Select Page

Wills, Trusts, and Estates
West Virginia University School of Law
Ellis, Atiba R.

Spring 2013
Wealth Transfers
Prof. Ellis
Dukenminier, “Wills, Trusts, and Estates,” 8th Edition
 
 
 
Overview of the trust and estate system
1)      How to transfer property from decedent?
a.       Wills
b.      Intestacy
                                                              i.      By default
c.       Non-probate transfers
                                                              i.      Joint tenancy
                                                            ii.      Life insurance
                                                          iii.      Legal life estates and remainders
                                                          iv.      Inter vivos trusts
                                                            v.      Contracts with payable-on-death provisions
                                                          vi.      Interests in trust
 
Right to convey v. right to inherit
1)      Hodel v. Irving, the right to convey is the fundamental right:
a.       no limitation of the right to convey on death.
b.      Anything that diminishes or abrogates the right to convey is unconstitutional.
c.       Fundamental rights reasoning → the right to convey is the fundamental right and it is protected from the governmental invasion.
d.      Holding:
                                                              i.      the right to convey:
1.      is the fundamental right.
2.      is included into bundle of rights.
3.      Cannot be taking out without D/P and compensation.
e.       The right to inherit:
                                                              i.      not the absolute right.
                                                            ii.      Legislatures may regulate giving some people more rights to inherit (impossible to disinherit your spouse but easy to disinherit your kids)
Rights which appear after the decedent passed away
2)      Shaw Family Archives v. CMG Worldwide
a.       Facts:  Merilin Monroe will. The will did not explicitly transfer the rights on publicity. Residuary clause: “Whatever is left, I give to the following people…” Monro made several devises. Shaw had Monroe’s pictures which he took himself. Shaw had his company and sold pictures. Strasberg sued Shaw b/c she had a “residual clause.” She sued in Indiana b/c Indiana had the statute on publicity rights.
b.      Issues:
                                                              i.      The choice of law problem in respect of wills  → the law of domicile where the decedent lived applies.
1.      Domicile:  the place where you live, where you have the intent to return.
2.      The primary probate in NY. Monroe’s house in CA → we can add probate in CA
                                                            ii.      Monroe had no right of publicity at her death
1.      Counter-argument: residuary language conveyed the right of publicity. Even after-acquired funds (after the death) belong to the estate →
2.      BUT the right to publicity was created 25-30 years after Monroe’s death. She never had that right when she died
a.       “At the time of her death she did not have any postmortem right of publicity under the law of any relevant state. As a result, any publicity rights she enjoyed during her lifetime were extinguished at her death by operation of law.”
b.      The after-creation of the statute dies not give her the right b/c:
                                                                                                                                      i.      The statute was not retroactive
                                                                                                                                    ii.      Indiana which adopted the statute is not her domicile
                                                                                                                                  iii.      NY and CA do not recognize those rights
                                                          iii.      She did not intend to devise publicity rights
                                                          iv.      Monroe’s heirs are not her legatees
c.       Rule:  you can’t devise what you don’t have, unless the retroactive statute is in place)
The problem of dead hand
1)      RST 10.1 “Donor’s intention determines the meaning of a donative document and is given effect to the maximum extent allowed by law”
2)      Shapira  v. Union National Bank → the meaning of the intent of the donor
a.      Facts: Shapiro gave the provision that conditioned the gift: marriage to the Jewish girl, both parents of whom are Jewish
b.      Son’s arguments: violation of equal protection, his ability to marry is different from others’ ability. So, he was treated differently and excluded wrongfully under the 14th Am → Court’s argument: not the 14th Am issue, the testator’s will issue. It’s about the right to convey. This is not the complete, but only partial restriction to the Son’s right to marry.
c.       Held: the condition is permissible. The state enforces the donor’s intention
d.      Policy considerations:
                                                              i.      The dead-hand control, no flexibility to change the will.
                                                            ii.      Unreasonable restriction on marriages
1.      Court: reasonable restriction b/c many Jewish girls are available within Mr. Shapiro’s reach. Distinction with Maddox where no many girls were available. 7 years is a long period of time to marry.
e.       Social objectives accomplished in the case:
                                                              i.      Finality is guaranteed
                                                            ii.      Consistency
                                                          iii.      If there is a right to convey, the person is to have the fullness of this right
                                                           iv.      The freedom of the testator
                                                             v.      As long as it is the legal provision, we should honor it, even if it is manipulative.
f.        RULES:
                                                              i.      unless disallowed by law, the intent of the testator controls
                                                            ii.      you can completely disinherit your child
Intestacy
the default distribution scheme
 
English Per Stirpes
(by right of representation)
Per Capita w/ Representation
(Modern Per Stirpes)
Per Capita at Each
Generation
Where is estate divided first?
1st gen. always
1st gen. live taker
1st gen. live taker
How many shares estate
divided into at that generation?
One share each party alive;
one share each party dead
but survived by issue
One share each party alive;
one share each party dead
but survived by issue
One share each party alive;
one share each party dead but
survived by issue
How to treat dropping shares?
Drop by bloodline
Drop by bloodline
Drop by pooling
steps
Divide at the first generation of
descendants.
 
