History of Inheritance Law: Everything You Need to Know

Copyright © 2020 Harry L. Munsinger, J.D., Ph.D.

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ISBN: 978-1-4808-9841-7 (sc)

ISBN: 978-1-4808-9842-4 (e)

Library of Congress Control Number: 2020921318

Archway Publishing rev. date: 11/04/2020

CONTENTS

Introduction

Chapter 1     Origins of Inheritance Law

Chapter 2     English Inheritance Law

Chapter 3     American Inheritance Law

Chapter 4     Probate and Will Contests

Chapter 5     Origin of Trusts and Fiduciary Duties

Chapter 6     Wills of Famous People

Chapter 7     Infamous Will Disputes

Chapter 8     Notorious Business Trusts

Conclusions

Endnotes

INTRODUCTION

Y ou can’t take it with you, so what happens to your assets when you die? People generally want to pass their wealth to a surviving spouse and children—but how can they do that? Must they draft a will or trust to pass assets to the next generations, or will the courts automatically distribute their assets for them? The answer is you can pass assets to your spouse and children by drafting a will or trust, or by letting a probate court administer your estate through intestate succession—although intestate succession may be different from what you intend. When a person dies without a will or trust, distribution of his or her property is governed by the estate code where the individual lived. If you don’t feel comfortable allowing a probate court determine who takes your property, then draft a will or trust expressing your personal intent. ¹ It’s good practice to draft a will or trust to control the distribution of your estate if you own significant assets and you want to make certain the property goes to the persons you love. Estate codes treat all families alike and may not distribute your assets to those you love.

Historically, laws of succession were written to benefit powerful interest groups, but in America, inheritance is a significant source of savings for many.

Purpose of Inheritance Laws

Inheritance is a major source of wealth for many Americans. Experts estimate that around 80 percent of American household wealth was inherited rather than earned. Studies indicate that Americans who died in 2015 left around $177,000 to their heirs.² That amount of inherited wealth can help a family buy a new home, pay for children’s education, or supplement retirement savings.

Originally, the laws of succession were shaped and controlled by wealthy groups for their own benefit. For example, early English laws of succession were developed to protect the interests of kings and wealthy aristocrats who owned large estates in feudal tenure. English common law and feudal tenure produced the doctrine of primogeniture—the inheritance of titles and all family real estate by the eldest surviving son. This system of inheritance ensured that wealthy English families would continue to own large estates for generations.³ In contrast, the American colonies developed democratic laws of inheritance designed to meet the needs of families who owned small farms. Most colonial fathers passed the family farm to their sons in equal shares.

Land was cheap and plentiful in America, and few families who owned large plantations in the colonies, so American laws of succession favored distributing wealth equally to all members of a family rather than giving everything to the eldest son. The family farm was usually divided among the surviving spouse and children when the husband/father died. If an inherited farm proved too small to support a family, there was plenty of land waiting to be purchased, improved, or homesteaded on the western frontier for anyone ambitious enough to move and improve the land. Most colonial Americans were not concerned with keeping large land holdings intact by passing the entire farm to the eldest son; in America, anyone with ambition could acquire a farm of his own with hard work because there was so much cheap land available.

A somewhat different inheritance system developed in some southern colonies because tobacco and cotton were grown by slaves on large plantations.

The laws of succession in a few southern colonies developed along lines similar to English inheritance laws because aristocratic plantation owners wanted to pass everything to their firstborn son and keep the family plantation intact.⁴ Today, Americans who own significant assets generally draft wills or trusts to control the inheritance of their property and distribute their assets equitably among the surviving spouse and children.

To understand how your assets are distributed when you die, you need to know about wills, trusts, probate, estate administration, and intestate succession.

A Will

Black’s Law Dictionary defines a will as an instrument by which a person makes a disposition of his real and personal property, to take effect after his death, and which by its own nature is ambulatory and revocable during his lifetime.⁵ A will must be in writing, be signed and dated by the testator before a notary and at least two witnesses, name an executor, beneficiaries, and describe the disposition of the estate. Ambulatory means the will is subject to modification during the testator’s lifetime.

A Trust

Black’s Law Dictionary defines a trust as a legal entity created by a grantor for the benefit of designated beneficiaries under the laws of the state and the valid trust instrument. The trustee holds a fiduciary responsibility to manage the trust’s corpus assets and income for the economic benefit of all of the beneficiaries.⁶ A trust must be in writing, be signed and dated by the grantor and trustee, and name beneficiaries. The terms of the trust govern how the assets are administered and distributed. The trustee holds legal title to trust property for the economic use and benefit of others and owes a fiduciary duty to manage the trust for the beneficiaries.

Probate.

Black’s Law Dictionary defines probate as a court procedure by which a will is proved to be valid or invalid; though in current usage this term has been expanded to generally refer to the legal process wherein the estate of a decedent is administered.⁷ When a person dies, the original will must be submitted to a probate court to determine whether it’s valid and to allow the court to appoint an administrator for the estate. The American probate process was borrowed from English common law, which followed ancient Roman practices governing the handling of wills. Probate is a procedure for proving the validity of a will, legal rules for administering the estate according to the terms of the will, proper steps for closing the estate administration once all the assets have been collected, debts paid and the assets distributed to beneficiaries according to the terms of the will, or a determination of heirs if there is no will.

Estate Administration

The will or a probate judge names an executor to administer the estate—either independently without court supervision or under the watchful eye of a probate court. The executor collects the decedent’s assets, drafts an inventory and appraisement, pays legitimate claims, files required tax returns, sells property to raise funds, and distributes assets to the proper beneficiaries. After the estate administration is complete, the executor files a final inventory and appraisement with the probate court and closes the estate. To protect beneficiaries, some states require that each step in the administration of an estate be approved by a probate court. Other states allow an independent administration of the estate without court oversight, which is a simpler and cheaper way to probate a will—although it runs the modest risk that an executor might defraud the beneficiaries by distributing assets improperly. What happens to your property if you don’t leave a will or trust?

