can’t take away at willàfundamental right.
b. Court agrees that encouraging the consolidation of Indian Lands is a public purpose of high order (it is important for future generations of Indians to make their lands more productive)
c. Court goes into balancing mode:
i. The lands are small and the interests held are small/ yet the ability to pass interests is a valuable right
ii. Regulation is destroying one of the most essential sticks in the bundle that is property rights: the right to exclude others.
d. Shaw Family Archives v CMG Worldwide, p 10 Can the gov increase the property rights that pass as part of a decedent’s estate?
i. Facts: Marilyn Monroe leaves will which has a residuary clause. This clause is what is left of the estate after specific things have been paid. Kind of like a catchall clause so whatever property not specifically mentioned in the will, isn’t forgotten. Monroe has many extensive things in her residuary clause. Target began selling t-shirts and things that had images of Monroe on them. The property at issue here, are the postmortem publicity rights and whether or not the rights to license these images belong to Monroe and her estate. In 1994- Indiana passed a postmortem right of publicity that was transferable 100 years after the persons death. It didn’t matter if the person had any connection with Indiana—Monroe didn’t have a connection to Indiana.
ii. Issue: Does Monroe have the publicity rights as accorded in the Indiana laws?
iii. Rule: No, postmortem rights of publicity statutes recognize that an individual cannot pass by will a statutory property right that she did not possess at the time of her death.
iv. Held: The photographer wins bc at the time of her death, she didn’t have these rights. She couldn’t have possessed the publicity rights at the time of her death bc they weren’t available at that time. You can’t give away that which you do not own.
1. We are concerned with the laws at the time of death. If we didn’t have this rule, we could keep estates open forever.
2. The Policy of Passing Wealth at Death (The pros and cons)
a. What justifications are there for the private transmission of wealth from generation to generation
i. Inheritance is natural and proper Natural and proper as an expression and enforcement of family ties which are important for a happy society and a good life. Society offers a happy life to the individual who wishes to provide for his family after death.
ii. Least objectionable way of dealing w/ property at owner’s death
iii. It can be used by society to serve as an incentive to bring forth creativity, hard work and productivity that benefits others.
iv. Providing security for future generations, Encourages savings, Want people to be able to do what they want w/ their property, Allowing people to build up wealth will ensure people taking care of them as they age. Younger will be encouraged to care for the older.
b. Arguments against the transmission of wealth
i. Richest people pass all of their money along which perpetuates wide disparities in the distribution of wealth. Top 1% transfer of wealth; only the rich benefit Concentrates inherited economic power in the hands of a few, Denies equality of opportunity to the poor, Tends to reward not merit or productivity but the chance of “fortunate birth”, Distorts motivations and corrupts the character of the children who are expecting to get such wealth
c. Dead-Hand Control: Influencing behavior after death:
i. The dead hand is the concept of the person who has died controlling the disposition of property. The person who died is now the dead hand and they are trying to drive everything even after death. General rule is that dead hand intent can control but cannot UNREASONABLY violate pub policy or restrict fund rights.
ii. Rst of Wills §10.1.Donor’s Intention Determines the Meaning of a Donative Document and is Given Effect to the Maximum Extent Allowed by Law.
1. The controlling consideration is determining the meaning of a donative document is the donor’s intention. This intention is given effect to the maximum extent allowed by law.
2. Rationale: Donative intent is the most important part of wills and trusts in the US Law
a. Freedom of disposition. Property owners have the nearly unrestricted right to dispose of their property as they please.
3. Problem: don’t know any intervening circumstances b/w death and the restriction
a. Can’t reason with the dead person when circumstances change from what they were aware. Ex: If someone wants all of their assets invested in company X, but at the time of his death, company X is bankrupt and out of business
4. Note: American law doesn’t grant courts any general authority to question the wisdom, fairness or reasonableness of the donor’s decisions about his property.
