Outline of Trust and Estates

Note: this is based in United States law

I. POLICY AND INTRODUCTION

1. Controlling consideration in determining meaning of a donative document is donor’s intention

2. Courts cannot consider wisdom, fairness, or reasonableness of donation

3. Courts can only bar donations if they are prohibited or restricted by an overriding Rule of law

1. Definitions

a. Probate property passes under decedent’s will

b. Non-probate property passes under instrument other than will

2. Types of non-probate property

a. Property owned in joint tenancy (real and personal)

b. Life insurance

c. Contracts with payable-on-death provisions (IRA’s, pensions)

d. Interests in trusts

3. Duties of personal representative (executor/administrator)

a. Inventory and collect assets

b. Manage assets during administration

c. Receive and pay claims of creditors

d. Clear titles to assets

e. Distribute remaining assets

4. Probate Procedure

a. Opening probate

i. Petition to court is submitted, will is presented

ii. Notice and opportunity to contest is allowed

iii. Creditors who do not respond are barred

b. Supervision of actions

i. In some states, actions of executor require court permission

ii. In other states, executor can act unsupervised

c. Closing the estate

i. Titles are cleared

ii. Debts are paid

iii. Court approves of administration and executor is released of liability

5. Universal succession

a. Alternative to probate

b. Heirs step into decedent’s shoes, assume title as tenants in common

c. No personal representative appointed

II. INTESTATE SUCCESSION

1. Introduction

a. Operates as default rule

b. Statutory scheme in effect where decedent resides will govern

c. UPC §2-101: Any part of decedent’s estate not effectively disposed of by will passes through intestate succession

2. Share of surviving spouse

a. Spouse is natural heir to decedent’s estate

b. Most states give at least one-half of estate to spouse

c. Policy is to preserve economic health of families after death

d. UPC §2-102: Share of spouse

e. UPC §2-103: If no spouse, estate passes to children, then parents, then siblings, then grandparents, then cousins

f. NY EPTL §2-1.6: Uniform Simultaneous Death Act if no sufficient evidence regarding order of death, the beneficiary is assumed to have predeceased the donor

g. NY EPTL § 4-1.1: Property split between spouse (one-half) and all issue (one-half), then to parents, then siblings, then grandparents, then cousins (see text)

h. States can create civil union or domestic partnership laws that give domestic partners the equivalent of a spousal relation for intestate succession purposes

3. Share of descendants

a. Representation children take the place of their dead parent

b. Three systems

i. English per stirpes if heir dies, his children split up what heir’s share would be

ii. Modern per stirpes if no heirs survive decedent, all takers at next generation split estate evenly

iii. Per capita at each generation if some heirs do not survive decedent, their shares are combined and evenly distributed to takers at next generation

c. To disinherit a descendant, you must give your entire estate to other people

d. NY EPTL §1-2.11: Per capita distribution means each person takes equal share

e. NY EPTL §1-2.14: Per stirpes means modern per stirpes, above

f. NY EPTL §1-2.16: Representation means per capita at each generation, above

g. UPC §2-104: Heir must survive for 120 hours, established by clear and convincing evidence, to inherit estate

h. UPC §2-105: If there is no taker, the entire estate escheats to the state

j. UPC §2-106: Representation means per capita at each generation, above

4. Share of ancestors

a. Definitions

i. Collateral kindred people related to decedent but not descendant or ancestor

ii. First-line collateral siblings, nieces, nephews, grand-nieces, grand-nephews, etc.

iii. Second-line collateral aunts, uncles, first cousins, first cousins once removed, etc.

b. If no first-line collaterals exist, one of two systems is used

i. Parentelic property first passes to grandparents’ line (oldest to youngest), then great-grandparents’ line, etc.

ii. Degree of relationship count steps to nearest relatives, up your line and down theirs

iii. States can mix and match, i.e. use degree of relationship test but have parentelic test break any ties

c. States can limit how distant relatives can be to receive inheritance, since distant relatives who don’t know the decedent don’t deserve to inherit their estate

d. Relative of half-blood generally treated the same as relative of whole-blood

e. UPC §2-107: Heirs of half blood inherit as if they were of the whole blood

f. UPC §2-108: Heirs in gestation at time of decedent’s death inherit if they survive 120 hours after birth

g. UPC §2-113: Individuals related through two lines only receive the larger of two shares

1. Meaning of Children

a. Adopted children

i. Adopted children are generally treated the same way as natural born children

ii. Once adopted, children lose the right to inherit from their birth parents

iii. Adoption of adults is generally allowed, though people may not adopt their spouse or lover

iv. Adopted children are presumptively included in class gifts

v. NY EPTL §1-2.10: Issue includes adopted children

vi. UPC §2-114: Adopted person is child of adoptive parents and not of natural parents, except that adoption by spouse of natural parent does not terminate rights of child with respect to other natural parent.

b. Posthumous children

i. Typically involves child conceived but not born before father’s death

ii. Rebuttable presumption that child born within 280 days of decedent’s death is considered to be a child of the decedent

c. Nonmarital children

i. Nonmarital children no longer barred from succession

ii. Paternity can be established one of the following ways:

a. Subsequent marriage of parents

b. Acknowledgement by father

c. Adjudication during father’s life

d. Clear and convincing proof after father’s death

iii. NY EPTL §4-1.2: Identification of non-marital children

iv. NY EPTL §4-1.4: Disqualification of deadbeat parents

d. Reproductive technology

i. Posthumously conceived child is, by definition, a non-marital child

ii. Some states have replaced definition with balancing test, considering:

a. Best interest of child

b. State interest in orderly estates

c. Deceased’s reproductive rights

iii. Parentage rights of surrogate mothers turn on intent of parties in surrogate agreement

iv. Parentage rights of same-sex couples determined by understanding of parties

e. NY EPTL §2-1.3: Adopted, posthumous, and nonmarital children are all entitled to inheritance, unless the decedent has expressed a contrary intention.

2. Advancements

a. At Common law , lifetime gift to child presumed to be advancement on intestate estate

b. Based on assumption that parent would have wanted equal distribution to all children

c. Modern trend requires advancements to be declared in writing, which essentially eliminates the doctrine

d. NY EPTL §2-1.5: Advancements (see text)

e. UPC §2-109: Advancements require written declaration by decedent or written acknowledgement by heir to be treated as such

3. Guardianship and Conservatorship of Minors

a. Guardian of the person

i. Responsible for minor’s care and custody

ii. Will be court-appointed unless specified in will

b. Property management options

i. Guardianship of the property

a. Requires court order to change investments

b. Can only use income from estate to support ward, not principal

c. Process is tedious and expensive

ii. Conservatorship

a. Conservator is given trustee-like treatment

b. Appointment and supervision by court is required, but individual decisions do not need court approval

iii. Custodianship

a. Property may be transfered to a person as custodian for a minor

b. Can be created by executing form

c. Custodian can manage property, subject to fiduciary duties

d. No court supervision is involved

iv. Trusts see later in the course

1. Homicide

a. A person who kills a decedent is barred from taking an inheritance

b. Killer is treated as having predeceased the decedent

c. Even if the killer is not convicted, he can still be barred if a court finds, by a preponderance of the evidence, that he would be found criminally responsible.

d. NY EPTL §4-1.6: Joint tenant convicted of first or second degree murderer is not entitled to distribution of monies in account.

e. UPC §2-803: Effect of homicide on inheritance

2. Disclaimer

a. Under Common law , there was no Disclaimer allowed under intestate succession, only under a will devise.

b. Most states have enacted legislation allowing disclaimer even under intestate succession.

c. Disclaiming heir is treated as having predeceased the decedent.

d. Reasons for disclaimer:

i. Tax savings pass property to person taxed at lower rate

ii. Avoiding creditors pass property that would otherwise be seized by heir’s creditors

e. If government is creditor, disclaimer would not allow heir to bypass lien

f. Government benefits recipients cannot stay below financial eligibility thresholds by disclaiming inheritance.

 

i. Gives settlers much power in determining fate of property long after death and introduces an interesting policy question as to how long trustee should follow instructions.

1. b. Estates: A collection of property, for our purposes, that was owned by a decedent.
2. c. Trusts and estates are studied together because they both deal with preserving and conveying wealth in a gratuitous way. Gratuitous wealth transmission is binding, like a contract, provided that (1) there is donative intent and (2)acceptance.
3. d. Options for Fate of Property after Death:

i. Property reverts to society

[1]

1. 1.

   Pros

   :

   1. a. Money for the government, i.e. Stakeholder’s Society by birthright given a certain amount of money when born, need not be an argument about size of government.
   2. b. Discourages huge amounts of wealth in a few people
   3. c. Land will be affordable and available
   4. d. Promote meritocracy
   5. e. Incentivize people to make their own keep
   6. f. More spending
   7. 2.

      Cons

      :

      1. a. Promotes wasting
      2. b. Promotes evasions of the law (i.e. excess gifts)
      3. c. Inability to care for family and/or business interests after death and many dependent on the continuation of those interests.
      4. d. No motivation to accumulate wealth, undermining capitalistic principles.
      5. e. People with money leave the country .

ii. Some or all goes to Family (which is the system throughout most of the world, up to 80% must be given to family)[2]

1. 1.

   Pros:

   1. a. Easier to enforce than wills
   2. b. Protects families
   3. c. Promotes family unity
   4. 2.

      Cons

      :

      1. a. Distorts motivations for children, promoting recklessness
      2. b. Controverts philosophy of some who believe that children should not be handed money[3]
      3. c. Assumes formalistic definition of family
      4. d. Fractionalization of land

iii. Honor the wishes of the dead. Dead person controls property as if she were living (US system)à

1. 1.

