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The Study of Law Currier, K.A., Eimermann, T.E. (2016). The study of law: A critical thinking approach (4th ed.). New York: Wolters Kluwer Aspen College Series The Study of Law A Critical Thinking Approach Fourth Edition Katherine A. Currier • Thomas E. Eimermann ®Wolters Kluwer Property and Estate Law In no country in the world is the love of property more active and more anxious than in the United States .

Alexis de Tocqueville CHAPTER OBJECTIVES _-Vt er reading this chapter, you should be able to: • Define real and personal property. • Discuss the rights of landlords and tenants. • Distinguish the different forms of joint property ownership. • Discuss limitations on property rights. • Discuss how property can be transferred either on a temporary or per­ manent basis. • Discuss intestate versus testate succession. • Explain the requirements for a valid will and the probate process. INTRODUCTION The concept of property is at the heart of the American legal system. Our eco­ -o mic system is built on the ideas of capitalism and free enterprise, and the con­ :ept of private property rights is central to our economic success.

Property is usually thought of as being a tangible object, such as a house r an automobile. However, in law the term applies to the set of rights related :o ownership. Examples include deeds, leases, easements, contractual rights, 341 • 342 Chapter 9: Property and Estate Law promissory notes, and even admission tickets to concerts or sporting even ts.

There are also circumstances under which a person can have a "property inter­ est" in a job, an idea, or a reputation. Therefore, in its broadest sense the lega: concept of property refers to any valuable right or interest that belongs to a person. Different sets of rules apply to what is classified as real property (that is, buildings and land) and personal property (for example, cars and jewelry). In this chapter we will also discuss the laws covering estate planning , the impor­ tance of writing a will, and the probate process.

At various points throughout the chapter, we will be illustrating the nature of property law through the lives of Bill Smith and Maria Rosalles . Bill Smith and Maria Rosalles were high school sweethearts. After graduation Maria enrolled in a nursing program at a local commu­ nity college and worked part-time in a nursing home. Bill got a job working as an auto mechanic for a large Ford dealership. They continued to date each other and after about six months decided their relationship had advanced to the point that they wanted to live together. Real property Also known as real estate; land and items growi ng on or permanently attached to that land. A. REAl PROPERTY Real property, also referred to as real estate, consists of land and whatever is growing on or built on that land. It includes not only the houses, garages, shed s, and other types of buildings that are on the land but also everything that is per­ manently attached to those buildings-such as light fixtures, plumbing fixtures , and built -in shelves.

At times it can be difficult to determine whether something is "perm a­ nently" attached. For example, normally a room air conditione r is seen as pe r­ sonal property. However, if the window frame has been removed and the air conditioner bolted to the wall, it might be seen as "permanently " attached, an d hence a fixture. When determining whether something should be considered a fixture, the courts look to the amount of damage that would be caused either to the item or to the underlying property if the item was removed from the prem­ ises. The courts will also take into account the intention of the parties .

In addition , real estate includes the trees and plants growing on the land , as well as the rights to gas and minerals under the land and to the air space abo ve it. In recent years the common -law right to air space has been modified so as to not interfere with modern aviation. A. Real Property 343. . Rental of Real Property a. Criteria for Renters Case 11: Bill and Maria (continued) Bill and Maria found that searching for an apartment they could afford was a lot more dif­ ficult than they had thought it would be. Several times, they saw an advertisement for an apart­ ment they thought they would like and set up an appointment to view it. Sometimes it turned out to be more expensive than they thought or not in a good location. But then they found the ideal place.

However, when they were about to sign the lease, the owner noted that they had different last names and asked if they were married. When they responded that they were not, he told them that he was sorry, but his religious views prohibited him from renting to unmarried couples. They shared their frustration with their friends, who advised them to see the attorneys at Darrow and Bryan. Bill and Maria's failed attempt to rent an apartment illustrates an issue in :an dlord/tenant law: what criteria owners can use, besides the ability to pay the r ent, for deciding to whom they will rent. As long as the decision not to rent is made by private individuals or orporations-as opposed to governmental entities like public housing a uthorities-potential renters are not protected under the U.S. Constitution's equal pr otection clause. However, the federal government, as well as most states, has "open housing" laws that prohibit private landlords from discriminating on the b asis of race, religion, sex, family status, disability, and national origin. Therefore, it is with such a statute that attorneys at Darrow and Bryan would begin their research. They found that the relevant state statute covered the categories listed a bove as well as marital status. The courts are split on whether a landlord can r efuse to rent to an unmarried couple when the fair housing statute prohibits dis­ c rimination on the basis of marital status. Some courts have prohibited such dis­ c rimination while others have allowed it under the theory that the denial was based on the couple's engaging in criminal conduct, "cohabiting," and not on their marital st atus. Unfortunately, for Bill and Maria their state fell into the latter category. Case 11: Bill and Maria (continued) lessor /land lord The owner of the property being leased.

Bill and Maria continued with their search for an apartment that would fit their needs with a landlord willing to rent to them. Happily, they soon found such an apartment. The next step was to sign a lease and make a security deposit. lessee/tenant b. The Lease The person with right A lease is an agreement in which the property owner, called either the lessor of possession during the o r the landlord, gives someone else, the lessee or the tenant, the right to use that term of the lease. • 344 Chapter 9: Property and Estate Law Leasehold A parcel of real estate held under a lease.

Tenancy at will An arrangement in which no time period is specified and the lessee can leave or the lessor can reclaim the land at any time.

Tenancy at sufferance A situation in which the person in possession of the land has no l egal right to be there.

Security deposit An amount of money, usually equal to one month's rent, that is collected at the time the lease is signed and then held by the landlord to cover the cost of repairs that may be needed when the tenant moves out. leasehold Estates Tena ncy for a term (estate for years) Per iodic tenancy Tenancy at will Tenancy at sufferance Figure 9-1 Leasehold Estates property for a designated period of time. A leasehold is a parcel of real estate held under a lease. Look at Figure 9-1. As you can see, leasehold estates can be classified as a tenancy for a term, a periodic tenancy, a tenancy at will, or a ten­ ancy at sufferance.

With a tenancy for a term, also sometimes called an estate for years, t he lease establishes a set period of time during which the lessee will have contr o, and after which all rights revert to the lessor. With a periodic tenancy the rema: periods are established at a set interval- for example, week to week, month to month, or year to year. At the end of each rental period the lease can be ter mi ­ nated with proper notice. However, if neither party gives such notice, the lea se automatically continues. When no time period is specified, it is called a tenan cy at will, and either the lessee can leave or the lessor can reclaim the land at any time. The law in many states requires that the owner give 30 days' notice befo re reclaiming possession. This has the effect of converting a tenancy at will into a month-to-month periodic tenancy. A tenancy at sufferance denotes a situati on in which the person in possession of the land has no legal right to be there. Ar. example of this would be homeless people occupying an abandoned building. Some states and cities have rent control statutes and ordinances that regu­ late the amount of rent that can be charged for existing apartments. c. Security Deposits Most leases contain a provision for a security deposit. A security deposit is an amount of money, usually equal to one month's rent, that is collected at t he time the lease is signed and then held by the landlord to cover the cost of repa irs that may be needed when the tenant moves out. State laws frequently regulate the handling of security deposits. Tenants are held responsible for any damage done to the property beyond what is consid­ ered to be "normal wear and tear." Conversely, state laws often place limits or: the amount of money that landlords can hold as a security deposit, require t he return of the security deposit within a set amount of time after the tenant vacat es. require documentation of the cost of repairs that are deducted from the depos i and sometimes require the payment of interest on the amount of money held. d. Living Conditions in Rental Units The common law favored landlords. The tenant had to take the propert y ir: the condition it was in at the time that the lease was entered into, even if the ten­ ant was not aware of defects at the time the lease was signed. The tenant also had to repair any damage resulting from natural disasters or the acts of other people , A. Real Property 345 • ~e tenant, or the tenant's family. The landlord's only obligation to the tenant was - t of not interfering with the tenant's "quiet enjoyment" of the premises. Quiet j oyment meant that the landlord could not interfere with the tenant's use of e property with respect to such things as what crops were planted or who was .::v1 ted onto the property. The tenant's primary obligation was to pay the rent.

Over the years many state legislatures enacted statutes that provide for _ more equitable relationship between landlords and tenants. Such laws often :eq uire the owner to repair and maintain the premises at certain minimum lev­ =·- . The plumbing and heating must work, the windows and the doors have to : ose, and so on. If an apartment is being rented as a residential unit, then it must : o rne complete with running water, a working furnace, and other minimum liv- g essentials. This requirement is present even if not written into the lease and is own as the implied warranty of habitability. It requires that the property be fit :o r the purpose for which it is being rented. These minimum standards are often equated with whatever is required in the local housing code. e. Eviction State laws also determine the procedures landlords must use to retake pos­ ses sion of their property. Under the common law a landlord could forcibly evict a tenant who was in default of any term in the lease. The landlord or the land­ . or d's agent could go in and literally throw the tenant and a tenant's personal ?O Ssessions out on the street. As a result of the hardship and the frequent vio­ ence such procedures brought abo.ut, most states now require that a landlord 5rst give an appropriate eviction notice and then go to court to get local law enforcement agents, such as police or sheriff's deputies, to supervise the physical : emoval of the tenant and any possessions.

