Trusts and Estates Prof. Rosenbury Fall 2005

Misty Watson

Trusts and Estates Prof. Rosenbury Fall 2005

Trusts and Estates Outline

I.  Introduction

A.  The Mess of Family, Property, and Death

i.  In re Vickie Lynn Marshall Handout (Pg. 1-2)

a)  Anna Nicole Smith Case – Bankruptcy versus Probate Court

b)  All federal courts, including bankruptcy courts, are bound by the probate exception to federal court jurisdiction and the federal court is required to regarding from deciding state law probate matters, no matter how the issue is framed by the parties.

c)  Probate courts determine an individual's property at death (Pg. 2-3)

d)  No federal right to write a will, this is a state issue. States have complete control over probate matters.

e)  Think about the rationale of the court when deciding probate matters. What facts are highlighted by the court?

B.  Overview of the Probate Process 30-39

i.  Probate and Nonprobate Property (Pg. 4)

a)  Probate property is property that passes under the decedent's will or by intestacy.

b)  Nonprobate property is property passing under an instrument other than a will.

ii.  Administration of Probate Estates(Pg. 4-5)

a)  Probate performs three functions

·  it provides evidence of transfer of title to the new owners by a probated will or decree of intestate succession

·  it protects creditors by requiring payment of debts, and

·  it distributes the decedent's property to those intended after creditors are paid

b)  Primary or domicilliary jurisdiction is assumed by the probate court where the decedent was domiciled at the time of death.

c)  Ancilliary jurisdiction is the jurisdiction over the decedent's real property

II.  The Default: Intestate Succession

A.  Introduction to Intestacy 59-62 (Pg. 5)

i.  Intestate – dying without a valid will

ii.  UPC 2-101 Intestate Estate – Any part of the decedent's estate not effectively disposed of by will passes by intestate succession to the decedent's heirs as prescribed in this Code, except as modified by the decedent's will.

B.  The Surviving Spouse

i.  Share of the Surviving Spouse 62-65 (pg. 5-6, 10-11)

a)  UPC 2-102 – Share of Spouse

b)  UPC 2-103 – Share of Heirs Other than Surviving Spouse

ii.  Who Qualifies as a Surviving Spouse 65-67 (pg. 6)

a)  Bigamous Marriages, handout

b)  In re Estate of Cooper, 433-438 (pg. 6-7, 11-12)

·  Homosexual partner of decedent attempted to claim a spouse's elective share of probate estate.

·  The term “surviving spouse” cannot be interpreted to include homosexual life partners. Homosexual activity is not a fundamental right.

c)  Unmarried Cohabitants, 65-67 & handout (pg. 7-8)

·  In re Estate of Vargas

·  Decedent was practicing bigamist. Court divided property equally between both legal and putative spouse.

·  An innocent participant who has duly solemnized a matrimonial union which is void because of some legal infirmity has the status of putative spouse.

·  When the theories do not fit the facts, courts have customarily resorted to general principles of equity to effect a just disposition of property rights.

d)  Sex Changes, 67 & handout (pg. 8-9)

·  In re Estate of Marshall G. Gardiner

·  Decedent was a post-operative male-to-female transsexual. Court voided decedent's marriage to petitioner as they were both considered male.

·  A marriage is a legal status, condition, or relation of one man and one woman united in law for life, or until divorced, for the discharge to each other and the community of the duties legally incumbent on those whose association is founded on the distinction of sex.

C.  Descendants

i.  Who Qualifies as a Descendant

a)  Marital Children (pg. 19-20)

·  Marriage creates a presumption the children born of a marriage are children of both spouses.

b)  Nonmarital Children, 100-101 (pg. 12, 20)

·  At common law nonmarital children were not allowed to inherit from either parent. Now a statute imposing a different restriction on nonmarital children must have a substantial justification as serving an important state interest not to violate the Constitution.

·  There is a presumption that fathers do not want children to inherit that they did not known about or never acknowledged.

c)  Adopted Children

·  Hall v. Vallandingham, 83-89 (pg. 12-13)

·  Children were adopted by their step-father cutting off their inheritance rights through their deceased natural father's family.

