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Estates And Trusts Outline

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Estates and Trusts Outline
INTESTACY

I. The Problem of the Dead Hand a. Rest. 3d of Property §10.1: The controlling consideration in determining the meaning of a donative document is the donor's intention. The donor's intention is given effect to the maximum extent allowed by law.
i. Unless disallowed by law, the donor's intention not only determines the meaning but also the effect of a donative document.
b. Shapira v. Union National Bank (1974): Father left share of residue to son conditioned on his marriage to a Jewish girl born of Jewish parents w/in 7 years.
Son argued that (1) restriction is unconstitutional (but no state action); and (2)
restriction violated public policy (court found this would not act as a complete restriction on marriage).
i. RULE: A condition that the donee's marry w/in a particular religion is enforced, unless it amounts to an unreasonable restriction on marriage.
c. Courts will not enforce conditions that violate certain public policies:
i. Total or unreasonable prohibition on a first marriage ii. Undermining family relationships: divorce, break off contact with sibling,
etc.

1. A bequest to the surviving spouse conditioned on the survivor not remarrying is invalid unless the purpose is to provide support

2. Provisions encouraging divorce are usually held invalid unless dominant motive of the testator must be to provide support in the event of separation of divorce

3. NOTE: Restraints on marriage or divorce may be VALID if meant to enable the beneficiaries rather than to spite them. Courts look to intent:
a. Example:
i. My executor shall give $100k to my sister Joan on condition that she divorces that no good scoundrel husband of hers

1. Court would strike this down b/c it induces divorce b. Example:
i. If my sister Joan divorces her husband, my executor shall pay her living expenses and education costs for 4 years or until she is able to support herself.

1. Court would uphold b/c this enables Joan to get back on her feet after divorce, not to induce a divorce.
iii. Waste (destruction of property)

1. Society's total wealth is usually maximized by permitting individuals to decide what is the best use of their property—but here, it results in waste and doesn't benefit society as a whole.
iv. Encourage unlawful activity v. [Will not test on restraints on donee's religion]
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Public Policy Example: H's will creates a trust for his wife, W, providing her with the trust income for her life BUT if she remarries, the income is to go to H's and W's then living kids.II.

Not a coercive restraint on marriage
This is a benign condition for a 19th Century man b/c back then, the wife was the H's responsibility. If W re-marries, her new husband would take care of her and this frees the first H to provide more for their kids.
d. Courts will not enforce conditions that are void for vagueness i. Example:

1. Trust contains condition that the "beneficiary maintain her piano playing skills"
a. Does she have to give a concert every year? Who knows!
Not concrete enough to enforce

2. What if it required her to "remain Catholic?"
a. Too vague. Both are impossible to enforce b/c there is no criteria to decide if the condition is met or not.
b. Courts don't want to have to decide whether the condition is met e. Courts will uphold a Condition Precedent (as opposed to a condition subsequent)
i. Condition precedents are practically a gift during life. It doesn't require
Court to monitor behavior in the future.
ii. Example:

1. A: "To Mary: if she is still married to Jim at my death, $5,000. If she is divorced from Jim, $500k."
a. Condition precedent is fulfilled at time of death...the condition does not survive A's death.

2. B: "To Mary: $100k, on condition that she divorces Jim"
a. This condition precedent is held as a gift for life…it doesn't expire with the death of B.
i. This is a bad condition b/c it goes against public policy, but if it was a condition precedent, it would be upheld
Probate and Non-Probate Property a. Probate property MUST past through probate court i. Examples of probate property = house; furniture; cash; all other property that is NOT non-probate b. Non-Probate property transfers automatically or via corporations i. Examples: Joint tenancies; life insurance; payable on death interest in a trust; all other property that "automatically transfers at death."
c. Probate performs 3 core functions i. Provides evidence of transfer of title to the new owners (i.e. clears title and makes property marketable again);
ii. It protects creditors by providing a procedure for payment of debts; and 2 Estates and Trusts Outline

d.

e.

f.

g.

iii. It distributes the decedent's property to those intended after the decedent's creditors are paid.
An estate does not need probate if:
i. The decedent had only non-probate property and personal property
(furniture, cash on hand, jewelry, etc.)
ii. AND/OR small bank accounts, wage claims, and cars  state statute permits transfer of these by filling out forms iii. After all debts are paid, the remaining estate is small enough to qualify for summary administration ($5K to $100K depending on the state). The heir can collect property on the basis of his affidavit alone.
Basic Steps:
i. Get "letters of administration" from the court ii. Using letters and death certificate, "collect" assets from banks, stock companies, etc. Sell property that no one wants or if needed to pay creditors.
iii. Notify creditors (actual notice to known or reasonably ascertainable creditors) & pay debts