   Pros

   :

   1. a. Promote autonomy and individuality.
   2. b. One can feel comforted in life that they can continue to express their ways- psychological value
   3. c. Encourages higher uses of property, such as, long term investment
   4. d. Encourages capitalism and meritocracy
   5. 2.

      Cons:

      1. a. Dead hand control- making decisions re: what happens to property. (Person is gone, why let them still make decisions?)

i. People particularly concerned about leaving all property to church. This problem occurred in both Mexico and England.

1. b. Less resources for government
2. c. Family could be disinherited, and thus not provided for.
3. e. States Right to Limit Disposition of Property: States have broad authority to adjust rules of descent and devise or property, but cannot abolish it. If it does, this would amount to a

   taking

   and

   just compensation

   would be due. The state cannot take away both intestacy and the right to write a will.

i. Irving Trust v. Day– SCOTUS holds that state may limit laws of intestacy without a 14^th/5^th amendment challenge.

ii. Hodel– SCOTUS holds that state may not abolish both right to devise property (through both intestacy/wills).

1. 1. Fractionalization of Native American land, federal statute by requiring land to escheat to the tribe. Held to be a constitutional taking.
2. 2. Right to devise property is an essential stick in the bundle of property rights.
3. f. Limits to Dead Hand Control:

i. Reasonability: Cannot order destruction of property

ii. Estate Tax: Tax imposed not on recipient of property, but taxed on decedent on the transfer of property. [an excise tax on transfer of property]

1. 1. Exemption Amt: $600,000-$1,000,000 and % as high as 77%
2. 2. Reagan/1980s: Brought down to 55% and exemption at 1 million
3. 3. Bush: Called it the death tax and wanted to get rid of it by reducing the rate each year and increasing the exemption amount:
   1. a. 2009- 3.5 million/45%
   2. b. 2010- no estate tax at all
   3. c. 2011- reverts back to 55% and 1 million
   4. 4. Policy: Concentration of wealth threatens democracy in many ways.

iii. Rule Against Perpetuities (RAP)

iv. Against Public Policy:

1. 1. Shapiro v. Union National Bank (Father conditioned inheritance on son marrying a Jewish woman.)
   1. a. Not unconstitutional vis a vis the Equal Protection Clause because only limiting right to inheritance, not to marry.
   2. b. Not against public policy because not a total restraint on marriage.
   3. c. Partial restraints on marriage usually permissible
   4. 2. Now: Likely that restriction would not be upheld.
      1. a. Restatements 3rd cautions against restraints on behavior, like conditions on marriage or religious beliefs.
      2. b. Max Fineburg case
      3. c. Banks, unlike executors (i.e. Joe Lieberman), have limited flexibility in executing trust.
      4. 3. Against Public Policy= Complete restrictions on marriage, racial preferences, conditions designed to break up marriages/families, destruction of property.
2. II. Transfer of the Decedent’s Estate
   1. a. Probate: Property that is owned by a person and that passes under the rules of probate. All the property that does not have some other legally recognized way of transmission at death is passed through probate.

i. Includes both wills and intestacy.

ii. Tangible personal property (no legally recognized title, so must pass through probate)

iii. Property held out right (fee simple absolute)

iv. Tenancy in Common

v. If Willà Passes by terms of the will

vi. If no Willà Passes through intestacy

vii. All property that is probate property must pass go through the probate system because cannot have property owned by dead people

1. b. Non-Probate: Property that passes by its own set of rules. Vast majority of property is non-probate property.

i. Joint Tenancy: Automatically passes to other owner(s)

1. 1. Will/intestacy has no impact on jointly owned property

ii. Life Insurance: Automatically passes to the named beneficiary

iii. 401K Retirement Plans

iv. Inter vivos Trusts: Settlor sets up trust with instructions. Property passes to beneficiary in accordance with rules of trust regardless of Will/intestacy

v. Contracts with POD provisions (payable on death)

1. 1. Stock can be held with a TOD provision (transfer on death)

vi. Why wills are still necessary with non-probate property:

1. 1. Married couples who die at the same time and also need to name a guardian for children.
2. c. Job of the Probate Court:

i. Marshalling the assets: collection, identification of the assets. This is done by the personal representative (called an executor or an administrator).

ii. Identify heirs: Who will get the property under will or intestacy.

iii. Pay the Creditors: Personal representative is personally responsible for dead person’s debts, including taxes.

iv. Distribute the property to those determined to be the right people.

v. Close estate.

vi. The court oversees the whole process, which can be positive to ensure that property is properly dealt with, but can also be cumbersome and costly.

i. Why do so many people die without wills?

1. 1. Have no property
2. 2. Scared of death, superstitious
3. 3. Costly to write a will
4. 4. Avoid hurt feelings and controversies in families
5. 5. Assume that rules will reflect preferences in some general way/ trust the system

ii. Intestacy rules are designed to effectuate what the government thinks people would want to have done with their property. Legislatures reflect societal values?

1. b. Intestacy Format: If the decedent has no will, all probate property passes first to the spouse of the decedent, then to issue, then to ancestors and collaterals.

i.

Based on different conditions, but spouse gets share no matter what.

ii.

: Children, grandchildren, great-grandchildren. If issue, end of story, no one else inherits.

iii.

: Parents, grandparents and great grandparents// Brothers, Sisters, nieces and nephews. Only if no children, some states only if no spouse.

iv.

1. c. Spousal Share:

i.

1. 1. Surviving husband or wife must be (1) legally married and (2) must survive.
2. 2. If kindred and no issue: $200k and ½ remaining excess
3. 3. If issue: Surviving spouse takes ½
4. 4. If no kindred and no issue: Survivor takes all.
5. 5. Kindred (in Mass)= any blood relative at all. Because it is impossible to not have any blood relative, spouse never takes all in Mass.
6. 6. Policy Implications of Mass:
   1. a. Distrust of spouse caring for children
   2. b. Even if no children, a distant cousin will inherit
   3. c. Mass is very blood-focused
   4. 7. Problems with Mass:
      1. a. Statute requires children to get half and have it be disbursed when they achieve majority, however, surviving spouse may need the money now to care for the children.

ii.

1. 1. No issue, no parents: Spouse takes all
2. 2. If all issue are also issue of surviving spouse: Spouse takes all
   1. a. Need not worry about children being disinherited
   2. 3. No issue, but surviving parents: Spouse takes $300,000 and ¾
      1. a. In some states, marriage cuts off parents
      2. 4. Issue of both spouses and Spouse has own children: Spouse gets $225,000 and ½
      3. 5. Decedent has own children: Spouse gets $150,000 and ½
      4. 6. Mass is adopting UPC, but no distinction between 3 and 4

iii. Problems:

iv.

can be difficult with regards to same sex couples, improper divorces, etc.

1. 1. DOMA- federal law does not recognize such relationships for ERISA, SS and other benefits.

 

Introduction

A. Policy of Passing Wealth at Death

a. Gratuitous Transfers at death (gifts)

i. Real Property = real estate, bank accounts

ii. Personal Property = cars, retirement accounts, securities

iii. Intellectual Property = any type

b. Donor’s Intention and the problem of the dead hand

c. Purpose = how we should design the legal system in which property can be handed down at death How to achieve this with certainty with the donor’s intent in mind.

d. 3 Main Types of Transfer

i. Probate System (intestate) = someone dies, “the decedent,” without making a will. The person died “intestate” (no valid will). Each state has a system of rules for intestate deaths (ex. Certain % goes to spouse, or children, or parents)

ii. Probate System (testate) = someone dies with a will (testate) can specify who the beneficiaries are in the will.

iii. Non-Probate Transfers = people seeking alternatives to the traditional probate system

1. Trusts

a. Private/Donative (giving wealth to an ascertainable individual)

b. Charitable trusts (giving wealth to a charitable trust)

c. Business Trusts

e. Passing Wealth at Death: Policy Considerations

i. Diana, Princess of Wales, dies and leaves a valuable necklace. What should be done?

1. Destroy it, bury it with her, treat it as un-owned property, have the government confiscate it, **honor Diana’s wishes (“testamentary freedom” )

ii. Confiscate it = is it fair that William and harry start off with all this wealth problems of equal opportunity. Fairness?

iii. Honoring Diana’s wishes = reinforces family ties, encourages creativity

iv. In the US = hybrid b/w gov. confiscation and honoring wishes. Gov. through the estate tax takes a part of it, rest is testamentary freedom.

1. 2009 = 45% estate tax w/ $3.5 million exemption

f. Codes/Restatement

i. Uniform Probate Code (UPC)

ii. Uniform Trust Code (UTC)

iii. Restatement 3rd of Property

iv. Restatement of Trusts

g. The Problem of the Dead Hand (Shapira Case)

i. Restatement 3rd of Property 10.1 = “Donor’s intention determines the meaning of a donative document and is given effect to the maximum extent allowed by law”

1. Controlling consideration = Donor’s Intention

2. Court’s role = to facilitate rather than regulate. Although there are some restrictions that the court can enforce.

ii. “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” +++

iii. + “Only to the extent that the donor attempts to make a disposition or achieve a purpose that is prohibited or restricted by an overriding Rule of law (such as, spousal rights, creditors rights, unreasonable restraints on alienation or marriage, provisions promoting separation or divorce, impermissible racial or other categorical restrictions, provisions encouraging illegal activity, and the rules against perpetuities and accumulations.”

iv. Shapira v. Union National Bank (can only marry a Jew = constitutional, not against public policy)

1. Facts = Will says “everything goes to my kids, but for ? son, only gets his part if he marries a Jewish girl with Jewish parents within 7 years of fathers death. If this doesn’t happen, then sons part of the will goes to the state of Israel”

2. Argument 1 = Will is Unconstitutional under 14th amendment (equal protection everyone has the right to marry whomever)

a. Court = Not taking away his constitutional right to marry, he can still go and marry whoever. Rather, court is being asked to enforce the testator’s restriction. Will doesn’t completely take away his right to marry, just partially (and reasonably) restricts it.