In an eviction proceeding most state courts have held that an implied war­ ra nty of habitability defense can be used. When a landlord fails to provide mini­ :nalliving conditions, such as shutting off the water or electricity, it is considered : o be a construction eviction. When this occurs, the landlord cannot evict a enant for failure to pay rent because the landlord has failed to maintain the remises at minimum standards. Case 11: Bill and Maria (continued) Quiet enjoyment The tenant's right to be free from interference from the landlord with respect to how the property is used. Implied warranty of habitability A requirement that property be fit for the purpose for which it is being rented. Owners are required to repair and maintain the premises at certain minimum levels.

Evict To remove a tenant from possession of rental property. Constructive eviction An act by a landlord that makes the premises unfit or unsuitable for occupancy.

After several years of happily living together, home. Purchasing a home involves many legal Bill and Maria decide to marry and invest in a tssues. 2. Buying and Selling Real Estate When real property is leased, the owner grants legal rights to use the property in question for a designated purpose for a set amount of time, but the lessor/ l a ndlord retains actual ownership. At the end of the lease, the lessee/tenant walks • 346 Chapter 9: Prope rty and Estate law Listing agreement A document that spells out the nature of the services a real estate agent will perform with respect to selling real property and how the agent will be compensated for those serv1ees.

Earnest money The money the buyer turns over to the real estate agent to be applied to the purchase price of property.

Title search An examination of documents recording title to the property to ensure the owner has a clear title. Encumbrance A lien or other type of security interest that signifies that some other party has a legitimate claim to the property. away with nothing more than "a box of rent receipts." On the other hand, after the same time period, home or condominium owners have enjoyed more contr o l over the use of their property, and, in most situations, when they decide to sell, they receive a return on their investment in the form of increased equity in the property. 1 a. Listing the Property In the typical residential real estate transaction, the seller either advertis es the availability of the property or lists it for sale with a real estate agent. If a re al estate agent is involved, the seller will sign a listing agreement, which spells out the nature of the services the agent will perform and how the agent will be com­ pensated for those services. The services usually include advertising the propert y in a local "multiple listing service," newspaper and Internet advertisements, and arranging open houses. b. Negotiations The legal aspects of a real estate sale start when the potential buyer makes an offer to purchase the property. Real estate agents usually carry standard­ ized fill-in-the-blank offer forms, and the buyer's agent fills in the information regarding the description of the property, the amount of money being offered , a listing of the fixtures and appliances that are to be included, and the date of possess ion. The offer sheet also usually contains a number of clauses that make the offer contingent on the buyer's being able to obtain financing, often at a specified interest rate; the building passing a termite inspection; and so forth .

The buyer then turns over a specified sum of money to the real estate agent as earnest money. This money is applied to the purchase price at the time the sale is completed and may be forfeited if the buyer defaults prior to the completion of the sale. The seller, in turn, accepts the offer, rejects it, or proposes a counteroffer. To accept the offer, the seller simply signs the appropriate line on the offer sheet.

A counteroffer usually consists of a lower asking price, somewhere between the buyer's offer and the original asking price. c. Preparation for the Closing A real estate closing is a meet ing at which the buyer and the seller or their representatives sign and deliver a variety of legal documents associated with the sale and transfer of the property. Prior to the closing, the buyer arranges for financing, and the seller arranges for a title search and sometimes title insurance.

A title search is an ex amination of documents recording title to the property to ensure the owner has a clear title to the property. A clear title, also known as marketable title, is an ownership right that is free from encumbrances or other defects . An encu mbrance is a lien or other type of security interest that signifies 1 Equity here refers to the difference between the selling price of the property and the balance of an y mortgages on the property . Although many people' s equity in their home did not increase in some regions of the United States during the "burst of the housing bubble" (approximately 2007-2012), usually home­ owners can expect an increa se in equity over time. A. Real Property 347 • - t some other party has a legitimate claim to the property as a means of satis­ :-

The buyer guarantees the title by either obtaining an up-to-date abstract or ?urchasing title insurance. An abstract is a condensed history of the title, which lu des the chain of ownership and a record of all liens, taxes, or other encum­ ran ces that may impair the title. The parties may also acquire title insurance to d emnify the purchaser or mortgage holder against any loss due to a defective "tle. If defects in the title are found and the seller is unwilling or unable to cor­ -ect these defects, the buyer can refuse to complete the transaction.

The most important part of the closing is the delivery of the deed. The eed is the legal document that formally conveys title to the property to the new w ner. In most sales a warranty deed is used. With this type of deed the seller, also known as the grantor, promises "clear title" to the property, one that has no enc umbrances or other defects .

Ownership of real property can be sole or shared. If shared, then the form of shared ownership needs to be included in the deed. Ownership can be shared eit her through either a joint tenancy or a tenancy in common. A joint tenancy oc curs when a single estate of land is acquired by two or more persons who have equal rights in the use of that property during their respective lives. A tenancy in common is very similar in that it also involves two or more people who share e of the propert y. The ownership shares do not have to be equal, however, nor do they have to have been acquired at the same time. In addition, on death the o w nership interest of a tenant in common passes to his or her heirs, while with a joint tenancy it passes to the co-owner(s).

A tenancy by the entirety is a special type of joint tenancy applicable only -o married couples. It is essentially a joint tenancy modified by the common-law th eory that the husband and wife are one person. During their lifetimes neither the wife nor the husband can transfer the property without the other's consent. _\s with any joint tenancy, on the death of one of the spouses the othe r takes w hole title to the exclusion of any other heirs. In some condominium arrange­ m ents the individual living units are individually owned or owned in joint ten­ an cy, and the common halls, walks, parking lots, and garden areas are a form of cenancy m common.

The distinction between joint tenancy and tenancy in common is very im portant. While both represent ways to jointly own property, the part owner of property held as a tenancy in common can bequeath that share to whomever th e owner pleases. However, the owner of property held in joint tenancy cannot h oose to whom the property will pass on the owner's death. Even if the owner pr ovides in a will that the property will pass to a named individual, it will none­ th eless pass to the other joint tenant. In fact, you will often hear the term joint tena ncy referred to as joi nt tenancy with a right of survivorship. Mechanic's lien A claim filed by a contractor or repair person who had done work on a building for which he or she has not been fully paid. Abstract A condensed history of the title, which includes the chain of ownership and a record of all liens, taxes, or other encumbrances that may impair the title.

Deed The legal document that formally conveys title to the property to the new owner.

Joint tenancy (also known as Joint tenancy with right of survivorship) Ownership by two or more persons who have equal rights in the use of that property. When a joint tenant dies, that person 's share passes to the other joint tenant(s) .

Tenancy in common Ownership by two or more people. When a tenant in common dies, that person's share passes either by will or by intestate statute. • 348 Chapter 9: Property and Estate Law Closing statement An itemized allocation of all the costs and moneys exchanged among the various parties, including financial institutions and real estate brokers, when a property is sold. Land contract An installment contract for the sale of land. d. The Closing At the closing the buyer signs the mortgage documents, and the seller receives the proceeds of the sale. A closing statement is prepared to itemize and allocate all costs and moneys exchanged among the various parties, including financial institutions and real estate brokers. In many states, property taxes assessed for one year are not collected until the next year, and the new owner is responsible for paying taxes that were incurred by the previous owner. If this is the case, the seller will give the buyer a credit that corresponds to the amount of taxes still owed for the period preceding the sale. If the actual possession of the property does not correspond to the closing date, credits are given to reflect the rent being paid by the seller to the buyer or by the buyer to the seller. e. Land Contracts As an alternative to the standard sale process described above, real estate is sometimes sold through a land contract. In essence it is an installment sales contract. The buyer takes physical possession of the property and begins making monthly payments to the seller, which will be applied to the agreed-on sale price of the property. However, the seller retains legal title to the property until all the agreed-on installment payments have been made. If the buyer for some reason defaults in making the payments, the contract is broken, and the seller gets to keep title to the property, as well as any payments that were made during the course of the contract. DISCUSSION QUESTION 1. Which of the joint tenancy options listed above do you think Bill and Maria should choose to have on the deed? Why? 3. limitations on the Use of Real Property In addition to the opportunity to take advantage of inflation in the housing mar­ ket, many people prefer home ownership because it gives them more freedom to treat their property as they please. However, as Bill and Maria learned, there are a variety of restrictions that may limit what a property owner can do. Case 11: Bill and Maria (continued) Bill and Maria were on cloud nine when they were able to purchase what they thought was their dream home in an up-scale suburban development called Happy Valley. However, they soon discovered that the Happy Valley Home­ Owners Association and various governmental agencies had a lot to say about how they could use their property.

First, the homeowners association ordered Bill to remove the 25-foot flagpole he had erected in his front yard because the association's rules limited the size of flagpoles to ten feet. · A. Real Property 349 • Second, Bill quit his job at the Ford deal­ e rship, and he began using his garage to repair au tomobiles. After some neighbors complained, the town zoning board sent him a letter inform­ in g him that he could not conduct a commercial b usiness from his home because the area was zo ned for residential use only. Finally, the state highway department noti­ fied them that they would be taking a ten-foot wide strip of land in order to widen a road that ran along the back of their lot line. Bill and Maria have returned to Darrow and Bryan to seek the law firm's assistance in dealing with these problems. a. Zoning Laws Zoning regulations, such as the one against operating a business in an area :aat is zoned for residential use only, restrict the power of landowners to use -eir land as they like. These laws are specifically designed to regulate the way w hich property can be used. Zoning laws that prohibit the construction of :;. factory on land that is zoned residential and mandating a minimum distance xtw een a house and the street are designed to protect the property values of the er people living in that area. Developers are sometimes required to turn over z portion of the land as a condition of being granted a variance or special use ?€!r mit.

