Contents

Preface xxxvii Acknowledgments xxxix

1. INTRODUCTION TO ESTATE PLANNING AND THE LAWYER’S ROLES 1

A. General Introduction 1 B. The Legal System Governing Trusts and Estates 4 Questions 5 1. Wills 5 Karen J. Sneddon, The Will as Personal Narrative 5 2. The Emergence of Will Substitutes 7 John Langbein, The Nonprobate Revolution and the Future of the Law of Succession 7 3. The Probate Process 9 Paula Monopoli, American Probate: Protecting the Public, Improving the Process 9 C. Testamentary Freedom and Limitations on “Control from the Grave” 12 Lee-ford Tritt, Sperms and Estates: An Unadulterated Functionally Based Approach to Parent-Child Property Succession 12 Feinberg v. Feinberg 13 Notes and Questions 17 Problem 18 Problem 18 D. The Professional Standards Associated with Estate Planning 19 1. Introduction 19 2. The Model Rules of Professional Conduct and ACTEC Commentaries 20 a. Counseling 21 b. Confidentiality 23 c. Conflict of Interest 26

xi xii Contents

3. Common Situations Raising Ethical Issues for Estate Planners 28 a. Joint Representation 28 Drafting Exercise 29 Problem 29 b. Third-Party Payment 29 c. Counseling 30 4. Malpractice 30 a. Avoiding Malpractice? 31 Stephanie B. Casteel, Letittia A. McDonald, Jennifer D. Odom & Nicole J. Wade, The Modern Estate Planning Lawyer: Avoiding the Maelstrom of Malpractice Claims 31 b. Privity 32 Hall v. Kalfayan 32 Notes and Questions 36 Problem 37 Appendix A UPC Section 1-201. General Definitions 38 Appendix B Glossary — American Probate Glossary 42 Appendix C Last Will and Testament of Michael Joseph Jackson 44

2. INHERITANCE AND RELATIONSHIP 47

A. Introduction 47 B. Who Is a Child? 48 1. In General 48 Susan N. Gary, We Are Family: The Definition of Parent and Child for Succession Purposes 48 Notes and Questions 51 2. — Interpreting Statutes 52 a. Establishing Maternity 53 b. Establishing Paternity 53 i. Marital Children and the Marital Presumption 53 Notes and Questions 55 ii. Nonmarital Children 56 Paula A. Monopoli, Nonmarital Children and Post-Death Parentage: A Different Path for Inheritance Law? 56 Notes and Questions 60 Problems 61 c. Adopted Children 61 Problems 63 Contents xiii

i. Children Adopted by a Stepparent 63 Problems 65 ii. Adult Adoption 66 Notes 66 iii. Equitable Adoption 67 Notes and Questions 68 Problems 69 d. Assisted Reproductive Technology (ART) Children 69 i. In General 69 Notes and Questions 71 Problems 71 ii. Surrogacy 71 Problems 72 iii. Posthumous Conception and Frozen Embryos 72 Kristine S. Knaplund, Children of Assisted Reproduction 73 Astrue v. Capato 75 Notes and Questions 79 Problems 80 Exercise 80 e. Foster and Stepchildren 80 3. Interpreting Class Gifts in Wills and Trusts 81 a. Class Gifts from Parents 81 b. Exception — Class Gifts from Nonparents 82 Note and Questions 84 C. Who Is a Parent? 85 1. In General 85 2. Inheritance by a Parent From or Through a Child Barred in Certain Circumstances 86 Notes and Questions 87 Exercise 87 D. Who Is a Spouse? 87 1. Legally Married Spouses 88 Notes 88 2. Common Law Spouses 89 Note 89 3. Putative Spouses 89 Question 90 4. Civil Unions and Domestic Partnerships 90 5. Cohabitants 91 Problems 91 Exercise 92 xiv Contents

