Freedom of Disposition refers to the power to transmit property at death. American law is fairly unique in that it allows, rather than regulates how an individual’s property is divised upon passing. Of course there are exceptions, but this semester is to focus on how these principles function generally.
Transmitting Property at Death: Dead Hands
Because “you can’t take it with you when you die” American law has been designed to permit a person, while living, to outline who or what gets their property when they die. There are no limits other than those that would blatently go against the rule of law. There are also some spousal and creditor rights, racial restrictions, or other limititations that prevent the dead from controlling entirely what becomes of their property. Typically, this right is done through the instrument of a will, and can be endless excepting the exceptions.
Shapira v. Union National Bank
315 N.E.2d 825 (Ohio C.P. 1974).
Question
Whether the will is unconstitutional or a violation of public policy.
Rule
The will cannot prohibit a person from becoming married entirely (violation of public policy) and cannot require the state to force a beneficiary to marry.
Essentially, a provision may be invalidated if the gift violates public policy. These public policy violations would include a (1) total restraint on marriage, (2) a partial restraint on marraige that is reasonable (considering opportunity and time), (3) encourage committing a crime or tort, (4) destroy property.
Holding
The will is not unconstitutional, is not a violation of public policy and are reasonable restrictions on marriage.
Facts
Dr. Shapira left a will that devised his possessions equally between his daughter and two sons. The will, however, required the sons to be married to a girl within the jewish faith with jewish parents at the time of his death. If the sons were not married at the time, then they had 7 years to marry within the conditions. If not, then their portion would be devised to the state of Israel.
Analysis
First, the will is not unconstitutional. Although the Constitution by means of the 14th amendment prohibits state actors from criminalizing cross-racial marriage, the state here is not being asked to enforce a provision (there is no injunction keeping the son from marrying) requiring a party to marry or not to marry. Instead, the state is being asked to enforce the contents of the will. Thus, the decision to marry remains with the beneficiary. Essentially, there is no constitutional right to inherit anything (only a constitutional right to transmit), so a decedent is free to limit an inheritance.
Second, this is not a violation of public policy. The will does not entirely restrict marriage, just partially. The restraint is further reasonable because of the pool of qualified candidates is available. Additionally, the will does not force the beneficiary to be married right away; allowing 7 years is plenty of time to have mature reflection without feeling oppressed into a decision.
Additional Notes
The type of condition presented in this case is more often made in a trust called an incentive trust. The purpose is to limit the actions of the beneficiaries; granting receipt upon good behavior.
This case also illistrates how much control the creator of the will has over the possessions. They can order destruction, or create limits on reception based on difficult tasks. This presents the question how much public policy has an influence on whether the will will be enforced. For instance, if the marriage was entirely restricted, or if the pool of candidates were significantly dimished, does it make the will unreasonable and thus unenforceable? That is a question many courts have struggled to answer. What if a lady asks her cats to be euthanized (in a humane manner)? Should the will be enforced?
Justifying the Principle
Why allow the dead to decide how their assets are allocated?
There are three ways distribution of assets occur at death: (1) Forced Succession, (2) Freedom of Disposition, (3) and Confiscation by the State. In the U.S. we focus primarily on the freedom of succession where there may be some forced succession for spousal or creditor rights. Most other countries used forced succession. Confiscation by the state has proven unsuccessful—1918 Soviets attempted it and gave up only a few short years later. The primary reason for using freedom of disposition because society hopes to incentivize people to save and create wealth, the added benefit of retaining the right of directing that wealth further increases the incentive structure. People like to give, and if not, people still like to dictate how their money is used.
Many individuals complain that the rich are only rich because their receive an inheritance. However, the evidence is fairly minimal in this regard. It appears (1) the wealth distribution amongst the richest individuals are mainly from self-made careers, (2) Individuals have found taht wealth transfers have not been a significant part of their wealth building, and (3) wealth transfers tend to lead to less wealth inequality because the transfer is generally going from a wealthy person to a poorer person.
Mechanics of Succession
Probate and Nonprobate Property
Each county has a court dedicated to administration of a decedent’s estate. If property is conveyed through a will or intestacy (no will and administered by the state) it is called probate property. Will substitutes and nonprobate transfers have become common because going through the court can be time consuming and expensive. If property passes through one of these mechanisms, it is called nonprobate properpty. Examples include an inter vivos (during life) trust, pay-on-death or transfer-on-death contracts, life insurance, and joint tenancy.
The purpose of probate is to: (1) show evidence of the transfer of title to new owners, (2) protect creditors by providing procedures on howh debts will be repaid, and (3) distribute the remainder of the decedent’s property to those who the decedent intends to receive the property.
Terminology
- Personal Representative: is a fiduciary who is responsible for collecting an inventoring the decedent’s property.
- Testate: to die with a will
- Executor: A person named in the will to execute the terms of the will
- Intestate: to die withou a will
- Administrator: A person named by the state to administrate over the estate, typically a surviving spouse, children, parents, siblings, or creditors.