Each surviving child receives
one share.
 
The share of each deceased
child passes to that child’s
descendants
The estate is divided into shares at
the first generation of survivors.
Per capita at the first level
 
Move down a generation and
divide the remainder “under
representation”
Find the first generation with
survivors and add the number of
survivors  plus the number of
deceased who left descendants
 
Give each survivor in the older
generation a share based on the
total
 
Move down a generation and
divide the remainder of the estate
evenly among children
 
§  Competing Systems of Representation:
·         English Per Stirpes:  vertical equality—each line of descent treated equally
o   1st generation splits equally, representation by vertical line
·         Modern Per Stirpes (MAJ):  each line of descent treated equally beginning at 1st generation w/ a living taker
o   Split equally at 1st generation w/ survivor representation
·         UPC § 2-106 (1990):  horizontal equality—per capita at each generation; each taker at each generation treated equally with other takers at that generation (“equally near, equally dear)
Simultaneous Death
·         Problem arises more in intestacy than elsewhere b/c well-drafted instruments typically require a beneficiary to survive the donor by a stated period of time (often 30 or 60 days)
·         b/c husbands and wives often travel together and are commonly each other’s primary beneficiary, the typical simultaneous death case involves spouses
·         Old Uniform Simultaneous Death Act: If “no sufficient evidence” of order, B deemed to predecease T
o   No sufficient evidence, very hard to interpret
 
§  Janus v. Tarasewicz
·         Facts:  H and W both unknowingly took cyanide-laced Tylenol.  H pronounced dead shortly after arrival at hospital; W on life support for 2 days longer b/f dying.   
·         Issue: who inherited H’s life insurance—W’s estate (if she survived H), or H’s mom (if W didn’t survive H)?  When was W dead?
·         Holding:  W survived H so her estate gets insurance
·         Rule:  survivorship must be proved sufficient evidence –OLD RULE
o   lead to amendment of UPC and USDA to require clear and convincin

ed through in vitro fertilization 18 months after her husband’s death using her husband’s frozen sperm. She applied for SS survivors benefits for the twins.
b.      Husband’s will: no provision for children conceived after his death
c.       Under Florida law: a child born posthumously may inherit through intestate succession only if conceived during the decedent’s lifetime
d.      Held: the children who could not inherit from the decedent under the state intestacy law, are not entitled to SS survivors benefits
2)      Woodward: balance b/w the competitive interests
a.       Husband died from leukemia. Wife conceived from his frozen sperm 3 years later. He didn’t necessarily want to have those children.
b.      Issue: whether posthumously conceived children are eligible for the government benefits?
c.       Older rule: children could not inherit b/c born 3 years after father’s death
d.      Mother’s arguments: by virtue of the genetic relationship, the children should be allowed to inherit. The problem with this position:
                                                              i.      The father’s consent was not given → uncertainty, unforeseeability
                                                            ii.      Even if he intended → administrative burden to open the estate again after 3 years of his death. The children could show up even after 100 years
                                                          iii.      Intent was not shown → how to ascertain his intent?
                                                          iv.      No protection for children b/c no expectancy
e.       Balancing the state interests in orderly administrating estates v. reproductive rights of the parent (the fundamental right of the father)
f.       The best interests of the children!!! Why posthumously conceived children should be treated differently?
                                                              i.      They could be the legitimate takers if the following conditions are met:
1.      The intent of the father to reproduce = expressed consent
2.      The consent of the father to include them into the property distribution or to support any resulting child.
3.      A genetic relationship b/w the child and the decedent
3)      In re Martin B
a.       The grantor established 7 trusts for the benefit of  his issue/descendants. The grantor’s son died. He froze his sperm. The children were born 3 and 5 years after the son’s death.
b.      Do the children count as issue?
c.       Held: the trust is silent → biological issue can take. The son did not specifically exclude them.
d.      Rule against perpetuities problem
                                                              i.      We don’t know how many people could be the issue of the son. They are excluded from the class b/c we don’t know about their existence. We want to close this case.
e.       What do you advise the grantor to do?
                                                              i.      Do you want to include or exclude this kind of heirs?
                                                            ii.      Careful drafting avoids many problems.
 
Guardianship of minors
1)      Guardianship of the property
2)      Conservatorship → more flexibility
3)      Custodianship
4)      trusts
Negative disinheritance
1)      Showing intent to disinherit an heir.
2)      The barred heir is treated as if he disclaimed his intestate share, which mean that he is treated as having predeceased the intestate.
Advancements
1.      Payments or gifts to the heir upfront, during his life.
2.      Modern trend: lifetime gift presumptively not advancement unless:
a.       Intent is shown by a contemporaneous writing by donor OR
b.      There is a written acknowledgement by the done
3.      Hotchpot rule