·  To construe the inheritance statute to allow dual inheritance would bestow upon an adopted child a superior status.

·  UPC 2-113 – Individuals Related to Decedent Through Two Lines (pg. 13)

·  UPC 2-114 – Parent and Child Relationship (pg. 13-14)

·  Had the UPC 2-114 been adopted by the Hall v. Vall court, the children would have been allowed to inherit through their natural father.

·  Minary v. Citizens, 89-94 (pg. 14-15)

·  Decedent adopted his own wife in order to conform to the requirements of mother's trusts to decedent's heirs.

·  Adoption of an adult for the purpose of bringing that person under the provisions of a preexisting testamentary instrument when he clearly was not intended to be so covered should not be permitted.

·  Oneal v. Wilkes, 94-99 (pg. 15-16)

·  Child's request for court to find that she was equitably adopted was denied.

·  The first essential of a contract for adoption is that it be made between persons competent to contact for the disposition of the child. A successful plaintiff must also prove some showing of an agreement between the natural and adoptive parents, performance by the natural parents of the child in giving up custody, performance by the child living in the home of the adoptive parents, partial performance by the foster parents in taking the child into the home and treating it as their child, and the intestacy of the foster parent.

·  Note re: Same-Sex Couples, 113-114

d)  Posthumous Children, 99-100

·  Woodward v. Commissioner, 102-111 (pg. 16-19)

·  Wife gave birth to twin girls. The children were conceived through artificial insemination using the deceased husband's preserved sperm.

·  Because death ends a marriage, posthumously conceived children are always nonmarital children. A court finding of paternity is a necessary prerequisite to inheritance right in the estate of the deceased genetic parent.

ii.  Share of Descendants, 73-77 (pg. 19)

a)  English per stirpes

·  The English distribution per stirpes is to divide the property into as many shares as there are living children of the designated person and decease children who have descendants living. The children of each descendant represent their deceased parent and are moved into their parent's position beginning at the first generation below the designated person.

b)  Modern per stripes – Per Capita with Representation

·  Under modern per stirpes, one looks first to see whether any children survived the decedent. If so, then distribution is identical to that under English per stirpes. However, where no children survive the decedent, then the estate is divided equally, per capita, at the first generation in which there are living takers, which is usually the generation of the decedent's grandchildren. In sum, under modern per stirpes the decedent's estate is divided into shares at the generational level nearest to the decedent in which one or more descendants of the decedent are alive and provides for representation of any deceased descendant on that level by his or her descendants.

c)  Per capita at each generation

·  If, under Section 2-103(1), a decedent's intestate estate or a part thereof passes "by representation" to the decedent's descendants, the estate or part thereof is divided into as many equal shares as there are (i) surviving descendants in the generation nearest to the decedent which contains one or more surviving descendants and (ii) deceased descendants in the same generation who left surviving descendants, if any. Each surviving descendant in the nearest generation is allocated one share. The remaining shares, if any, are combined and then divided in the same manner among the surviving descendants of the deceased descendants as if the surviving descendants who were allocated a share and their surviving descendants had predeceased the decedent.

D.  Ascendants and Collaterals

i.  Share of Ascendants and Collaterals, 78-83 (pg. 20)

a)  All persons who are related by blood to the decedent but who are not descendants or ancestors are called collateral kindred. Descendants of the decedent's parents, other than the decedent and the decedent's issue, are called first-line collaterals.

b)  Descendants of the decedent's grandparents, other than the decedent's parents and their issue, are called second-line collaterals.

c)  Table of Consanguinity – 79

d)  Two basic schemes to determine who is next in line of succession

·  Parentelic System

·  Under the parentelic system, the intestate estate passes to grandparents and their descendants, and if none to great-grandparents and their descendants, and so on down each line (parentela) descended from an ancestor until an heir is found.

