Trusts and Estates Outline- B. Fogel- Fall 2011
– Introduction, General Themes
o RSMO 474.010 (general rules of descent), 474.015 (failure to survive decedent by 120 hours), 474.030 (partial intestacy), 474.050 (posthumous children to inherit), 472.005(16), 472.010 (definitions)
o UPC 2-102 (share of spouse-intestate succession), 2-103 (share of heirs other than surviving spouse- intestate succession), 2-104 (requirement that heir survive decedent by 120 hours), 2-105 (no taker), 2-108 (after-born heirs)
o Arguments against inheritance
§ It perpetuates wide disparities in the distribution of wealth
§ Concentrates inherited economic power in the hands of a few
§ Denies equality of opportunity to the poor
§ It tends to reward not merit or productivity but the chance of fortunate birth
o Intestacy- dying WITHOUT a will (this is how most people die)
o Testate/Testacy- a person dying WITH a will
o Testamentary Freedom-
§ The idea of freely distributing your property to whoever you want
§ It is perfectly ok to discriminate in the will – based on gender, color of skin, religion or anything else
§ Reasons for testamentary freedom: you own it, you get to do whatever you want with the property (within limits)
o Probate Terminology and History, Will Contest Probate and Procedure (40)
o RSMO 474.320 (will form, execution, attestation), 474.337 (written will self-proved, how), 473.043(1) (will of decedent, where delivered- wills found in safe deposit boxes, how delivered-refusal to deliver, how handled), 473.047 (certificate of probate or rejection), 473.050(1) (wills, presented for probate, time limited- presented, defined), 473.065 (probate of will-when, procedure for contest), 473.073 (proof required for probate and grant of administration), 473.081 (probate of portion of a will), 473.083 (will binding, when- contest of will, when, procedure), 473.084 (compromise of controversy as to probate, when binding), 473.087 (will not effective until probated)
o UPC 2-502 (execution; witnessed wills; holographic wills)
o Probate Procedure:
§ 473.087- will not effective until probated
§ 473.043- delivery of wills
§ 473.020- if no application filed, others may request administration or probate- petition form
§ 473.073- proof required for probate and grant of administration
§ 473.050- wills, presented for probate, time limited (basically 1 year)
o Probate perform 3 functions
§ It provides evidence of transfer of title to the new owners by a probated will or decree of intestate succession
§ It protects creditors by requiring payments of debts
§ It distributes the decedent’s property to those intended after the creditors are paid
o the will should be probated in the jurisdiction where the decedent was domiciled at death (but real property probated in jurisdiction where its located)
o Non-Probate- property that passes outside of probate under an instrument other than a will.
o Probate- Property that passes through probate under the decedent’s will or by intestacy. The procedure by which a transaction alleged to be a will is established judicially as a valid testamentary disposition, and also applies to the act of approving the will after probate has taken place. 3 main functions of probate:
§ Main purpose is to provide evidence of transfer of title to the decedent’s heirs or devisees.
§ Protects creditors by providing a procedure for payments of debts
§ Distributes the decedent’s property to those intended after the decedent’s creditors are paid
o Distribution of probate assets
§ Under will or intestate successors
§ May require a court proceeding involving probate of a will
§ Or a finding of intestacy followed by appointment of a personal representative to settle the probate estate
o General steps in probate process:
§ Opening the state by offering will for probate
· Primary or domiciliary jurisdiction for probate found in jurisdiction where decedent was domiciled at time of death (exception: if real estate not located in same place as where decedent was domiciled when he died). Ancillary administration required if property located in another jurisdiction. Majority of states require prior notice to interested parties before appointment of person representative or probate of will. Remember, the law if the state where decedent was domiciled at death governs disposition of personal property, and the laws of the state where decedent’s real property is located governs the disposition of real property.
§ Collecting the decedent’s assets
§ Paying any family allowance and setting aside homestead and exempt personal property
§ Paying creditor’s claims and tax bills, and
§ Distributing the assets of the estate upon the probate court entering a decree of distribution
o Estate: two categories
§ Stuff decedent owned at time of death (with no instruction where it goes after death)
§ Backup- Reversion
o If there is property and decedent said where it is supposed to go (say to grandmother). What if grandmother dies before the death of the decedent and then the property will go back into the estate.
o In property law – it is
the trustee to the beneficiaries named in the will and do no go through probate
§ Designating a POD (payable-on-death) beneficiary in a life insurance contract or other contract
· Life insurance proceeds of a policy on the decedent’s life are paid by the insurance company to the beneficiary named in the insurance contract
· POD contracts- A decedent may have a contract with a bank, an employee, or some other person or corporation to distribute the property held under the contract at the decedent’s death to a named beneficiary
o Contesting wills- Grounds for contest: a will contest poses the issue of whether the document offered for probate is a valid will. While most will contests involve issues of testamentary capacity or undue influence, a will contest may also be based on defective execution, revocation of the will by the testator, lack of testamentary intent, fraud, and mistake.
o Pension Plans
§ Pension Plans
· Employer gets a deduction by putting money in the pension plan now. But you do not have to count as income. But when you take money out of the pension plan – will be counted as income and taxed accordingly.
· Income tax liability with the pension assets does not go away just because you die. If you leave your 401(k) to your kid, when your kid takes money out, they pay tax on it
· Under federal law, wife has an absolute right to be beneficiary
· You want to delay taking the money out of the pension plan. To get that deferral, you need a “designated beneficiary.” Because of income tax issues, pension plans almost always have a designated beneficiary (which means its not in the estate).
· Reason for designating beneficiary: designated beneficiary can take it out over time- much better to spread it because you pay less tax. If it is all in the estate, it is bad because the estate needs to take all the money immediately and you have to pay all the income taxes at once, which means you lose the advantage of timing and deferral. (Without designated beneficiary- the whole amount is paid to the estate, and then taxes are paid on the whole thing at once)