Typically disagreements arise among the various interests affected as to "'Yh at types of zoning laws are needed and whether the specific requirements are :-ea sonable. For example, while there may be general agreement that "set-backs" :;.re beneficial, there is often disagreement as to how many feet they should be. -:bese types of disagreements are typically resolved through the political process f lobbying and elections. On the other hand, it is not unusual for a party that ses in the political arena to use the courts to challenge the application of a zon­ g law on the basis that it violates the constitutional prohibition against taking _ rivate property "for public use without just compensation." 2 We discuss this -o ncept further in the section below on eminent domain. b. Building Permits and Safety Requirements Municipalities often require various types of permits before someone can negin building or remodeling on their property. They also require inspections ne done to ensure that the various safety requirements are being met. Health e partments, fire departments, and the federal Occupational Safety and Health _\dministration provide other examples of health and safety regulations affecting r operty owners. c. Restrictive Covenants and Homeowner Association Regulations A restrictive covenant is a provision in a deed that prohibits specified uses nf the property and commonly is added at the time a developer subdivides and :_-\lr hough the Fifth Amendment of the U.S. Constitution applies to actions of the federal government y, the Supreme Court has interpreted the Fourteenth Amendment due process clause as placing similar = ditions on state and local governments. Restrictive covenant A provision in a deed that prohibits specified uses of the property. • 350 Chapter 9: Property and Estate Law Easement A right to use property owned by another for a limited purpose. License Permission to enter or use the property of another that can be revoked at any time. improves the property before it is marketed for housing. Common provisiom include requirements relating to minimum square footage, set-back, and arc hi­ tectural styles. Others may prohibit the installation of satellite dishes in yae l­ or the overnight parking of boats or recreational vehicles in driveways. These covenants are recorded in the county land records and become part of the tid"' for all subsequent owners.

Historically, restricti ve covenants were also used to exclude some racial an ethnic groups from living in certain areas. In Shelly v. Kraemer, 3 however, the U. ~. Supreme Court ruled that such racially restrictive covenants could not be judici a ll. enforced, and in Jones v. Alfred H. Mayer Co. 4 the Court interpreted the feder a.; Civil Rights Act of 1866 as prohibiting racial discrimination in the purcha sin and leasing of property. In addition, the federal Civil Rights Act of 1968 and man .

state and local open housing ordinances now prohibit such discrimination . 5 Closely related to restrictive covenants are homeowner association regula­ tions that can cover everything from the height of flagpoles to the exterior co lor of houses. When buyers purchase their property, they are agreeing to be cover e by the homeowner association regulations. Potential buyers who want greater freedom have to seek alternative properties with fewer restrictions. d. Easements An easement is the right to use property owned by another for a limit ed purpose. Utility companies acquire easements that allow them to install and maintain electrical cables and gas pipes on property owned by others. If the electric company has to bring a bucket truck onto your property in order to trim trees around their electric lines, they have a legal right to do so.

Another common type of easement allows a neighbor to drive over a sm a ll section of someone else's property in order to gain access to his or her own land. For example, assume that Doug owned Lot A and Lot B. The country road fronted the south and west side of Lot A, but stopped just before Lot B. The only way to access Lot B was by taking the country road and then driving for a sho rt distance over the northwest corner of Lot A. When Doug sells Lots A and B to different buyers, he places an easement in the deed for Lot A stating tha t the owner of Lot B has the limited right to travel across Lot A to reach Lot B. Note that an easement should be distinguished from a license. A licen se gives someone only a temporary right to enter the property of another and can be revoked at any time. An example of a license is a ticket to a football game. 4. Involuntary Loss of Property There are several ways in which a real estate owner ca n lose all or part of the land's value. These include seizure by a creditor , a taking through the govern ­ ment's power of eminent doma in, and adverse possession. 3344 u.s. 1 (1948 ). 4392 u.s. 409 (1968). 5Even though they have been illegal for more than 50 years , racially restrictive covenants still ex ist in many older property records, because of the time and expense involved in physically deleting them. A. Real Property 351 • a. Seizure by a Creditor When a creditor holds a mortgage or some other form of lien on real prop­ ert y, and the homeowner stops payment, the creditor can force the sale of the pr operty in order to satisfy the balance owed on the mortgagee or lien. This pro­ cess is known as foreclosure. The creditor is usually required to initiate a fore­ closure action in the courts, but some mortgages include power of sale clauses, a uthorizing private sales that do not require court action.

Many states protect homeowners from creditors through what is known as a homestead exemption. As the name "homestead" suggests, usually the exemp­ tion only applies to a primary residence. The purpose of such laws is to protect ::lo t only the homeowner but also the homeowner's family so that creditors may ::lO t force a sale of their home in order to acquire assets to pay for the home­ ow ner's debts. In some states, a homestead exemption is automatic as soon as the property is occupied and used as a home. In others, however, in order to gain th e benefits of a homestead exemption, the homeowner must file a formal dec­ l ar ation, stating that the home is the declarant's principal dwelling. To find the re quirements and benefits of a homestead exemption in any given state, research :hat state's statutes.

b. Eminent Domain Eminent domain is the power of government to take private property for a p ublic use. Although the government does not need the owner's consent, it must pr ovide the owner with just compensation for the property. If the government an d the owner cannot agree on a "fair" price, the courts determine what con­ sti tutes fair market value for the property. These limitations-that the property m ust be taken for a public use and that the government must pay just compen­ sa tion-are found in the U.S. Constitution. The Fifth Amendment states: "nor shall private property be taken for public use without just compensation." The upreme Court has determined that this "taking clause" of the Fifth Amendment · also applicable to the states through the Fourteenth Amendment's due process clause. 6 The most controversial aspect of the application of eminent domain relates -o the determination of what constitutes "public use." Historically, "public use" meant a taking for a clearly governmental purpose, such as for a new public school, a new road, or a public park. However, over time the definition of "pub- ·c use" took on a broader meaning to also include a "public benefit" such as the elim ination of urban blight.

This definition was challenged in the U.S. Supreme Court case of Kelo v. _ ew London . 7 Ms. Kelo had spent years remodeling a dilapidated home in New lo ndon, until it became a showpiece Victorian home. She then received a con­ e mnation notice from her town of New London, stating that the town planned :o take away and demolish her house so that it could lease her land and that of her neighbors to a private developer who was planning on building a luxury Chi cago, B . & Q. R. Co . v. Chicago, 166 U.S. 226,241 (1897).

- . 45 u.s. 469 (2005). Foreclosure The process by which a creditor who holds a mortgage or some other form of a lien on real property can force the sale of that property in order to satisfy the debt to the mortgagee or lien holder. Power of sale clause A clause authorizing a private foreclosure sale that does not require court action.

Eminent domain The power of government to take private property for public purposes.

just compensation The amount of money the government must pay the owner of property it seizes through eminent domain. • 352 Chapter 9: Property and Estate law hotel, condominiums, offices, and shops. The city saw this as a way to revitali ze an area of its waterfront district by creating more than 3,000 jobs and addin g over $1 million annually in property tax revenue.

Ms. Kelo rejected the city's offer to demolish her home in return for "just compensation." As many homeowners would, she felt that no amount of mone y could pay her for the time and labor she had invested in creating her drea m home. However, the legal argument she advanced was that the city was not tak­ ing her property for a public purpose, but rather was doing it for the benefit of a private developer. At the U. S. Supreme Court, her attorney argued that: This case is about whether there are any limits on government's eminent domain power under the public use requirement of the Fifth Amendment. Every home, church or cor­ ner store would produce more tax revenue and jobs if it were a Costco, a shopping mall or a private office building. But if that's the justification for the use of eminent domain, then any city can take property anywhere within its borders for any private use that might make more money than what is there now. 8 This was met by Justice Ginsburg's rejoinder: You are leaving out that New London was in a depressed economic condition, so this is distinguished from the case where the state has no particular reason for wanting this, but the critical fact on the city side, at least , is that this was a depressed community and they wanted to build it up, get more jobs .... [M]ore than tax revenue was at stake. The community had gone down and down and the town wanted to build it up. 9 In one of the most controversial decisions of the 2004-2005 term, by a five­ to -four vote, the Supreme Court upheld the town's seizure of Kelo's property on the basis that a taking for economic development met the Constitution's require­ ment of a "public use," even when the land is transferred to a private developer. 10 The decision created immediate outrage across the country. In the majorit y opinion of Kelo, the Court had noted that "[w]e emphasize that nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power. Indeed, many states already impose 'public use' requirement s that are stricte r than the federal baseline." 11 Within a year, more than half of the states responded to this opening and enacted legislation prohibiting the use of eminent domain for economic development purposes.

