Wills trusts estates outline PDF

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Fall 2006 Professor Stikoff

Trusts & Estates Outline INTRODUCTORY MATERIAL I.

OVERVIEW a. Traditional subject matter (default rules) i. Intestate Succession ii. Testate Succession iii. Trusts  settelor transfers property to third party (trustee). Trustee manages property for benefit of one or more beneficiaries. b. Probate transfers vs. Non-probate transfers i. most property transfers nonprobate ii. free market competitor to court supervised probate system iii. tremendous success a “stinging indictment” to the probate system c. reform movements (policy issues) d. Incapacity planning e. Malpractice  “a mine field of ethical problems”

II.

Mechanics: a. Inter vivos trust: trustee holds for benefit of beneficiaries. i. Property held in a testamentary trust created under decedent’s will passes through probate; inter vivos, however, avoids probate b. Pay on death and transfer on death contracts; need only file death certificate c. Life insurance is a form of POD d. Joint tenancy; decedent’s interest vanishes at death; survivors owns who property. STUFF TO BE INCORPORATED INTO OUTLINE:

STEP ONE; HIRE A PERSONAL REPRESENTATIVE TO WRAP UP DECEDENT’S AFFAIRS; PERSONAL REP IS A FIDUCIARY. Dying with will= dying testate; names personal rep is an executor. If dies intestate, and personal rep wont serve, then court appoints an administrator; surviving spouse, then children, parents, siblings, creditors. Person dying testate devises real property to divisees, and bequeaths personal proper to legatees. Probate does three things; provides evidence of transfer of title, protects creditors, and distributes property to creditors Generally, law of state where decedent resided governs disposition of personal property, and law of state where real property is located governs disposition of real property

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Fall 2006 Professor Stikoff

Trusts & Estates Outline

Administrator Must give bond; that is, insure against mismanagement.

Solemn vs common form; in common form, the executor proved by oath to be the executor, and began administering the estate without contest, within a few years, an interested party can file a caveat, compelling contested form. UPC provides for notice probate (formal/solemn), and ex parte probate (informal/common) UPC 3-301 governs informal; see description on top of page 46 Formal is 3-401. See 46 3-501 governs supervised administration, supervised by the court. Can act without court appeals, but cannot make a distribution without approval from the court (see 3-504) Unsupervised is 3-715. Broad powers to trustee. Unsupervised is default, but interested party can petition for supervised at anytime under 3-502. Creditors face a nonclaim statute, which is essentially a statute of limitations. See page 47 Negative will: “John gets nothing;” by default, to actually disinherit, dad must devise his entire estate; if a partial intestacy exists, John will get a share of that nondevised estate. However, under 2-101(b), pg 69, John is treated as if he disclaimed his share, meaning he’s treated as if he predeceased dad.

Parent child relationship rule; file in under “Hall;” 2008 amendment to 2-116; clarifies 2-118(a); parent-child relationship exists between adoptive child and parent, but not between that child and natural parents (2-119(a)), except as excepted under 2-119(b)-(d). see page 93 Worst evidence rule; the person best able to testify to the intent of a will is the dead person 3 keys of wills; voluntariness, authenticity, and meaning Formalities exist to authenticate

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Fall 2006 Professor Stikoff

Trusts & Estates Outline

3 types of wills; (1) attested wills, (2) notarized wills, and (3) holographic will Attested Wills: -NEED; WRITING, SIGNATURE, AND ATTESTATION. SEE COMPARISON OF RULES ON PAGE 143. SOME USE STATUTE OF FRAUDS (3 WITNESSES) SOME USE WILLS ACT (2 WITNESSES), UPC USES NOTARIZATION EVIDENTIARY FUNCTION; OBVIOUS. CHANNELING FUNCTION; MAKES ADMINISTRATION EASIER CAUTIONARY FUNCTION; ACKNOWLEDGING SIGNIFICANCE OF A WILL PROTECTIVE; UNDUE INFLUENCE AT END OF LIFE STRICT COMPLIANCE RULE; MUST STRICTLY COMPLY WITH THE WILLS ACT; PREVENTS FALSE POSITIVES (FAKE WILLS)

III.

Intestate succession a. Default rules b. Succession problems of children c. Bars to succession (e.g., killing the testator)

IV.

Testate Succession (wills) a. Opting out b. Interpretation i. Wait until the best witness is dead, then try to figure out what it means ii. Extrinsic evidence c. Will Contests (is this really the will?) d. Limitations i. Traditional family  Should working partner with most of property in his name be able to cut the non-working partner out of the will? ii. Children and behavior  marrying within the faith

V.