3. Argument 2 = Will is against Public Policy

a. Court = not imposing religion on him, nor making him marry a Jew. It is not a total restraint (which would be unenforceable) it’s a partial restraint that is reasonable so it’s fine. Reasonableness is big part here (7 years to find a girl, many jewish girls in the county) its fine!

4. Intention of Testator* = court emphasized that the “if he doesn’t marry, then his part goes to Israel” = demonstrates the depth of the testators conviction. Court has a duty to honor the testator’s intention within the limitations of law and of public policy.

v. Dead Hand = “a hand that does not have a live mind controlling it and making a continuously informed judgment as circumstances change, that can no longer be affected by the opinions of others, and that does not suffer the consequence”

vi. Intent to disrupt a family relationship = a will or trust provision is ordinarily invalid if it is intended or tends to encourage disruption of a family relationship. Same with provisions encouraging separation or divorce.

h. Transfer of the Decedent’s Estate

i. Probate & Non-Probate Property

1. Probate Property = is property that passes through probate under the decedent’s will or by intestacy.

a. Intestate (no valid will)

i. Personal representative = “administrator”

ii. Real property = “descends to heirs”

iii. Personal Property = “distributed” to “next of kin”

b. Testate (valid will)

i. Personal representative = “Executor”

ii. Real Property = “devises to devisees”

iii. Personal Property = “bequeaths to legatees”

2. Non-Probate Property = property passes outside the probate court system with an instrument other than a will.

a. Types

i. Joint Tenancy

ii. Life Insurance

iii. Contract with payable on death (POD) provision

iv. Inter vivos Trust*

ii. Functions of Probate

1. 3 Core Functions

a. Provides evidence of transfer of title to the new owners (i.e. it clears title and makes property marketable again)

b. Protects creditors by providing a procedure for payment of debts

c. Distributes the decedent’s property to those intended after the decedent’s creditors are paid.

iii. Probate Court Procedure

1. In each state = the procedure is governed by a collection of statutes and court rules giving meticulous instructions for each step in the process.

2. Steps = opening probate (letters of administration authorizing person to act on behalf of the estate) à formal/informal probate à Barring creditors of the decedent (Every state has a statute requiring creditors to file claims within a specified time period, claims filed after are barred) à Closing the estate

3. Formal vs. Informal

a. Formal Probate = the court supervises the actions of the personal representatives in administering the estate through a potentially costly and time consuming process

b. Informal Probate = the personal representative may administer the estate without court supervision unless an interested party asks for court review.

4. Small estates = almost every state permit heirs to avoid probate where the amount of property involved is small, often by requiring nothing more than an affidavit of the decedent’s successor.

 

B. Intestacy **********************************************************************

a. Introduction

i. Will Benefits (why better than intestacy) = identify who will take the persons property + can designate guardians for minor children + identify a trustworthy individual or trust company to administer the estate + reduce probate costs by waiving a required bond + achieve tax savings + faster, less costly

ii. Intestacy = no will

1. Partial Intestacy = decedent leaves a will that disposes of only part of the probate estate; the part of the estate not disposed of by the will passes by intestacy

iii. Default Rules = rules that apply in the absence of some other written express provision

1. To opt out of default rules, make express provisions that say otherwise.

2. Lawyers almost always try to avoid intestacy choose a will or a trust instead

3. Why die intestate?

4. 50% of the US population die intestate

iv. Heirs = we don’t know who our heirs are until we die. People that think they are heirs are “heirs apparent”

v. Policy Consideration in intestacy à Idea is that we want to come up with a distribution that the average or typical or hypothetical decedent would want (“probate intent)

vi. ***UPC 2-101: Intestate Estate***

1. 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.

2. 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 intestate share.

vii. ***UPC 2-102: Share of Spouse***

1. The intestate share of a decedent’s surviving spouse is:

a. The entire intestate estate if:

i. No children or parent of the decedent is alive; or

ii. All of the decedents surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent; (when there’s children b/w the dead person and survivor spouse + the survivor spouse has no other children with another person)

b. The first [$300,000], plus ¾ 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 (if no children but a parent of the decedent is alive)(first 300,000 go to spouse + ¾ of the rest à ¼ will go the parent)

c. 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 (protects child that are in the marriage);

d. 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 of the surviving spouse. (Protects child that is not from the marriage)

viii. ***UPC 2-103: Share of Heirs Other than Surviving Spouse***

1. Any part of the intestate estate not passing to a decedent’s surviving spouse under section 2-102, or the entire intestate estate if there is no surviving spouse, passes in the following order to the individuals who survive the decedent:

a. To the decedent’s descendants by representation (Children)

b. If no children, to the decedents parents equally (Parents)

c. No children, no parents to the descendants of the decedents parents (brother, sisters) If they are dead too, then to their kids (nieces & nephews)

d. Grandparents

e. Stepchildren

f. Relatives on the side with one or more surviving members

ix. ***UPC 2-105: No Taker***

1. If there is no taker, the provisions of this article, the intestate estate passes to the state

x.

xi.

b. Simultaneous Death **********

i. “A person succeeds to the property of a decedent only if the person survives the decedent for an instant in time.”

ii. Older, Uniform Simultaneous Death Act (USDA) says if there is no sufficient evidence of the order of deaths, the beneficiary is deemed to have predeceased the donor.

1. Problem = what is sufficient evidence?

iii. Janus v. Tarasewicz (wife/husband died at the same time?)

1. Facts = $100,000 life insurance policy. Wife and husband died b/c they ate Tylenol but it was really cyanide. Issue of who died first, b/c if the husband died first then wife got the insurance policy ? wife’s estate would ultimately get it. If it was at the same time, it would be different outcome of the money (stan’s mom might get some money stans mom is bringing the suit). Husbands mother says theirs no sufficient evidence that the wife survived the husband = she wants some of the money!

2. Issue = who died first, who gets the estate?

3. Holding =

a. Burden of Proof = Survivorship is a fact that must be proven by preponderance of the evidence

b. There was enough evidence to show that wife was alive for some time after the husband died à therefore, money goes to the wife (ultimately her estate/dad)

4. Rationale Goes against probable testator intent à Is there a huge benefit to deciding cases like this? If it was death one second after the other?? It seems like the husbands intent was not for this to happen he wanted the money to go to his wife if he died, and then to his mom. The court gave the money to the wife’s dad…. He probably didn’t want this

iv. ***UPC 2-104: Requirement of Survival by 120 Hours***

1. For intestate succession = in order to take = must survive the decedent for 120 hours (5 days)

2. Burden of Proof = clear and convincing evidence

3. Janus case would have been decided the other way…wife didn’t survive for 120 hours longer than husband so the husband’s mom would’ve taken.

c. 3 Systems for Calculating Descendants Shares **********

i. English Per Stirpes

1. 1/3 of states use this. Vertical equality each line of descent treated equally. Always start dividing at the next level (first line down from decedent) à (**Go to first line right below decedent, then divide equally (kids can take by representation as well)

ii. Modern Per Stirpes

1. Each line of descent treated equally beginning at 1st generation with a living taker (**go down to the first line where someone is alive, then divide equally among that line)

2. ½ of states use this

iii. Per Capita at Each Generation (UPC 1990 2-106(b))

1. Horizontal Equality = each taker at each generation treated equally (equally near, equally dear)

2. Begin at first generation with a living taker

3. **Go to level with a living taker, the deceased people who are in that same generation get put together in 1 pot, rest to living taker.

iv. Other Notes about systems

1. When a line dies out, it gets ignored completely

2. Blood relatives only, spouses/in-laws don’t count

3. If the parent is still alive, the child doesn’t take anything by representation

v. Negative will UPC 2-101(b) = allows an heir to be disinherited and is treated as if he predeceased the person.

d. Shares of Ancestors and Collaterals

i. No first-line collaterals

1. Parentelic system = goes to grandparents and their descendants, and if non to great-grandparents and their descendants)

2. Degree of relationship = passes to the closest of kin, counting degrees of kinship.

ii. Collateral Kindred = all persons who are related by blood to the decedent but who are not descendants or ancestors

iii. First-line collaterals = descendants of the decedent’s parents, other than the decedent and the decedent’s descendants

iv. Stepchildren = few states and UPC created a new class of heirs consisting of stepchildren who take as a last resort if there are no surviving grandparents or descendants of grandparents or more closely related kin.

v. Half Bloods = Majority of states and UPC 2-107 state that a relative of the half-blood is treated the same as a relative of the whole blood. (few states like FL and TX say that they get ½ share)

C. Transfers to “Children” **********

a. Adopted Children (meaning of “children)

i. Usually, the genetic parents lose all rights, and the adopted parents become the child’s parents for all reasons. “rebirth into new family” .

ii. Adopted parents à are the people who the child inherits from

iii. Natural Parents à Lose all rights, obligations, inheritance

iv. Hall v. Vallandingham (adopted kids want to inherent from their natural father/uncle)

1. Facts = Adopted kids want (thru representation) to inherit from their natural uncle.

2. Issue = do kids have right to inherit thru their natural parent?

3. Reasoning

a. Old statute = children can inherit from their natural parents and the adopted parents (both)

b. New Statute = upon entry of a decree of adoption, the adopted child shall lose all rights of inheritance from its natural parents, and their collateral and lineal relatives. (No dual inheritance)

4. Holding = based on rebirth theory, the children are reborn into the new family all ties are severed, therefore cannot inherent from natural parent. Nor, can these adopted kids inherent thru their natural parent.

v. Different approaches/Different States

1. Adopted child only gets from adoptive parents and their relatives

2. Adopted child gets from both adoptive parents & genetic parents and their relatives

3. Adopted child gets from adoptive relatives and also from genetic relatives if a stepparent adopts the child.

vi. ***Restatement 3rd of Property: Parent and Child Relationship*** (adoption)

1. An individual is the child of his or her genetic parents, whether or not they are married to each other, except as otherwise provided in paragraph 2 or 5, or as other facts and circumstances warrant a different result.

