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Wills, Trusts, and Estates
WMU-Cooley Law School
Jacobs, Catherine

I. INTODUCTION TO ESTATE PLANNING
 
A.    Possibilities:
1.            Destroy
a)      (-) Public Policy against destroying valuable property.
2.      Bury
         a. (-) Doesn’t make sense for some (Harley Davidson) and not possible for others (stock options.
3.      Communal
         a. (-) Negative social effects—vultures around death beds, removes incentive for individuals to create wealth.
B. Remaining Options:
1. Gov’t Confiscation
2. Gov’t directs where property goes (i.e. to heirs)
3. Private disposition (i.e. Decedent decides)
      a. Trend: Away from Gov’t Direction (Intestate) à Private Disposition
b. Exception: H&WàUniversal Exception, they are looked at as joint—assets even in just one name are joint.
C. Estate Tax:
Trend: Lower marginal rates and Increase exempt amount
–          Both of these movements will cont. until 2010 until estate tax become 0, until the following year when it again rises like a phoenix from the ashes.
–          There is a desire on the part of some that the gov’t should not take ANY of your property at your death. Others believe that the Gov’t should take all.
–          Mark Ascher (p 14-15) proposed letting estate tax curtail inheritance almost completely, except for 6 areas of exception. His justification: the gov’t deficit—this argument is not strong b/c there is no evidence that this deficit is particularly strong, or that this would be the area to overall to pay the deficit. Another motive is at play.
–          Advocates of highly taxing/confiscating inheritance have 2 main arguments:
1.      Democratic Fear of an Oligarchy. This argument is not a real fear in the 21st c. U.S. b/c we are a wealth creating society not a wealth inheriting society. Even thought De Tocqueville warned of this, he was writing in a different time. Families don’t control the U.S. passing wealth from generation to generation. 
§ From 300 A.D. to the 1720’s per capita income was about the same
§ 18th c per capita escalated by 20%
§ 19th c per capita increased 200%
§ 20th c per capita increased 800%
§ The increase in per capita income is reflected in the quality of living—the amount of income and property that we have and that will eventually pass at out deaths.
2.      Egalitarian Argument: there is virtue in equalizing wealth. The heirs have no real right to inherit b/c they have not done anything productive. BUT what the real question is, is if the donor should be able to dispose of his OWN property as he sees fit?
a.      Should all people start out equally? If yes, is this idea substantially fostered by substantial estate tax?
·         Ways this argument ignores other ways we are all deciding unequal:
                                                                                                    A.      Natural talents that are passed from parents to kids (i.e. Michael Jordan, Heidi Klum). You can’t equalize this with tax. Genes for intelligence, beauty, productivity may be much more valuable.
                                                                                                     B.      Cultural inheritances
b.      Cultural and genetic wealth can far outweigh the wealth.
c.       Even if we found virtue in confiscation—practical difficulties arise:
·         People would avoid having wealth by (1) people won’t produce enough and (2) if people make it they will spend it.
·         Find ways to subvert the law during life: (1) pay more $ for a child’s education (i.e. private v. public).
·         Too hard to monitor all the ways that people would subvert the system.
D. John Langbein:
Movement from Physical CapitalàHuman Capital:
–          In the 20th c. emphasis on human capital, no longer farm/firm from your family as the emphasis was in the 19th c. Now formal inter vivos investments in education.
Trend for less need to provide for the next generation:
–          Last 2 centuries are a sign that the future generations are going to continue to grow in wealth.
–          Additionally, with longer life expectancies, before we pass out children will be in the prime of their income making—making them even less in need of their parents’ money.
Diminishing Marginal Utility of Wealth:
–          Langbein says that individuals left money to their kids sometime by accident—fear of outliving their money. Annuities protect people from this. The other option is to have so much money that you can earn enough interest that you could never out live it.
1.      The pension system is largely responsible for encouraging the exhaustion of wealth during one’s lifetime. You don’t accidentally leave too much $ to the kids. You no longer worry about running out of money, but there isn’t as much to leave to others when you die. You don’t accidentally leave too much $ to kids. You no longer worry about running out of money, but there isn’t as much to leave to others when you die.
E. Private Law:
1.      Mandatory Provisions
a.      When an event takes place, your property must go to B.
b.      The trend is moving away from this.
2.      Default Provisions
c.       If you don’t specify otherwise, this is what happens to your property at death (Intestacy).
3.      Enabling Provisions
d.      What must I do to opt out of default, so I can determine where I want my property to go (Provision that explains how you can exercise your power).