Trusts a. Asset protection  Spend-thrift trust b. Legacy Trusts  putting your own money in a trust c. Charitable trusts d. Dead Hand Control  Rule Against Perpetuities

VI.

The Policy of Passing Wealth at Death and Dead Hand control

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Trusts & Estates Outline

a. Shapira v. Union National Bank: Dr. Shapira leaves his residuary estate to three children in equal parts. Conditional gift to David if he marries a Jewish girl with Jewish parents within 7 years of Dr.’s death. If not, “gift over” to the State of Israel. i. Π’s Con Law Argument  Like racially restrictive covenants in Shelley, state enforcement of such provisions would be Unconst ii. Court: this is a disincentive, but not a prohibition. Like any other condition, he can marry whomever he wants but might not get $. iii. Public Policy Argument  Public policy in favor of marriage, and this condition might reduce marriage iv. RULE  REASONABLE conditions will be upheld. Reasonableness will be measured: 1. Temporally 2. Geographically v. Decision: there is ample time and opportunity to marry b. Anglo-American starting point is testamentary freedom  Restatement 10.1 at 20, 21 i. donor’s intention is given maximum possible effect by law, given certain restraints c. Dead hand Control: Restatement 10.1: controlling feature is intent of donor i. Distribution ii. Private ordering, creating wealth d. Difficult balance between total freedom and total confiscation i. Pros of freedom: 1. Happiness 2. Wealth creation 3. Eliminates costs of policing 4. Incentives ii. Cons of Freedom  perpetuation of wealth inequality e. Resatement (Third) §29(c) invalidates trusts that are “contrary to public policy: generally frowns on restraints on beneficiary behavior, but calls for balancing of conflicting social values

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Fall 2006 Professor Stikoff

Trusts & Estates Outline INTESTATE SUCCESSION STATUTORY FRAMEWORK I.

Intestacy a. Dying w/o a will  Default rules apply to probate property i. Personal property governed by law of domicile state ii. Real property governed by law of state b. Partially intestacy – will only covers part of the property; Usually covered by a residuary clause c. Importance of intestacy i. Standing – who can sue to challenge a will ii. Determines undefined terms in wills (Who is a “child”?) iii. Rules that help us address situational problems: Simultaneous death, “slayer rules” iv. Forced Share for spouses and descendants. d. Heir  person who takes under intestacy statute; before death they are heirs apparent e. Spouse  Traditional law gives most/all of property to spouse; Splitting property between kids and parents requires appointment of guardians

II.

Intestacy under UPC  Spouse (parents, descendants) a. Spousal share: §2-102 i. 2-102(1)(i): No Descendants, No Parents  all to spouse ii. 2-102(1)(ii): All to spouse if Descendants are also spouse’s kids, and spouse has not other kdis iii. 2-102(3): $150k plus ½ to spouse if spouse has other kids who are not decedent’s kids iv. 2-102(4): $100k plus ½ to spouse if spouse has if one or more of descedent’s kids are NOT spouses kids v. 102(2) $200K + ¾ to spouse if no kids, but parent of decedent survives b. Order of succession if no spouse: i. 2-103(1)  Descendants take first ii. 2-103(2)  parents take (equally if both survive) if there are no descendants iii. 2-103(3)  brothers and sisters (“descendants of decedent’s parents) by representation (per capita at each generation) (pg. 81) iv. 2-103(4)  ½ to each of maternal grandparents and paternal grandparents (or all to one side if no survivors on other sice) – per capita at each generation v. 2-105  no laughing heirs: escheats to state of no spouse, descendents, parents, siblings or grandparents/GD c. Underlying issue  balancing administrative costs and the need to fit every pattern

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Trusts & Estates Outline

III.

Other spousal issues: a. Duration of marriage i. UPC doesn’t take into account duration of marriage, except in terms of forced shares b. Domestic Partnership  Unmarried cohabitating people, regardless of gender. odds are people want domestic partners to inherit their wealth i. UPC standard  two people living in the same household in a marriage like relationship

IV.

