WILL, TRUSTS AND ESTATES
A = Mom/Dad
B = Child
C D à Children of B
Who is B’s ancestor? A (Ancestors are up)
Who are the descendents? B = C&D A = B,C,&D
Trust: transfer of assets; gratuitous tranfers §102 tax code = gifts
Testamentary Trusts = created in will
Estate = all your assets at time of death. Death creates an estate.
Escheat = means property goes to the government.
CONSANGUITY: If individuals are related by blood, they are related by consanguity
AFFINITY: relations by marriage.
PROBATE & NON-PROBATE PROPERTY
– Probate property: Property that passes through probate under the decedent’s will or by intestacy.
– Non-probate property: Property that passes outside of probate through a non-probate mode of transfer.
THE MECHANICS OF SUCCESSION
Prob. Prop. Non-probate property
-Will -Inter vivos gift
-Intestacy -Life insurance, POD’s, JTWROS
A à W (A married to W)l
A’s will leaves everything to X
Assets = 1M life insurance policy (non-probatable); JTWROS of 500K (non-probatable asset)
X gets nothing b/c there are no assets of the estate.
FUNCTIONS OF PROBATE
– Three core conditions of probate:
o Provide evidence of title transfer to new owners;
o Protect creditors by providing a procedure for payment of debts; and
o Distribute the decedent’s property to those intended after the decedent’s creditors are paid.
o Inventory and collect assets
o Manage assets during administration
o Receive & pay claims of creditors
o Clear title to any assets
§ Real estate is more important than personal property
o Distribute remaining assets to proper party
FORMAL V. INFORMAL PROBATE
– Formal probate (Dependent administration)
o Court supervises the actions of the personal representative in administering the estate through a potentially costly & time consuming process.
– Informal probate (Independent administration)
o Unsupervised administration
o The personal representative may administer the estate w/o court supervision unless an interested party asks for court review.
WEALTH TRANSFER TAX OVERVIEW – CHP. 1
Donor à Donee
$14K per done; non-taxable gift = gift tax free
For 2014, $5,340,000.00: APPLICABLE EXEMPTION AMOUNT (lifetime/death)
– Gifts in excess of the 14K reduce the available amount of the 5.34M applicable exemption.
– This reduction applies to subsequent gifts & the amount available to the decedent upon death.
– The 5.34M amount isn’t doubled for transfers occurring during life & at death.
o Example: Class, I hope the following example adds to your understanding of this topic. Individuals A and B are wealthy but have never made gifts until now. A decides to give $14k cash to 10 family members. Because of the $14k per donee annual exclusion, A's aggregate transfer of $140k to the 10 donees would not use up any of his $5.43M transfer tax exemption amount. In contrast, B gives $140k to his sibling. The first $14k of this transfer qualifies as part of the $14k per donee annual exclusion. However, there is another $126k to address. The $126k excess over the $14k is covered by the available $5.
perly be amended to provide 1/3 for spouse?
o The challenge by the children as an impermissible takings would fail since Hodel does not protect the right to receive. It protects the right to transmit.
– Executor (testate)
– Administrator (intestate)
– Independent executor (testate – informal probate)
§304.001 – PERSONAL REP.
– Court shall grant letters testamentary or of admin to persons qualified to act, in the following order:
o `Person named as executor in will
o D’s surviving spouse
o Principal devisee of the D
o Any devisee of the D
o Next of kin
o Creditor of the D
§401.001 – EXPRESSION OF TESTATOR’S INTENT
– Any person capable of making a will may provide that no other action shall be had in the probate court in relation to the settlement of the person’s estate.
– Any person capable of making a will may provide in their will that no independent admin is allowed. In this case, if estate is administered, it will be through the direction of the probate court.
§305.101 – BOND REQUIREMENTS
– Bond is required unless stated otherwise in will.
– Bond can be waived per 305.101
– Waiving bond does not affect the type of administration. No bond does not automatically equal an independent administration.
– DEFAULT RULE: Dependent administration w/bond