Trusts & Estates Essentials Power Point Slides Class #2

Trusts & Estates EssentialsPower Point Slides Class #2 1-17-19 Hot Buttered Rum Day

Trusts & Estates Essentials: Logistics Starting Tuesday 1/22: • I’ll Take Attendance • Another Class in the Room until 8:50 I’ll Post on Course Page by 3 p.m. Saturday • Assignments for Next Week • Additional Materials Please See Me Nicola Condello Alejandro Diaz Gastelum

UNIT ONE: BASELINES CHAPTER 1: OVERVIEW

Section 1.1: Introduction & Section 1.2: Testamentary Freedom (Generally) • Trusts and Estates (T&E) deals with gratuitous transfers of property (transfers without consideration). • (Casebook p2) “[T]he field's first principle is freedom of testamentary disposition: that testators (people who make wills) and settlors (people who make trusts) enjoy ‘the nearly unrestricted right to dispose of their property as they please.’ Restatement (Third) of Property: Wills & Other Donative Transfers §10.1, comment a.” • Major themes of T&E arise from importance of testamentary freedom.

Section 1.1 & Section 1.2 Course Themes • When is gift truly grantor’s intent? (Often Hard Q if grantor is deceased) • Was gift really voluntary? Did grantor have sufficient mental capacity to make the gift? • How do we ensure documents are authentic (formalities, etc.) • Extrinsic evidence of intent: when allowed & how evaluated?

Section 1.1 & Section 1.2 Course Themes • Use of default rules & presumptions to fill in gaps & explain language. • Accounting for passage of time (e.g., between drafting & operation of will) • Regulating costs of administration of donative instruments • When should a decedent’s preferences yield to the needs of the living? (focus of 1.2.1)

Section 1.3: Sources of Law, Probate Courts & Probate Administration • Mostly Self-Explanatory • Four Distinctions you Need to Know • Primary Jurisdiction (Domicile) v. Ancillary Jurisdiction (Real Property in Different Jurisdiction) • Informal v. Formal Probate • Probate Estate v. Net Probate Estate • Probate v. Non-Probate Property (More Details in Chapter 10 if you are interested) • Qs on Section & Distinctions Tuesday

Section 1.2: Testamentary Freedom1.2.1 State Law (Limits on Freedom) • Relatively few substantive limits on Testamentary Freedom in State law • Protection of Surviving Spouses (see chapter 7) & Creditors • Limits on Duration of Dead Hand Control (Rule against Perpetuities as Modified) • “Public Policy” Limits: Impermissible Instructions & Conditions (Today)

Unacceptable Conditions Conditions So Abhorrent …

Unacceptable Conditions Conditions So Abhorrent … You Can’t Even Impose Them on Your Own Children

Unacceptable Conditions Total Restraint on Alienation Partial Restraint OK if “Reasonable” Most Restrictions Restrain Alienation to Some Extent If too burdensome/weird could treat as too much restraint (b/c nobody will purchase) Maybe: “so long as the owner sleeps on the parcel every night.”

Unacceptable Conditions Total Restraint on Alienation Doing Criminal Acts “To Rebecca if she murders Parker”

Unacceptable Conditions Total Restraint on Alienation Doing Criminal Acts Total Restraint on Marriage: Generally Barred “Reasonable” partial restraints generally allowed E.g., “So long as she doesn’t marry until she turns 25” We’ll explore with Shapira & Problem 1.1

Unacceptable Conditions Total Restraint on Alienation Doing Criminal Acts Total Restraint on Marriage: Generally Barred Encouraging Divorce (Evil In-Laws Grant): “To Sansa so long as she divorces Tyrion”

Unacceptable Conditions Total Restraint on Alienation Doing Criminal Acts Total Restraint on Marriage: Generally Barred Encouraging Divorce (Evil In-Laws Grant): Grant Penalizing Divorce Seems to be OK “To Sansa for Life, but if she divorces Tyrion, to Jon”

Unacceptable Conditions Total Restraint on Alienation Doing Criminal Acts Total Restraint on Marriage: Generally Barred Encouraging Divorce Commonly Protected Characteristics Race-Based Limitations (Clearly Unenforceable) Sex-Based Upheld (At Least w/in Family) Religion: (We’ll Discuss w Shapira)

Unacceptable Conditions You are responsible for this list (I’ll edit syllabus to reference) Total Restraint on Alienation Doing Criminal Acts Total Restraint on Marriage: Generally Barred Encouraging Divorce Commonly Protected Characteristics Questions?

Shapira v. Union National Bank • Referenced in casebook • We’ll do in more detail because: • Good case to see number of relevant concerns when state is using “reasonableness” test • Nicely sets up Problem 1.1 • I have taught in my Property course • Some students here have studied • I have follow-up problems and multiple choice Qs

Shapira v. Union National Bank (Note Q1) • The Maddox opinion cited in Shapira ruled that conditions on marriage are unacceptable where there is a sufficiently “small number of eligible” partners. Consider whether this is a sensible rule. If you were living in a state with that test, (a) How small a number of eligible partners would make the condition unacceptable? (b) What evidence could you use to determine the number of eligible partners?