Intestate Succession

If you don’t leave a will or trust when you die, your assets are distributed according to the laws of intestate succession. Your heirs are determined by the estate code where you resided before you died. For example, if you die in Texas without a valid will, how your estate is distributed depends on whether the decedent was married, whether the property is community or separate, whether an asset is real estate or personal property, whether the decedent was single or widowed, and whether he or she left surviving children.⁸

Married with Children—Separate Property

When a decedent was married and left a surviving spouse and children, the spouse receives a life estate in any separate property real estate the person owned at the time of death; this means the surviving spouse may occupy the property as long as he or she is living but can’t sell the separate property real estate. The children take their parent’s separate property real estate in equal shares when the surviving parent dies. Separate personal property of a deceased married person with children is divided two-thirds (in equal shares) to the children and one-third to the surviving spouse.

Married with Children—Community Property

When a married deceased person left a surviving spouse and children of both parties, the surviving spouse takes all the community property (both real and personal property) when the spouse dies. However, if there are children from outside the existing marriage, then the children take one-half the community real estate and one-half the community personal property in equal shares. The surviving spouse takes the remaining half of the community real estate and community personal property.

Single or Widowed without Children

If a person dies and was single or widowed without children, the heirs depend on who survives the decedent. If only his parents survive, they take all his or her real and personal property in equal shares. However, if both parents and siblings survive, then one-half the real and personal property goes to the parents in equal shares, and one-half goes to the siblings in equal shares.

Widowed with Children

If a widow or widower dies without a will, his or her property passes to the children in equal shares.

Married without Children

If a married person dies without children, who takes his or her property depends on which family members are surviving. For example, if the parents survive, one-quarter of all separate real estate goes to the mother, one-quarter of all separate real estate goes to the father of the decedent, and the remaining one-half of the separate real property goes to the surviving spouse. If there is no surviving parent, then one-half of the separate real property goes to the decedent’s surviving siblings or their descendants, and one-half goes to the surviving spouse. If only one parent survives the decedent, one-quarter of the separate real estate goes to the surviving parent, one-quarter goes to surviving siblings or their descendants, and one-half goes to the surviving spouse. If no parents or siblings of the deceased survive, all the separate real estate goes to the surviving spouse. If no siblings of the deceased survive him or her, then one-half the separate real estate goes to the surviving parents, and one-half goes to the surviving spouse. All the other property (separate assets other than real property and all community property) goes to the surviving spouse.

The Texas Estate Code was designed to be fair to family members, but it treats all families alike no matter their circumstances, so intestate succession may not be the best alternative to a valid will that expresses the decedent’s unique preferences about who should take his or her separate and community property at death. It’s generally better to leave a will or trust when you die if you own significant assets so you will be certain your loved ones receive the benefits of your estate according to your wishes.

In addition to a will, several other documents constitute a basic estate plan.

Basic Estate Plan

If you have assets you want to leave to specific individuals, or if you have moved to a new state, recently married, had a baby, retired, been divorced, or experienced any significant life change, you should put your financial house in order by talking to an estate attorney who can draft a basic estate plan to meet your unique needs. The basic elements of an estate plan include a will, power of attorney, medical power of attorney, directive to physicians, a HIPAA release, and a living trust if you want to avoid the expense and publicity of probate or have minor children or disabled family members who need care, guidance, and support.⁹

Anyone with significant assets should have a basic estate plan to make certain their wealth is distributed to those they love and the proper persons are appointed to make health and financial decisions concerning end of life situations. A will determines how assets are distributed to adults or into a trust for the protection of children or disabled individuals. A general power of attorney grants another adult the authority to act for you if you are unable to handle your own personal or financial affairs. A medical power of attorney gives another adult authority to make health-care decisions for you when a physician certifies you are unable to make those decisions yourself. A directive to physicians communicates your wishes about end-of-life care. Finally, a HIPAA release authorizes the disclosure of confidential health information to listed individuals.

Some families draft a living trust to handle their unique estate needs and avoid the expense and publicity of probate.

A living trust gives privacy and control over assets after a person dies. Trusts avoid the publicity associated with probate, and a trustee will manage and distribute the estate according to the terms of the trust document for the health, maintenance, support, or education of a surviving spouse and children who may need financial protection and guidance. A trust is also helpful if any family members are disabled and cannot care for themselves.

For larger estates that contain substantial assets, families often establish a limited partnership using trusts to control and manage the assets. A limited partnership allows central control of a farm, business, or investment portfolio and lets family members hold minority interests in the family farm, business, or investment portfolio. A family limited partnership may also offer a marketability or lack of control discount that can lower or eliminate expensive estate taxes at the death of an older family member. In addition, the family limited partnership places another layer of security and legal protection between your assets and potential creditors.

A will can be changed at any time by drafting a new one or adding a codicil to an existing will. If there is no will, state intestate laws control who takes your assets according to the current estate code where you lived before your death. Wills and trusts have served numerous purposes over the centuries in England and America, but they have ancient origins in the early legal systems of Mesopotamia, Greece, Rome, and England.

Origins of Inheritance Law

Many of our modern laws of succession have ancient roots in the Code of Hammurabi, which contained several early rules about inheritance. Greeks introduced the use of wills to transfer land when the father died and there was no surviving son. The Romans borrowed ideas about succession from the Greeks and formalized them in the Twelve Tables, which listed the rights and duties of every Roman citizen, including laws of inheritance. In early