Simultaneous death a. Default rule  must survive decedent in order to inherit (unless will specifies otherwise); much more important in 20th century with proliferation of automobiles and air travel b. Uniform Simultaneous Death Act (1940, rev. 1953): If there is no “sufficient evidence” of survivorship, the beneficiary is deemed to have predeceased the donor. i. Problem: What does “sufficient evidence” mean?? c. UPC 2-702  must establish survivorship by 120 hours, or will be deemed predeceased. Issues: i. What is the role of the common disaster? Should statute worry about common incident? Should it just worry about time? ii. What is life and death? iii. 100 vs. 120 hours?

V.

Shares of Descendants a. In all states, after spouse, descendants get the rest b. Representation  people represent their predeceasing ancestor (F and G [grandchildren] represent their dead father C [child of A]. c. Per Stirpes Rules: A has 2 kids (B and C), both of who predecease him. B’s child is D, and C’schildren are E and F i. English per stirpes (“by the blocks”)system; BRANCHES – divide among lines at first generation after decedent ; D gets half, E and F each get ¼ ii. Modern per stirpes (per capita w/ representation) – go to first LINE where someone is alive D, E and F each get 1/3 iii. Both systems generally lead to same result – only differs when decedent has grandchildren but no child iv. Ambiguity  look to local intestacy law to define per stirpes d. UPC 2-106: Waggoner’s per capita at each generation; pooling at each generation; “equally near, equally dear,” horizontal equity i. A has one living child (D). three living grandchildren; E (from B), F and G (from C). ii. D gets 1/3, 2/3 drop down iii. E, F and G each get 2/9 (1/3 of 2/3 )

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Fall 2006 Professor Stikoff

Trusts & Estates Outline VI.

Ancestors and Collaterals a. Parentillic system i. Parents and their descendants ii. Grandparents and their descendants iii. Great grandparents and their descendants iv. Great great grandparents and their descendants b. Degrees-of-relationship system: See page 86 i. Everybody gets a number ii. Great grandparents, uncles and aunts, nephews and nieces are all the same (#3) iii. Split intestate property between people of nearest degree c. Massachusetts compromise --> Degree of relationship with parentilic system d. Step family  don’t count in most states e. Half Bloods  i. American rule – they count (UPC §2-107 ii. English rule – they’re out iii. Scottish rule – get half

VII.

Opting Out  Negative Disinheritance a. Traditional law – can only disinherit if you dispose of property otherwise b. UPC 2-101(b)  Right to exclude; shares of expressly excluded parties pass as if disclaimed by those parties

PROBLEMS REGARDING CHILDREN I.

Adopted children a. Adoptive children take from adoptive family for intestacy purposes; no “double dipping” b. UPC 2-113  individual related through 2 lines is entitled to only one share (the larger share): prevents double inheritance c. Problem: children adopted by step-parents d. Hall  Earl’s four minor children later adopted by widow’s husband. Earl’s brother dies intestate, unmarried and childless. Court holds that new adoption cuts off rights of intestacy from biological father’s family. This result must be right, because then an adopted child would have superior rights to natural children. e. 2 competing theories of adoption, which may lead to different results: i. Transplantation  stick child into a completely new family. People would probably want to cut the child off from intestate succession ii. Step-Parent adoption  spouse of minor adopts. People might want to keep the kids f. Differs by state: MD holds transplantation, TX allows inheritance from both g. UPC 2-114(b)  a custodial natural parent spouse adoption does not cut you off from the other side of your family

