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