Monday, March 30, 2020

Langbein on the the Nonprobate Revoutlion

Props to a master.  John H. Langbein, Yale Law School, has posted Because Property Became Contract: Understanding the American Nonprobate Revolution:
In modern American practice the state-operated court system for transferring wealth on death, called probate, is being displaced. The wealth-transfer process has been increasingly privatized, conducted now mostly in the back offices of financial institutions rather than in the probate courts. Driving this privatization of wealth transfer has been a profound change in the nature of personal wealth, away from land and tangibles into contract claims against financial intermediaries such as banks, securities issuers, mutual funds, brokerage houses, insurers, and pension funds. Financially intermediated wealth has the distinctive attribute that it arises from the administrative processes of these institutions, work that entails recurrent transactions and communications. Once a staff is in operation to perform such tasks, extending its role to include the transfer of account balances on death has been easy. The account owner shunts the asset away from probate by completing a beneficiary designation form directing the institution to distribute the account asset in designated shares to designated persons. The emergence of this free-market transfer system has disrupted the application of a variety of the default features of the probate process, most ominously, the creditor protection function. 
--Dan Ernst