2. An adopted individual is a child of his or her adoptive parents

a. If the adoption removes the child from the families of both of the genetic parents, the child is not a child of either genetic parent.

b. If the adoption is by a relative of either genetic parent, or by the spouse or surviving spouse of such a relative, the individual remains a child of both genetic parents.

c. If the adoption is by a stepparent, the adopted stepchild is not only a child of the adoptive stepparent but is also a child of the genetic parent who is married to the stepparent. The adopted child is also a child of the other genetic parent for purposes of inheritance from and through that parent, but not for purposes of inheritance from or through the child.

3. A stepchild who is not adopted by his stepparent is not the stepparent’s child

4. A foster child is not a child of his or her foster parent or parents

5. A parent who has refused to acknowledge or has abandoned his or her child, or a person whose parental rights have been terminated, is barred from inheriting from or through the child.

vii. ***UPC 2-118 and 2-119: Adopted Children***

1. Key determination à whether there is a “parent-child” relationship.

a. If yes, “the parent is a parent of the child and the child is a child of the parent for the purpose of intestate succession.”

2. Adoption = a parent-child relationship exists between an adopted child and the adoptive parent, but not between an adopted child and the child’s genetic parents – subject to the following exceptions:

a. Stepchild Adopted by Stepparent à A parent-child relationship exists b/w an individual who is adopted by the spouse of either genetic parent AND:

i. The genetic parent whose spouse adopted the individual; and

ii. The other genetic parent, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit from or through the other genetic parent

b. Individual adopted by relative of a genetic parent à A parent-child relationship exists between both genetic parents and an individual who is adopted by a relative of a genetic parent, or by the spouse or surviving spouse of a relative of a genetic parent, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit from or through either genetic parent

c. Individual Adopted after Death of Both Genetic Parents à A parent child relationship exists b/w both genetic parents and an individual who is adopted after the death of both genetic parents, but only for the purpose of the right of the adoptee or a descendant of the adoptee to inherit through either genetic parent.

b. Posthumous Child = conceived before fathers death, born after the fathers death. What is the rule about inheritance rights in that situation? = The child is in being from the time of conception rather than birth

c. Non-marital children = older rule was that they were the child of no one. Modern rule is that there is no distinction b/w marital and non-marital child. All states permit inheritance from the mother, but the rules respecting inheritance from the father vary. General trend is toward allowing DNA testing, sometimes exhuming the body to figure it out

d. Class Gifts = “Any gift that’s not made to a specific individual” (ex. To the players of ND football)

i. “to my children” = usually means just your immediate children, others think it means descendants as well

ii. “to my descendants” = might be an ambiguity in what it means

More about the Ouline

The Power to Transmit Property at Death: Justification and Limitations.

1. The right to inherit and the right to convey

A. Testamentary Freedom is

a. The right to give property to whomever you want

b. Set whatever conditions you want

c. The right to destroy property

d. Right to determine who gets the property

e. Right to give someone else the power to determine what happens with your property

B. Reasons for Testamentary Freedom:

a. Freedom provides and economic incentive for progress

b. Freedom prevents wasteful spending and ensures saving

c. It is their property

C. The transmission of wealth is often in the transfer of human capital

a. Education

b. Colleagues

c. Opportunities

d. Politics

Hodel v Irving: Congress passes statute that says: “if you hold a fractional interest in an estate, then it will go back to the Tribe.” Court held unconstitutional, and inheritance issues could be avoided, problem not solved

ROL: The complete abolition of testamentary rights of an owner to dispose of property rights is a taking without just compensation, which violates the Fifth Amendment.

2. Problem of the Dead Hand

A. Rule of law that prohibits or restricts freedom of disposition in certain instances are those relating to:

a. Spousal rights

b. Creditors’ rights

c. Unreasonable restraints on alienation

d. Unreasonable restraints on marriage

e. Provisions promoting separation or divorce

f. Racial or other categorical restrictions

g. Encouraging illegal activity

h. The rule against perpetuities

Shapira v Union Bank: Shapira’s son, Daniel, coud only inherit if he was married to a Jewish woman whose parents were both Jewish at the date of Shapira’s death or within seven years thereafter. Court held no good.

ROL: (1) Probate of a will, in and of itself, is insufficient to be deemed state action. (2) A testator may validly impose a restraint on the religion of the spouse of the beneficiary as a condition precedent to inheriting under a will. Where the restriction, however, unreasonably limits the beneficiary’s right to marry, it will be deemed void.

3. Transfer of the Decedents Estate Probate and Non-Probate

A. Probate Property

a. Property Transferred by will or intestacy at death

B. Non Probate Property’

a. Trusts

b. Joint Ownership (with right of survivorship)

c. Payable on Death Provisions

d. Insurance

e. Lifetime Gifts

4. Administration of Probate Estates

A. Functions of Probate

a. Provides evidence of transfer of title to the new owners

b. It protects creditors by providing a procedure in which they can be repaid

c. It distributes the decedents property as intended by the decedent

5. Summary of Probate Procedure

A. Opening Probate

a.

B. Formal v Informal Probate

a.

C. Barring Creditors of the decedent

a.

D. Closing the Estate

a.

Professional Responsibility in Estate Planning

1. Duties to Intended Beneficiaries

A. Privity and Duty

a. In order to recover for negligence a plaintiff must show that the defendant owed a duty of care. Generally, duty arises out of relation between the parties and the scope of such a duty is l limited to those in privity of contract.

b. Regardless of Privity, attorneys drafting wills owe a duty of reasonable care to the intended beneficiaries.

c. Some states require the plaintiff to be named in the will. Some states do not follow this rule altogether, but instead require privity

d. 2 methods to prove duty:

a. Third party beneficiary

b. When the injury is foreseeable, then a duty is owed.

Simpson v Calivas: The will was ambiguously written causing the probate court to award a life estate in Simpson’s property to Robert Simpson Jr.’s (P) stepmother, although notes from meeting with D showed that the intent was for Simpson Jr. (P) to receive the entire interest. Court found Attorney liable

ROL: An Attorney owes a fiduciary duty to an intended beneficiary.

2. Conflicts of Interest

A. When an attorney thinks he may come up with a conflict of interest, a good attorney can help protect himself by implementing an engagement letter.

a. Purposes of Engagement Letter:

1. Evidentiary: We might dig up things and use them.

2. Cautionary: You need to know that we may have to disclose info that you don’t want disclosed.

3. Channeling: We may push you toward what we think is most practical.

b. Content of Engagement Letter:

1. Billable Rate

2. Issue presented/addressed

3. Parties Involved…Who is the Client? Example senile father and lucid son looking out. Answer is still dad.

4. Confidentiality

5. Conflicts

6. Scope of representation. What are you doing, and when will representation end? Estate planning example…once doc done

A v B: Hill Wallack (defendant) was sued by his client B, to enjoin them from disclosing his illegitimate child with a mistress C, to his wife. Court held lawyer to tell wife of baby, but not mistress’s identity.

Intestacy: Estate Plan by Default:

1. Basic Intestacy Scheme

A. Default estate plans set up by the state when an individual dies without a valid will. Default under probate

B. Supplies the rules that happen when you die. Most gift schemes are opting out of intestate statutory provisions. If some gift given, but not enough detail, the rules of intestate will apply.

C. Steps in establishing the intestacy process

a. Characterized Ds property

1. What did D own

2. How much is probate?

b. Who is alive? (spouse, kids…ect)

c. Which provision do I follow?

d. Apply that provision/statute

e. Deal with per stirpes if you have to.

D. Statute will describe who takes.

a. §2-101: INTESTATE ESTATE

1. 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.

2. 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 class member 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.

E. Reasons to avoid Intestacy

a. Identify who will take your probate assets

b. Wills can be used to designate guardians for children

c. Select a trustworthy fiduciary to administer your estate

d. Save money in probate fees by waiving bonds

e. Achieve tax savings

F. HOW DO YOU APPROACH PROBATE

a. Figure what property is probate and what property is not probate

b. Figure out which jurisdiction governs each property-which statute applies

c. Apply the statute

2. Share of Surviving Spouse.

A. In WA registered domestic partner counts as a spouse

a. §2-102 SHARE OF SPOUSE

1. The intestate Share of a decedent’s surviving spouse is:

a. The ENTIRE ESTATE IF:

i. No descendent or parent of the decedent survives the decedent; OR

ii. 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 (She has no children from another marriage

2. THE FIRST $300K, PLUS 3/4ths of any balance of the intestate estate, IF (1) no descendant of the decedent survives the decedent, BUT (2) a parent of the decedent survives the decedent. (So, no children from between the couple but his or her parents are alive)

3. THE FIRST $225K, plus ½ of any balance of the intestate estate, IF (1) ALL of the decedent’s surviving descendants are also descendants of the surviving spouse AND (2) the surviving spouse has one or more surviving descendants who ARE NOT descendants of the decedent. (If he has no children from a previous marriage BUT she has children from a previous marriage)

4. THE FIRST $150K, plus ½ of any balance of the intestate estate, IF one or more of the decedent’s surviving descendants are not the descendants of the surviving spouse.