Unlike eminent domain cases, when the government regulates through zon­ ing, it does not have to pay the landowner compensation for the lost use of the property unless the zoning restriction amounts to a "taking." For example, con­ sider the case of Mr . Lucas. He purchased two beach-front lots with the inten­ tion of building single-family houses, but before he could start construction on the lots, the legislature enacted the Beachfront Management Act. This act pro­ hibited Mr . Lucas from building any permanent structure on his land. The U.S . Supreme Court agreed with his contention that the state government owed him 8Transcript of oral argument , Feb. 22, 2005. 9ld. 1°Kelo v. New London, 545 U.S. 469 (2005) . u I d. at 489. A. Real Property 353 • ~ compensation because the challenged action constituted a "taking" under --e Fifth and Fourteenth Amendments. 12 Florence Dolan, the owner of a plumbing and electric store, tried to make a · ar argument. Her city had agreed to give her a permit to redevelop her site _ long as she dedicated 15 feet as a public greenway and an additional15-foot "p as a pedestrian /bicycle pathway. She argued this was a taking for which the . owed her just compensation. When the controversy made it to the Supreme ::O urt, the justices cited an earlier case for the proposition that "[g]overnment hardly could go on if to some extent values incident to property could no t be diminished without paying for every such change in the general law." A land use reg ulation does not effect a taking if it "substantially advances legitimate state interests" and does not "deny an owner economically viable use of his land." 13 To summarize, in zoning cases, when the government places a zoning restric­ on on how a landowner may use a portion of his or her land, the government --ill not have to pay just compensation if the restr iction advances legitimate state rerests and does not deny the owner the economically viable use of the land. ~ow ever, if the restriction denies the owner an economically viable use of the .an d and there is no clear relationship between a legitimate state interest and the :estriction, the government will have to pay just compensation. The restriction - en qualifies as a taking for which the government must pay. c. Adverse Possession A third way in which landowners can involuntarily lose the use of their .an d is by someone establishing "actual, open, adverse, and exclusive use" of the ro perty for a statutorily determined number of years. This process is known as adverse possession. It is involuntary in the sense that the owner does not intend :o give up ownership, but unknowingly forfeits ownership by not having paid ro per attention to protecting these rights.

Thus, if a neighbor erects a backyard storage shed that partially crosses the r operty line, and the owner takes no steps to have the shed removed, that part of the property could eventually be claimed by the neighbor.

Typically, for someone to qualify for ownership in this manner, that per­ son' s use of property must be: 1. actual: the land in question must actually be used for some purpose (e.g., for a fence, shed, or garden); 2. open: visible to the public; 3. adverse: contrary to the interests of the owner; 4. exclusive : not open to others; and 5. continuous for a required period of time (usually between five and 20 years). 11Lucas v. S.C. Coastal Council, 505 U.S . 1003 (1992).

u o olan v. City ofTigard, 512 U.S. 374, 384-85 (1994). Adverse possession A transfer of real property rights that occurs after someone other than the owner has had actual, open, adverse, and exclusive use of the property for a statutorily determined number of years. • 354 Chapter 9: Property and Estate law The requirement that the adverse possession be continuous can be satisfied by one or a number of successive owners. This is known as tacking. In the fol ­ lowing case, the Steucks argued that they had acquired title to a portion of the ir neighbor Easley's land through their actions as well as those of the two previo us owners. Over the past 20 years they had hunted in the area, gone four-wheelin g, hiked, and put up several tree stands.

Easley owns at least 360 acres of undevel­ oped land. . . . He uses his land primarily for hunting and also for activities such as gathering firewood, picking apples, and hiking on the hik­ ing trails. He has set aside some of his land as a sanctuary for the purpose of managing, growing and protecting a deer herd.

Easley testified that he and one or more of his family and friends are on his land approxi ­ mately 180 days per year. They do not hunt in the sanctuary, which includes the disputed area. He goes into the disputed area once or twice a year and tries to observe it from a distance because walking through it defeats the purpose of a sanc­ tuary. He never noticed persons trespassing in the disputed area nor saw anything that caused him to believe someone was doing something of a permanent nature. No one in his family or his hunting group gave him any indication there was hunting or other activities going on in the dis­ puted area. He did see two tree stands in the area, but they were very old, and he was sure they had been there for many years prior to his purchase of the property. [W]e conclude the regular use of the dis­ puted area for hunting, the deer stands, and the dirt road and trail do not constitute open, noto­ rious, visible, exclusive and hostile use. Because of this conclusion, we do not discuss the require­ ment of continuous use.

There was no finding that Easley ever met Daniels, Daggett or their friends hunting in the disputed area. The circuit court found that Easley could have and should have heard the gun shots during spring and fall gun seasons. We do not agree that the sound of gunshots gives a reason­ ably diligent titleholder notice of adverse posses­ sion. Even assuming that the shots come from the titleholder's property and not from someone else's property beyond, the gunshots would have been consistent with trespassers. As for the deer stands, the testimony was that they were portable deer stands, some kept in place all year. Even if visible, the deer stands, too, are consistent with trespassers. ... Notably, neither Daggett nor Daniels posted the disputed area, which would have been notice to Easley that someone else claimed it. We conclude the plaintiffs have not estab­ lished adverse possession of the disputed area. CASE DISCUSSION QUESTIONS 1. Do you agree with the Wisconsin court's decision rejecting Steucks's adverse possession claim? Why or why not? B. Personal Property 355. 2. Do you think Easley should have been required to do more to monitor - e u se of the land he has been using as a sanctuary for managing, growing and --or ecting a deer herd? If so, what and at what cost? DISCUSSION QUESTIONS 2. What do you think the attorneys at Darrow and Bryan will advise Bill ;....d Maria to do in response to the:

a. notifications they received from their homeowners association regarding the flagpole? b. letter from the munic ipal zoning board regarding his business? c. letter from the state highway department regarding taking a strip of land?

3. Should a condominium association that wishes to appeal to seniors .x allowed to prohibit children from living in its units? What are the policy ar guments for and against? How would you distinguish between children living ~ the unit versus those just visiting? Specifically, if you cannot discriminate on :he basis of race, why should you be able to discriminate on the basis of age?

4. Why should the government be able to take somebody's property ·without his or her consent? Give some examples of what you would view as .egit imate uses of eminent domain.

5 . Each night as Greg drove up his driveway, he paused to appreciate the ,ov ely flowers he had planted alongside his fence, bordering his land. One night, h owever, he drove home to find the flowers dug up and the fence gone. After a few fr antic calls he discovered that when he erected the fence, he had inadvertently pl aced it two feet over the property line and onto his neighbor's land. Does Greg h a ve any legal recourse? The answer will depend on who owns the land-Greg or his neighbor. Even if the neighbor holds the deed to the property, is it possible f o r Greg to obtain real property rights? B. PERSONAL PROPERTY All property other than real property is classified as personal property. Personal property is often further categorized as being either tangible or intangible .

Tangible property (also referred to as chattel) consists of goods that can be touched and moved, such as automobiles, jewelry, clothing, and television sets.

I ntangible property is personal property that cannot be touched, such as a stock c ertificate or a patent. While you can certainly touch the piece of paper that documents the stock ownership or the awarding of the patent, it is not the paper itself that has value. Property can change its nature from real to personal or from personal to real. For example, while oil is still in the ground, it is considered to be real prop­ erty , but once it has been extracted from the ground and loaded on a tanker or sent down a pipeline, it becomes personal property. When trees are still in the forest, they are real property. When they are cut, they become personal prop­ erty. It is not always easy to dete rmine when this change occurs. For example, Personal property All property that is not real property. Tangible property (also known as chattel) Personal property such as automobiles, jewelry, clothing, and television sets that can be touched and moved. Intangible property Personal property that cannot be touched. • 356 Chapter 9: Property and Estate Law Bailment A temporary transfer of personal property to someone other than the owner for a specified purpose.

Bailor The owner of the personal property that is being temporarily transferred as part of a bailment. Bailee The party taking temporary control of the personal property during a bailment.

Intellectual property Intangible assets, such as trademarks, copyrights, and patents. a mobile home on the sales lot is personal property. If it is moved to a mob ile home park, has its tires removed, and is affixed to a foundation, it becomes real property. However, what if its tires are not removed and it is simply placed on the lot? Is it still personal property?

Determining whether property is real or personal can have important co n­ sequences, as the courts apply different rules to the different types of proper ty. For example, the selling and leasing of personal property are covered by the general principles of contract law and the Uniform Commercial Code, discusse d in Chapter 8. The selling and leasing of real estate was covered earlier in thi s chapter. 1. Transfer of Personal Property Personal property changes hands in much the same way real property does. It can be sold, it can be given away, it can be seized for nonpayment of a debt, and it can become part of a person's estate.

Keep in mind that the elements for a valid gift differ from those for a con­ tract. While both require an offer and acceptance, only a contract requires con­ sideration. And, for a valid gift to occur, there must be a completed delivery. The gifting process is not complete until the recipien t has accepted the giver's offer and actually received the item being given. Therefore, the elements for a valid gift are: an offer, an acceptance, and delivery. Ownership of personal property may also be transferred when it is lost, abandoned, and mislaid property. Property is classified as lost if the owner has involuntaril y parted with it and does not know where to find it. On the othe r hand, if the owner deliberately placed it somewhere and then forgot where it ha d been placed, it is classified as mislaid rather than lost. It is considered abandoned property when the owner left it with no intention of coming back to reclaim it. If you find lost property, you acquire title that is good against everyone except the true owner. However, you may have to turn the property over to the police for a certain amount of time to ensure that the rightful owner does not return to claim it. On the other hand, if you find mislaid property, property that was inadve r­ tently left behind, such as a ring next to a sink, then you acquire no ownershi p rights in it. Finally, if you find abandoned property, you become the owner.

