LexisNexis Capsule SummaryTrusts and Estates.docx

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LexisNexisCapsuleSummaryTrustsandEstates

[Note:

Numbersinbracketsrefertotheprintedpagesof

UnderstandingTrustsandEstatesbyRogerW.Andersen

wherethetopicisdiscussed.]

LexisNexisCapsuleSummary

TrustsandEstates

Chapter1

LAWYERS,ESTATES,ANDTRUSTS

§1ServingtheLiving[1-2]

TrustsandEstatesisthestudyofwaystohelplivingpeoplesolvefamilyproblems.Recognizingthatlawyerconductaffectstheliving,somecourtshavebrokendowntraditionaldefensesandheldlawyersresponsibletowillbeneficiarieswhowerenottheirclients.

A.TraditionalDefenses

1.Privity

Traditionally,willbeneficiarieswholosttheirsharebecauseofthelawyer’snegligencewereoutofluck.Becausethelawyerhadrenderedservicetothenow-deadclient—ratherthantothewillbeneficiaries—thebeneficiarieshadno“privity”withthelawyerandcouldnotrecover.

2.StatuteofLimitations

Traditionalrulessaidthestatuteoflimitationsforanynegligencebegantorunwhenthewillwasdrafted,oftenmanyyearsbeforetheerrorwasdiscoveredaftertheclientdied.Thedelaybarredmanyclaims.

B.ATrend

StartingwithLucasv.Hamm,364P.2d685（Cal.1961）,courtshavebeenabolishingtheprivitydefenseandreadingthestatuteoflimitationsasbeginningtorunatthetestator’sdeath.Thetrendisnotuniversal.See,e.g.,Millerv.Mooney,725N.E.2d545（Mass.2000）（rejectingtortliability,butleavingopenthequestionofthirdpartybeneficiaryliability）.

§2AnOverviewofIntergenerationalWealthTransfer[2-11]

A.Probate

1.TheProcess

Probatesystemscollecttheassetsofdecedents,satisfycreditors,resolveconflictsamongbeneficiaries,anddistributewhatislefttotheappropriatepersonsorinstitutions.

a.SubjecttoProbate.

Propertythatthedecedentheldaloneorasatenantincommonissubjecttothesystem.Jointtenancy（ortenancybytheentirety）property,lifeinsuranceproceedsonthedecedent’slife,andpropertyinlifetimetrustsarealloutsideofprobate.Dependinguponlocalrules,thedecedent’shalfofcommunitypropertymayormaynotpassthroughprobate.

b.PersonalRepresentative

Whenapersondiesandadecisionismadetoprobatehisestate,someone—usuallyafamilymember—willpetitionacourtinthedecedent’sstateofdomiciletoappointa“personalrepresentative”tohandlethework.Executors（ifthereisawill）andadministrators（ifthereisnowill）arethemostcommontypesofpersonalrepresentatives.

c.SmallEstates

Manystatesallowsmallestatestopasswithoutcourtadministration,orwithminimalcourtinvolvement.See,UPC§§3-1201to3-1204.

d.SupervisedEstates

Thoughlocalpracticewillvary,administrationofacourt-supervisedestategenerallylookslikethis:

Uponappointmentofthepersonalrepresentative,thecourtissuesappropriatelytitled“letters”toevidencetheindividual’sauthority.Thepersonalrepresentativethencontactsbanks,stocktransferagents,andthelike,tocollectthedecedent’sassets.Aninventoryisfiledandcreditorsarenotified.Ifknownorreasonablyascertainablecreditorsaregivenactualnotice,theirclaimsmaybecutoffifthecreditorsdon’tfilepromptly.SeeTulsaProfessionalCollectionServices,Inc.v.Pope,485U.S.478（1988）.

Next,estateadministrationentersaholdingperiod.Appraisalsaremade;taxformsarefiled;sometimespropertyissoldtopaycreditorsorbecausenoonewantsit.Theremaybeawillcontestorlitigationaboutthewill’smeaning.Whenallquestionsareresolved,thepersonalrepresentativeclosestheestatebydistributingtheremainingpropertytothoseentitledtoit.

2.IsProbateNecessary?

Probateisnotalwaysnecessary.All,orvirtuallyall,ofthepropertymaypassfreeofprobate.Theremaybenocreditors,ortheymayhavebeenfoundandpaid.Everyonemayagreeonwho’stogettheproperty.

B.LifetimeTransfers

1.Trusts

HarvardProfessorAustinW.Scottsaid,“[t]hepurposesforwhichtrustscanbecreatedareasunlimitedastheimaginationoflawyers.”1AustinW.Scott&WilliamF.Fratcher,TheLawofTrusts4（4thed.1987-1991）.

a.BasicRequirements:

∙Intention

∙Property

∙Trustee

∙Beneficiary

b.Livingv.Testamentary

Atrustcreatedduringthelifeofthesettloriscalleda“living”（or“lifetime”or“intervivos”）trust.Atrustiscreatedbywilliscalleda“testamentary”trust.Questionsinvolvinglivingtrustscanberesolvedincourtsofgeneraljurisdiction,butthereisnoongoingjudicialsupervision.Testamentarytrustsaretypicallysubjecttothecontinuingjurisdictionandsupervisionoftheprobatecourt.