3. INTESTACY — WHAT HAPPENS TO A DECEDENT’S PROPERTY IF THERE IS NO WILL? 93

A. Introduction 93 1. The History and Development of the Intestacy Regime 95 2. The Limitations of Intestate Succession — Not All Things to All People 96 Problems 97 3. The Intestate Estate 97 Note 98 4. Requirement of Survival 99 B. Share for Surviving Spouse 99 1. Introduction and Share in Non-UPC States 99 Note and Questions 100 Letter Writing Exercise 101 2. The UPC Share for Surviving Spouses 101 Problems 105 C. Share to Lineal Descendants 107 1. In General 107 Exercise 108 D. Share to Ancestors and Collateral Heirs and Escheat to the State 108 Note and Question 109 E. The Representation Models 110 1. Strict Per Stirpes 112 a. Procedure for Determining the Per Stirpes Share 113 2. Modified Per Stirpes (“Per Capita with Representation”) and the 1969 UPC System of Per Stirpes 115 a. Procedure for Determining the Shares Employing the Per Capita with Representation (Modified Per Stirpes) and the 1969 UPC Per Stirpes System 116 In re Estate of Evans 118 3. The Current UPC Method — “Per Capita at Each Generation” 120 a. Procedure 121 Problems 124 Question 128 F. Reducing the Intestate Share for Advancements 128 1. Is an Inter Vivos Transfer a Gift, an Advancement, or a Loan? 128 Note and Question 130 Letter Writing Exercise 130 2. How Do These Transfers Affect the Shares to the Heirs? 130 Contents xv

3. Advancements and the “Hotchpot” Calculation 131 Problems 131 Appendix A Table of Consanguinity 133

4. NONPROBATE TRANSFERS — PASSING PROPERTY BY WILL SUBSTITUTES AND GIFTS 135

A. Introduction 135 Problems 136 B. The Different Laws of Wills and Will Substitutes 136 Grayson M.P. McCouch, Probate Law Reform and Nonprobate Transfers 138 C. Why Use Will Substitutes? 139 1. The Utility of Will Substitutes 139 2. Probate Avoidance 140 a. Benefits of Avoiding Probate 140 b. Myths About the Utility of Will Substitutes 141 c. There Are Advantages to Going Through Probate 142 d. Other Matters to Consider 143 D. Determining Which Property Is Probated and Which Is Not 143 David Horton, Indescendibility 144 Question 145 1. Trusts 146 Group Letter Writing Exercise 147 2. Joint Tenancies with Rights of Survivorship and Tenancies by the Entirety 148 3. Life Insurance 149 4. Annuities and Retirement Accounts 150 5. Contracts of Deposit with Financial Institutions 151 a. Single-Party Accounts 151 b. Multiple-Party Accounts — Joint Tenancy with Right of Survivorship 151 c. Payable-on-Death (POD) Beneficiary Designation 152 d. Convenience Accounts 153 Estate of Helen Butta 154 Notes and Questions 157 6. Security Accounts 157 7. Transfer-on-Death Deeds for Real Estate 158 Exercise 158 E. Gifting — Not Exactly a Will Substitute 159 1. What Distinguishes a Gift from Other Property Transfers? 160 2. Methods of Gifting 160 xvi Contents

3. Was the Gift Successfully Made? 161 Problems 161 F. Developing a Comprehensive Estate Plan Incorporating Will Substitutes 163 1. Selecting the Beneficiary 164 Thomas E. Lund, Coordinating Beneficiary Designations with the Estate Plan 164 2. What If the Beneficiary Predeceases the Decedent? 165 Role-Play Exercise 166 G. Which Controls? The Will or the Will Substitute? 167 Lincoln Life and Annuity Co. of NY v. Caswell 168 Notes and Questions 171 H. Does Divorce Revoke a Beneficiary Designation to Spouse? 172 In re Estate of Johnson 172 Notes and Questions 175 Appendix A Chart for Exercise on Page 158 177

5. WILL VALIDITY 179

A. Introduction 179 David Horton, Wills Law on the Ground 180 B. Legal Requirements for the Testator 180 C. Formalities Required in the Will 181 1. The Writing Requirement 183 Notes and Questions 186 2. The Signature Requirement 187 a. Where to Sign? 187 b. How to Sign? 188 c. Who Can Sign? 188 Notes and Questions 189 3. Publication 189 4. The Witness Requirement 190 a. Who May Be a Witness 191 b. Where Must the Testator and Witnesses Be? 191 i. Must the Testator Sign or Acknowledge in the Witnesses’ Presence? 191 Kirkeby v. Covenant House 191 Question 195 ii. Must the Witnesses Sign in the Testator’s Presence? 195 iii. When Must the Witnesses Sign? 196 In re Estate of Peters 196 Notes and Questions 198 iv. Interested Witnesses 199 Contents xvii