3. Simultaneous Death

A. The determination of legal death must be made in accordance with the usual and customary standards of medical practice. Both victims arrived at the hospital with artificial respirators and no obvious vital signs

Janus v Tarasewicz: Stanley and Teresa Janus, unknowingly took Tylenol laced with cyanide. Stanley immediately experienced seizures and Teresa had the same problem within minutes. Wife “outlived” Husdband by 2 days, Court held Wifes family gets everything. (Rule has changed)

OLD ROL: Determination of legal death must be made in accordance with the usual and customary standards of medical practice. If there is no sufficient evidence of the order of deaths, the beneficiary is deemed to have predeceased the donor. The problem was “no sufficient evidence;” a very low standard of Proof.

New ROL: UPC provides that an heir or devisee that fails to survive by 120 hours is deemed to have predeceased the decedent. Secondly, survivorship must be proved by clear and convincing evidence.

Two major changes:

Must survive by 5 days

Survivorship must be proved by clear and convincing evidence

4. Shares of Descendants

A. Two Types of Descendants

a. Lineal Descendant: straight down the line so that they are your children, grandchildren, parents

b. Collateral descendants-persons who are related by blood to the decedent but who are not descendants or ancestors. For example, brothers and sisters

1. Two forms of collaterals:

a. First line collaterals (descendants of your parents)

b. Second Line collaterals (descendants of your GRANDparents)

c. §2-103: SHARE OF HEIRS OTHER THAN SURVIVING SPOUSE

Any part of the intestate estate not passing to the decedent’s surviving spouse under §2-102, or the entire estate if there is no surviving spouse, pass in the following order to the individuals designated below who survive the decedent:

a. To the decedent’s descendants by representation

b. If there is no surviving descendant, to the decedent’s parents equally if bother survive OR to the surviving parent;

c. If there is no surviving descendant or parent, to the descendants of the decedent’s parents (brothers or sisters) or either of them by representation (nieces and nephews)

d. If the is no surviving descendant, parent, or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, HALF of the estate passes to the decedent’s paternal grandparents equally if both survive, or to the surviving paternal grandparent, or to the descendant of the decedent’s paternal grandparent or either of them if both are deceased, the descendants taking by representation; ad the other passes to the decedent’s maternal relatives in the same manner; but if none on one side then all of the estate goes to the other side.

5. Per Stirpes and Lineal Descendants

A. Universal Rule: Shares stop at the living, they do not extend below to lineal descendants. The Relevant date is the date in which there is death, not filing.

a. English Per stirpes

1. Deceased but represented-lineal descendants

2. If 4 kids, and each kid has 42 each and parent dies, all kids get 1/42 of ¼, if one kid, get whole ¼

b. Modern Per stirpes

1. Treats each line beginning at the closest living generation equally.

2. Each line of descent treated equally beginning at first generation with a living taker. Everything in a pot at one level, then leftovers back in pot.

c. UPC Per Stirpes (per capita at each generation)

1. Where you have people on the same generational level, they are allocated an equal amount (reword). First level, make an initial allocation to first surviving generation. Drop down the blood line to the first alive and then distribute it equally.

B. Washington uses RCW §11.04-11.15 Modern Per Stirpes

a. Half Bloods – RCW §11.04.035

1. Kindred of the half blood shall inherit the same share which they would have inherited if they had been of the whole blood, unless the inheritance comes to the intestate by descent, devise, or gift from one of his or her ancestors, or kindred of such ancestor’s blood, in which case all those who are not of the blood of such ancestors shall be excluded from such inheritance: PROVIDED, HOWEVER, That the words “kindred of such ancestor’s blood”and “blood of such ancestors”shall be construed to include any child lawfully adopted by one who is in fact of the blood of such ancestors.

a. Statute relevant to the Hall Vallandingham

b. Adopted Children RCW §11.04.85

1. Adopted child is not related as an heir to his former natural parents. A lawfully adopted child shall not be considered an “heir”of his or her natural parents for purposes of this title.

c. Step-Children RCW §11.04.095

1. If a person dies leaving a surviving spouse or surviving domestic partner and issue by a former spouse or former domestic partner and leaving a will whereby all or substantially all of the deceased’s property passes to the surviving spouse or surviving domestic partner or having before death conveyed all or substantially all his or her property to the surviving spouse or surviving domestic partner, and afterwards the latter dies without heirs and without disposing of his or her property by will so that except for this section the same would all escheat, the issue of the spouse or domestic partner first deceased who survive the spouse or domestic partner last deceased shall take and inherit from the spouse or domestic partner last deceased the property so acquired by will or conveyance or the equivalent thereof in money or other property; if such issue are all in the same degree of kinship to the spouse or domestic partner first deceased they shall take equally, or, if of unequal degree, then those of more remote degree shall take by representation with respect to such spouse or such domestic partner first deceased.

6. Negative Disinheritance

A. Old rule was that a person could not be simply disinherited by saying that X gets nothing, the decedent had to get rid of all property expressly. If any went to intestacy, X would get if entitled.

B. New rule is the creation of a negative will

a. §2-101(b) states that a barred heir is treated as if he disclaimed his intestate share, which means that he is treated as having predeceased the intestate.

7. Transfers to Children

A. Meaning of Children

a. Adopted Children

1. RCW §11.04.85: Adopted child is not related as an heir to his former natural parents. A lawfully adopted child shall not be considered an “heir”of his or her natural parents for purposes of this title.

Hall v Vallandingam: Parent has two children, Brother and Earl. Earl marries Elizabeth and they have 4 children. Earl dies, and Elizabeth remarries Jim, and Jim adopts the four children. Court says that Jim adopted you and you are no longer Earl’s child.

Old ROL: An adopted child is no longer considered a child of either natural parent and loses, upon adoption, all rights of inheritance from his natural parents.

New ROL: If a child is adopted, then they can inherit from or through their deceased natural parent, but the parent may not inherit from a child who has been adopted

b. Adult Adoption

1. Most jurisdictions draw no distinction between the adoption of a child and the adoption of an adult. Some states, you can’t adopt a lover. Can help with standing (must take intestate)

2. Gave rise to stranger on the case, which loosely established that an adopted child could ONLY inherit from their adoptive parents.

Minary v Citizens Bank: Facts: Amelia Minary place property in trust for eventual distribution “to her then-surviving heirs.” We have Amelia and she created trust for 3 sons, J, T, and A. Alfred, having no children, adopts his wife. Brining her in to Amelia’s testamentary scheme. He just wants to make sure his wife is provided for. Court said Adoption of spouse does not make ancestry.

ROL: One who adopts a spouse or other adult cannot thereby make the adoptee an heir to an estate created by an existing testamentary instrument executed by an ancestor of the adopter. The court looked at intent, but she could have intended the opposite. Furthermore, intent may be irrelevant.

O’Neal v Wilkes: O’Neal, who had been raised by testator but never formally adopted, petitioned the court for a declaration of equitable adoption. Court held no because adopter and the person who gave the child away could not contract.

More about this Outline

1. Testate/Intestate – If a decedent dies with a valid last will and testament, he died testate. Otherwise, he died intestate. Note that it is possible to be partially intestate if the will does not cover all of the decedent’s property.

2. Testator/Testatrix A male or female that executes a valid will

3. Descent property passes by another mean than a will. The government makes the decision on where the property goes.

4. Devise A gift of real property under a will. Can mean both real and personal property

5. Devisee A beneficiary receiving real property under a will

6. Bequest/Legacy A gift of personal property under a will

7. Beneficiary/Legatee A beneficiary receiving personal property under a will

8. Personal Representative The person appointed by the probate court to oversee the administrative process of wrapping up the decedent’s affairs

9. Executor What the personal representative is called when the decedent dies testate and the will names the personal representative

10. Administrator What the personal representative is called when the decedent dies testate or intestate but names NO personal representative

11. Probate Court The state court with special jurisdiction over determining who is entitled to receive the decedent’s probate property

12. Statute of Descent and Distribution If a decedent dies intestate as to some or all of his or her property, the property will be distributed to those identified to receive it under the state’s statute of descent

13. Heirs At common law, if a decedent dies intestate, his REAL property was said to descend to his heirs

14. Next-of-kin At common law, if a decedent died intestate, his PERSONAL property was distributed to his next of kin

15. Primogeniture The practice at common law of giving all land to the oldest male heir

16. Escheat In certain instances, upon the passing of the decedent, his property will revert to the state

Chapter 1: Introduction to Estate Planning

I. The Power to Transmit Property at Death: Justifications and Limitations

a. The Right to Inherit & Right to Convey: Implications of this include who owns property once a person dies? Does it belong to the living or the dead?

1. Jefferson: “The portion occupied by any individual ceases to be his when he himself ceases to be, and reverts to society.”

2. Blackstone: Vesting property to ancestors is not a natural but a civil right. Law may have ripened from the principle that children/family members were at the person’s deathbed.

3. Locke: Common practice/universal practice seems to suggest the cause is natural.

4. Until 1980s, Jefferson and Blackstone view prevailed over Locke. Irving Trust Co. v. Day.

b. Two Way to Transmit Property

1. Devise: by making a will, decedent/testator makes a choice. This is a way of passing real property to devisees. The technical term of person who takes is devisee or beneficiary.

· Language: A bequest is made as to personal property, and the takers are legatees.

2. Descent: transmitted not by will but by inheritance. This is a decision made by the government through statutes. Otherwise known as intestate succession.

· Language: The person who takes under intestate succession is called an heir.

c. Hodel v. Irving: This case concerns the constitutionality of the Indian Land Consolidation Act of 1983 (federal statute). The question of devise generally is typically controlled by State law , but here federal law controls because this statute dealt with Native American relations and because the government holds land in trust (for the benefit of) for the Native Americans who were living on the land. The statute was trying to address fractionation. Fractionation=land is allotted to individuals and when those people pass, it goes/passes to children, and so forth. This costs money and makes it very hard to keep records.