1. One advantage of probate is it tolls the SOL for creditors.
iv. Distribute remaining property to beneficiaries v. Pay estate income tax vi. File sworn statement that everything has been done properly and send copy to beneficiaries.
Simpson v. Calivas (1994)]: Testator told lawyer to leave "the house to wife, land to son." Lawyer drafted will to read "real estate to son, except for homestead,
which goes to wife."
i. New/Majority Rule = Lawyer has a duty to intended beneficiaries
(Professional Responsibility)
ii. Old/Minority Rule= Lawyer's duty runs only to testator
Changes in will interpretation i. How will the new rule, allowing the attorney to be sued by disappointed beneficiaries put pressure on these traditional rules?

1. The probate court will not correct for mistakes in execution (I.e.
one of the witnesses was out of the room when testator signed)

2. The probate court will not correct for drafting mistakes.

III. Intestacy Generally a. Intestacy Statute: Functions i. Estate plan for people without a will ii. Backup plan for if the will fails or is not comprehensive (partial intestacy)

1. No remainder iii. Default rules of construction for terms not defined on the will iv. Determine who has standing to contest a will - only people with standing are those who would benefit if the will failed.

IV. Intestacy: Spouse 3 Estates and Trusts Outline a. Intestate Share of Surviving Spouse i. Decedent leaves no surviving descendants or parents  Surviving Spouse gets 100%
ii. Decedent does leave descendants or parents:

1. Older statutes  spouse gets ½

2. New Rule/UPC/NJ 3B: 5-3 a. All children belong to the marriage  Spouse gets 100%
b. Either party has a child with another person  spouse gets a lump sum plus a percentage of the rest b. NJ 3B: 5-3 - Intestate Share of Decedent's Surviving Spouse or Domestic
Partner:
i. Surviving Spouse or Domestic Partner gets the entire estate if:

1. The descendent is not survived by any parents or children etc.; OR

2. All of the decedent's descendants also are surviving spouse's descendants ii. If Decedent is survived by parent but not children:

1. The first 25% of the intestate estate goes to the spouse (not less than $50K or more than $200K) plus ¾ of the balance if survived by parent but no children etc.
iii. If either the Decedent or Surviving Spouse have other children:

1. The first 25% of the intestate estate (but not less than $50K or more than $200K) plus ½ of the balance if either the decedent or the survivor has children etc. from outside the marriage.
EXAMPLE: NJ 3B: 5-3-

Linda dies survived by spouse Thomas and their 2 kids and Linda's song from another relationship, Paul. Linda leaves $800k.
o What is Thomas' share under old rule?
 $400k (surviving spouse gets ½)
o What is Thomas' share under NJ rule?
 $500k
 Thomas, surviving spouse, has children so:
o He gets 25% of intestate share of $800k = $200k
(remember: no less than $50k or more than $200k)
o He then gets ½ of the $600k remainder ($800k - $200k) =
$300k

What would Thomas' share be if Linda had no other children, but Thomas had another son, Anthony?
 $500k…same as above.
What if Linda leaves $100k?
o What does Thomas get in NJ?
 Take 25% of intestate estate (.25 x 100k) = $50k (at the floor here, b/c no less than $50k)
 Then take ½ the remainder (100k - 50k)/2 = $25k 4 Estates and Trusts Outline
 Thomas gets $75k

In an older state?
 $50k … ½ intestate share c. Simultaneous Death i. Old Rule = If there is no evidence that a party survived the decedent, he or she is deemed to have predeceased the decedent.
ii. New Rule/UPC/120 Hour Rule = Unless there is clear and convincing evidence that a party survived the decedent by 120-hours, he or she is deemed to have predeceased the decedent.

1. Applies to probate property/trusts. Unclear whether it applies to other non-probate property

2. Decedent and testator do not have to be related or die in a common disaster a. I.e. When drafting a trust or will, one might prefer to specify a month or three months b. Some states make it 30, 60, or 90 days.
EXAMPLE:-

Thomas and Linda are "deemed to have predeceased" each other. What does that mean?
o Thomas has a house

Linda has an insurance policy naming Thomas as primary beneficiary, her parents as contingent beneficiaries
Thomas' house goes to Linda's PARENTS
Linda's insurance goes to:
o If Thomas dies before Linda, his share goes to Linda's PARENTS
o If Linda dies before Thomas (predeceases him), Linda's estate goes to her
PARENTS
 It likely goes to the backup beneficiary of the will or 2nd person of choice iii. NJ 3B: 3-32: Requirement of survival by 120 hours

1. "For purposes of construing a will, trust agreement, or other governing instrument, an individual who is not established by clear and convincing evidence to have survived…another individual by 120 hours is deemed to have predeceased that individual."