Questions 199 Problems 200 c. The Self-Proved Will 200 Problem 202 d. The Notarized Will 203 e. Putting the Formalities into Practice 203 David K. Johns, Will Execution Ceremonies: Securing a Client’s Last Wishes 203 Questions 205 D. Holographic Wills 206 In re Estate of Edward Frank Muder 206 Note and Question 211 In re Estate of Charles Kuralt 212 Notes and Questions 215 Problems 215 E. Dispensing with Formalities 217 1. Substantial Compliance 217 John H. Langbein, Substantial Compliance with the Wills Act 218 In re Snide 219 Notes and Questions 222 2. Excusing Harmless Error 223 In re Estate of Wiltfong 225 Notes and Question 229 F. Choice of Law 230 G. Ethical Issues in Will Drafting 231 1. Conflicts of Interest 231 a. Drafting Attorneys as Fiduciaries 231 Questions 233 b. Exculpatory Clauses 233 c. Drafting Attorney as Beneficiary 234 2. Duty to Produce and Keep the Will 235 Questions 237 3. Drafting Software, Mistakes, and the Unauthorized Practice of Law 238 Exercises 239

6. INTERPRETING THE WILL 243

A. Introduction 243 Mary Louise Fellows, In Search of Donative Intent 244 Notes and Questions 245 xviii Contents

B. What Constitutes the Will? 246 1. Integration 247 2. Incorporation by Reference 248 Notes and Questions 249 Problem 249 3. Republication by Codicil 250 4. Events of Independent Significance 250 Problem 252 5. Memorandum at Death 252 Problems 253 6. Pour-Over Wills 254 Exercise 254 C. Interpreting the Meaning of a Will Using Extrinsic Evidence 255 1. The Plain Meaning Rule 255 2. Modern Approaches 255 3. Resolving Ambiguities 257 Estate of Hinz 258 Notes and Questions 261 Problem 261 Exercise 261 4. Mistake — Reformation of Wills 262 John Langbein and Lawrence Waggoner, Reformation of Wills on the Ground of Mistake: 262 Question 264 Problems 264 D. Interpreting the Meaning of a Will Using the Rules of Construction 265 Adam J. Hirsch, Text and Time: A Theory of Testamentary Obsolescence 266 1. Classification of Devises 267 2. Rules of Construction Applicable Only to Wills 268 a. What Happens When a Devise Fails? 268 b. Lapse and Antilapse — What Happens to a Bequest When the Beneficiary Predeceases the Testator? 269 i. The General Rule — Lapse 269 ii. The Exception to the General Rule — Antilapse 269 iii. Class Gifts 271 iv. Contrary Intent and Words of Survivorship 272 Estate of Tolman v. Jennings 273 Notes and Questions 276 Problems 277 Exercises 278 c. Ademption by Extinction and Nonademption 279 Contents xix

d. Accessions 282 In re Estate of Magnus 284 Notes and Questions 286 Problems 286 Exercises 287 e. Ademption by Satisfaction and Nonademption 288 Notes 289 f. Exoneration and Nonexoneration 290 g. Abatement and Nonabatement 291 Problems 292 h. Apportionment 292 In re Estate of Kuralt 293 Notes and Questions 297 Exercise 298 3. Simultaneous Death: A Rule of Construction Applicable to Both Wills and Will Substitutes 298 a. Determining Death 299 b. Requirement of Survival 299 c. Simultaneous Death 302 Problems 302 E. Disclaimers and “Deemed Death” 303 Problem 306 Exercise 307 Appendix A Last Will and Testament of Marjorie M. Black 308

7. REVOKING THE WILL AND WILL CONTESTS 319

A. Introduction 319 B. Revocation by Subsequent Instrument or by Physical Act 319 1. General 319 Notes and Questions 321 2. Revocation by Subsequent Instrument 321 Problems 323 3. Revocation by Physical Act 323 Problems 324 4. Presumptions with Regard to Revocatory Acts 325 a. Mutilated Will 325 b. Lost Will 326 In re Estate of Beauregard 326 Notes and Questions 329 C. Revocation by Changed Circumstances 329 1. Revocation by Marriage — Omitted Spouse 330 xx Contents