F. Restatement 3RD of Property: Sec 10.1 The controlling consideration on determining the meaning of a document is the donor’s intention. The donor’s intention is given effect to the maximum extent allowed by the law
– Rationale: Property owners have a nearly unrestricted rt to dispose of their property as they please.
1.      Effect of a donative document: Intent determines the meaning and effect of the document. American law does not grant courts the general authority to question the wisdom/fairness or reasonableness of a donor’s decision. Main fxn is to facilitate rather than regulate.
§ Law curtails freedom only to the extent that the donor attempts to make a disposition that is restricted by an overriding rule of law.
·           Spousal rights
·           Creditors rights
·           Unreasonable restrains on alienation or marriage
·           Provisions supporting separation/divorce
·           Impermissible racial or other categorical restrictions
·           Provisions encouraging illegal activity
·           Rule against perpetuities and accumulations
G. xShapira v. Union National Bank – Inheritance passed on, only if son married a Jew. Held constitutional b/c no restriction on P, but enforcing restriction on inheritance. (also illustrates the problem of dead-hand control)
– Right to dispose of wealth at death is strong, but not absolute. Ct will strike unreasonable provisions.
– Unreasonable – destruction or waste of wealth (i.e. In Shapira, if son doesn’t inherit, money will go to someone else and there is no deadweight loss. However, cts won’t enforce a will provision asking executor to tear down a decedent’s home.
– Exceptions: Composer or writer who has kept all his notes. Wants notes burned so that no one judges him on incomplete things.
– Dead Hand Control: Will not be enforced where there is an absolute (this may pose a definitional problem) restraint on marriage, religious requirement (have to stay active in a certain religion), encouraging separation/divorce, promoting family strife, property destruction directive.
H. Transfer of the Decedent’s Estate: Probate and Nonprobate
Probate: property that passes under the decedent’s will or by intestacy. Inherited from Eng. Two ways to deal with property at death.
(1) Corrective Way: (UNIVERSAL SUCCESION) heirs at law take title in property subject to debts/wills and ct has no role to play unless someone complains.
                                                              i.      (+) Less costly, less delays
                                                            ii.      (-) More chance for mistake with assets and debts
 (2) Prophylactic way: (PROBATE) bring all assets to CT and make sure the CT deals with all things.
                                                              i.      (+) Makes sure that all debts are paid and that the money goes to the appropriate people.
                                                            ii.      (-) Very expensive and time consuming
These are 2 competing ways and the US has gone the way of probate.
Nonprobate: property passing under an instrument other than a will. Distribution of property does not involve a court proceeding but is made in accordance with terms of a contract or a trust or a deed. Most property transferred this way. (i.e. joint tenancy, life insurance, pay-on-demand K like stocks, pension plan, bank acct, and trusts)
Administration of Probate Estates – Terms:
Personal representative—Leads property through probate—two types:
                                                              i.      Executor—If decedent dies testate and the will names the person who is to execute the estate.
                                                            ii.      Administrator—When the person in charge of administering the estate is not named in the will they will be appt by the probate court.
1.      Picked from a statutory list of persons to be given preference: surviving spouse, children, parents, siblings, creditors.
2.      Person appt’d administrator must give bond unless other provisions called for in the will.
3.      Heirs and devises & Bequeath and legateesàHistorical distinction not madenow
a.       Devise &Devisees—Real property
b.      Bequeath & Legatees—Personal Property
4. Three Stages of Probate:
a.      (1) Open: Procedure is governed by a collection of stats and court rules.
i.        Performs 3 functions: i. provides evidence of transfer of title to new owners: ii. Protects creditors by requiring payment of debts: iii. It distributes the decedents property to those intended after the creditors are paid.
ii.      Where: Will should fist be probated in the jdxn where the decedent was domiciled at the time of deathà”primary” or “domiciliary” jdxn. If real property is located in another jdxn—ancillary administration in the jdxn is required.
iii.    Authorization: To administrate the estate comes from the issuance of “letters of testamentary to an executor or letters of administration to admin authorizing that person to act on behalf of the estate. 
iv.    Notice: To interested parties before the appointment of a personal rep or probate of a will is required in the maj. Of states (NOT ex parte proceed

es performed in other states. 3 states passed leg granting some same sex couples some rts (see p 66).
 
