WEALTH TRANSFERS OUTLINE
Professor Ellis — Fall of 2014
Intestacy (the Default!!!!)
What legislatures in Western World have decided where the person would have wanted their stuff to go. Determines where it goes if there are not instructions. If will invalid in whole or in part. If non-probate transfer or trust doesn’t work and money sits there, goes to intestacy.
– wills, trusts, NP transfers = ways to opt out of intestacy.
– people who inherit/ relative or issue.
– there are no heirs of the living.
– there is a right to convey but not a right to inherit
– heir apparent – person who would take at the decedent’s death.
Right to Inherit v. Right to Convey
– there is no right to inherit
– right to convey is absolute
– almost impossible to cut out spouse entirely, but usually easy to disinherit kids.
Hodel v. Irving:
Facts: Indian fractionalization case where righto devise and convey prohibited.
Holding: there is a governmental absolute right to convey that is protected from governmental invasion in that if it is taken, the government would owe the person it took it from just compensation under the 5th Amendment takings clause.
– right to devise is a fundamental right
– not a right to inherit
– Lockian view
– had standing because children had expectancy interest
Different Views on Inheritance
– Jefferson, Blackstone, and Locke have views on notion of right to inherit v. right to convey
– Jefferson: property cannot be held by the dead. Society should have more control.
– Blackstone: legal function, not a right. Can be changed as it sees fit through the political process. (civil)
– Locke: Natural rights. We want to pass on our stuff to our kids.
Shaws Family Archives v. CMG Worldwide
Facts: Marilyn Monroe had a residential clause in her will that left the rest of stuff to someone. He died and his wife later became administrator. She mad a company for this and closed the estate. MMLLC. A company Shaw Family Archives had iconic pictures of MM and Target in Indiana and sold t-shirts. MMLLC sued saying that it should get the publicity rights for MM because of the residual clause after Indiana passed a statue over 30 years after MM died that created right to transfer publicity.
Holding: The right to convey has to exist at death. Thus any right bestowed by Sec. 3344.1 (post-mortem right of publicity) on a personality already deceased at the time of it enactment could not be transferred by will.
– cannot devise what you don’t have
– no evidence of MM’s intent and even if there was still can’t devise what you don’t have
– intent cant be taken from boilerplate
The Problem of the Dead Hand
Restatement (Third) of Property Sec 10.1
The controlling consideration in determining the meaning of a donative document is the donor’s intention. The donor’s intention is given effect to the maximum extent allowed by law.
Rules to leaving property
– owners can basically do what they want with property and law facilitates
– there are some rules though
o spousal rights
o creditors’ rights
o can’t make unreasonable restraints on alienage or marriage
o can’t make provisions that promote divorce
o cannot make racial or other nasty restrictions
o cant encourage illegal activities
Shapira v. Union National Bank (Ohio) 1974
Facts: dad left provision in his will that kids couldn’t inherit if they did not marry Jewish girls with Jewish parents at a specific time. the kids claim it is unconst. restriction on marriage, against public policy, and unreasonable.
Holding: It is enforceable. Right to property is not absolute. Testator is allowed to disinherit. Inheritance can be restricted. Partial restraint on marriage is fine and not against public policy. The dad wanted the money to go towards promoting Judaism. His purpose was good and restrictions reasonable.
– this didn’t go against the law
– you could argue that this is racism which is prohibited under Shelley (right to marry)
Bequests that Disrupt Family Relationship
– usually not allowed unless they are intended to provide support
– EX: husband leaves stuff to wife as long as she is widow. Purpose is to provide for her until she remarries
– to disrupt family relationships is against public policy
– conditional gifts, usually to stop the beneficiary from being a lazyass
property that passes through the will through the probate system or intestacy
-passes outside probate, not in will
– joint tenancy property, real and personal
– life insurance
-contracts with payable-on-death provisions (sometimes).
– interests in trust: trustee holds property for benefit of beneficiary
– testamentary trust: created under will. passes through probate
– inter vivos trust: made during decedent’s life. Doesn’t pass at probate
Division b/w Spouse, heirs, and collaterals
– most people want it to go to spouse
– heirs – issues entitled to distribution at persons death
– heirs apparent – those with expectancy interest
Probate Terminology and History
probate property – passes through the probate under the decedents will or by intestacy
nonprobate property – passes outside of an instrument other than a will (life insurance, contracts payable on death, interest in rust so long as inter vivos trust)
Personal Representative – fiduciary that, if person dies intestate,
– investigates and gets the property
– manages and protects property
– processes creditors’ claims and taxes
– distributes property
– also known as administrator
Executor – named representative in will
Adminstrator – when will doesn’t name or named person won’t do it
Probate Court – the court that supervises the administrator of the probate estate
partial intestacy – when a persons will disposes of only part of the probate estate.
collateral kindred – all persons who are related by blood to the decedents but who are not descendants or ancestors
first line collaterals – descendants of the decedents parents other than the d
AN BY DEFAULT
UPC § 2-101. Intestate Estate
“a) Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this code, except as modified by the decedent’s will.
b) A decedent by will may expressly exclude or limit the right of an individual or class to succeed to property of the decedent passing by intestate succession. If that individual or a member of that class survives the decedent, the share of the decedent’s intestate estate to which that individual or class would have succeeded passes as if that individual or each member of that class had disclaimed his or her intestate share.”
UPC § 2-102. Share of Spouse.
The intestate share of a decedent’s surviving spouse is:
1) the entire intestate estate if:
A) no descendants or parent of the decedent survives the decedent; or
B) all of the decedent’s surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent;
2) the first [300,000] plus 3/4th of any balance of the intestate estate, if
no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent;
3) the first [225,000] plus ½ of any balance of the intestate estate, if all of
the decedent’s surviving descendants are also descendants of the surviving spouse and the surviving spouse has one or more surviving descendants who are not descendants of the decedent;
4) the first [150,000], plus ½ of any balance of the intestate estate, if one or more of the decedent’s surviving descendants are not descendants are not descendants of the surviving spouse.
UPC § 2-105. No Taker
If there is no taker under the provisions of this Article, the intestate estate escheats to the state.
The meaning of Heirs and the transfer of an expectancy
– an expectancy interest can be destroyed
– expectancy cannot be transferred at law, but a purported transfer of one for consideration can be enforceable as a contract if ct. thinks it is fair.
Share of Surviving Spouse
– primary policy of intestate statute is to get the intent of deceased
– studies say w/no children, ppl general would leave to spouse
– in most intestate statutes in states surviving spouse gets at least ½
– under UPC 2-102 if all dead person’s decedents are also decedents of spouse, spouse gets all
– if not descendant, about ½ states say that spouse shares w/decedents parents