2. Revocation on Divorce 330 Notes and Questions 332 a. Will Substitutes 333 3. Revocation Due to Homicide 333 a. Will Substitutes 336 Problems 336 4. Revocation Due to Abuse 337 Problem 338 D. The Impact of Revocation 338 Adam J. Hirsch, Inheritance and Inconsistency 339 1. What Happens to a Previously Revoked Will When the Revoking Will Is Itself Revoked? 340 Question 342 2. What Happens When a Revocation of a Prior Will and Execution of a New Will Are Interrelated? 342 a. Dependent Relative Revocation 343 i. A Traditional Application of DRR 345 Kirkeby v. Covenant House 345 Notes 346 b. Harmless Error and Substantial Compliance 346 Problems 347 E. Will Contests 347 1. Improper Execution 349 2. Testamentary Capacity — General Capacity and Insane Delusion 349 a. General Capacity 349 b. Insane Delusion 350 Breeden v. Stone 350 Notes and Questions 355 3. Lack of Testamentary Intent 355 Problems 356 4. 356 Estate of Sharis 356 Notes and Questions 361 5. Fraud and Duress 362 6. Tortious Interference with an Expectancy 363 F. Preventing Challenges — In Terrorem or “No-Contest” Clauses 364 Notes 365 G. Alternative Dispute Resolution in Probate 366 1. The Benefits 367 2. The Challenges 367 3. Are Mediation or Arbitration Clauses Enforceable? 368 Notes and Questions 369 Contents xxi

H. Contracts Concerning Wills 370 1. Contract to Make a Will 370 2. Contracts Not to Revoke Wills 371 Notes and Questions 372 Problems 372 Exercise 373

8. CREATION OF TRUSTS 375

A. Introduction 375 1. What Is a Trust? 375 2. Terminology for Trusts 377 a. Settlor 377 b. Trustee 378 c. Trust Protector 378 d. Beneficiary 378 e. Qualified Beneficiary 379 f. Corpus (Property or Res) 380 g. Inter Vivos and Testamentary Trusts 380 i. Inter Vivos Trusts 381 ii. Testamentary Trusts 381 h. Revocable and Irrevocable Trusts 381 i. Revocable Trusts 382 ii. Irrevocable Trusts 383 i. Charitable Trusts 383 j. Private Express Trusts 383 k. Trust Agreement/Declaration of Trust 383 l. Constructive Trusts 384 m. Resulting Trusts 384 n. Merger 385 B. Creation — Elements of a Trust 386 1. Valid, Legal Purpose 387 Problem 388 2. Competent Settlor 388 Notes and Questions 389 3. Trustee 390 a. Choosing a Trustee 390 b. Acceptance 391 c. Resignation of a Trustee 393 Problems 394 Exercises 395 xxii Contents

4. Intent to Create a Trust 396 a. Inter Vivos Gift in Trust or Ownership Retained? 397 Palozie v. Palozie 397 Questions 401 b. Gift in Trust or Outright Gift with Explanatory or Precatory Language? 401 In re Estate of Bolinger 402 Notes and Questions 407 c. Transfer into Trust or a Promise to Make a Gift in the Future? 408 Problems 409 5. Corpus (Property or Res) 409 Problems 412 6. A Beneficiary 412 a. Identifiable Person or Class 412 Clark v. Campbell 413 Question and Problem 414 b. Honorary Trusts 414 c. Trust for a Purpose 415 Notes and Questions 416 d. Trust for a Specific Animal 416 Notes and Questions 417 Exercise 418 7. Formalities — Written Trusts vs. Oral Trusts and Secret Trusts 418 a. Oral Trusts of Personalty 419 Problem 419 b. Oral Trusts of Real Property 420 i. Voluntary Trust 420 ii. Partial Performance 420 iii. Constructive or Resulting Trust 421 Gregory v. Bowlsby 421 Questions 423 c. Oral Trusts to Be Given Effect at Death — Secret and Semi-Secret Trusts 424 Pickelner v. Adler 425 Questions 426 Problem 426 8. Exculpatory (Exoneration) Clauses 426 Questions 428 9. Mandatory Rules 428 C. Revocable Trusts 429 1. Typical Structure 429 Contents xxiii

2. Funding the Trust 430 Exercise 433 3. Purposes and Advantages 433 a. Lifetime Purpose — Planning for Incapacity 434 b. After-Death Purposes — Avoiding Probate 434 4. Disadvantage — Statute of Limitations for Creditors 435 5. Misconception — Taxes 435 6. Rules for Revocable Trusts That Differ from Those Applicable to Other Trusts 435 a. Capacity 435 b. Duty to Beneficiaries 435 c. Rules That Apply to Wills 436 Problem 437 Exercises 437