1. Does this happen elsewhere?

· This isn’t really a problem in other contexts because of likelihood of sale. Usually will come together and sell the property as a whole.

· Alienation of Property: doesn’t happen here because the land is held in trust and is thus limited in who can buy it.

· Another problem is partitioning: the court will partition in kind. But this was also not the problem.

2. Congress tried to fix the problem by saying that parcels (small, fractional) 2% or less in acreage and has earned less than $100 to owner would escheat back to the state. But this provision could apply to several acres that weren’t rented. In other words, Congress said someone could not pass less than a 2% interest by devise or descent.

3. The plaintiffs here were heirs & devisees, so they did not own the property yet because they have no property interest. They have a mere expectancy. Thus, they did not yet take any property under the statute.

· However, the plaintiffs have 3rd party standing to sue in places of decedent’s right.

· The argument is that the RIGHT to devise property by will or pass by intestate was taken (this is the right the statute took). However, decedent could still pass property as inter vivos gift.

· Sticks in a bundle: one was taken, but owner could still use property, transfer property

4. In analyzing this takings claim, one factor looked at is economic impact of regulation. Plaintiffs can earn money from their property while alive and the interest was a few thousand. But this is land as a whole, and they have still lost a few rights. How do you put a price on those rights?

· Think about life insurance and analogize. The interests have some value just as one purchases a policy to be able to leave property to heirs & devisees at an interest of $2700.

5. Investment-Backed Expectations: extent to which legislation interferes. Court says it is hard to identify these because they weren’t the ones who bought the property.

6. Average Reciprocity of Advantage: Court is less likely to find a taking when people burdened also benefit. Here, this is the case because most are members of tribes.

7. The Court determines that YES this is a taking and requires just compensation because government took away an important right. Important rights are completely eliminated, as in Kaiser.

8. Hypo: Pertaining to elective shares, a spouse gets a forced share of an estate. What if a statute was changed to say that instead of a 1/3 elective share it is now going to be 1/2. Is this a taking under the Hodel analysis?

· No. There is still half of the land left for decedent. State has broad authority to adjust.

· The opinion says Congress can still regulate by saying that someone cannot subdivide property and cannot pass property by intestate succession.

9. What if Congress passed a statute that held land as JT instead of TICs? This would help because it would consolidate ownership.

10. Congress tried to amend the statute & changed restrictions so that they abolished descent but gave option to devise only to other owners of the parcel.

· Court again said this was too limited (because only to members of other parcels) in Babbitt v. Youpee.

11. Congress then adopts a new attempt. Now they say 5% or less cannot be divided by people but has to go to oldest child. Sounds like primogeniture.

d. Shaw v. CMG: Case involving pictures of Marilyn Monroe that were supposed to be held in a residuary clause of her will. However, Shaw began trying to sell her image on t-shirts and also began selling licenses to use photos of Monroe.

1. The IP rights asserted here are the right to publicity against people trying to license photos of her. MMLC says they own this right because they were granted that right through the residuary clause. “If I own anything else, it goes to…”

2. The Court rules against MMLC. First issue is where Monroe was domiciled (either NY or CA). However, if does not matter because both laws say you cannot will things you do not own and these rights did not exist when she died.

3. R: The law of the domicile of the testator at his or her death applies to all questions of a will’s construction.

4. R: A disposition by the testator of all his property passes all of the property he was entitled to disposed of at the time of his death.

5. UPC 2-602: states that a will may pass property acquired by the estate after the testator’s death, but this was NOT adopted in either state.

· NOTE: CA has since changed its law to say now retroactively the right of publicity exists even after death.

e. The Policy of Passing Wealth at Death

1. Resolved: That the right to transmit property at death by devise and descent should be significantly curtailed.

· Pro: It would change the status quo, dominating families would stop domination (and its bad to have dynastic families), could only pass on property used for productive purposes, would cut down on the idle rich.

· Con: The system we have now is the least objectionable arrangement for dealing with property on owner’s death, inheritance is natural and proper, providing for a family does society a service, saving money is also a huge part of our system and people might just blow money if they know they can’t devise how they would like, government should not tell you how to spend, it provides a social service of taking care of testator, can reap what you have sown

2. Congress passed in 2001 an Estate & Gift Tax. It was a gradual repeal of the estate tax, which will disappear in 2009. Then, it will kick back in 2011 (unless Congress does something). Republicans have asked for a complete repeal. Some think it will come back but only for very large amounts of wealth.

3. Washington Post article: our country has deficits and shows how much we are. Basically we are going to be borrowing huge amounts of money in the coming years. So, how do we make up that money loss with the least amount of pain? Why should we burden the next generation?

4. What are possibilities of passing property at death?

· Destroying It

· Burying it with someone

· Treating it was unowned and allow a free-for-all for others to grab

· Having the government confiscate it

· Honoring Diana’s wishes

5. Ascher’s Proposed 6 exceptions to when property should NOT end at death:

· Marital exemption

· Dependent lineal descendants

· Disabled lineal descendants

· Inheritance by lineal ascendants

· A universal exemption (passing a moderate amount)

· Passing to charity a fraction (with this the gift tax would increase to circumvent lifetime gift giving)

· He leaves estates of 250,000 or less untouched

6. Kristol: make it a policy that no individual could inherit in a lifetime, more than one million dollars, and any possessor of a large fortune must distribute it, prior to death or by testament, to his children, his relatives, his friends, or anyone. Kristol says this does not discourage incentive to invest and make money. Could also have the plenary power associated with distributing wealth.

· Also discusses the hidden agenda of liberals-wanting money to go into a public treasury where they can say how it will be spent rather than simple redistribution among individuals.

7. Soviet Union example: inheritance was re-established after it was outlawed for four years. Failed experiment. Inheritance was viewed as a method of providing for dependents, relieving the state of that burden.

8. Blum & Kalven: says the gravest source of inequality is not economic but rather what is called cultural inheritance for lack of a better term. Instead of wealth, incomes need to be brought closer together.

9. Langbein: he says intergenerational wealth transmission occurs not primarily at death but throughout the child’s lifetime (for example, college, buying a house, investing in things).

f. The Problem of the Dead Hand

1. Hobhouse: the living should judge their own concerns; the dead cannot foresee upcoming events and thus should not be able to influence conduct after death.

2. RST § 10.1 Donor’s Intention Determines the Meaning of a Donative Document and is Given Effect to the Maximum Extent Allowed by Law

· The controlling consideration in determining the meaning of a donative document is the donor’s intention.

· Rationale: freedom of disposition: property owners have nearly unrestricted right to dispose of property as they please

· Effect of a donative document: intent determines meaning and affect

a. The law facilitates rather than regulates; American law curtails intent only if contrary to a rule of law. Examples might be spousal rights, creditors rights, unreasonable restraints on alienation or marriage, provisions promoting separation or divorce, impermissible racial or other categorical restrictions, provisions encouraging illegal activity and rules against perpetuities and accumulations.

g. Shapira v. Union National Bank: a father wanted his children to continue to live the Jewish faith, so he placed a marital restraint in his will.

1. Issue: Whether the condition is constitutional, contrary to public policy and unenforceable because of its unreasonableness, and that he should be given his bequest free of the restriction.

2. Rule: The right to marry is protected by the 14th Amendment in Loving v. VA and thus is protected from restrictive state legislative action.

3. Rule: The right to receive property by will is a creature of the law, and is not a natural right or one guaranteed or protected by either the Ohio or the U.S. Constitution. It is a fundamental rule of law in Ohio that a testator may legally entirely disinherit his children.

4. Rule: A partial restraint of marriage which imposes reasonable restrictions is valid and not contrary to public policy. The great weight of authority in the U.S. is that gifts conditioned upon the beneficiary’s marrying within a particular religious class or faith are reasonable.

5. Analysis: Plaintiff tried to move from the Loving case to Shelley v. Kraemer to say that enforcement by a state judicial proceeding of a restrain on marriage is unconstitutional. But the court says that here they are not being asked to enforce a restriction upon the son’s right to marry but instead to enforce a restriction on the son’s inheritance. As to public policy, this is merely a partial restraint on marriage.

· What if the will forbid the son to marry? That is unreasonable. One cannot totally forbid marriage because we don’t want families destroyed.

· Footnote 7: Distinguished between requiring that a person remain true to a certain faith as opposed to being in good standing (which is acceptable because the courts can merely check records without having to delve into the tenets of a faith).

a. Courts should not determine church doctrine, but can determine facts.

6. Plaintiff argues that where he lives should matter. He says there are not enough girls where he is living. Comparison to Maddox (the number of eligible bachelors so small that is was a virtual restraint and because there was no gift over) where the courts says here the difference is now that technology helps create a larger pool of applicants.

· Court says here there is a “reasonable latitude of choice.”

7. Plaintiff argues he could just marry then divorce, but the Court thinks there is too little a possibility of this happening.

8. Plaintiff says this condition pressures him to make a quick decision which could jeopardize his Education , but the court thinks 7 years is a fine grace period.

9. Conclusion: There are reasonable restrictions on marriage.

10. Social Objectives by Honoring Dead Hand? Posner suggests courts should have power to modify conditions on testamentary gifts because “recontracting” is impossible once a person is dead, which during life could have been bargained for; cy pres doctrine suggests that courts can reform to stay close to wishes but make sure gift does not fail.

· Shapira could have bargained with his dad.

· What if donor said you had to smoke everyday? What if it said you must drink one bourbon everyday? General rule is that we allow freedom of testation as long as not violating public policy.

11. RST Second of Property § 6.2 provides that a “restraint unreasonably limits transferee’s opportunity to marry if a marriage permitted by the restraint is not likely to occur.” This makes marriage a factual question.