·  Degree of relationship system

·  Under the degree-of-relationship system, the intestate passes to the closest kin, counting degrees of kinship.

ii.  Special Issues Regarding Half-bloods, 83

E.  Advancements, 114-116 (pg. 20-21)

i.  UPC 2-109 Advancements

a)  (a) If an individual dies intestate as to all or a portion of his [or her] estate, property the decedent gave during the decedent's lifetime to an individual who, at the decedent's death, is an heir is treated as an advancement against the heir's intestate share only if (i) the decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift is an advancement or (ii) the decedent's contemporaneous writing or the heir's written acknowledgment otherwise indicates that the gift is to be taken into account in computing the division and distribution of the decedent's intestate estate.
(b) For purposes of subsection (a), property advanced is valued as of the time the heir came into possession or enjoyment of the property or as of the time of the decedent's death, whichever first occurs.
(c) If the recipient of the property fails to survive the decedent, the property is not taken into account in computing the division and distribution of the decedent's intestate estate, unless the decedent's contemporaneous writing provides otherwise.

F.  Bars to Succession (pg. 21-22)

i.  In re Estate of Mahoney, 126-132

a)  Wife was convicted of husband's manslaughter. Appealed the judgment stating that she could not inherit from her husband's death.

b)  A constructive trust is nothing but the formula through which the conscience of equity finds expression. Property is acquired in such circumstances that the holder of legal title may not in good conscience retain the beneficial interest. Equity, to express its disapproval of his conduct, converts him into a trustee.

c)  The principle to be applied is that the slayer should not be permitted to improve his position by the killing, but should not be compelled to surrender property to which he would have been entitled if there had been no killing. The doctrine of constructive trust is involved to prevent the slayer from profiting from his crime, but not as an added criminal penalty.

ii.  Disclaimer (22-23)

a)  Sometimes a heir or devisee will decline to take the property, a refusal that is called a disclaimer.

b)  Drye v. U.S.

·  Drye attempted to disclaim property from his mother's estates due to unpaid tax assessments so that the property would pass to his daughter.

·  Under the relevant IRS Code, to satisfy a tax deficiency, the Government may impose a lien on any property or rights to property or rights to property belonging to the taxpayer.

III. Attempting to Manifest Intent: Wills or Testate Succession

A.  Executing Wills

i.  Testamentary Capacity

a)  Mental Capacity

·  The Test of Mental Capacity (pg. 32)

·  To be competent to make a will, the testator must be an adult and must be capable of knowing and understanding in a general way (1) the nature and extent of his or her property (2) the natural objects of his or her bounty, and (3) the disposition that he or she is making of that property, and must be capable of (4) relating these elements to one another and forming an orderly desire regarding the disposition of property.

·  The test is one of capability, not of actual knowledge.

·  In re Estate of Wright, 141-146 (pg. 32-33)

·  Eccentric testator devised a house to a woman friend and a house to his daughter.

·  The legal presumption is always in favor of sanity, especially when all testamentary requirements have been completed.

·  Testamentary capacity cannot be destroyed by showing a few isolated acts, foibles, idiosyncrasies, moral or mental irregularities or departures from normal unless they bear directly upon and have influenced the testamentary act. The evidence must establish that the will itself was the creature or product of hallucinations or delusions bore directly upon and influenced the creation and terms of the testamentary instrument.

·  The evidence must establish, in addition to the fact of the existence of the hallucinations or delusions, the fact that by reason of these hallucinations or delusions the testatrix devised or bequeathed her property in a way which, except for the existence of such delusions she would not have done.

b)  Insane Delusion (pg. 33, 47)

·  Some courts have held that if there is any factual basis at all for the testator's delusion, it is not deemed insane. The majority view, however, is that a delusion is insane even if there is some factual basis for it if a rational person in the testator's situation could not have drawn the conclusion reached by the testator.

·  Insane delusion will normally only invalidate that part of the will that was a result of the insane delusion. That property will pass through intestate.

·  In re Strittmater, 149-150

·  Testator was feminist that left her estate to the NOW.

·  Decedent supposedly suffered from paranoia. Decedent hated men to a neurotic degree.

·  In re Honigman, 150-156 (pg. 33-34)

·  Widow objected to the will on the basis of the testator's alleged insane delusion that the widow was cheating on him.

·  If a person persistently believes supposed facts, which have no real existence except in his perverted imagination, and against all evidence and probability, he is, so far as they are concerned, under a morbid delusion; and delusion in that sense is insanity. Such a person is essentially made or insane on those subjects, though on other subject he may reason, act and speak like a sensible man.