WILLS & TRUST
Chapter 1
Distinction between Probate Assets and Non Probate Assets
Rules for probate and non-probate are different
· Non Probate Assets – Assets that determines the beneficiary of the asset upon death, e.g. Trust
· Beneficiary takes at decedent’s death w/o any further action by the courts
§ Pass to the beneficiary at death
§ Non probate assets include: life insurance (whole life policy and term policy), revocable trust, joint ownership property with right of survivorship (joint tenancy and tenancy by the entirety (have to be married)), and pension accounts
· Know the difference between whole life policy and term policy
o Whole life policy – life insurance that covers an insured for life, during which the insured pays fixed premiums, accumulates savings from an invested portion of the premiums, and receives a guaranteed benefit upon death
o Term life insurance policy – covers the insured for only a specified period.
· Decedent can designate non-probate assets “to my estate” and can become probate assets
· Probate Assets are everything else – property the decedent owns at death + property acquired by the decedent’s estate at or after the decedent’s death.
· Probate Process – Probate estate moves through the probate court where creditors are paid off, and the balance to the beneficiaries, heirs, legatees, etc.
§ E.g. $1million dollars (probate asset) at death goes to the probate estate
§ Such as cars, stocks, cash, furniture….
§ Probate Court → court that has jurisdiction over the personal property of the decedent wherever located, and real property of the decedent where the court is located
· Ancillary Proceeding – to get jurisdiction of real property in another state
§ Personal Representative (PR) – court appointed person that takes control of an estate, pays debts, and distributes assets
· Can be an administrator (by intestacy)
o Distribute property according to Law of descent (Intestacy Law)
§ This kicks in when there is no will → 732.102/3
· Executor – person named in will to be a PR
· Donative Freedom
· Cultural Tradition
§ Rest 3d of Property – the organizing principle of the American law of donative transfers is freedom of disposition.
§ Freedom of Disposition/Donative Freedom encompasses several distinct yet related ideas
· The right to give your property away during life and pass it on at death,
· The right to choose who receives it,
· The right to choose the form in which they get it, AND
· The right to give another person the right to make those choices even after your death
· Constitutional Protection
§ The power to transfer wealth at death is not a constitutional right, it is created by statute
§ Donative Freedom is not considered to be constitutionally protected against ALL forms of interference or limitation (although it does have some)
· There are multiple laws which restrict who, how and when you can transfer your property
o i.e. marriage laws, Rules against Perpetuity, etc
§ Irving Trust Co. v. Day → SC held that the 14th Amendment does not prohibit a state from granting the decedent’s spouse and elective share in the decedent’s estate
· Case seems to state that Succession of Property of a Deceased are of STATUTORY CREATION and the LEGISLATURE has the power to regulate this particular area
§ The dead hand rules succession only by sufferance – The state gives you the right to choose who gets your property
§ Babbitt v. Youpee/Hodel v. Irving – SC cases which seem to contradict Irving
· Stated that the govt’s restriction on a property owner’s right to transfer property at death amounted to a taking without just compensation
· 14th Amend doesn’t prohibit state from making rules about limiting passing assets on death
· Irving case concerned a statute that said Indian land can’t descend by intestacy or devise but escheats to the tribe
o Owner could have still used a recoverable trust to bypass law
· The State can’t restrict devise and law of intestacy
o But states still have a broad discretion to limit transfer at death
· Notes: Irving casts a cloud over the idea that the dead hand rules succession only by sufferance – the state has complete control over the distribution of property at death
§ So how do the Courts Interpret these Cases all Together?
· What the court may be saying is that “Complete abolition of both descent and devise of a particular class of property MAY be a taking” in circumstances such as those in the Indian Case
Terminology
· Descedent – a person who has died
· Intestate – a person who dies without a VALID WILL
§ Partially intestate – when a person dies with a VALID WILL, but has failed to dispose of ALL OF HIS PROPERTY
· The Intestate Property is Distributed in accordance with intestate succession rules (whether it is Fully or Partially Intestate!)
§ Descent – the inheritance of land
§ Heirs – those who took land by intestacy
§ Distribution – succession to personal property when person is intestate (this is b/c the title of personal property passed to a PERSONAL REPRESENTATIVE, who made distribution to those entitled to share in an intestate’s pers
e Formal Requirements of the Wills Act – attestation, etc – do not govern will substitutes and are not complied with.
· 3 Essential Functions of Probate
§ Title-Clearing – Making property owned at death marketable again
§ Creditor Protection – Paying off the decedent’s debts
· The due process clause requires that creditors of the decedent who are known must be given actual notice of court proceedings serving to bar creditors’ claims
§ Distribution – Implementing the decedent’s donative intent respecting the property that remains once the claims of creditors have bee discharged
· Will Substitutes avoid the Expense, Delay, Hostility, etc which is seems to go along with a PROBATE TRIAL
§ However, will substitutes have little success in CLEARING TITLE and PROTECTING CREDITORS
· Generally, if the Named Beneficiary of the Will Substitute Pre-deceases the Transferor the Default is to fall back on PROBATE DISTRIBUTION
· REALIZE – many legal consequences still turn on whether an instrument is labeled a WILL or a WILL SUBSTITUTE
§ i.e. a marital dissolution accompanied by a property settlement operates to VOID any devise to one spouse in another’s will. However, the legislature have generally failed to reform these statutes to make void will substitutes transfers made to former spouses.
§ So always ask
· Does this rule only apply to WILLS
· Should the Rule probably apply to substitutes
· Should the rule apply to ALL donative transfers
· The Right of Publicity – the legal recognition of people’s interest in their own names, signature, likeness, or other indicia of identity
§ Although a majority of jurisdiction that have considered this issue by statute or by court-made law recognizes the right of publicity to be descendible, all limit the duration of the right
· Florida Will Formalities
§ Need 2 Signatures
§ A Writing
§ Signed by the Person to be bound
§ Witnesses have to witness each other sign and person to be bound
· 737.111 – recoverable trust must adhere to will formalities
· Sources of Family Property Law