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Trusts & Estates Outline

Equitable Adoption -- Equitable adoption (virtual adoption) can also determine the distribution of property in intestacy and under wills and trusts. -- O’Neal v. Wilkes (Georgia 1994)  In the trial court, the jury found that Hattie O’Neal had been virtually adopted by the decedent, Roswell Cook. The court granted a judgment notwithstanding the verdict to appellee Firmon Wilkes, as administrator of Cook’s estate, on the round that the paternal aunt who allegedly entered into the adoption contract with cook had no legal authority to do so. Affirmed—no valid contract to adopt.  Hattie was a child whose parents died. Hattie’s aunt took her to Roswell Cook and his wife, who wanted a daughter. Hattie was never statutorily adopted by Cook, he raised her and provided for her education and she resided with him until her marriage in 1975. She never took his name, but he referred to her as his daughter and identified her children as his grandchildren. Cook died intestate.  Essentials to an adoption contract (of a child): - (1) The adoption must be made between persons competent to contract for the disposition of the child. - (2) Some showing of an agreement between the natural and adoptive parents - (3) Performance by the natural parents of the child in giving up custody - (4) Performance by the child by living in the home of the adoptive parents - (5) Partial performance by the foster parents in taking the child into the home and treating it as their child, and - (6) The intestacy of the foster parent.  Issue: Did Page (the aunt) have the authority to contract for O’Neal’s adoption? NO.  Even though Hattie’s dad was alive at the time of the adoption, the court acknowledged that his consent to the contract was not necessary as he never recognized or legitimized her or provided for her support in any manner.  Page took care of Hattie before the adoption, but she was not a “legal custodian” as defined by the Georgia Code and therefore did not have the right to contract for her adoption. Even so, a legal custodian does NOT have the right to consent to the adoption of a child, as this right is specifically retained by one with greater rights over the child, a child’s parent or guardian. Page’s actions were due to a familial obligation, not a legal obligation. Requirement (2) was not met.  Sears’ dissent: Equity considers that done which ought to have been done. Equity would enforce the contract by decreeing that the child is entitled to the fruits of a legal adoption. -- Once the child reaches her majority, she can consent to her own adoption. -- If H and W take a baby A into their home and raise it as their child but do not formally adopt A, in some states A may be able to inherit from H and W under the doctrine of equitable adoption. -- Equitable adoption permits an equitably adopted child to inherit from the foster parents, but the foster parents (and their relatives) cannot inherit from the child. Having failed to perform the contract, they have no claim in equity. -- Other relatives: In Maryland, a court held that an equitably adopted child could not inherit from her parent’s sister even though the sister’s estate thus escheated. However, a WV court held that an equitably adopted child could inherit from another child of the foster parent.

E85

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Fall 2006 Professor Stikoff

Trusts & Estates Outline II.

Posthumous child a. Child born after you die but conceived while you were alive; typically father killed in war while wife is pregnant b. General Rule  child must be born w/in 280 days of father’s death c. Policy: if it’s in child’s advantage to be deemed in being en utero, we consider it so, if the child it in fact born alive d. UPC 2-108  individual in gestation at a particular time is treated as living at that time if individual lives 120 hour or more after birth.

III.

Non-marital children a. General Rule  deemed to be child of mother; and child of father if paternity is proved b. Uniform Parentage Act if father acknowledges paternity or if child is less than 2 and father lives in same home and acts like father, paternity is established. c. Policy: proof of mother exists, but father is harder to prove d. UPC 2-114(c)  natural parent cannot inherit from or through child unless natural parent has openly treated child as his and has not refused to support

IV.

Advancement  money distributed during the decedent’s life? a. When a parent makes an advancement to the child and the child predeceases the parent, the amount of advancement is deducted from the shares of the child’s descendants if other children of the parent survive b. Traditional rule  life time gifts are set off against your inheritance. Child who received $100,000 has share offset by that amount c. Policy: Keeping the playing field equal  want to give everyone equal money i. Problem: isn’t a gift during life indication that parents wanted child to have more? ii. Problem: valuation. How do you value a pony as a birthday gift? iii. Problem: What counts? Direct gifts? College tuition? d. UPC §2-109: Need writing. If there is no writing specifying this is an advancement, then we don’t consider it as such (writing must also must say that property is advancement if recipient predeceases decedent) i. One who did a writing would probably also have a will ii. Evidentiary standard effectively killed the doctrine e. Hotchpot Example  Mike Brady dies with $50,000; page 122 i. Gave $10,000 to Bobby ii. Add 10 and 50  $60,000 iii. Greg gets $20,000 iv. Peter gets $20,000 v. Bobby gets $10,000 vi. If advancement is larger than share of hotchpot, then share is 0. Gift during life is evidence that parents want you to have the money

V.

Management of children’s property page 125

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Fall 2006 Professor Stikoff

Trusts & Estates Outline

a. Guardians of the property are a bad idea – limited powers, court reports all the time b. Custodianship  better c. Want: Will that names a guardian for children with a trust. d. Facility of payment clause  fiduciary may disperse payments to child’s guardian. LIMITS AMOUNT TO BE DISTRIBUTED. e. Conservatorship: essentially a trust. f. Custodianship: person is given property to hold for the benefit of the minor under the UTMA. Can be made as a devise or gift; gets read of need to draft a trust. Can be done by standard forms. May include a facility of payment clause. SEE DIFFERENCE IN UTMA AND UGMA LAW ON PAGE 126. i. Less ability to reinvest; “standard of care that would be observed by a prudent person dealing with the property of another”

BARS TO SUCCESSION I.

Involuntary Bars to succession  slayer statutes a. Policy: slayers shouldn’t be able to inherit because of deterrence (l...