12. Some courts apply a reasonableness test (is technology making this easier to meet?). Other courts have different tests; for example in IL, a similar provision in a trust was held invalid without consideration as to reasonableness.

13. A will or trust provision is ordinarily invalid if it is intended or tends to encourage disruption of a family relationship. So if a condition is not to remarry, this will not fly unless purpose is to provide support.

· Ex: difference between “so long as she remains my widow” (valid) with a trust that provides income to spouse for life but terminates if spouse remarries (invalid).

· Encouraging separation or divorce usually also invalid unless providing support.

14. RST Third of Trusts § 29(c) invalided trusts that are contrary to public policy. Calls for a balancing test of social values.

15. Note: Incentive Trust & The Dead Hand

· Conditional gifts tend to be put in incentive trusts and are sometimes aimed at fixing behavior. There is some evidence that the receipt of a large inheritance is associated with reduced workforce participation.

a. This is where incentive trusts come in-generally broken down into three categories

i. Encourage beneficiaries to pursue an education

ii. Moral or religious outlooks or promote a particular way of living

iii. Have a productive career.

b. Generally enforceable as long as not against public policy.

c. Sometimes incentive trusts can backfire if poorly written: Playboy heir example.

· Changed circumstances can also frustrate purpose. “Earn a dollar, get a dollar example.”

16. Note: Destruction of Property at Death: Can a testator destruct his property at death?

· Testator wants house destroyed: Courts says this is waste, but we let people do that in life. So why allow it? A will is power without accountability.

· Justice Black and his conference notes. Should we allow these to be destroyed? He says he does not want the chilling effect where people refuse to give honest opinions or that people will speak differently or not at all. Should the executor uphold this? What about the historic value?

· Kafka and his unfinished work (or similar situation with musicians)? Should we follow the instruction to destroy manuscripts? What would judge do? Composer could always just burn them.

17. Strahivelitz proposal: if during life the testator put a future interest in the property up for sale and (1) government declined to condemn the future interest, then a testamentary direction to destroy the property would be followed. His safe harbor mechanism provides evidence of testamentary capacity AND ensures resolution of purpose by exposing testator during life to reputational sanction AND ensures testator internalizes the relevant costs by requiring testator to forego during life the price others are willing to pay to preserve.

II. Transfer of the Decedent’s Estate

a. Probate & Non Probate Property

1. Probate: passes through probate under decedent’s will or by intestacy.

· Examples: provisions in a will; if no will, what is left.

2. Nonprobate: passes outside of probate under an instrument other than a will. Most property transferred this way.

· Joint Tenancy Property (real and personal): decedent’s interest vanishes at death; has the right of survivorship, so all you must do is file a death certificate. Usually found with bank accounts, brokerage & mutual fund accounts, real estate is often held in JT, particularly b/t married couples.

· Life Insurance: get paid upon receipt of death certificate; beneficiary paid through contract

· Contracts with POD provisions: pension plans often provide survivor benefits; IRAs, 401(k)s, brokerage accounts. Again all one needs to do is file a death certificate with the custodian holding the property.

· Interests in Trust: trustee holds property for the benefit of the beneficiary who may have LE’s or other interests. If created by decedent, trust may be revocable or irrevocable. If decedent has testamentary power of appointment over trust, decedent’s will must be admitted to probate, but trust assets are distributed directly by trustee to beneficiaries named in will and don’t go through probate.

a. Property held in testamentary trust created under a will passes through probate, but property in an inter vivos trust during decedent’s life does not.

3. Distribution of nonprobate assets does not involve court proceeding but is made in accordance with terms of a K, trust or deed. Distribution of probate assets under will or to intestate successors, however, may require court proceeding involving probate of will or finding of intestacy followed by appointment of personal representative to settle the probate estate.

b. Functions of Probate

1. There are 3 core functions:

· Provides evidence of transfer of title to new owners

· It protects creditors by providing a procedure for payment of debts; and

· It distributes the decedent’s property to those intended after the decedent’s creditors are paid.

c. Administration & Terminology

1. When probate is necessary, 1st step is appointment of a personal representative (executor or administrator) to oversee the winding up of decedent’s affairs. Principal duties include:

· Inventory and collect decedent’s assets

· Manage assets during administration

· Receive & pay claims of creditors & tax collectors

· Clear any titles to cars, real estate or other assets &

· Distribute remaining assets to those entitled.

2. If decedent dies testate & names a person who is to execute the will & administer probate estate, such personal representative is called an executor. When person is in charge of administering the estate is not named in a will, personally representative is called an administrator.

3. Personal representatives are appointed by, under control of, and accountable to probate court.

4. One advantage of writing a will is that T can designate administers of an estate (although some states prohibit nonresident individuals from serving as administrator). If a person dies intestate or fails to name qualifying executor in a will, administrator selected from statutory list of persons, usually, in order: surviving spouse, children, parents, siblings, creditors.

5. A person appointment administrator must usually give bond. In most states, if will names the individual rather than a corporate fiduciary as executor, executor must also give bond unless will waives bond requirement which is routinely waived in most wills. Another reason for writing a will, therefore, is that the expense of a fiduciary bond can be eliminated if that appears desirable if that appears desirable.

6. Two Legal Vocabs-One Applying to Real Property, One to Personal

· A person dying testate devises real property to devisees and bequeaths personal property to legatees. However, Restatement applies devise to both real & personal property.

a. Also can just use the phrase “I give” regardless of type of property.

· A person dying intestate has real property that descends to heirs while personal property is distributed to next-of-kin.

a. At CL, heirs & next-of-kin are not necessarily the same. For instance, when primogeniture was in effect, real property descended to the eldest son (the heir) and personal property was distributed equally among all the children (the next-of-kin).

i. At CL, heirs & next-of-kin are not necessarily the same. For instance, when primogeniture was in effect, real property descended to the eldest son (the heir) and personal property was distributed equally among all the children (the next-of-kin).

b. Today in almost all states a single statute of descent and distribution governs intestacy. Same persons are named as intestate successors to both real & personal property. Thus, today the word heirs usually means those persons designated by statute to take a decedent’s intestate property, both real & personal. Next of kin means the same thing.

c. At CL, spouse was not an heir, but had only curtesy or dower rights. Today in all states, statutes of descent & distribution name the spouse as a possible intestate successor, depending upon who else survives, and a spouse thus may be an heir.

d. Summary of Probate Procedure

1. Opening Probate: varies by state.

· Wills should first be probated, or letters of administration should first be sought, in the jdx where the decedent was domiciled at death (known as primary or domiciliary jdx).

· If real property is located in another jdx, ancillary administration in the jdx is required. Must prove title to real property in the situs state’s recording system and to subject those assets to probate for the protection of local creditors.

· Each state has a detailed statutory procedure for issuance of letters testamentary to an executor or letters of administration to an administrator authorizing the person to act on behalf of the estate.

· SOL=3 years from the date of death (3-108) after that, presumption of intestacy conclusive. CL said at any time.

a. States mainly east of Miss. Follow English procedure of contentious v. noncontenious proceedings. Executor has a choice between common and solemn form.

More of this Outline

I. INTRODUCTION

A. What makes private property “private property” ?

1. A property interest is an ownership right or privilege to a tangible or intangible thing

2. Government creates property rights through legal implications/sanctions

3. The court system enforces property rights; recognizes validity or legitimacy of interest through documents; resolution of disputes are settled by judicial system, arbitration, negotiation, etc

B. What level of capacity must I have to write a will?

1. In order to make a will, a person

a. Must be 18 (or 19 in two jurisdictions) AND

b. Have the requisite level of capacity

C. Trusts v. Wills

1. A trust is a mechanism to control wealth (tax implications) during a person’s lifetime and can be made revocable, during life, and after death.

2. A will is an ambulatory document: a will does not become effective until person dies

II. State’s Control of Inheritance: protecting property rights

A. Irving Trust p. 3: there was bifurcation of interests; the federal Constitution forbade the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction

1. Holding: Federal constitution doesn’t forbid states to place conditions on the passage of property from the deceased to survivors; there are no federal constitutional protects regarding making of testament. Up to states to make laws.

B. Hodel v. Irving: p. 3 [overbroad regulation]

1. Facts: there was fractionation of Indian land allotments where portions became increasingly small and overhead/administrative costs to dole out lease interests to hundreds of owners was inefficient; the government passed a statute, § 207, to prevent distribution of land through testament, by devise or descent; looking for economic efficiency/viability where the land would escheat to the tribe, one owner, instead of many

2. Issue: whether the statute is a “taking” of appellees’ property without just compensation (statute reduced value of land b/c couldn’t leave it via testament/devise/descent

3. Rationale: the statute was overbroad regulation; there is a rational purpose, but this is not the narrowest means available to accomplish the goal; government could have said that through intestacy laws the land could go to the tribe without forcing individuals to lose their rights to devise and descent (to whom the property goes); state govt has certain interests but they must be reasonably and narrowly achieved

4. Holding: the statute’s result constituted a taking = overbroad, unconstitutional b/c 5A curtailed power of gov’t to limit right to convey property at death (Congress later more narrowly tailored statute to bring about same result)

5. Implications: puts limitations on how govt can regulate but doesn’t say it can’t regulate at all

C. How would Hodel apply in a regular case today?

1. I write a will and leave assets to son, but I have not updated will to include daughter

a. The state can interfere and say that I intended to benefit children not just son; state has an interest in protecting interests of minor children and can interfere so long as its means are reasonable and narrow (balance decedent’s interests)

2. Husband leaves all his money to Fordham and nothing to wife

a. Wife can say that estate must disgorge some amount of wealth to wife as long as it is narrowly tailored

D. UPC 2-602: will can provide for passage of all property testator owns at death and all property acquired by the estate after the testator’s death

E. EPTL 3-3.1: unless will provides otherwise, disposition by testator of all his property passes all of the property he was entitled to dispose of at the time of his death.

