Trusts & Estates - TRUSTS & ESTATES Fall...

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Unformatted text preview: TRUSTS & ESTATES Fall 2005 i I. INTRODUCTION A. Gratuitous Wealth Transmissions 1. intestate succession 2. wills 3. will substitutes (e.g. revocable trusts) 4. trusts (e.g. powers of appointment) B. Freedom of Disposition Principle 1. Definition : (a) broad freedom to dispose of property during lifetime or after death 2. Limitations : (a) elective share statutes (i.e. spouse has a non-barrable right to inheritance) (b) rule of perpetuities 3. Justifications : (a) natural right inherent to ownership, but Constitution rejects this (b) gratuitous transfers encourage saving and investment, which in turn generates productivity and creativity 4. Dilemma : (a) US political system traditionally maintains an anti-aristocracy ethic (i.e. no class distinctions), which conflicts with freedom of disposition 5. Constitutional Dimension : (a) Irving Trust Co. v. Day (1942) there is no restriction on states powers to limit, condition or abolish freedom of disposition (i.e. not a natural right) (b) Hodel v. Irving (1987) right of freedom of disposition is a US tradition so the complete abolition of both the devise and descent of property may be a taking C. Probate v. Non-Probate 1. Probate : (a) applies to transfer of property that has legal and substantive effect upon death (b) pertains to a legal procedure for validating a will and proving that decedent had legal and mental capacity, and that will was properly executed (c) judicially supervised estate administration 2. Non-Probate : (a) inter vivos transfers of some property interest that have legal effect during life, but only substantive effect at death (b) free from the legal machinery of liquidation and estate administration 3. Probate Systems : (a) wills (b) intestate succession 4. Non-Probate Systems : (a) life insurance (b) pensions (c) joint accounts (d) revocable trusts 5. Purpose of Probate : (a) obtain possession (b) clear title (c) satisfy creditors ( note : most creditors do not rely un probate, but agreements) 1 6. Purpose of Non-Probate : (a) probate is time consuming and expensive (b) probate estate will be tied up before liquidation and distribution to transferees (c) involves significant court, personal representative and attorney fees 7. Identifying Non-Probate Assets : (a) anything with a right of survivorship is a non-probate asset (i) tenancy in common does not have right of survivorship (ii) joint tenancy and tenancy by entirety have rights of survivorship II. INTESTATE SUCCESSION A. Applicability 1. applies only to probate assets 2. applies only in absence of legally effective will or other legally effective probate- avoiding will substitute transaction (i.e. default rule ) B. Objective 1. to mimic the presumed intentions of a reasonable decedent, to look after the needs of surviving dependents, and to promote fairness C. Pattern of Distribution 1. by blood first to spouse and descendants (adoptees), then to collateral relatives 2. sole means of defining the legal meaning of term heir...
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Trusts & Estates - TRUSTS & ESTATES Fall...

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