9. FIDUCIARY DUTIES 439

A. Introduction 439 John H. Langbein, Mandatory Rules in the Law of Trusts 440 B. Duty of Obedience 442 Rob Atkinson, Obedience as the Foundation of Fiduciary Duty 442 C. Duty of Loyalty 443 1. Conflicts of Interests — Transactions for the Trustee’s “Personal Account” (Self-Dealing) 445 Hosey v. Burgess 446 Notes and Questions 449 2. Conflicts of Interest — Transactions Involving Personal or Business Relationships 449 3. Exceptions to the Duty of Loyalty — UTC §802(b) 450 a. Terms of the Trust 450 Notes and Questions 451 b. Court Approval 451 c. Consent of the Beneficiaries 453 d. Trustee Compensation 453 e. Proprietary Mutual Funds 453 f. Advances by Trustee 454 g. Voting Stock 454 Note and Questions 455 Problems 455 4. Best Interests of the Beneficiaries — Reprise 456 xxiv Contents

John H. Langbein, Questioning the Duty of Loyalty: Sole Interest or Best Interest? 456 D. Duty to Inform and Report 459 1. Common Law Duty 459 2. Expanded Duties Under the Uniform Trust Code 460 Questions and Notes 461 3. To Whom to Report? 461 Problems 463 E. Duty of Impartiality 463 F. Duty of Care or Prudence 465 1. Managing the Property 465 2. Investing the Property 467 a. Types of Investments 467 b. The Prudent Investor Standard 468 John H. Langbein, The Uniform Prudent Investor Act and the Future of Trust Investing 468 In re Trust Created by Inman 473 Notes and Questions 476 Problems 477 G. Allocation of Principal and Income 479 John H. Langbein, The Uniform Prudent Investor Act and the Future of Trust Investing 479 H. Remedies for Breach of Trust 482 Uzyel v. Kadisha 483 Note 485 I. Removal of Trustees 486 J. Trust Protectors and Powers to Direct 488 1. Trust Protectors 488 Notes 489 2. Power to Direct 489 Problems 491

10. RIGHTS OF BENEFICIARIES AND CREDITORS IN TRUST PROPERTY; MODIFICATION AND TERMINATION OF TRUSTS 493

A. Introduction 493 B. Distribution Provisions — Rights of Beneficiaries 494 1. Overview of Distribution Provisions 494 a. Mandatory Provisions 494 b. Discretionary Provisions 495 c. Spray or Sprinkle Provisions 497 Contents xxv

2. Interpreting Discretionary Standards of Distribution 498 a. Judicial Review of Trustee’s Exercise of Discretion — Reasonableness and Good Faith 499 b. Support and Maintenance 501 c. Education 501 d. Emergency 502 e. Welfare, Best Interests, Happiness 502 f. Beneficiary’s Other Assets 502 g. Duty to Inquire 503 O’Riley v. U.S. Bank, N.A. 504 Note and Questions 509 3. When the Trustee Is a Beneficiary 510 Mesler v. Holly 510 Notes and Questions 512 Problems 513 Exercise 514 C. Rights of Creditors and Planning to Protect the Assets in a Trust 515 1. General 515 2. Creditors of a Beneficiary Who Is Not the Settlor 517 a. Mandatory Distributions 517 b. Discretionary Distributions 517 c. Spendthrift Clauses 519 d. Exceptions to Spendthrift Protection — “Super Creditors” 520 Shelley v. Shelley 521 Duvall v. McGee 525 Notes and Questions 527 Problems 528 Exercises 529 3. Creditors of a Beneficiary Who Is Also a Settlor 529 a. Revocable Trusts 529 b. Irrevocable Trusts 530 c. Asset Protection Trusts — Foreign and Domestic 531 Problem and Note 534 D. Modification and Termination of Trusts 534 1. Revocable Trusts 535 Problem 537 2. Irrevocable Trusts 537 a. Making Modification Unnecessary 537 b. Termination According to the Terms of the Trust 538 c. Modification or Termination with Settlor’s Consent 538 d. Modification or Termination Without Settlor’s Consent (Usually After Settlor’s Death) 539 xxvi Contents

i. Material Purpose Doctrine 540 Note 541 ii. Modifi cation or Termination by Consent of the Benefi ciaries 541 Question 543 iii. Modifi cation or Termination Due to Changed Circumstances — Equitable Deviation 543 In re Riddell 544 Notes and Questions 548 iv. Modifi cation (Reformation) to Fix a Mistake 549 v. Statutory Provisions That Correspond with Best Practices 550 Problems 552 3. Decanting Statutes 553 Problems 556