- Will or testament: a document describing how the deceased wishes their assets to be conveyed.
- Devise: to transfer real property to devisees (those who receive)
- Bequeath: to transfer personal property to legatees (those who receive).
- Heirs: persons designated by the statute to take the decedentats intestate property. Only identifiable at death. Before death, they are called heirs apparent
Digital Assets
Access to digital assets can be authorized by the decent through the will.
Probate Process
The first question to ask when somebody dies and probate is required, where does probate need to be opened? Jurisdiction for personal property relies on the domicile of the decedent upon death. Jurisdiction for real property relies on the location of the property. If those are two different states, then the estate must open an ancillary probate in the state where the real property relies.
Second, the executor or personal responsibility is appointed. Typically the executor goes to an attorney who opens the pleadings and asks the court to recognize the executor.
Third, the executor is authorized with the authority collect the assets of the deceased. To gather, there is often a bond requirement (waived generally when the executor is a family member).
Fourth, notice is provided to potential creditors.
There is also a level of supervision by the court. Sometimes the court wishes to approve every sale and other times the court is fine with the executor going forward with the sale.
This process is generally quick, but if matters are contested it could take months to a year.
Finally, the estate needs to close, meaning everything has been collected and distributed.
Professional Responsibility
Duties to Intended Beneficiaries
Simpson v. Calivas
650 A.2d 318 (N.H. 1994).
Question
Whether there is a duty to a third-party beneficiary. Whether determining declaritive intent collaterally estoppes the litigation.
Rule
When it is foreseeable that a third-party beneficiary may be injured by the will, there is a duty to the beneficiary. Collateral estoppel only applies if the finding is essential to making a judgment. A finding of intent is not necessary for judgment for this type of proceeding.
Holding
There is a duty of care to beneficiaries and a finding of intent does not collaterally estopp the litigation. Reversed and Remanded.
Facts
Robert Simpson Sr. went to Calivas to draft a will. Included in the will was a life estate for his second wife for the homestead and the remainder was to go to his son, Robert Simpson Jr. Upon the death of Sr., there was confusion on whether the homestead included all of the property or just the house. The trial court determined homestead included all of the property. Later, Jr. agreed to purchase his step-mom’s life estate for $400,000. At the conclusion of the proceedings, Jr. sued Calivas for negligently drafting a will that expressed the intent of Sr.
Analysis
First, there is a duty of care to third-party beneficiaries of a will, even when there is no privity between the lawyer and the beneficiary. When the drafter of the will knows a beneficiary is to be listed, it is foreseeable that any errors would cause injury to the beneficiary. Thus, a beneficiary could claim breach of contract for failing to draft the contract in accordance with the testator’s stated wishes.
Additional Notes
This is a case stating that privity between the beneficiary and the lawyer drafting is not necessary to file a malpractice claim. The majority of states follow this approach while 10 still keep the traditional rule.
Joint Representation
A. v. B.
726 A.2d 924 (N.J. 1999).
Question
“Whether a law firm may disclose confidential information of one co-client.”
Rule
Can’t disclose confidential information unless the client is using the lawyers services to defraud another.
Holding
This is a discretionary disclosure where the husband is defrauding the wife. Disclosure is permitted.
Facts
A husband and wife were being represented by a law firm for their estate. During the conflict check, (1) their surname was misspelled, (2) they signed a waiver of conflicts agreement. Later, a mother of the husband’s child (not his wife) went to the same law firm to have a paternity claim against the father. Because of the previous misspelling, no conflicts were initially discovered. The claim of the mother resulted in the discovery that the husband (not to the mother) was the father. During the determination of assets, the law firm discovered the conflict and begin to manage communication between the parties.
As part of the estate planned by the husband and wife, if a spouse precedes the other in death, the residual of their estate would pass to the children of their spouse. This included both legitimate and illegitimate children. However, the wife did not know about the illegitimate child of the husband. Executing the will would result in her estate going to a party of which she was not aware.
Thus, the law firm wanted to inform the wife of the husband’s illegitimate child.
Analysis
1.6 prevents disclosure of confidential information unless if an exception is satisfied. Mandatory disclosure may occur if the lack of disclosure would result in immediate harm to another. Although the firm argues disclosure is mandatory, the court disagrees saying the harm is too remote. However, the firm could disclose because the husband is using the firm to defraud his wife. This disclosure is discretionary (but that is not an issue because the firm wishes to disclose anyways).
It also helps that the husband signed the waiver of conflicts and that the disclosure was discovered through another means (rather than through the husband’s confidence).
Additional Notes
Typically, a law firm will draft an engagement letter that contains a waiver of confidentiality with the other party in the dual representation. That is, the parties agree to disclose everything to each other. If not, the law firm will not engage. Essentially, the issue in A. v. B. would not have happened with this type of engagement.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