SHAPIRA: Note/Q2  We’ll Explore Shapira Reasoning by Looking at Five Key Distinctions Drawn by the Opinion (Listed after Note/Q2)

SHAPIRA: DISTINCTION #1  Gift conditioned upon religious faith of beneficiary  v. Gift conditioned upon marriage to person of particular faith  Why Relevant?

SHAPIRA: DISTINCTION #1  Gift conditioned upon religious faith of beneficiary  v. Gift conditioned upon marriage to person of particular faith  • Coercing Belief  v. Conduct  • Administrability

SHAPIRA: DISTINCTION #1  Gift conditioned upon religious faith of beneficiary  v. Gift conditioned upon marriage to person of particular faith  • Coercing Belief  v. Conduct  • Note View of Marriage in 1974 • Can Use Case to Support Conditions Requiring Conduct Affecting Religious Concerns but not Coercing Belief • Administrability

SHAPIRA: DISTINCTION #1  Gift conditioned upon religious faith of beneficiary  v. Gift conditioned upon marriage to person of particular faith  • Administrability: Compare: • To Pigpen, so long as the kitchens and bathrooms are always kept very clean. • To Schroeder, so long as he never plays any workby Beethoven on the piano.

SHAPIRA: DISTINCTION #1  Gift conditioned upon religious faith of beneficiary  v. Gift conditioned upon marriage to person of particular faith  • Administrability: Compare: •  To Lucy so long as she remains a member of the Society of Friends. •  To Linus, so long as he remains a good Catholic. QUESTIONS?

SHAPIRA: DISTINCTION #2  Gift conditioned upon divorce  v. Gift conditioned upon marriage to person of particular faith (maybe ) Why Relevant?

SHAPIRA: DISTINCTION #2  Gift conditioned upon divorce  v. Gift conditioned upon marriage to person of particular faith (maybe ) • Court: Latter not sufficient to encourage fake marriage & divorce. • Grantee can’t avoid condition by saying “I will act in bad faith” (this concern arises regarding many legal issues). • Note case looks different if son already married to Muslim woman (or maybe engaged?)

 SHAPIRA: DISTINCTION #3  Conditional gift with “gift over” to third party v. Conditional gift without “gift over” Comprehensive Estate Plan (likely ) (Note: Gift Over Unrelated to Challenged Condition Probably Won’t Support Allowing Condition) v. “In Terrorem” Condition (maybe )

 SHAPIRA: DISTINCTION #4  Forcing a marriage as a condition of a completed gift  v. Withholding gift until marriage made  Why Relevant?

 SHAPIRA: DISTINCTION #4  Forcing a marriage as a condition of a completed gift  v. Withholding gift until marriage made  • Remedy: Injunction v. Forfeiting Gift • Like case involving divorce settlement requirement that child be raised in particular faith • Won’t impose contempt/criminal sanctions for not following religion

SHAPIRA: DISTINCTION #5  Quaker Men (Maddox)  v.  Jewish Women (Shapira) Why Relevant?

SHAPIRA: DISTINCTION #5  Quaker Men (Maddox)  v. Jewish Women (Shapira) • Quakers = Too Few Available Partners  • E.g., you must marry one of the Bronte Sisters  Questions on Shapira?

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) Max has become preoccupied with the high rate of intermarriage among young Jews. He decides that he wants to encourage his own children, Michael and Leila, to marry within the faith. Yields 3 Non-Cumulative Qs (A or B or C)

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) Max has become preoccupied with the high rate of intermarriage among young Jews. He decides that he wants to encourage his own children, Michael and Leila, to marry within the faith. • Michael marries a Jewish woman, but Leila marries a non-Jewish man. As a result, Max executes a will that leaves his entire estate to Michael. Could a court conclude that Max's will violates public policy and decline to enforce the condition on that basis? Why or why not?

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) Max has become preoccupied with the high rate of intermarriage among young Jews. He decides that he wants to encourage his own children, Michael and Leila, to marry within the faith. • Michael marries a Jewish woman, but Leila marries a non-Jewish man. As a result, Max executes a will that leaves his entire estate to Michael. Note: on face, just choosing one child over another, which is OK. Any “public policy” claim would require extrinsic evidence that will be contestable

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) Max has become preoccupied with the high rate of intermarriage among young Jews. He decides that he wants to encourage his own children, Michael and Leila, to marry within the faith. B. Neither Michael nor Leila is married when Max makes his will. Knowing that Erla [his wife] will disinherit any of their children who do not marry within the faith, Max's will leaves all of his property to Erla. Could a court conclude that Max's will violates public policy and decline to enforce the condition on that basis? Why or why not?

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) Max has become preoccupied with the high rate of intermarriage among young Jews. He decides that he wants to encourage his own children, Michael and Leila, to marry within the faith. C. Neither Michael nor Leila is married when Max makes his will. Max inserts a clause into the document that says: “I leave my property to my children, Michael and Leila, in equal shares. However, to inherit their share, my children must marry a Jew who lives in the city of Jerusalem within one year of my death.” When Max dies, Michael is 19 and Leila is 17. On what bases might a court conclude that the condition violates public policy?