5. American Law curtails freedom only to the extent that the donor tries to make a disposition that is restricted by an overriding rule of law. Examples:
a. Those involving destruction of property: usually void against public policy
b. Spousal rights
c. Creditors rights
d. Unreasonable restraints on alienation or marriage
e. Provisions promoting separation or divorce
f. Impermissible racial or other categorical restrictions
g. Provisions encouraging illegal activity
h. The rules against perpetuities and accumulations
d. Shapira v. Union National Bank (1974) -DEAD-HAND CONTROL, Partial Restraints on Marriage Permissible
i. Facts: P’s portion of the residual interest under his father’s will was conditioned on the requirement that he be married to a Jewish girl, both of whose parents are Jewish at the time of the father’s death. If after 7 years, P isn’t married or married to non-jew, his share goes to the state of Israel. P, unmarried, brings action arguing that the condition upon his inheritance is unconst, contrary to pub policy, and unenforceable bc of its unreasonableness.
1. Public policy- protect the institution of marriage
ii. Issue: Is a partial restraint on marriage in a will a violation of the right to marry protected by the 14th amend? Is a partial restraint on marriage that imposes only reasonable restrictions valid and not contrary to public policy?
iii. Rule: Restraint to induce marriage within a religious faith is valid if under the circumstances, the restraint does not unreasonably limit the transferee’s opportunity to marry. A testator may validly impose a restraint on the religion of the spouse of a beneficiary as a condition precedent to inheriting under the will. Yet, something that imposes an unreasonable restriction is invalid. Ex: a will stating that a woman had to marry one person within a group of (5) was invalid. If there had only been 5 unmarried Jewish Women, in rural ohio; in 1800s UNREASONABLE.
iv. Held: Plaintiff argues that this condition violates constitutional safeguards, based upon the premise that the right to marry is protected by the 14th amendment. Yet this has nothing to do with his right to marry it is important that gifts condition upon marriage are reasonable. The right to receive property is a creature of the law and it not a constitutionally guaranteed right. The restriction that T’s son must marry Jewish girl is NOT a violation of the right to marry protected by the 14th AM…The restriction is (1) reasonable, which means it is (2) not contrary to public policy, and (3) Court here is not being asked to enforce any restriction upon P’s constitutional right to marry
1. Court wants to preserve the intent of the decedent: for his possessions to be used to encourage the preservation of the Jewish faith, either through his sons or else through the State of Israel
2. Restrictions are arising almost entirely based on public policy. Public policy does not preclude the fulfillment of reasonable restrictions upon marriage as a condition of inheritance.
v. Here there are better ways to accomplish this goal. Like breaking this up into parts, give some when they get married, the rest when the first child is born, etc.
e. Restrictions on the right to convey property at death: Limitations to the Dead Hand
i. Destruction of property
1. Does it seem like a good idea to smash D’s necklace?
2. Destruction of property at death is usually not supported—economic waste
ii. We do not allow a Testator to completely disinherit a spouse
1. Every state has some kind of protection for spouses (this is a restriction on the power to transfer)
iii. We do not allow estates to sidestep the obligations to creditors
1. Ex: Mortgages
iv. We don’t enforce provisions that support divorce or separation
1. Ex: I will give you my silver collection as long as you divorce Hank.
v. Can’t use money to encourage illegal activity
1. Ex. Leaving your money at death to a terrorist group.
a. Giving money to take a hit out on someone
f. Some restrictions are allowed:
i. Reasonability test imposed to determine whether or not one should be allowed
1. In Shapiro, the restriction passed the reasonabili
to the act of approving the will after probate has taken place
· Universal succession: the heirs or the residuary devisees succeed to the title of all the decedent’s property; there is no personal representative appointed by the court
· NOTE: UPC authorizes universal succession as an alternative to probate
b. The 3 Functions of Probate:
i. It provides evidence of transfer of title to the new owners (it clears title and makes the property marketable again)
ii. It protects new creditors by providing a procedure for payment of debts
iii. It distributes the decedent’s property to those intended after the decedent’s creditors are paid
c. Benefits of Probate
i. Judicial oversight
ii. Takes care of things we may have forgotten about
· Will never know how will die and might have claim
iii. May not want to put title of valuable thing in trust.