When personaf property is intentionally transferred on a temporary bas is for a specified purpose, a bailment occurs. For example, a bailment occurs when you take your clothes to be dry cleaned or your car to be repaired. A bailment also occurs when you contract with a moving company to move your furniture from one location to another. The owner is called the bailor, and the party taking temporary control of the property is called the bailee. The law imposes a dut y on the bailee to exercise reasonable care toward the property while it is under the bailee's control. 2. Intellectual Property The term intellectual property is used to cover intangible assets that are the product of someone's intellectual creation, such as inventions or the authorship of a book. Traditionally, land was the greatest measure of a person's wealth, B. Personal Property 357 • r today intellectual property has become extremely important. With this new -urce of wealth have come new legal problems. For example, while it is usually ~:li re clear if someone is illegally trespassing on your land, it is not always easy - know when someone is infringing on your rights to your intellectual property. a. Types of Intellectual Property The legal protections for intellectual property consist of trademarks, ser­ ; e marks, copyrights, patents, and trade secrets. The law gives the registered a ld ers of trademarks, service marks, copyrights, and patents the right to control o w they can be used.

Trademarks are unique terms, names, combinations of letters or num­ x rs, and logos that identify particular products or services. Familiar examples elude "Dodge," "IBM," and "V-8." To be a trademark, it must not be similar to another mark and it cannot be a generic name. Some words, such as zipper and 3ca lator, were once trademarks but lost that status as their use became generic. :h is is why you may have seen ads from the Xerox Corporation in which they -o rrect someone who is about to say, "I'll Xerox that," with the reminder it -h ould be "I'll copy that." Service marks are symbols used in connection with - erv ice -oriented businesses.

Trademark law is controlled by the federal Lanham Trademark Act. 14 That act bars registration of trademarks that disparage a group or bring it into con­ -empt or disrepute. In the past, the trademark office has denied marks, such as ""Stop the Islamization of America" and "Slants," on the basis that the former ·auld be viewed by many as disparaging Muslims and the later as disparaging _\si an- Americans. 15 However, what we view as disparaging changes as societal views change. In 1 966, the Washington Redskins National Football team was issued a trademark :o r "Redskins," 16 but in 2014, the Trademark Trial and Appeal Board declared iliat the team name of the NFL's Washington Redskins was "a racial slur." 17 This a ction does not prevent the team from continuing to use the Redskins name. How ever, the team can no longer use trademark protections to prevent others from making or selling goods with the team logo on them. This could have dire fin ancial consequences for the team and the NFL. The team has announced its intent to appeal the Board's decision in federal court.

Copyrights give authors, composers, and artists the right to control, with er tain limitations related to "fair use," the use of their writings, musical per­ o rmances, and artist ic creations. The Copyright Act protects "original works o f authorship fixed in any tangible medium of expression" including "picto­ ria l, graphic, and sculptural works," 18 but it does not extend to "useful articles" '' 1 5 u.s.c. § 1051 (2012) . 15"Eric Brad l ey, Federa l Boa rd Could Ho ld Key, USA Today, May 29, 2014, C1 -2 at C2 . '6h ttp://ttabvue.uspto .gov/ttabvue/v? qt= adv&pno=9 2 04618 5.

, -htt p://www.nbcnews.comlnewslsportslredskins-ruling-could-sti ck-tim e -say-trademark- e xperts ­ n 134781. 1817 U .S.C. § 102 (a) ( 5) (2012). Trademark A name, combination of letters or numbers, or logo that identifies a particular product.

SeiVice mark A mark used to identify a service-oriented business.

Copyright An author or artist's right to control the use of his or her works. • 358 Chapter 9: Property and Estate Law Patent A right to exclude others from making, using, or selling one's invention. Trade secret A formula or process that has not been patented and is known by a limited number of individuals working for the company that uses it. (defined as objects with "an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information"). 19 The most debated portion of copyright law involves the concept of "fair use." The doctrine of fair use was developed through court decisions and then codified in Section 107 of the copyright law. There you will find a list of the vari­ ous purposes for which the reproduction of a particular work may be conside re d fair use. Examples include criticism, comment, news reporting, teaching, scholar­ ship, and research .

The distinction between what is fair use and what is infringement will not always be clear or easily defined . There is no specific number of words, lines, or notes that may safely be taken without permission. However, Section 107 sets out the following four factors to be considered in determining whether or not a particular use is fair: • the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; • the nature of the copyrighted work; • the amount and substantiality of the portion used in relation to the copy­ righted work as a whole; and • the effect of the use upon the potential market for, or value of, the copy­ righted work.

Acknowledging the source of the copyrighted material does not substitute for obtaining permission .

A patent gives its owner the right to exclude others from making, using, or selling his or her invention. Patents are issued by the government and must be for a tangible product, not just an idea. The product must also be novel, nonobvious , and useful. The newest developments in patent law involve the rapidly growing science of genetic engineering. In Association for Molecular Pathology v. Myriad Genetics, Inc., 20 a unanimous U.S. Supreme Court invalidated a patent that had been issued to Myriad Genetics which they claimed gave them an exclusive right to isolate certain genes. A coalition of doctors, geneticists, researchers, women's groups, and cance r patients challenged the patent because it raised patient cost and limited access to tests that identify an increased risk of breast cancer.

Justice Thomas 's opinion noted that Myriad had indeed found and identi­ fied a useful gene, but that naturally occurring genes (as opposed to gene varia­ tions created in a laboratory) were not eligible to be patented because they were not invented.

Another very controversial area of patent law involves the criteria for patenting computer software programs . More than 400,000 patents have been granted by the U.S. Patent Office for software programs. 21 A trade secret is a formula or process that is known only by a limited num­ ber of individuals working for the company that uses it. An example would be 19Jd. § 101. 20133 S. Ct. 2107 (2013). 21Richard Wolf, Billions At Stake In App Patent Case, USA Today, Mar ., 31,2014, at Bl. B. Personal Property -e formula for making Coca-Cola. A trade secret might also qualify for a pat­ b ut then it would no longer be a secret, as patents are public. Patents are also .ilid only for a limited number of years. b. Enforcing Intellectual Property Rights Once a trademark, servicemark, copyright, or patent has been obtained, it a mes a form of personal property that can be sold or given to someone else. :or example, holders of copyrights and patents collect licensing fees for allowing -meone else to sing their song in a public performance or to use their book as -e basis for a movie script. If the holder of an intellectual property right thinks that it is being infringed, -e f irst step in the process of enforcing that right is to identify those who may be .:o ing the infringing. When dealing with trademarks, an Internet search for key -ords (such as "Coke" or "Jell-0") or phrases (such as "Like a Good Neighbor") :an often identify illegal use of a trademark .

The second step usually involves sending "cease and desist letters." They ay offer to negotiate a fee for continued use or threaten to sue in federal court ; the infringers do not cease their illegal activities.

The third step is to sue. If the plaintiff succeeds, the penalties can include o netary damages and injunctions against further violations. The penalties in :naj or copyright infringement cases can run into millions of dollars. In Sony 3.\1G Music Entertainment v. Tenenbaum, 22 the court upheld the validity of a -67 5,000 damage award against a college student who had illegally downloaded 0 songs from the Internet. That comes to $22,500 per song. :JISCUSSION QUESTIONS 6. As college and professional athletic programs seek to market their teams an d control use of their identity, their team logos, mascots, and uniform colors iav e taken on greater significance.

a. Who should be given the right to control the production and sale of team t-shirts, sweat-shirts, coffee mugs, etc. with the team logo on them? Does your answer change depending on whether the items belong to a small college soccer team, a large university basketball team, or a professional football team? Why or why not? b. Do you think professional sports organizations should be able to trademark or copyright their team colors or uniform designs? Why o r why not? c. Given the hundreds of professional teams, and hundreds of colleges and universities, do you think it is possible for high schools to develop a logo or uniform color scheme that does not duplicate one already used by colleges or pro sports?

7. With respect to the provision in the copyright law that prohibits gr anting trademarks to words and phrases that "disparage a group or bring :: 19 F.3d 67 (2013). 359 • • 360 Chapter 9: Property and Estate law Estate The total property of whatever kind, both real and personal, that a person owns at the time of his or her death. Estate planning The process of analyzing a person's future financial needs, developing strategies to meet those needs, and determining how the remaining assets should be distributed following that person's death. Will The document used to express a person's wishes as to how his or her property should be distributed upon death.

Intestate When a person dies without a valid will.