1.2.1 State Law Last Names O-V: Problem 1.1 (W4) C. “to inherit their share, my children must marry a Jew who lives in the city of Jerusalem within one year of my death.” When Max dies, Michael is 19 and Leila is 17. On what bases might a court conclude that the condition violates public policy? • Is pool of pot’l spouses in Jerusalem enough? • Matter that kids are in, e.g., Florida? (cf. Shapira) • Is one year too quick? • Is forcing marriage by 18/20 years old against public policy?

1.2.1 State Law: Everman & “Public Policy” as Limit on Testamentary Freedom The term “public policy” cannot be comprehensively defined in specific terms but the phrase “against public policy” has been characterized as that which conflicts with the morals of the time and contravenes any established interest of society.… REACTION?

1.2.1 State Law: Everman & “Public Policy” as Limit on Testamentary Freedom The term “public policy” cannot be comprehensively defined in specific terms but the phrase “against public policy” has been characterized as that which conflicts with the morals of the time and contravenes ANY established interest of society.…

1.2.1 State Law: Everman &Instructions to Destroy Property • Will Provision: Personal Representative “…to cause our home at 4 Kingsbury Place…to be razed and to sell the land upon which it is located…and to transfer the proceeds of the sale…to the residue of my estate.” • Court strikes down because • Against interests of beneficiaries, neighbors, City of St. Louis (Historic Preservation) • No apparent benefit to anyone • Capricious, eccentric, extravagant

1.2.1 State Law: Everman &Instructions to Destroy Property • Will Provision: Personal Representative “…to cause our home at 4 Kingsbury Place…to be razed and to sell the land upon which it is located…and to transfer the proceeds of the sale…to the residue of my estate.” • “[T]his senseless destruction serving no apparent good purpose is to be held in disfavor. A well-ordered society cannot tolerate the waste and destruction of resources when such acts directly affect important interests of other members of that society.…” • After Death v. While Alive?

1.2.1 State Law: Everman &Instructions to Destroy Property • Will Provision: Personal Representative “…to cause our home at 4 Kingsbury Place…to be razed and to sell the land upon which it is located…and to transfer the proceeds of the sale…to the residue of my estate.” • Possible Stories • Rare disease caused by the structure? • Built by ex-husband, whom she hated? • Thought it was haunted? • Other? • Make Sense of Beneficiaries or City Not Joining Suit?

1.2.1 State Law Last Names A-C, W-Z: Problem 1.2 (W9) • While suffering from the tuberculosis that would end his life, Franz Kafka (1883-1924), author of the novel The Trial (1925) and the short story The Metamorphosis (1915), wrote to the close friend whom Kafka had named as the executor of his estate and instructed him to immediately destroy all of Kafka's unpublished manuscripts. At the time, most of Kafka's work had not yet been published. • B. If you were Kafka's friend who received his letter directing you to destroy all of his unpublished manuscripts, what would you do?

1.2.1 State Law Last Names A-C, W-Z: Problem 1.2 (W9) • During his lifetime, Maurice Sendak (1928-2012), author and illustrator of Where the Wild Things Are (1964), signed a will with this provision: “I direct my executors to destroy, immediately following my death, all of my personal letters, journals and diaries. I have informed my executors of the location of these articles in my residence located at [address].” • C. If you had been appointed the executor of Sendak's will, what would you do?

1.2.1 State Law Last Names A-C, W-Z: Problem 1.2 (W9) • Kafka: Destroy all unpublished manuscripts. • Sendak: Destroy “all of my personal letters, journals and diaries.” • A. Relevant Differences between Kafka & Sendak? • D. Relevant Differences between these and provision in Everman?

1.2.1 State Law Last Names A-C, W-Z: Problem 1.2 (W9) • E. What result if Sendak had directed his executor to re-purpose his country residence into a charitable nonprofit museum, with specific instructions to leave all furnishings and decorations in place permanently and never to alter the physical structure?

Section 1.2: Testamentary Freedom1.22 Constitutional Law (NOTIO) Topic in 1.22 • NOT U.S. Constitutional Limits on Testamentary Freedom • INSTEAD: When States Restrict Testamentary Freedom, How Does U.S. Constitution Limit Those Restrictions

Section 1.2: Testamentary Freedom1.22 Constitutional Law When States Restrict Testamentary Freedom, How Does U.S. Constitution Limit Those Restrictions? BACKGROUND CASES: New York Trust Co. v. Eisner (1921) Federal Estate Tax constitutional even though it impaired the freedom of disposition. Irving Trust Co. v. Day (1942) State spousal elective share constitutional even though it impaired the freedom of disposition to beneficiaries other than spouse.

Section 1.2: Testamentary Freedom1.22 Constitutional Law When States Restrict Testamentary Freedom, How Does U.S. Constitution Limit Those Restrictions? PRIMARY CASE: Hodel v. Irving • Difficult Takings Q (Not tested in this course) • Opinion not very clear on why different from Eisner & Day • I’m covering this and Problem 1.3 for reading and interpreting the actual and hypothetical statutes

Trusts & Estates Essentials Power Point Slides Class #2