iv. Makes it final after SOL
· Statute of limitations for will contest is 3 years
d. Summary of Probate Procedure
i. Opening Probate
1. The Will should be probated or letters of administration (or letters of testamentary when you die without a will) should be sought in the jurisdiction where the decedent was domiciled at death. These authorize the administrator to act on behalf of the estate.
a. Figuring out where to file for probate:
i. Wherever primary residence was (if split 50/50, and property in both places, probably need to file in both states)
ii. So, could end up w/ 2 estates…primary jurisdiction and ancillary jurisdiction
b. Figure out who the representative is (spouse, children, parents, siblings, almost any relative, creditor is the order if no executor)
ii. Formal versus informal Probate:
1. The person seeking letters can choose
2. Formal Probate: UPC §3-401 under this section, formal probate is a litigated judicial determination after notice to interested parties. An interested party can demand formal probate to: probate a will, block an informal proceeding or to secure a declaratory judgment of intestacy.
a. The court supervises the actions of the personal representative in administrating the estate.
b. The court must approve the inventory and appraisal, payments of debts, family allowance, granting options on real estate, sale of real estate, borrowing funds and mortgaging of property, leasing of property, proration of federal estate tax, personal representative’s commissions, attorney’s fees, preliminary and final distributions and discharge of the personal representative. The rep must present an accounting to the probate crt.
3. Informal Probate: after appointment, the personal rep administers the estate without going back to the court. The rep has the broad powers of a trustee in dealing with the estate property and may collect assets, clear titles, sell property, invest in other assets, pay creditors, continue any business of the decedent and distribute the estate—all without court approval. UPC §3-715.
a. The estate may be closed by the personal rep by filing a sworn statement that he has published notice to creditors, administered the estate, paid all claims and sent a statement and accounting to all known distributes. UPC §3-1003.
b. Key assumption is that typical executor or administrator is a trusted family member and so is the beneficiary.
c. UPC § 3-301. Requirements for informal probate. P 44 of textbook.
iii. Time Contest
1. Time for contesting probate of a will is dependent upon statute of jurisdiction. (1-3 years
2. IF constitutional and statutory requirements for notice are accomplished, than the PROBATE COURT CAN NO LONGER REVOKE PROBATE (WILL BECOMES FINAL)
3. Statute of limitations to contest a will: 3 years (UPC 3-108)—NOTE: common law there was no SoL
iv. Barring Creditors of the Decedent
1. Every state has a statute requiring creditors to file claims within a specified time period; claims filed thereafter are barred. Called Non-claim statutes—come in two forms
a. They either bar claims not filed within a relatively short period after probate proceedings are begun, generally two to six months or they, whether or not probate proceedings are commenced, they bar claims not filed within a longer period after the decedent’s death.
b. Due process demands that reasonably known creditors receive actual notice before they are barred by a short-term statute
a. Most states have a 1 year statute of limitations
v. Closing the estate:
1. Closing the estate (an accounting and affidavit saying you have done everything necessary. May be closed by the personal representative filing a sworn statement that he has published notice to creditors, administered the estate, paid all claims and sent a statement and accounting to all known distirbutees
2. then discharged by the court, and not relieved of administrative duties until discharged)
e. Is Probate Necessary?
i. Probate is expensive
1. Court fees
2. The commission of a personal rep
3. Attorneys fees
4. Appraisers fees
ii. Can be avoided:
1. During life the owner creates a joint tenancy/or revocable or irrevocable trust (diff if you have many diff assets)
iii. Not necessary for chattels:
1. Used furniture/garage sale items.