Testator/Testatrix The person making a will to direct how his or her assets will be distributed at death. it into contempt or disrepute," what arguments could an attorney make either supporting or opposing the use of"Redskins"? C. ESTATE PlANNING Estate planning is the analysis of a person's future financial needs and the devel­ opment of strategies to meet those needs while the individual is alive, to expedite the probate process that follows death (see Section 4 below), and to avoid inheri­ tance and estate taxes. In this context an estate is the total property of whatever kind, both real and personal, that a person owns at the time of his or her death. (See Figure 9-2.) At the time of a person's death this property is distributed on the basis of the person's will or the state's intestacy laws and the terms of other state laws regarding such matters as joint ownership rights and life insurance contracts. Examples of property passing independently of the terms of a will or intestacy laws include investment funds and death benefits from insurance policies. These will be distributed to the named beneficiaries of those funds and policies. 1. Wills A will is a legal expression of a person's wishes as to how his or her property should be distributed upon death. When someone dies without a valid will, that person is said to have died intestate. When this occurs, the person's property is distributed on the basis of guidelines laid down by the legislature of the state in which the deceased was domiciled (that is, had his or her legal residence) at the time of death. Although these laws usually favor the spouse and the children, they may not correspond to how the deceased wanted to dispose of the estate.

For example, many states split the deceased estate among a surviving spouse and the children, whereas the deceased may have wanted the entire amount to go to the surviving spouse. For this reason, as well as to take advantage of potential tax savings, it is highly desirable to have an up-to-date will.

Wills are classified as formal, informal, and nuncupative. A formal will is one that has been prepared on a word processor or typewriter and has been properly signed by the testator (the person making the will) and the required wit­ nesses. (Note: In some states, a female testator is known as a testatrix.) Alternative Meanings for "Estate" In real estate law: An interest in or a title to real property. In probate law: The total of all property (including assets and liabilities) owned by a person at the time of that person's death that is distributed through a will or in accordance with state intestate laws. Figure 9-2 Definition of Estate C. Estate Planning 361 • A holographic will, or informal will, is one that was handwritten by the tes­ - tor, without the witness signatures necessary for a formal will. Only about half -· e s tates recognize such wills as valid. A nuncupative will is an oral will. Few ~ tes recognize such wills, and those that recognize them do so only when the :esta tor was in fear of imminent death and usually require at least two witnesses. The standard will consists of a clause that identifies the testator, clauses ~ king specific legacies or bequests, and signature clauses for the testator and ·tn esses. A gift of real estate in a will is called a devise, while a gift of personal _ ro pe rty in a will is called a bequest or a legacy. The person named to receive the gift is called a beneficiary. The typical will also includes provisions for the pay­ :;nent of taxes and expenses, funeral arrangements, and appointment of execu­ :ors and guardians and a simultaneous death clause. An executor (or executrix) is a person appointed by the testator to carry out the directions and requests in :he will. A guardian is one who is given the responsibility of managing the affairs or property of a person who is incapable of administering his or her own affairs.

Fo r example, a guardian might be appointed to care for the decedent's minor children. A simultaneous death clause states that if a person named as a benefi­ ciary in the will dies within a short period of time after the decedent dies, it will be assumed for purposes of the will that the person in question failed to survive :he decedent. Such clauses are normally inserted for tax purposes. Without such a clause, the estate of each decedent might be taxed as though each survived the o ther and hence inherited the prope rty from the other. Therefore, estate taxes w ould have to be paid twice.

In some jurisdictions the courts will dispense with the need to call in wit­ nesses to attest to the validity of a w ill if it contains a self-proving clause. Such a clause is actually a notarized affidavit, signed by the attesting witnesses . The la use simply states that the witnesses swear to the information that a probate ourt wou ld need in order to admit the will to probate-that is, that the testa­ or was at least 18 years old, appeared to be of sound mind, and was not acting un der any outside influence.

A testator can change a will with a codicil. The codicil has to be signed and witnessed like a will. Alternatively, the testator can destroy the old will and draft a new one.

Before the will is signed, read it out loud to the testator. At this time clients are often too stressed to be able to read the will to themselves as carefully as they sh ould. At the signing make sure the testator initials every page. 2. Trusts In order to avoid some aspects of probate and to minimize tax liabilities, modern estate planning often includes the creation of specialized trusts. A trust is a legal r elationship in which one party holds property for the benefit of another. In this c o ntext the property is transferred to a trust fund, where it is to be used for the be nefit of a designated person or persons rather than passing directly to them as p a rt of the probate process. The person who creates the trust is called the donor, gran tor, or settlor. The person appointed to administer the trust is the trustee , an d the person who receives the benefits of the trust is the beneficiary. Executor /Executrix A person appointed by the testator to carry out the directions and requests in his or her will. Simultaneous death clause A clause that states that if a person named as a beneficiary in the will dies within a short period of time after the decedent dies, it will be assumed for purposes of the will that the person in question failed to survive the decedent . Self-proving clause A notarized affidavit, signed by the attesting witnesses, which may eliminate the need to call witnesses during the probate process to attest to the validity of the will. Codicil A supplement or addition to a will that modifies, explains, or adds to its provisions.

Trust A legal relationship in which one party holds property for the benefit of another. • 362 Chapter 9: Property and Estate Law Donor (also known as a grantor or settler) A person who creates a trust.

Trustee The person appointed to administer a trust.

Durable power of attorney A document that gives someone else power to act for you if you become incapacitated and unable to handle matters on your own. DNR (Do-Not­ Resuscitate) A document designed to inform emergency responders that the person does not want to be resuscitated. POLST (Physicians Orders for Life Sustaining Treatment) A form that requires health care professionals to give or withhold the treatments specified on the form. The two types of trusts most commonly used in estate planning are inter vivos trusts and testamentary trusts. An inter vivos trust is one that is create d before a person's death. Inter vivos is Latin for "among the living." A livin g trust is a commonly used type of inter vivos trust specifically designed to avoid probate. This type of trust allows a person, while still living, to benefit anotheL For example, parents might set up a trust that provides annual stipends to the ir children. Such inter vivos trusts can be either revocable or irrevocable. With a revocable trust the donor can change the beneficiaries and the terms, and even terminate the trust completely at any time and take back full ownership and control of the property. On the other hand, with an irrevocable trust the ter ms cannot be changed, and the donor cannot regain ownership or control of the property. A testamentary trust is created by a will and does not become effecti ve until after the testator's death.

3. living Wills and Medical Directives A "living will" is not a will in the sense we have been using the term. It does not express a person's wishes as to how property should be distributed at deat h. Nonetheless, a living will is an essential part of the estate planning process. It is a type of advanced medical directive that expresses a person's wishes as to the types of medical treatment he or she would want should there comes a time when he or she can no longer express those desires. It comes into play, for example, if the person is in a coma or enters an advanced stage of dementia. Its purpose is to help family, friends, and medical personnel make treatment decisions consistent with the signer's wishes.

Another document that is often part of the estate planning process and that works in conjunction with a living will is a durable power of attorney for healt h care. A durable power of attorney for health care designates a specific named individual to make legally binding health care decisions for someone if that per­ son becomes unable to speak for him- or herself.

Finally, there are two other medical directives that, while not created dur­ ing the original estate planning process, come into play near the end of life . The y are a DNR and a POLST. DNR is an abbreviation for do-not-resuscitate, and typically, it is prominently posted in residents' rooms in senior care facilities to inform emergency responders that the individuals do not wish to be resuscitate d if they stop breathing or their heart stops beating. A POLST (Physicians Orders for Life Sustaining Treatment) is a form specifically designed for persons who are in an advanced stage of a fatal illness or who have a diminished capacity to make their own health care decisions. Health care professionals and institutiona l providers are legally required to either give or withhold the treatments specified on the form. DISCUSSION QUESTION 8. Under what circumstances do you think people should be able to withdraw life-support equipment from someone who is in an irreversible coma? C. Estate Planning 363 • -ould doctors be allowed to "help" a patient die by giving the patient a lethal ~ se of morphine or some other drug when the patient has an incurable disease, -in great pain, and wishes to end the misery? What should be done if that :: rso n is in a coma and did not have a formal living will but did tell a close :-"la tive that he or she did not wish to be kept alive in such a situation? . Probate obate is the process of the court overseeing the distribution of property left by :omeone with a will or by someone who dies without a will. Jointly owned prop­ ~ does not have to go through probate, as it automatically passes to the joint w ner. Also, unless the estate is named as the beneficiary, life insurance proceeds =o directly to the named beneficiary.

Formal probate proceedings 23 typically start with the filing of a petition t he local courts. This petition is usually accompanied by a certified copy of 3le death certificate and a will, where one exists. After payment of required :ee s, letters of testamentary are issued to give the executor, or a court-appointed a dministrator (or administratrix) if no executor is named in the will, the power : o take control of the deceased's assets, pay the bills, and distribute the proceeds of the estate. Various inventories and other reports have to be filed with the -o urt at several stages of this process. The probate process provides an opportu­ nity for unsecured creditors of the decedent to submit claims for payment from h e estate.

Where there is a will, the executor is responsible for paying any outstand­ ing debts and distributing the remaining property according to the terms of the w ill. Common problems include difficulty in identifying existing bank accounts, in surance policies, and the current location of people named in the will. Less o mmon but far more challenging are situations where there are multiple wills o r challenges to what appears to be the most recent will. a. Challenges to a Will Will contests often revolve around arguments that the testator either was n ot competent or was unduly influenced. Should there be a will contest, the wit­ n esses will be asked to testify as to whether the testator knew the extent of the testator's property and knew who the natural beneficiaries were. In addition, t hey will be asked to testify regarding whether the testator signed voluntarily, understood what was signed, knew it was a will, and asked the witnesses to sign.

