Hylton Trusts And Estates Outline

Trusts & Estates

Fall 2015 – University of Virginia School of Law

• General Policy:

  • Rights to Inheritance vs. Freedom of Disposition vs. Escheat vs. Free alienation

  • Formality vs. Reflection of Testamentary Intent vs. Default Rule Formation vs. Fraud

  • Dead Hand Control

  • Restrictions on freedom of disposition: when can you not decide how to dispose of your property?

  • Efficient transfer of property

  • Trusts as Economic Activity vs. Wealth Transfer (investor vs. caretaker trustee)

  • Role of Lawyer Mistake/Malpractice

  • When do property rights vest?

    • To whom do you owe a duty—where do they come from and what rights/remedies do they create?

    • Present Beneficiary vs. Future Beneficiary

  • Historical evolution

  • (Differences in jurisdictions/UPC&UTC)

• Ch. 1. Freedom of Disposition

  • Possible Outcomes at Death (5):

    • (1) Escheat: property goes to the state

      • Rule of construction against this

      • See e.g. Marilyn Monroe (right to publicity) case; rights that don’t exist at time of will generally escheat

      • This is constitutionally permissible: if govt can take some it can take all

        • Estate tax: tax on the property of the dead

        • Inheritance tax: tax on recipient after they receive the property

      • POLICY: Less desirable in our culture

        • E.g. USSR tried it, had to get rid of it later because (1) inefficient/high enforcement costs (2) people feel entitled

    • (2) No Choice: goes to children/family/etc. by legal scheme

      • Mostly just in the past, but this is the case in intestacy

    • (3) Will: Pick the owner

      • Default in western world

      • But see limitations on disinheriting your spouse (except GA)

    • (4) Free to choose: can pick the owner and attach restrictions on property

      • Case law is murky

      • Can’t violate public policy

      • See Shapira (marry a Jewish girl)

    • (5) Free for All: people just take things

      • Most common in other countries

  • Freedom of Disposition

    • RULE: generally have freedom of disposition, including reasonable restraints, except where against public policy. Inheritance is not a constitutional right, although you cannot restrict both disposition and devise of property.

    • Shapira v. Union National Bank (Ohio 1974): “reasonable restriction”

      • FACTS: equal shares to three children, one daughter moved to israel, and two sons would only get if marry jewish girls with 2 jewish parents w/in 7 years, otherwise would go to Israel (Israel sent lawyers)

      • HOLDING: Nothing in this will is against public policy (like a requirement to divorce might be) so it is valid, even if the number of weddable jews is small in the locality.

      • HOLDING: no right, constitutional or otherwise, to inheritance. The state may modify and eliminate inheritance procedures and can go as far as to require Escheat.

      • POLICY: may be a problem if gay today, or “cannot marry jews,” or must get divorced

        • Throw out condition and leave provision? Throw out provision too and let pass by partial intestacy?

      • POLICY: problem with dead-hand control control is that you can’t change your mind after you’re dead

    • Maddox v. Maddox (VA 1854) Unreasonable restraint

      • FACTS: inheritance conditioned on remaining member of “Society of Friends,” by time marriageable age only 5-6 members in her neighborhood, married someone else and lost membership

      • RULE: Unreasonable restraint on marriage voids condition because it is against public policy.

      • DISTINCTION (Shapira vs. Maddox Rules): no longer “horse and buggy days”, larger number of Jewish women in this area, so restraint is reasonable

    • Eyerman v. Mercantile Trust Co. (Mo. 1975): Destruction of Property/Waste

      • RULE: requiring destruction of property when no more family members to live there is contrary to public policy

    • Kentucky Red Combs Example (~1990):

      • FACTS: condition requiring that med school fire an employee before receiving devise went unchallenged

      • PROFESSOR: sort of like divorce, but might not be quite as against public policy

    • Hodel v. Irving (SCOTUS 1987) Cannot Restrict Both Dispose and Devise

      • FACTS: Indians granted land with right to rent but not to dispose or to devise—automatically descends to children upon death. Land kept splitting until parcels were unusably small. Congress passes law reverting land to tribe once it dropped below a certain acreage.

      • RULE: Statute struck down. State may not restrict ability to both dispose and devise—must allow some method by which to alienate property (must either let dispose of during life, or devise upon death)

      • AFTERMATH: people overinterpreted—you cannot completely abolish alienation rights, but you may require to, for example, remain in family

        • Pennsylvania Coal Co. v. Mahon (1922) (J. Holmes): takings case, cannot “go[] too far”

    • Shaw Family Archives Ltd. v. CMG Worldwide, Inc. (SDNY 2007) (Marilyn Monroe) - Posthumously Acquired Property Rights

      • FACTS: will said nothing about publicity rights because they didn’t exist at the time, left residual (most) to acting coach

      • RULE: rights do not go to the residuary devisees because you cannot devise (or have a default rule of devise) a right when it does not exist at time of death. Publicity rights escheat into the public domain.

      • ANECDOTE: first case recognizing publicity rights was Haelan Laboratories (2d Cir. 1953) where players signed exclusive rights to two competing baseball card companies. Court established privacy right that can be sold, so one company could sue the other (as opposed to the player).

      • POLICY: California amended statute for public rights to overrule holding (indiana too now for James Dean)

  • Probate

    • Executor: person appointed by court or chosen by testator to oversee probate of a will

    • Administrator: person appointed by court to oversee intestacy process

    • Probate Administrative Procedure

      • Someone must file paperwork with courthouse

      • Probate avoidance:

        • If no creditor or other type of dispute then probate is often skipped

        • Can avoid probate if estate is if below a certain limit (e.g. 30k), but probate is the ONLY way to testamentarily transfer deed/title to real property (can’t get a...

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