11. POWERS OF APPOINTMENT AND THE RULE AGAINST PERPETUITIES 557

A. What Is a Power of Appointment? 557 1. Definition 557 2. General 558 3. Distinguishing Between a Power of Appointment and Fiduciary Power 560 Problems 562 B. Creating a Power of Appointment 562 C. Exercising of a Power of Appointment 563 1. Overview 563 Problem 565 2. Different Ways to Exercise a Power of Appointment 565 Exercise 565 a. Residuary Blending Clause with Blanket Exercise—Does It Satisfy a Specific Reference Requirement? 566 Motes/Henes Trust Bank of Bentonville v. Motes 567 Notes and Questions 570 b. Can a Powerholder Exercise the Power by a “Pure” Residuary Clause? 570 Will of Block 571 Notes and Questions 573 c. What Is Required for Substantial Compliance? 573 In re Estate of Carter 573 Notes and Questions 576 Exercise 577 Contents xxvii

3. Exercise in Further Trust 577 4. Problems with Appointees 579 a. Exercise in Favor of Impermissible Appointees 579 BMO Harris Bank N.A. v. Towers 579 Notes and Questions 582 b. Predeceased Appointees 583 c. Selective Allocation 584 D. Release, Failure to Exercise, and an Express Statement of Nonexercise 585 1. Who Gets the Property? 586 a. Takers in Default Stated 586 b. No Takers in Default Stated 587 2. Contract to Exercise a Power 588 Problems 589 Exercise 590 E. Rights of Creditors and Taxes 591 1. Creditors 591 2. Taxable Transfer 592 F. Contingent Future Interests and the Rule Against Perpetuities 593 1. In General 594 2. Perpetuities Reform — Wait and See and USRAP 595 a. USRAP 596 b. Perpetuities Saving Clause 597 Notes and Questions 598 3. Complete Abolition? 598 Lawrence W. Waggoner, Curtailing Dead-Hand Control: The American Law Institute Declares the Perpetual-Trust Movement Ill Advised 599 Notes and Questions 600 4. Charitable Interests — Exception to the Rule 600

12. PROTECTING THE FAMILY 601

A. Introduction 601 B. History of Adult Partner Protections 602 Susan N. Gary, The Oregon Elective Share Statute: Is Reform an Impossible Dream? 602 Questions 603 C. Differing Protections Under Community Property and Common Law Property Systems 604 1. Community Property 604 2. Common Law Property 605 3. Division at Death for Migrating Couples 606 xxviii Contents

Notes and Questions 607 D. Protection for the Surviving Spouse — The Elective Share 608 1. What Happens Without an Elective Share? 608 Problems 608 2. Non-UPC Approaches to the Elective Share 609 Karsenty v. Schoukroun 610 Notes and Questions 614 E. The UPC Approach to the Elective Share 615 Susan N. Gary, The Oregon Elective Share Statute: Is Reform an Impossible Dream? (Cont.) 615 Notes and Questions 618 Exercise 618 1. General Approach to Determining the Elective Share Amount Under the UPC 619 2. Determine the Value of the Augmented Estate 619 a. The Spousal Equivalent Rule — UPC §2-207 620 b. The Net Probate Estate — UPC §2-204 620 c. Nonprobate Transfers to Others (§2-205) and to the Surviving Spouse (§2-206) 621 i. Property Owned in Fact or in Substance by the Decedent Immediately Before Death 621 ii. Certain Transfers During Marriage with Interests Retained by the Decedent (UPC §2-205(2)) 623 iii. Transfers to Persons Other Than Surviving Spouse During Marriage and Within Two Years of Decedent’s Death (UPC §2-205(3)) 623 Questions 624 3. Determine the Marital Property Portion of the Augmented Estate 624 Problem 625 Notes and Questions 625 4. Determine the Elective Share Amount 626 Problems 626 5. Determine Whose Interests Have to Be Abated to Fund the Elective Share 627 Problem 628 F. Prenuptial and Other Marital Agreements 628 1. When Is a Waiver Valid? 629 In re Estate of Hollett 629 Notes and Questions 633 2. The UPC Response 633 Notes and Questions 635 Problems 636 Contents xxix

G. Protections for an Omitted Spouse and Child 636 1. The Omitted Spouse 637 a. The Testator’s Intent? 637 Bay v. Estate of Bay 638 Notes and Questions 641 b. The UPC Approach 642 Note and Question 643 Problems 643 Exercise 644 2. Omitted Children 644 a. History of Protections 645 Joshua C. Tate, Caregiving and the Case for Testamentary Freedom 645 Notes and Questions 648 b. Intentional Disinheritance 649 In re Gilmore 649 Notes and Questions 652 Problem 652 c. The UPC Approach 652 Notes and Questions 654 Problems 655 Exercises 655 Problems 655