When called upon to judge the validity of a will, the courts focus on three factors: whether the testator was an adult, usually 18 or older; his or her tes­ ta mentary capacity; and whether the testator voluntarily executed the will. As to the second requirement of testamentary capacity, all that is required is that 23Many states have created an alternative track that allows people to settle simple estates (where there is a will and which do not involve a lot of money) without the extensive reporting requirements and costs th at are associated with traditional probate proceedings. Probate The process of court supervision over the distribution of a deceased person's property.

Administrator/ Administratrix A person appointed by the court to manage the assets and liabilities of the decedent.

Testamentary capacity The mental capacity, also known as sound mind, whereby the testator understands the nature of his or her property and the identity of those most closely related to him or her. • 364 Chapter 9: Property and Estate Law the testator know what he or she owns and what he or she wants to do with ;_ as well as knowing the "natural objects of the testator's bounty" -that is, testator's spouse and other close relatives. The third requirement is intende d r invalidate a will that the testator signed due to fraud or undue influence.

The following case provides the classic case of an older, wealthy man wi~~ adult children who marries his young female caregiver. The children challe nge the validity of his newest will, arguing the young wife unduly influenced the i:­ father, causing him to change the terms of his will in her favor.

Mary Haviland appeals a trial court's deci­ sion invalidating her deceased husband's will as the product of her undue influence . ... [W]e find no error and affirm.

James Haviland was born on July 18, 1911. He enjoyed a long and distingu ished medical career .... Haviland and his first wife, Marion, had four children together .... In 1996, while recuperating at Providence Hosp ital from a leg injury, then 85-year-old Haviland met then 35-year-old Mary, a hospital nurse assistant . .. .

Haviland and Ma ry married in August 1997. Over the course of their marriage, millions of dollars of Haviland's separate assets were transferred .. . into the couple's joint check­ ing account , Mary's separate checking account, or Mary's separate line of credit. In turn, bank statements document the withdrawal of millions of dollars from the joint checking account .. .. Haviland also conveyed two parcels of his sepa­ rate real property to Mary as her separate prop­ erty. In addition, Haviland's retirement accounts were cashed in, and substantial sums of money were gifted to Mary's children from a previ­ ous marriage and to other designees. Haviland did not make comparable gifts to his own children.

Meanwhile, Haviland's physical health substantially deteriorated. In 2002, Haviland changed primary care physicians and indicated on the new patient registration form that he was having memory problems .... In 2005, Mary quit her job to care full time for Haviland .. .. Before his marriage to Mary, Haviland .. .

made generous gifts to education, the arts, and charitable organizations. During his marriage to Mary, he made four revisions to his estate plan.

Each change resulted in a greater portion of his estate going to Mary and less going to his chil­ dren and designated charities.

The last major revision occurred in 2006, when Mary phoned Alan Kane, an attorney at K&L Gates LLP, to advise him that Haviland wished to change his will. After the phone call, Mary typed a letter to Kane and enclosed a copy of Haviland's 2002 will with requested revisions. On the day of the will signing, Mary brought Haviland to Kane's office. Kane testified that he met with Haviland for five minutes before the will signing but that he did not discuss with him his family or the objects of his bounty, or ask Haviland questions about the nature and extent of his estate. By 2007, Haviland's mental condition dete­ riorated to the point that he could not recognize Mary 75 percent of the time. On November 6, Haviland visited the emergency room for dehy­ dration. The emergency room consultation report ' describes Haviland as suffering from advanced dementia.

After the court admitted Haviland's 2006 will to probate, three of Haviland's children commenced this will contest. They alleged that Haviland lacked testamentary capacity at the time he signed the 2006 will and that the will was a product of undue influence. A lengthy bench trial followed.

At trial, Dr. Elaine Peskind, a geriatric psy­ chiatrist, testified about her review of Haviland's records and her "retrospective" analysis. In her professional opinion, Haviland began exhibiting symptoms of Alzheimer's disease as early as 2000 and had progressed to the early stages of the dis­ ease by 2002. The trial court . . . determined that clear, cogent, and convincing evidence established that the 2006 will was the product of undue influence by Mary.

The court set that will aside, admitted the 2002 will into probate, removed Mary as per­ sonal representative, and appointed a new admin­ istrator of Haviland's estate. "The law presumes the validity of a ratio ­ nal will." However, a will executed by a person who otherwise possesses testamentary capac­ ity may be set aside if the beneficiary exercised undue influence over the testator. To invalidate a will on this basis, the court must find that the beneficiary exerted sufficient influence at the time of the testamentary act to have "controlled the volition of the testator, interfered with his free will, and prevented an exercise of his judgment and choice." The party challenging the will must pYUV~ ulrub~ 1in\btln:-e Jy· w~.:fl; ~-~n~ am.f ~o-'Ulr­ vincing evidence. [A] combination of suspicious facts and circumstances may give rise to a rebuttable C. Estate Planning 365 • presumption of undue influence. The "most important" suspicion-raising facts include (1) that the beneficiary occupied a fiduciary or con ­ fidential relation to the testator; (2) that the ben­ eficiary actively participated in the preparation or procurement of the will; and (3) that the beneficiary received an unusually or unnaturally large part of the estate . Added to these may be other consider­ ations, such as the age or condition of health and mental vigor of the testator, the nature or degree of relationship between the testator and the beneficiary, the opportunity for exerting an undue influence, and the naturalness or unnaturalness of the will. Once the evidence raises this presumption, the burden shifts to the will proponent to rebut it with "evidence sufficient at least to balance the scales and restore the equilibrium of evidence touching the validity of the will." In the absence of rebuttal evidence, the evidence raising the pre­ sumption may be sufficient to invalidate the will.

Here, the trial court invalidated the will as tbe product of Mary's undue influence. It found that Mary was Haviland's fiduciary, participated in the creation of the 2006 will, and received an unnaturally large share of Haviland's estate in comparison to his earlier estate plans. It also found that Haviland was extremely vulnerable to undue influence due to physical disabilities, some cognitive impairment, and Mary's position as his primary caregiver. Finally, it found that Mary depleted his estate through a systematic, persis­ tent, and largely unexplained pattern of transfer­ ring assets from Haviland's estate for her benefit and that of her children and other designees. i'!h:!re- 1i> 1.-1brr; 1.-ugenl, amr CUIIVlUUi:rg t:Vl~ dence in the record that Mary "controlled the volition of the testator, interfered with his free will, and prevented an exercise of his judgment and choice." • 366 Chapter 9: Property and Estate Law Kindred (also known as consanguinity) Persons related to the decedent by blood. Affinity Persons related to the decedent by marriage. Lineal heir (also known as descendants or issue) Someone who is a grandparent, parent, child, grandchild, or great-grandchild of the decedent. Collateral heir One who has the same ancestors, but does not descend from the decedent. Per stirpes (also known as right of representation) A method of dividing an intestate estate whereby a person takes in place of the dead ancestor. CASE DISCUSSION QUESTIONS 1. According to the court, what factors have to be present to ra1se a rebuttable presumption of undue influence?

2. Why do you think the court requires the party challenging a will to prove undue influence by clear, cogent, and convincing evidence? 3. Do you agree with the court's finding that there was undue influence ffi this case? Why or why not? If a will is ruled to be invalid, as it was in the Havilandcase, unless a prior valid will exists, the estate has to be distributed according to the rules of intes tate successwn. b. Intestate Succession In situations in which no valid will exists, the deceased is said to have die ci intestate, and the probate property will be distributed according to the state intestacy statutes. Most intestate laws give a set proportion of the estate to the surviving spouse, with the rest going to the children. If there are no children, the estate assets usually go first to the spouse, second to the decedent's parents, and then to brothers and sisters .

Heir is the generic term for someone entitled to inherit property left by the decedent. Kindred are those persons related to the decedent by blood. A relationship through blood is also known as consanguinity . Persons related by marriage are said to be related by affinity. A lineal heir is someo ne who is a grandparent, parent, child, grandchild, or great-grandchild of the decedent.

Descendants or issue are those lineal heirs who descend from, or issue from the decedent, such as children and grandchildren . A collateral heir is one who has the same ancestors but does not descend from the decedent . A brother or sister of the decedent would be a collateral heir. Figure 9-3 illustrates these relationships. If an heir is not alive at the time the assets are distributed, the dead heir 's share passes to that person's heirs per stirpes. This is also known as the right of representation. For example, if a parent is dead, the children inherit the dead parent's share. Referring to Figure 9-3, assume the decedent's wife has prede­ ceased him. If all three sons are still living, under most intestate statutes each son will receive one-third of the estate. If Son 1 has also predeceased his father, then his child, Grandchild A, will receive Son 1's one-third share. However, if Son 2 has predeceased his father, his children, Grandchild B and Grandchild C, wi ll only receive one-sixth each: their father's one-third, divided in half.