2.OtherLifetimeTransfers

Survivingjointtenantsowntheentirepropertywhenonejointtenantdies.Becausethesurvivornolongersharesownershipwiththeonewhohasdied,thedecedenteffectivelyhastransferredwealthatdeathwithouttheneedofprobateFundspaidbyathirdparty（likealifeinsurancecompany）atthedeathofsomeoneareoftentreatedascontractrightsofthebeneficiary,ratherthanpropertyoftheonewhodied.“Payable-on-death”and“transfer-on-death”bankandbrokerageaccountsreachthesameresult.

C.TheUniformCodesandtheRestatements

TheUniformProbateCode（UPC）andtheUniformTrustCode（UTC）offerstatutorylanguageandcommentarytostatelegislaturesconsideringreform（andindirectlyinfluencecourtdecisions）.TheRestatementsofPropertyandofTrustsprovideguidancetocourts（andindirectlyinfluencelegislatures）.

Chapter2

INTESTACY

§3Overview[13-14]

Intestatestatutesidentifywhotakesadecedent’sprobateproperty:

∙ifthereisnovalidwill（totalintestacy）or

∙totheextentthatthewilldoesnotdisposeofalloftheproperty（partialintestacy）.

Oftenthesestatutesalsoserveasmodelsforotherlawsthatmandatesharesfordisinheritedspousesorforgottenchildren.Intestateschemesalsoprovidedocumentdrafterswithalargevarietyofchoicestopresenttotheirclientswhowantwillsortrusts.

§4Spouses[15-18]

A.WhoIsaSpouse?

Whetheranindividualcaninheritasa“spouse”isusuallyaquestionofeachstate’sdomesticrelationslaw.Moststatesrequireavalidmarriagebetweenpeopleofdifferentgenders.Someonewhohascohabitedunderagoodfaith,butmistaken,beliefthatheorshewasmarriedmaybeabletoclaimanintestateshareasaputativespouse.SeeRestatement（Third）ofProperty§2.2comment.e.Vermontrecognizespartiestoacivilunionasspouses.See15Vt.Stat.Ann.§1204（b）.

B.TheSpouse’sShare

Thesizeofasurvivingspouse’ssharevaries,dependinguponbothstatelawandwhoelsesurvives.Ifthedecedentleftnochildren,thespousemightgeteverything,ormightsharewiththedecedent’sparents.Ifthedecedentleftchildren,thespousewilloftensharewiththem,takinghalfifthereisonechild,andone-thirdifthereismorethanonechild.Somestatesgivethespousealump-sumamountandthendividethebalancebetweenthespouseandthechildren.Inotherstates,thespousegetseverything,andthechildrenhavetorelyupontheirsurvivingparenttoserveasaconduit,leavingthemanythingthatisleftoveratherdeath.

1.TheConduitTheory

Theconduittheorymayworkwellinthetraditionalsituationofspouseswhomarry,raisechildren,anddiewithouthavingdivorcedorremarried.

Whenthesurvivingspouseisnottheparentofsomeorallofthedecedent’schildren,however,thesurvivormaybelesslikelytofavorthosechildrenand,thus,belessreliableasaconduit.

TheUPCdistinguishesbetweensingle-marriageandmultiple-marriagesituations.Ifthesurvivingchildrenareallchildrenofthedecedentandsurvivingspouse,thesurvivingspousegetseverything.UPC§2-102

（1）（ii）.Ifthesurvivingspouseistheparentofthedecedent’schildren,butalsohasotherchildren,thesurvivortakes$150,000,plusone-halfofthebalance.UPC§2-102（3）.Ifthedecedentleftchildrenwhoarenotchildrenofthesurvivingspouse,thesurvivortakesonly$100,000,plusone-halfofthebalance.UPC§2-102（4）.

§5OtherFamilyMembers[18-30]

A.QualifyingtoTake

1.NonmaritalChildren

Atcommonlaw,nonmaritalchildrencouldnotinheritfromanyone.Nowtheycanalwaysinheritfromtheirmothers.Jurisdictionsdefinedifferentlythesituationsinwhichnonmaritalchildrencaninheritfromtheirfathers（andviceversa）.

TheEqualProtectionclauseofthe14thAmendmentprotectsnonmaritalchildrentosomeextent.Trimblev.Gordon,430U.S.762（1977）,invalidatedanIllinoisstatutethatallowednonmaritalchildrentoinheritfromtheirfathersonlyiftheirparentseventuallymarriedandthefathersacknowledgedthechildren.InLalliv.Lalli,439U.S.259（1978）,theSupremeCourtupheldaNewYorkstatutethatallowedanonmaritalchildtoinheritfromherfatheronlyifthemanhadbeenfoundtobethefatherinapaternityactionbroughtbothwithintwoyearsofthechild’sbirthandwhilethemanwasalive.ThesesortsofrequirementsseemhardertojustifyinanageofDNAanalysis.

2.AdoptedChildren

a.IdentifyingtheQuestion

Questionscanariseaboutwhethertheadoptedperson（theadoptee）caninheritfromtheadoptee’sgeneticparentorthroughtheadoptee’sgeneticparent（forexample,fromagrandparent）.Similarly,theremaybequestionsaboutwhethertheadopteecaninheritfromtheadoptee’sadoptiveparentorthroughtheadoptee’sadoptiveparent.Thesamesortsofquestionscanariseintheotherdirection,iftheadopteediesfirst（forexample,whethertheadoptee’sgeneticgrandparentcaninheritfromtheadoptee）.

b.I