2. Simultaneous Death: A person succeeds to the property of a decedent only if the person survives the decedent for an instant in time. Historically, a survival requirement applied to anyone claiming a decedent’s probate testate or intestate property, but not to nonprobate property. The modern trend applies a survival requirement to nonprobate property as well.
xJanus v. Tarasewicz – simultaneous cyanide death, turns on Uniform Simultaneous Death Act:
o   If there is “no sufficient evidence” of the order of the deaths, the beneficiary is deemed to have predeceased the donor. Thus, neither inherits from the other.
o   Ex: If 2 JTs, A&B dies sim, ½ of property is distributed as if A survived and ½ is distributed as if B survived. Same rule applied to property held in tenancy by entirety or community property.
o   Life ins.—proceeds are distributed as if the insured survived the beneficiary.
 
UPC 2-104 – creates 120-hr survivorship threshold and clear and convincing standard to deal w/ problem, procedurally efficient b/c easy to apply, substantively efficient b/c assets still distributed quickly.
 
3. Shares of Ancestors and Collaterals
Collaterals: persons related by blood, excluding descendants, property always passes to spouse and descendants first, then to collaterals.
o   First –line—descendants of the decedent’s parents, other than the decedent and the decedent’s issue.
o   Second-line—Descendants of the decedent’s grandparents other than the decedents parent and their issue.
Half Bloods (UPC 2-107) inherit the same.
Consanguinity – relationship by blood, see chart
o   Two types of Representation:
Parentelic: Descendants of the decedent trump everyone else. Your children are your first parentella. Similarly those in the second parentella (first-line collateral) collateral) trump the third parentella. Once you reach a parentella where there is a taker the property is distributed depending on the default approach of the state (per capita, per stirpes, per capita w/ representation).
Degree of Kinship: Many statutes do not use parentelc system beyond 2nd parentela. After that they go to degree of relationship/kinship system, where each person stands on their own.
o   Two Ways to Measure—(see chart)
§ Civil Law Structure/Degree of Relationship: count up from the decedent to common ancestor, then down to claimant to get degree, then add them together.
·         Ex: Share great-great grandparents. Look at Chart. 4 Steps from decedent and 5 down to my 3rd cousin once removed (claimant). That person is 9 away. Compare w/ 2nd cousin thrice removed 3+6=9.
·         Both people with 9, if no one has a lower number, then they split the estate 50/50
·         Parentelic Preference: Exists in some Civil Structures—2 people with the same degree of kinship, look to see who is in the closer parentela. Here 2nd cousin thrice removed wins.
o   Cannon: Count steps up and steps down, but don’t add. Take the larger of the numbers and that is the degree of kinship. The person with the smaller number wins. Same ex as above
o   UPC 2-103(4): Escheat: If there is not a taker within the grandparents’ line or closer, the property escheats to the state.
o   Note: See Representation Charts Drawn on back of printed out intestacy notes.
 
F. Transfers to Children
UPC 2-114 Parent and Child Relationship. Except as provided in (b) and (c), for purposes of intestate succession BY, THROUGH, or FROM a person, an individual is the child of his/her natural parents, regardless of their marital status. The parent child relationship may be established under the Uniform Parentage Act (illegitimate children).
Uniform Parentage Act which establishes proof of paternity through three channels: 1) ct order entered during life of father declaring paternity, 2) child was held out as his own during his life (ie – evidence), 3) if it was impossible to hold child out as his own (posthumous child or he didn’t know), paternity can be established via clear and convincing evidence (DNA test), 4) the father acknowledges his paternity in writing and files the writing with appropriate administrative agency or court.