Adopted children have the same rights to inheritance as naturally born children. If there are no children, parents, siblings, aunts or uncles, nephews or nieces, or cousins, the property reverts, or escheats, to the state . C. Estate Planning 367 • Grandmother and Grandfather 61ood · eal Heirs Mother and Father 61ood I Coll ateral Hei r Sib lingBiood Decedent !::=::::.:= =- -= I' - tin eal Heirs/1 De scendants ssue or 1---- Chi ld 1 B lood -= I Grandchild N1ood -=-==-=-=--=-= Figure 9-3 A Decedent's Intestate Hei rs Chi ld 2Biood - I I --· Grandchild B81ood ,_ The Uniform Probate Code has been adopted by 18 states. You can access the text of the code as it has been adopted by each of those states by going to www.

law.cornell.edu!uniform!probate .html . r- -- :- Wife Affini ty '=== I Child 3 Blood = I Grandchi ld CBiood • 368 Chapter 9: Property and Estate Law II Ill CHAPTER SUMMARY Property law deals with ownership rights in real and personal property. Re al property is land and anything permanently attached to land. Personal prope rty is everything else. Property can be owned either individually or with others. Joint ownership that vests ownership rights upon death in the other co-owner(s) is known as joint tenancy with the right of survivorship. With a tenancy in com­ mon the co -owner can pass his or her share to heirs at death. Real property can be transferred through sale, at the death of the owner, as a gift, through seizure by a creditor, by eminent domain, or through adverse possession.

There are important legal constraints that limit how property owners can use their property. These include zoning laws, covenants, easements, and home­ owner association restrictions. Landowners can also rent their property for spec­ ified amounts of time. Residential landlords are obligated to provide habitable living areas, and tenants can sue for constructive eviction if landlords fail to do so. State and local open housing laws place some restrictions on the criteri a landlords can use in determining to whom they will rent.

Estate planning involves the analysis of a person's future financial needs and of ways to ensure that the person's desires regarding distribution of asset s will be accomplished after death. Wills and trusts are two of the most commo n estate -planning tools. If a person dies without a will, that person is said to ha ve died intestate, and the property passes to the decedent's heirs according to tha t state's statutory intestacy scheme. CRITICAL THINKING EXERCISES 1. Assume you have invented a new type of baby stroller that can be converted into a portable crib. You also have a home business, making and sellin g your "secret recipe" chocolate chip cookies. For each of the following, determine which type of intellectual property protection is appropriate: trademark, copyright, patent, trade secret, or nothing.

a . The step-by-step instructions for how to manufacture your stroller. b. The instruction booklet you give to purchasers of your strollers. c. The distinctive mark you emboss on your strollers. d. The lyrics to a song you create for a TV commercial advertising your stroller. e. The recipe for your cookies . f. Your idea for a tire that would never go flat.

2. Sam and Mary are planning to marry and build a home. With her own money Mary plans on purchasing a piece of property. She wants Sam's name to appear on the deed as a joint tenant. Do you think this is advisable?

3. For each of the following questions, assume the decedent died withou t a will and all the decedent's debts have been paid, as have all of his last sicknes s, C. Estate Planning eral, and settlement of estate expenses. Base your answers on the following rut es: Ch. 190, § 1 Spouse's share of property not disposed of by will _ surviving husband or wife shall be entitled to the following share in the spouse's real an d personal property not disposed of by will: 1) If the deceased leaves kindred and no issue, and the whole estate does not exceed .-wo hundred thousand dollars in value, the surviving husband or wife shall take the whole thereof; otherwise such survivor shall take two hundred thousand dollars and on e-half of the remaining personal and one-half of the remaining real property.

2) If the deceased leaves issue, the survivor shall take one-half of the personal and one­ hal f of the real property. 3) If the deceased leaves no issue and no kindred, the survivor shall take the whole.

Ch .

190, § 2 Distribution of personal property T he personal property of the deceased shall be distributed in the proportions hereinaf­ rer prescribed for the descent of real property.

Ch.

190, § 3 Descent of real property W hen a person dies seized of real property, it shall descend, subject to the rights of the h usband or wife of the deceased, as follows: (1) In equal shares to his children and to the issue of any deceased child by right of rep­ re sentation; and if there is no surviving child of the intestate then to all his other lineal d escendants . If all such descendants are in the same degree of kindred to the intestate, they shall share the estate equally; otherwise, they shall take according to the right of r epresentation.

( 2) If he leaves no issue, in equal shares to his father and mother.

( 3) If he leaves no issue and no mother, to his father.

( 4) If he leaves no issue and no father, to his mother.

( 5) If he leaves no issue and no father or mother, to his brothers and sisters and to the issue of any deceased brother or sister by right of representation; and if there is no s urviving brother or sister of the intestate, to all the issue of his deceased brothers and s isters. If all such issue are in the same degree of kindred to the intestate, they shall share rhe estate equally; otherwise, according to the right of representation.

( 6) If an intestate leaves no kindred and no widow or husband, his estate shall escheat to the commonwealth.

a. Juan died, leaving a wife, Carmen, whom he adored, and a brother, T ames, whom he hated and had not seen for the past 30 years. For each of the :ollowing, determine how much of Juan's estate Carmen will inherit and how :nuch James will inherit. (1) Juan leaves $180,000. Wife Carmen:

Brother James: (2) Juan leaves $500,000. Wife Carmen:

Brother James: 369 • • 370 Chapter 9: Property and Estate law Ill (3) Juan leaves $500,000. Assume James had predeceased Juan but h as a living child, James, Jr., whom Juan has never met.

Wife Carmen:

Nephew James, Jr.: b. William died with an estate of $500,000. He left a wife, June, but no issue and no kindred. How much will June inherit? c. Mary died with an estate of $500,000. She left a husband, John, and two living children, Rachel and Albert. How will the estate be divided among her husband and children?

Husband John:

Daughter Rachel: Son Albert:

d. Roberto died with an estate of $500,000. He left a wife, Maria, and a living child, Bill, who has a child, Jill. His other child, Sam, predeceased him. Sam has two living children, Tracy and Tim. How will the estate be divided among his wife, Maria; his child, Bill; his grandchild, Jill; and his grandchildren , Tracy and Tim?

Wife Maria: Son Bill: Grandchild Jill:

Grandchild Tracy:

Grandchild Tim:

e. Samantha died with an estate of $500,000. She left no husband and no children . They had all predeceased her. However, she did leave five grandchildren.

Two of the grandchildren, Amy and Albert, are the children of her deceased son, Robert. The other three grandchildren, Bonnie, Brad, and Bennett, are the children of her deceased daughter, Emily. How will the estate be divided among the five grandchildren?

Grandchild Amy:

Grandchild Albert:

Grandchild Bonnie:

Grandchild Brad:

Grandchild Bennett: WEB EXERCISES 1. The U.S. Patent and Trademark Office maintains a website through which you can learn more about trademarks , copyrights, and patents. Start by going to www.uspto.gov.

a. First, in the middle of the home page, click on "Trademark Basics." Read the basic information provided and follow up on any links that are of interest to C. Estate Planning you. Then, return to the home page and under Trademarks click on the link for "Trademark Search." This is the on-line Trademark Electronic Search System. Choose the "Basic Word Mark (New User)" form and then search for any well-known trademark, such as "Nike" or "Redskins." You may have to click on several of the search results before seeing the symbol as well as the words that have been trademarked. What was the trademark for which you searched? What did you find? b. Now contrast the treatment of trademarks with that of patents. Return to the home page at www.uspto.gov, and click on "Patent Search." Use the "Quick Search" link to locate information on conduit benders. Scan through the list and then click on the link for "Reciprocal conduit bender ." Read the sections labeled "Background of the Invention" and "Summary of the Invention." Based on the information contained in these two sections, briefly explain what a conduit bender is and how the inventor's product dif­ fers from those that had been patented before his.

2. Use a free on-line resource, such as FindLaw, http://lp.findlaw.com, or your state's government website, to research the intestacy laws in your state.

How do they differ from the statute presented in Critical Thinking Exercise 3 on page 369? Do you think the provisions in your state's statute do a better or worse job at "guessing" what the deceased what have wanted? [Note: For those of you living in Massachusetts, you will find that the intestacy statute had been substantially changed from what is included in the text.] Pages 341 through 355 1. Define the two basic types of property.

2. What types of laws impact a landlord's selection of tenants? What types of criteria are legal and what types are not?

3. Describe the different types of leasing agreements and how they differ .

4. What is a constructive eviction, and how does it relate to the implied warranty of habitability?

5. What is a listing agreement?

6. Why might it be important to know whether two friends shared ownership in a house as joint tenants or as tenants in common?

7. What are land contracts? Can you envision any problems with their use? For example, do you think the terms of a standard land contract generally favor the buyer or the seller?

8. What is the purpose of zoning laws? How do they affect homeowners and developers?

9. When can a zoning regulation be seen as a governmental "taking" such that the government must give the landowner just compensation? 10. What limits are there on the government's right to take property through emi­ nent domain?

11. Describe two ways in which an owner's right to use his or her property may be limited by private arrangement.

12. How does someone acquire property through adverse possession? Ill 371 • • 372 Chapter 9: Property and Estate law Pages 355 through 360 13. Why is it important to know if property is classified as personal or real?

14. What are the requirements for a valid gift?

15. What is the distinction between lost and mislaid property? Why does it matte r? 16. What is a bailment?

17. What is intellectual property, and how is it protected?

Pages 360 through 367 18. What does it mean to say someone died intestate?

19 . Why is it not a good idea to die without a will? 20. Define each of the following: a. formal will b. holographic will c. nuncupative will 21. What is the purpose of a simultaneous death clause? Give an example of whe n such a clause would be relevant and why it would be important.

22. What is the purpose of a trust?

23. What types of property do not have to go through the probate process?

24. What do the terms sound mind and undue influence mean in the context of challenging a will?