F. Shaw Family Archives [gov’t enforcement of property right = property interest]

1. Facts: Marilyn Monroe dies, will has residuary clause; Shaw Family Archives licensed picture of Monroe to be put on t-shirts; Estate sues claiming property interest in MM’s publicity right; statute creating property right in publicity right created after MM’s death

2. Rationale: cannot give away that which you don’t own; government defined MM’s private property and regulates the property interest she had at the time of her death

3. Holding: cannot assert or pass on a property interest that is acquired after your death (Shaw Family Archives wins)

4. Modern Rule:

a. UPC permits property rights in things acquired post-mortem

b. California: publicity rights are devisable at death, even by general residuary clauses in wills made before 1984 (statute is retroactive)

G. Shapira v. Union National Bank: p. 28 [state action]

1. Facts: will said that two sons must marry Jewish women within 7 years of their father’s death and if they fail to meet this condition the gift goes to the state of Israel; son who does not marry Jewish girl says the will is unconstitutional under the 14th Amendment because there is a fundamental right to marry (Loving, Griswold, etc); son says there was state action to make claim viable because the state court becomes a state actor because it is enforcing the will

2. Issue: is the will unconstitutional?

3. Rationale: court agrees that there is a fundamental right to marry, but the court is not a state actor because the court is not really regulating the marriage; in this case he has ability to travel and has multiple options in a major metropolitan area; court used standard of reasonableness

a. State action: in Maddox (p. 31), court found that the condition (marrying someone from the Society of Friends) was an unreasonable restraint on marriage bc she could only choose from 5 men to receive gift (almost prohibiting marriage)

b. It is a fundamental rule of law that a testator may legally disinherit his children. Thus, a testator has a constitutional right to restrict a child’s inheritance

4. Holding: the condition of the will is constitutional bc a gift conditioned upon the beneficiary marrying within this particular religious class (Jewish) is reasonable

5. Modern Alternative: Incentive trust (little if any judicial interference; create trust during life of donor, if son meets criteria, fiduciary administers trust accordingly)

6. Using ill-defined public policy opens the door to a judge substituting his or her judgment for that of the testator

H. Estate of Feinberg: voided limitation to marry within Jewish faith without applying reasonableness test (grounded in Loving principles) » appeal pending

I. Basile v. Aldrich: Personal representative and sole beneficiary in will petitioned for construction of will and initiated an adversary proceeding to determine disposal of after-acquired property not referenced in the will. Testator’s nieces moved for finding that the after-acquired property had to be disposed of under laws of intestacy. The Circuit Court, entered summary judgment for personal representative. Nieces appealed. FL District Ct. of Appeals affirmed and found for the personal representative.

J. Restatement 3d (2003) §10.1

1. Unless disallowed by law, the donor’s intention not only determines the meaning but also the effect of a donative document; UNLESS public policy supersedes, the intent of the donor stands Public policy considerations include:

a. Spousal rights

b. Creditors’ rights

c. Unreasonable restraints on alienation or marriage

d. Provisions promoting separation/divorce

e. Racial restrictions

f. Encouragement of illegal activity

g. Rules against perpetuities/accumulations

2. In Maddox there was a regulation because the will contained an unreasonable restriction on the right to marry while in Shapira there was a reasonable restraint on who donee could marry

3. Restriction to particular faith is likely to stand if it is a reasonable restraint (most courts use reasonableness test is marriage likely to occur, except see Feinberg)

K. Probate vs. Non-probate Property

1. Probate: passes through probate under decedent’s will or by intestacy. If property doesn’t qualify as NP, then it automatically defaults into probate.

a. Purposes:

i. Provide evidence of transfer of title to new owner

ii. Protects creditors by providing procedure for payment of debts

iii. Distributes decedent’s property to those intended after creditors are paid

b. Terminology:

i. Will: instrument disposing of real and personal property

ii. Personal Representative: fiduciary who Inventories and collects the property fo the decedent; manages and protects property during administration of the estate; processes the claims of creditors and tax collectors; distributes the property to those who are entitled to it.

(a) Executor: named in the will, executes will, administers the probate estate

(b) Administrator: appointed by court when will doesn’t name executor, named executor is unable/unwilling to serve, or decedent dies intestate

(c) Executors and Administrators are appointed through letters testamentary or letters of administration (authorizing person to act on behalf of estate). Both must give bond, unless expressly waived in will.

iii. Devise/Devisees: person dying testate devises real property to devisees

iv. Bequeath/Legatees: person dying testate bequeaths personal property to legatees

c. Jurisdiction:

i. Primary domiciliary: will should be first probated where the decedent was domiciled at death

ii. Ancillary administration is required If decedent owned real property in another jurisdiction at death.

d. UPC has two forms of probate

i. Ex Parte Probate (informal): After appointment, personal representative administers the estate w/out going back to court ie clear titles, pay creditors, sell property, etc. UPC 3-715. Informal probate is the norm.

ii. Notice probate (formal UPC 3-401) may be used to probate a will, block an informal proceeding, or secure a declaratory judgment of intestacy. It is a litigated judicial determination after notice is given to interested parties.

2. Nonprobate: passes outside of probate under an instrument other than a will

a. Including: joint tenancy property (real and personal), life insurance, contracts with payable-on-death provisions (IRAs, 401(k)s, pension plans), interests in trust

i. Note: testamentary trusts created under a will go thru probate; inter vivos trust are nonprobate

L. Estate Planning Problem: p. 49

1. Should there be a will set up for these assets? What will go through probate?

a. In regard to the residence, if there is joint tenancy, usually attached is a right of survivorship, but must be written; may or may not go through probate

b. Checking account unless it has a payable upon death provision, in which case it would not go through probate

c. Certificate of deposit; same as checking account

d. Stocks: there could be a will substitute or payable upon death provision

e. Life insurance: contractual right; would not go through probate unless beneficiary is the estate of the deceased

i. Note: just b/c doesn’t pass through probate doesn’t mean that life insurance policy is outside of the estate for all purposes

f. Pension plan: there can be substantial wealth in pension plans; ERISA could apply; will substitute could be in place; community property issues may come up

i. ERISA plans: no probate, straight to beneficiary (always the spouse)

g. Mortgage: liability survives the individual’s death, but the creditor must go to probate court and file a claim against the estate; mortgage not be exonerated unless testator writes that executor should extinguish all debts

h. Car: most states don’t make cars go through probate

i. Furniture and household/personal effects: amount exempted by statute does not go through probate

j. Mutual fund: Unless beneficiary named (specifically), goes through probate

M. Claims of Debt Against an Estate

1. General Process

a. Debts are collected from the estate before distribution to inheritors

b. Claims first subject to both state and federal taxes

c. Notice to creditors is required under EPTL and SCPA

2. Statute of Limitations (non-claim statutes) creditors must file claims within specified time; late claims are barred

a. Short Period: generally must file within 2 to 6 months (UPC 4 months) after probate proceedings begin

b. Longer Period: generally must file within 2 to 5 years (UPC 1 year) after decedent’s death (whether or not probate proceedings are commenced)

3. Notice of Decedent’s Death and Claims

a. The estate must:

i. Notify creditors (known or reasonably ascertainable – actual) about decedent’s death through publication or personally (constructive or actual) AND

ii. Allow reasonable time for response and collection.

b. NY SCPA §1802: claims must be made within 7 months of the date of decedent’s death; if not, the fiduciary is not liable for assets that (should have but) have not been paid

c. NY SCPA §1803: All claims against the estate must:

i. Be in writing

ii. Have a statement of facts of why money is owed

iii. Specify the amount of the claim

iv. Delivered to the fiduciary or sent by certified mail (RRR) at place of residence. If published, then place specified or on the clerk of court if fiduciary can’t be found within the state after due diligence. Fiduciary may require an affidavit.

4. Form of Claims

a. EPTL 12-1.1: distributees and testamentary beneficiaries are liable to extent of value of any property received by them for debts and reasonable funeral expenses of decedent, expenses of administering estate and taxes for which estate is liable. If there is insufficient property in estate.

i. P must establish that he cannot fully satisfy his claim for 1 of 3 reasons

(a) Not enough property available in hands of personal representative

(b) Person prior in liability can’t satisfy

(c) Claim is the enforcement of lien or security interest against property decedent specifically disposed of by will or life insurance proceeds]

b. EPTL 12-1.2: Order of liability; preferences

i. Distributes and testamentary beneficiaries are liable in the following order:

(a) Distributes

(b) Residuary beneficiaries

(c) General beneficiaries

(d) Specific beneficiaries

(e) Surviving spouse to whom disposition has been made which qualifies for estate tax marital deduction

ii. Express/implied intention of Testator to prefer certain beneficiaries can override order of liability

5. Abatement of Claims

a. Failure of P to present claim to personal representative doesn’t impair his right to bring action against distributees or testamentary beneficiaries

i. Note: this isn’t an extension of the SOL for P to bring the claim]

b. EPTL 12-2.2: action can be brought against one or more persons if liable; others can be impleaded for indemnity or contribution

i. If testator does not state how to make the distribution, we look to EPTL 12-1.2 (see above) BUT if the testator does explicitly list, per 12.1-2(c), who will satisfy the debts, the will stands and s/he can change the order of liability

N. Universal Succession: heirs or residuary devisees step into shoes of decedent at decedent’s death, taking decedent’s title and assuming all liabilities and obligation of playing legacies according to decedent’s will (Europe & Louisiana)

1. UPC §3-212 to §3-322: universal succession ok as alternative to probate administration (court issues written statement ok’ing if necessary parties are included & estate not subject to contest) [note: no states have adopted this]

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