13. PLANNING FOR INCAPACITY 657

A. Introduction 657 B. Financial Decisions During Incapacity 658 1. What Happens When There Is No Planning? 658 2. What Is Possible with Advance Planning? 660 a. Powers of Attorney 660 i. General 660 Exercise 662 Notes and Questions 662 ii. Agent’s Responsibilities 662 In re Ferrara 663 Notes and Questions 666 iii. Uniform Power of Attorney Act 667 Notes and Questions 670 Problems 671 iv. Dealing with Digital Property 671 xxx Contents

Questions 672 Exercise 673 b. Agents vs. Conservators 673 i. Revocable Trusts 673 In re Franzen 674 Notes and Questions 676 Problems 677 Exercise 677 C. Health Care Decisions During Incapacity 677 1. What Happens Without Planning? 678 a. The Constitutional Context for the Right to Die 678 i. Quinlan and Cruzan 678 ii. Schiavo 679 In re Guardianship of Theresa Marie Schiavo 680 Notes 683 b. State Standards for EOL Decision Making 683 Problems 684 2. What Is Possible with Advance Planning? 685 a. Advance Medical Directives 685 Notes and Questions 687 Exercise 688 D. Covering the Costs of Medical and Long-Term Care 688 1. Medicare 689 2. Medicaid 691 a. Requires Medical Assistance 691 b. Cannot Have Too Many Assets 692 i. Disclaimers 693 Schell v. Department of Public Welfare 693 Notes and Question 696 ii. Exceptions? 696 c. Cannot Have Too Much Income 697 Note 698 Problems 699 E. The End of Life — Physician-Assisted Suicide 700 1. State Approaches 700 2. Is Banning Physician-Assisted Suicide Constitutional? 701 Notes 702 F. Ethical Issues in Representing a Person with Mental Disabilities 702 Notes and Questions 705 Problem 705 Contents xxxi

G. Planning for the Care of Children on the Death or Disability of a Parent 706 1. Death of a Parent 706 2. Standby Guardianship 708 3. Partial Delegation — Educational and Medical Consents 710 4. Child with Disabilities 710 5. Financial Planning for a Child 711 Problem 711

14. ESTATE AND GIFT TAX PLANNING 713

A. Introduction 713 B. The Politics of Taxing Transfers of Wealth 716 Problem 718 Note and Questions 718 C. Introduction to Transfer Taxes 719 Note 721 D. Income Tax Issues Related to Estate Planning 721 1. What Are the Income Tax Consequences to the Recipient upon Receiving a Gift or Bequest? 721 2. What Is the Recipient’s Basis in Property Received as a Gift or Inheritance? 722 3. How Is the Income Earned on Transferred Property Taxed? 724 E. Taxation of Estates 725 1. Determining the “Gross Estate” 726 a. Property in Which the Decedent Had an Interest at Death — IRC §2033 727 b. Revocable Trusts — IRC §2038 727 c. Transfers with a Retained Life Estate — IRC §2036 728 Note 729 d. Life Insurance Proceeds — IRC §2042 729 e. Transfers of Certain Interest Within Three Years of Death — IRC §2035 730 f. Annuities — IRC §2039 730 Notes 731 g. Joint Tenancy with Right of Survivorship — IRC §2040 731 h. General Power of Appointment — IRC §2041 732 i. Qualified Terminable Interest Property (QTIP) Trusts — IRC §2044 733 2. Deductions Allowable in Determining the “Taxable Estate” 734 a. Administrative Expenses, Etc. — IRC §2053 734 b. Debts of the Decedent 734 c. Transfers to Surviving Spouse — IRC §2056 734 xxxii Contents

d. Other Deductions 737 Note 737 3. Calculating the Estate Tax — IRC §2001 737 4. Estate Tax Credits 737 5. Liability for Estate Tax 738 F. Taxation of Gifts 739 1. Determining “Total Amount of Gifts” 739 a. Gifting Within the Annual Exclusion Amount 740 Notes and Questions 741 b. Gifting for Medical and Educational Needs 742 c. Section 529 College Savings Plans, or Qualified Tuition Programs 742 2. Deductions Allowable in Determining “Taxable Gifts” 742 3. Gift Tax Rates and Credits 743 G. The Generation-Skipping Transfer Tax — Briefly 743 H. Post-Mortem Planning Using Disclaimers 744 Problems 746 Appendix A 749

