Estates and Trusts
McDowell
Fall 2017
Introduction:
Intestacy – transfer of property w/o a will
State has a universal will that applies to people that don’t have a will when they die—aka the intestacy statute. The intestacy statute fills holes in will and gives a best guess at what the person would have written in their will. (“what would average person want”)
Intestacy statute provides estate plan for people that who did not write a will; comes into play when will fails; applies when will is incomplete.
Rules of intestacy determine who could challenge a will—people that take via intestacy have interest in challenging will b/c if will fails they take.
Probate Property: passes through probate court under the decedents will or by intestacy
Probate Court (AKA Surrogates Ct. or Orphans Ct.)
Probate is the state supervised system of transfer of property at death
Thought to guarantee creditors security and make sure all was done fairly and that the will was correctly administered
Core functions:
Provides evidence of transfer of title to new owners, making property marketable again; (bank account, real estate, car)
Protects creditors by providing a procedure for payment of decedents debts; and
Distributes decedents property; adjudicates the validity of wills
However, with cars you can take death certificate to DMV and transfer title (don’t NEED probate)
With real property, after decedent dies the court must retitle property to new owner (if not, descendant cant sell property)
Appoints guardians for minors and incompetents
Even if an estate includes “probate property” it may not need to be probated if:
The decedent had only non-probate property and personal property (furniture, cash, jewelry)
AND/OR small bank accounts, wage, claims & cars, and STATUTE permits transfer of these by filing out forms OR
Estate is small enough to qualify for SUMMARY ADMINISTRATION ($5k to $100k, depending on the state). Parties file and affidavit with the court and get on with it. UPC 3-1201 to 3-1204
Non-Probate Property/ Will substitutes: property that passes outside of probate by way of a will substitute and is not subject to the jurisdiction of a probate court.
Joint tenancies – decedents interest vanishes at death
Life insurance – transferred to beneficiary immediately
Payable on Death provisions (POD) – bank transfers to beneficiary
Interest in a trust
Joint bank accounts
What still has to pass through probate?
All traditional forms of property not in trust and without POD provisions
Who can demand probate? Only people who would be beneficiaries of will
If an interested party contests the executor’s action, he or she can compel a probate proceeding
Interested party is defined as people named in will or who would take in intestacy
*IF everyone is on the same page, and no one contests the will – probate NOT NEEDED
Which of the following qualifies as probate property?
Joint tenancy with right of survivorship? No, since decedents interest vanishes at death
Bank acct. with POD designation? Pay on death is distributed to beneficiary
A copyright novel? Interest is assigned to another party
None of the above
Professional Responsibility: Lawyers liability to beneficiaries
Old/Minority rule – Lawyers duty runs only to testator
New/ Modern rule – Lawyer does have duty to intended beneficiaries (hefty liability)
Intestacy:
Intestate Share of Surviving Spouse:
If will does not specify how to distribute then the court will follow intestate statutes
If there are no surviving relations within the degree of kinship specified by the intestacy statute, the decedents property escheats to the state.
Generally speaking, the law of the state where a decedent was domiciled at death governs the disposition of the decedents personal property, and the law of the state where the decedents real property is located governs the disposition of the real property.
If the decedent leaves no surviving descendants or parents, then the surviving spouse gets 100%.
Decedent does leave descendants or parents
Older Statute: Spouse gets 50% (or a lump some plus a percentage of the rest)
Modern Statute (UPC):
Spouse gets 100% unless (if nuclear family – spouse gets
common disaster
*Can be explicitly overridden
Why? B/C if the spouse only survives for 6 days then they will have no point in the property so why have the wrong person get the money. It is more likely the decedent wanted it to go to the parents in that instance.
Rule of Law: Do not need to be husband and wife and also do not need to die within the same accident.
Intestate Shares of Children/ Descendants:
UPC 2-103 – SHARE OF HEIRS OTHER THAN SURVIVING SPOUSE:
In all states, after the spouse’s share (if any) is set aside, children and descendants of deceased children take the remainder of the decedents property to the exclusion of everyone else.
If there is issue (children, grandchildren, great-grandchildren) they share everything that is left when the spouse’s share has been satisfied.
If there is a spouse or issue, no remoter kin will inherit (stop here)
If decedent leaves none of the above but is survived by parent(s), all to parent(s). (stop here)
If decedent leaves none of the above, to siblings and their children by representation.
Distribution:
Strict/English per stirpes:
Process: Divide the estate equally among (1) surviving children of the deceased and (2) dead children who have left living issue. Each dead child’s share goes to his issue. Repeat all the way down.
Consequences: Although this system produces unequal shares across the grand children (possibly depending on how many grandchildren each deceased child has), it produces equal shares across the decedent’s line of descent. It assures vertical equality, comparing lines of descent, but at the expense of horizontal equality, that is, equal shares for each taker of equal degree of kinship to the donor.