2. NJ goes beyond probate estate  "other governing instrument" 
applies also to joint tenancies with right of survival.

3. There is a change in standard of proof: from preponderance of the evidence to "clear and convincing" evidence iv. Janus v. Tarasewicz (1985): Stanley & Theresa Janus, a married couple,
unknowingly took Tylenol capsules laced w/ cyanide. Soon afterward,
Stanley collapsed. W/in minutes, Theresa started experiencing seizures.
They were both taken to the hospital  Stanley had no blood pressure,
pulse, or signs of respiration & was declared dead. Theresa at 1 st exhibited 5 Estates and Trusts Outline no visible signs but the doctors were able to get her heart beating again &
she remained in a deep coma. She was declared totally brain dead 30 days later.

1. RULE: The determination of legal death must be made in accordance w/ the usual & customary standards of medical practice.

2. The record clearly establishes the treating physician's diagnoses of death w/ respect to Stanley & Theresa were made w/in the usual customary standards of medical practice. Thus Theresa survived
Stanley.

V. Intestacy: Children a. In all jurisdictions in this country, after the spouse's share (if any) is set aside,
children and descendants of deceased children take the remainder of the decedent's property to the exclusion of everyone else.
b. Intestate Share of Descendants: 3 Standard Approaches:
i. English Per Stirpes (1/3rd of States):

1. Property is divided into as many shares as there are living children and deceased children who have descendants living.

2. Each dead child's share goes to his issue. Same w/ grandchildren.

3. Repeat all the way down.
a. WEIGHS EACH BRANCH EQUALLY REGARDLESS
OF HOW MANY PEOPLE THERE ARE IN THAT
BRANCH.
ii. American/Modern Per Stirpes (1/2 of States):

1. Go to the first generation of descendants in which someone is alive.
a. SKIP GENERATIONS WITH NO LIVING MEMBERS

2. From there, the rest is the same as English per stirpes.
a. WEIGHS
EACH
PERSON
IN
THE
SAME
GENERATION EQUALLY
b. Estate is usually divided equally (per capita) at the 1 st generation in which there are living takers, which is usually the generation of the decedent's grandchildren.
iii. Per Capita at Each Generation/1990 UPC (dozen States):

1. Go to first generation with living member

2. Then divide the estate into as many parts as there are living members of that generation plus dead members who have left living issues.

3. Distribute shares: once share for each living member of the generation and one share for each deceased member who left an issue.

4. Shares of the deceased members are bundled up/pooled for the next generation; to be distributed to the next generation the same way.
c. Disinheritance 6 Estates and Trusts Outline i. Old Rule = Disinheritance is not possible by a declaration in a will that
"my son John shall receive none of my property."

1. In order to disinherit him must devise his entire estate to other persons.

2. No negative disinheritance at common law ii. New Rule/UPC §2-101(b) = Authorizes a negative will. The barred heir is treated as if he is disclaimed his intestate share, which means he is treated as having predeceased the intestate. Can say "John gets nothing."
d. Shares to Ancestors and Collaterals: What happens if someone dies without children, parents or a spouse?
i. NJ 3B:5-4: If there is no spouse then…

1. To issue (if there is an issue, STOP HERE)

2. If no issue, to parents (if there is even ONE PARENT, STOP
HERE)

3. If no issue or parents, to siblings and their children by representation.
ii. "Laughing Heirs" = persons so distantly related to the decedent as to suffer no sense of bereavement, laughing all the way to the bank.
e. Half-Bloods/Half-Siblings i. Great variations among states.
f. Adoptive Children i. Old Presumption = Extended family of adoptive child (I.e. grandparents)
do not want to leave to adoptive child.
ii. NJ 9:3-50:

1. Effect of adoption: Child's rights to inherit from adoptive family a. The adopted child is treated in every respect like a child born to his adopting parents. He inherits from his adoptive parents, siblings, and grandparents; and they inherit from him.

2. Effect of adoption: Child's rights to inherit from his natural family a. General Rule = Child DOES NOT inherit from biological family.
b. Exception = If a natural parent remarries and the stepparent adopts the child, that natural parent's rights and obligations do not change.
i. If H and W divorce, the kids inherit through H if H
dies before adoption.
ii. H dies, W remarries J. Kids do not inherit through
H if W remarries.
iii. Under the UPC, if a parent dies, the other parent remarries, and this child is adopted by the step-parent, the child inherits from all three.
iv. Hall v. Vallandingham (1988): Biological father's brother died intestate and children claim they should get a share. The children's stepfather adopted them.

1. RULE: Adoption severs family ties to the genetic family.

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