Real Property, Trust and Estate Law Journal (54:02)

Articles in this issue

Access Anxiety

Mary Jo Wiggins,ABA Section of Real Property, Trust and Estate Law

The advent of the “access economy” and other social and economic forces have led to strong market interest in diverse residential living structures. In the residential living arrangement known as “coliving,” companies, operating as either property owners or managers, offer hybrid, private, or communal living space in multi-unit dwellings to private individuals in exchange for payment at below market consideration. Typically, the individuals contracting with coliving companies acquire a very small, private bedroom, but share with others a living room and other communal spaces. One aspect of coliving that makes it qualitatively different from previous iterations of urban group living is that coliving companies actively and openly market that they will curate a uniquely communal living environment. Coliving companies self-consciously aim to facilitate community norms and group cohesion, all with the ultimate goal of creating what the companies themselves call a “community experience.” Coliving is both similar to and different from other transactions that are commonly associated with the seemingly ubiquitous “sharing economy.” Coliving is an important emerging trend in residential living design and, as it continues to grow in prominence, will inevitably challenge well-established legal concepts and doctrines. This Article explores the evolving intersection between coliving and select aspects of property and contract law. Although other commentators have written about the legal and policy challenges posed by similar economic innovations, this Article is novel to the extent that it offers a detailed and refined account of prevailing coliving models, situates the models in a precise legal and conceptual framework, and analyzes key policy implications.

Post-Marital Income Shifting and the End of Alimony Trusts

Grayson M.P. McCouch,ABA Section of Real Property, Trust and Estate Law

In 2017 Congress repealed the provisions that allowed divorced or legally separated couples to shift the income tax burden of alimony payments from the payor spouse to the payee spouse. The stated purposes for the change were to simplify the tax code and to eliminate an unwarranted tax preference favoring divorced couples over married couples. On closer scrutiny, it appears that Congress may have been less interested in simplification or equity than in scoring revenue gains to offset the cost of unrelated tax cuts for high-income individuals, business owners, and corporations. In addition to reallocating the tax burden of direct alimony payments, the 2017 changes increase the likelihood that the grantor of a trust will remain taxable after divorce or legal separation on trust income distributed to a former spouse. In the absence of a statutory exception, the grantor trust rules will apply to the extent that trust income might be used to satisfy the grantor’s continuing alimony obligation, no matter how contingent. Furthermore, even if the grantor has no continuing alimony obligation, any trust income distributable to the former spouse will be attributed to the grantor if the trust was created during marriage. Unfortunately, given the budget considerations that facilitated the 2017 changes, it will be politically difficult to alleviate their undesirable consequences.

Conflict of Laws Issues in Multi-State Mortgage Financings: Antideficiency and One Action Rules and More

Brian D. Hulse,ABA Section of Real Property, Trust and Estate Law

This Article addresses the complex and inconsistent choice of law issues in mortgage financings where multiple states’ laws govern the transaction. These issues commonly occur in financings where one state’s law governs the loan agreement, promissory note, and guaranties, and the loan is secured by real property in one or more other states whose law mandatorily governs certain aspects of the transaction, especially those that directly affect foreclosure procedure, lien priority and title to real property. The law in this area is often surprising, even to experienced finance lawyers. For example, the general rule is that it is not the law of the property state that controls the right to a deficiency judgment; rather, it is the law of the state whose law governs the debt obligation. In these multi-state financings, the parties should carefully consider how the governing law provisions are structured and how the collateral can best be realized in a default situation.

The Decline of Revocation by Physical Act

Barry Cushman,ABA Section of Real Property, Trust and Estate Law

The power to revoke one’s will by physical act was enshrined in Anglo-American law in 1677 by the Statute of Frauds. It remains the law in Great Britain, in such developed Commonwealth countries as Canada, Australia, and New Zealand, and in each state of the United States of America. Yet the revocation of wills by physical act has become badly out of phase with the law governing nonprobate transfers, which as a general matter requires that an instrument of transfer be revoked only by a writing signed by the transferor. This Article surveys the place of revocation by physical act in the law governing will substitutes, such as payable-on-death designations on bank accounts, transfer-on-death designations on brokerage accounts, life insurance and annuities, beneficiary deeds, and revocable trusts. Revocation by physical act is available with respect to none of the first four types of nonprobate transfer; meanwhile, revocation of revocable trusts by physical act is now effectively defunct in nearly half of the states. Because the donative transfer of most wealth in the United States takes place through will substitutes rather than through the probate system, the role of revocation by physical act in the law of succession is one of diminishing significance. Revocation by physical act is a legal institution in decline, and increasingly an anomaly within the law of gratuitous transfers. The outstanding question is whether, and if so, to what extent and in what form, that anomaly is worthy of preservation.

Real Property, Trust and Estate Law Journal (54:02)