15. ADMINISTRATION OF THE PROBATE ESTATE 751

A. Introduction 751 Paula Monopoli, American Probate: Protecting the Public, Improving the Process 753 Exercise 756 B. Matters That Need Immediate Attention 757 1. Appointing Someone to Take Charge 757 2. Deciding What to Do with Decedent’s Body 757 3. Protecting the Decedent’s Property 758 4. Having a Guardian and Conservator Appointed for Minors and Incapacitated Persons 759 5. Providing for the Family Financially During Estate Administration 759 Notes and Questions 760 6. Obtaining the Will and Other Important Documents 760 C. Where to Probate the Estate — Jurisdiction and Venue 761 D. Formal and Informal Procedures to Probate Estates — In General 762 E. Opening the Estate — Getting the Will Accepted for Probate and Getting the Personal Representative Appointed 763 1. General 763 2. Probating the Will or Adjudicating Intestacy 764 3. Appointing the Personal Representative 765 4. Obtaining Letters 766 Contents xxxiii

Notes 766 Exercise 767 F. General Duties, Powers, and Liability of the Personal Representative 768 1. Duties of the Personal Representative 768 2. Powers of the Personal Representative 769 3. Liability of the Personal Representative 770 G. Duty to Gather, Inventory, and Value the Estate 770 1. Gathering the Decedent’s Property 770 2. Inventorying and Valuing the Decedent’s Property 771 Exercise 772 H. Duty to Manage the Property of the Estate 773 I. Duties Associated with Creditors 773 1. General 773 2. Notification and the Statute of Limitations 774 Tulsa Professional Collection Services, Inc. v. Pope 775 Notes and Questions 780 Exercises 780 3. Presenting Claims and Determining Validity 781 Exercises 781 4. Payment of Claims and Priority of Payment 782 a. Secured Creditors 783 b. Homestead Allowance, Exempt Property, and Family Allowance 783 Question 784 Problem 784 5. Payment of Claims Using Nonprobate Assets 785 a. Creditor Access to Trusts 786 b. Creditor Access to Joint Tenancies with a Right of Survivorship 786 c. Creditor Access to Beneficiary Designations; Statutory Exemptions 787 d. Creditor Access to TOD and POD Accounts and Deeds 788 e. Procedure for Pursuing Claims Against Nonprobate Transferees 788 J. Important Matters to Be Addressed Before Finalizing the Estate 789 1. Will Contests and Other Estate Controversies 789 2. Tax Issues 790 3. Partial Distributions 792 K. Closing the Estate — The Final Accounting and the Final Distribution 792 1. Closing the Estate 792 2. The Final Distribution 793 Exercise 794 xxxiv Contents

3. Finality of Final Settlement and Reopening the Estate 795 L. Ethical Issues in Estate Administration 795 Legal Ethics Opinion 1778 800 Problem 802 Appendix A Estate Administration Checklist 803

16. CHARITABLE TRUSTS 809

A. Charitable Purpose 810 B. Charitable — Not Benevolent 810 Shenandoah Valley National Bank v. Taylor 811 Questions 815 Exercise 815 C. Tax Purposes 816 D. Modification of Charitable Trusts 816 1. Cy Pres 816 a. Buck Trust 817 In re the Estate of Beryl Buck 818 John G. Simon, American Philanthropy and the Buck Trust 819 Questions 823 2. Deviation 823 Jonathan Scott Goldman, Just What the Doctor Ordered? The Doctrine of Deviation, the Case of Doctor Barnes’s Trust and the Future Location of the Barnes Foundation 824 In re Barnes Foundation 825 Questions 827 Problems 828 3. UPMIFA 828 E. Enforcement of Charitable Trusts 829 1. Donor Standing 830 Smithers v. St. Luke’s Roosevelt Hosp. Center 831 Notes and Questions 835 Hardt v. Vitae Foundation 835 Notes and Questions 838 2. Special Interests Doctrine 839 3. Relators 840 4. Internal Revenue Service 840 5. Role of the General Public — The Bishop Estate 840 Note 843 F. Drafting for Donor Intent 843 Contents xxxv

1. Robertson v. Princeton 843 2. Leona M. and Harry B. Helmsley Trust 845 G. Drafting Considerations 846 1. Non-Perpetual Trusts 846 2. Clear Statement of Intent 846 3. Flexibility 846 4. Provisions for Modification 847 5. Standing 847 6. Mediation or Arbitration 847 Note 848 Exercises 848

Table of Cases 849 Table of Laws and Other Material 855 Index 869