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Trusts and Estates

Class 1 – 9/25

Gallanis
 Went here for JD

Transfer of Wealth
1. Deal
a. Contracts (not this course)
2. Misconduct
a. Criminal, torts (not this course)
3. Donative intention
a. Inter vivos (between living persons)
i. Gift (first year contracts)
ii. Trust
b. At death (this is the focus of our class)
i. Trust
ii. Will/intestacy/nonprobate mechanism

Trusts and estates law affects everyone

Goals for course:


1. Familiar with law
2. Reasons behind the law
a. Do those reasons make sense?
3. Appreciate the work of estate planners
4. Think about changes in society and how they (should) affect the law

Main Statutes: Uniform Probate Code and Uniform Trust Code


 UPC
o Aimed to develop model statute in the late 60s

Statutes to read are listed in the casebook

Chapter 1 Topics:
 Introductory Material
 Probate vs. nonprobate transfers
o Probate is synonym for administrative
 Succession of property by administrative process of the probate
court
o Nonprobate transfers
 By some mechanism set up before death that enables the transfer of
property
 Example: pension account, joint bank accounts, life insurance
 Donative freedom and its limit
Pure vs. imperfect will substitutes
 Wills are revocable and ambulatory (walk with donor, and take effect at the time
of the donor’s death)
 Will substitute has the same
 Joint tenancy is classically imperfect
o Not revocable and not ambulatory

Ambulatory
 Amble like walking
 Imagine property walking along with owner, and not being transferred until the
owner dies

Why is this so important?


 Relationship between probate and nonprobate is key to this class
 Probate are old
 Nonprobate are comparatively new
 Question: how are we going to treat them? Are they fundamentally different than
probate transfers? Or are they just probate transfers under another name?

Another theme: donative freedom

Shapira v. Union National Bank


 Will said kids need to marry someone Jewish within 7 years to get $$$
 This is about the donative freedom of the donator
o Broad sphere, we want to honor their intentions
 Policy arguments
o No one has a right to anyone’s money
o But we are concerned with some restrictions on property

9/27 – Class 2

Chapter 2 – Intestate Succession


1. Intestacy: spouses and children
2. Beyond spouses and children
3. Is intestacy good enough for you?

Why People Don’t Have Wills


 Age
 Level of assets
 Cost/time
 No children/obvious takers
 Intestacy is okay
 Reminder of mortality
 Might upset family
 Will substitutes
 Uncertain how to do it
v
Goals for Intestacy Laws
 Mirror testamentary intent
 Clarity/lack of ambiguity
 Promote family harmony
 Protect dependent family member
 Encourage saving

Problems
1. No heirs of the living, only heirs of the dead
2. Relevant code: UPC 2-102 (heirs are the relevant parties that can challenge a will)

What about “…to my daughter for life, remainder to my daughter’s surviving


descendants by representation”?
 Points to state’s statute (may be a default rule)
 If no default rule, then modern per stirpes
 Specify what type of stirpes you mean

Going to focus on two problems in Chapter 3 tomorrow


Also read Execution of Wills from Chapter 4 (Background writing and signature)

10/2 Class

Class gifts: Terms appear in both wills and donative documents

Switching now to donative documents, on probate side of the line

10/4 Class

Will execution
 We’ve been focusing on standard wills, which require
o Writing
 Advent of electronic wills
o Signature
 McKellar
o Attestation
 Peters

10/12 Class Notes

Roadmap for the chapter:

What are various kinds of nonprobate transfers and how do they work?
 Revocable trusts
 Life insurance

To what extent should nonprobate transfers be governed by the same rules as wills?
 Revocation upon divorce
 Antilapse
 Simultaneous or near simultaneous death
 Revocation by homicide (slayer rule)

10/19 MISSED CLASS, GET NOTES

10/25 Class Notes

To what extent should nonprobate transfers be governed by the same rules as wills?
 Revocation upon divorce
o ERISA
 Antilapse
o Anthony: traditional approach
 If beneficiary fails to survive, there’s no lapse
o Button: opposite approach
 Imposed requirement of survivorship
o UPC Statute 2-707
 Future interests under the terms of a trust
 “To A for life, remainder to ____”
 Yes conditioned on survivorship
 Gives constructive gift to those who don’t survive but do have
descendants
o UPC 2-706 applies to other types of will substitutes
 Simultaneous or near simultaneous death
 Revocation by homicide (slayer rule)

11/1 Class Notes

Exam Overview
 Ask questions for all of class
 3 hours, proctored
 3 questions
o 2 questions are typical law school exam type questions (issue spotting)
o 1 policy question
 Exam is limited open book
o Exam assumes that you will have your textbook and your rule book
 Won’t be a full-out practice exam because he’s changing it
 No calculators
 Reading list?
 Actual words of the statute matter

Five main topics


1. Formation and formality
2. Administration
a. Trustee’s powers, fiduciary duties
3. Restraining alienability
4. Modification and termination
5. Charitable trusts

SLIGH V. FIRST NATIONAL BANK, TRUSTEE


Procedural Posture

Plaintiff judgment creditors sought to garnish defendant debtor's beneficial


interest in two spendthrift trusts in order to partially satisfy a tort judgment. The
Holmes County Chancery Court (Mississippi) dismissed the creditors' complaint,
ruling that the assets of spendthrift trusts may not be garnished to satisfy the
claims of tort judgment creditors. The creditors appealed.

Overview

A creditor husband was injured in a car accident with the debtor, an uninsured
motorist who was intoxicated. As a result of the creditors' tort action, the
creditors were awarded a large judgment in compensatory and punitive damages.
The debtor had no assets other than his interest as beneficiary of two spendthrift
trusts established by his mother before her death. The debtor was the lifetime
beneficiary of the two trusts, which each had two remaindermen. The creditors
filed a request for garnishment of the trust assets on the trustee bank, which filed
a motion to dismiss. The chancellor granted the motion, ruling that the
spendthrift trusts were not subject to the claims of debtor's creditors. The court
reversed the chancellor's finding, ruling that the policies in favor of enforcing
spendthrift trust provisions do not outweigh the claims of involuntary tort
creditors. The interests of the remaindermen also do not overcome the creditors'
claims where the remaindermen's interest is subject to defeasance by the terms of
the trust. The court held that the beneficiary's interest in a spendthrift trust
should not be attached until all of his other assets have been exhausted.

Outcome

The court reversed and rendered the dismissal of the creditors' complaint.

Exam
 3 questions
 2 issue spotters
 1 policy question
 Limited open book
 Reading list for course will be attached to exam
 Monday, December 4 and Tuesday, December 5
o 9:30am – 11:30am