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Wills and Trusts
University of Dayton School of Law
Sherrets, Carl D.

Wills and Trusts


Spring 2013


· Wills & Trusts Generally

o Methods of transferring property at death

§ Will (Probate Assets)

§ Intestate Succession (no will)

§ State law (affects non-probate assets)

§ Trusts

o Key Terminology

§ Decedent: Dead Person

§ Executor: Person who is responsible for implementing the will in a probate estate

§ Probate: Process of figuring out the will and transferring the probate assets

§ Instate Succession: when someone dies w/o a will

§ Instate Succession Statute: statute that determines who gets the intestate estate of decedent

§ Pour Over Will: will that leaves everything to a trust

§ Codicil: Amendment to a will

§ Assets

· Probate Assets: Assets that are controlled by the Probate Process and passed pursuant to will

§ House, Car, Bank Account, Property held as Tenants in Common

· Non-Probate Assets: Assets that are not controlled and passed pursuant to person’s will, but rather are transferred in accordance with the law (trump any wording in will that passes this property)

§ Property held as JTWROS (passes automatically to survivor with joint ownership)

§ Accounts that are Joint w/ Rights of Survivorship (trumps the will)

§ Life Insurance Policies (pass to beneficiary, not through will)

§ Retirement Plans (pass to beneficiary: IRA, 401(k), Profit Sharing Plans)

§ Trusts

· Non-Probate way to pass property upon death, acts as will substitute

· Components

§ Grantor (creates and funds the trust)

§ Trustee (controls the trust) can also be the Grantor

§ Beneficiary (person who receives the benefits of the trust) can also be the Grantor

· Process

§ Grantor creates Trust (may or may not fund trust while alive)

§ Upon death, can have pour-over-will, fund the trust

§ Grantor picks Trustee to run the Trust

§ Grantor tells Trustee what to do with the Trust Assets upon Grantor’s death

§ Usually designated to beneficiary over time, etc.

· Property held by one person for the benefit of another.

§ Testamentary – Trust in a will; active upon death

§ Inter-vivos – living trust; effective during lifetime of grantor.

§ Estate

· What one person owns at death.

· Identify both Assets and corresponding beneficiaries.

o 6 ways to avoid Probate

§ P.O.D.

· Payable on Death – Accounts at financial institutions

· Take precedent over will

· § 2131.10 Ohio Statute on POD’s

§ T.O.D.

· Transfer on Death – Real Estate, Securities, Vehicles

· Securities, Title 1709

· Auto’s § 2131.13

· Real Estate § 5302.22


· Joint Tenant with Right of Survivorship

· § 2105.31 – .39

§ Contract

· Insurance, Retirement

· Beneficiaries written in

§ Living Trust

· Must be funded, i.e. must have assets in trust before death

§ Statutory

o General Process of Estate Administration

§ 1) Person dies

§ 2) Create Estate (Probate Estate)

§ 3) Estate Administration (date of death à date of distribution)

· a) Appoint personal administrator (if no will) / executor (if will)

§ Will can appoint/designate the executor

§ If not appointed, state has rules of picking personal administrator or executor

§ Someone can volunteer (so long as there are no successful challenges)

· b) Establishment of assets and value of estate

· c) Payment of debts and taxes and attorneys

· d1) If Will:

§ Apportionment of probate assets by will provisions

§ Apportionment of non-probate assets by law (in accordance with) asset (if no beneficiary à probate asset)

· d2) If no Will

§ Apportionment of probate assets law state rules of intestate succession (default of will)

§ Apportionment of non-probate assets law asset (if no beneficiary à probate asset)

· e) Submission of paperwork to Probate Court for verification

· Role of the Lawyer

o Introduction

§ Purpose is to represent client and effectuate their intent upon their death

§ Rule 1.8(c) – Not receiving gifts (substantial gifts);

· family of lawyer cannot receive gifts either

· Lawyer cannot be beneficiary, but can be executor or trustee.

§ Four Major Documents of Estate Planning

· 1) Will

§ Must consider the assets that will be affected as well as what assets are non-probate

§ Who owns what and at what level of ownership interest

· 2) General Durable Power of Attorney

§ Purpose: if person incompetent (mentally or physically), it appoints someone w/ all of the powers of the original person

§ Can be abused by holder of POA

§ First Choice Agent is Attorney-in-Fact

§ If no POA, then court has to appoint legal guardian to make decisions

· 3) Health Care Power of Attorney

§ Purpose: give someone the legal authority to make medical decisions for another

§ Without HCPOA

§ Rules of Probate Court dictate what will happen for incompetent people

§ Must remain on life support for one year, then family may petition PC for right to pull the plug

· 4) Living Will Declaration

§ Purpose: give hospital direction about what to do if you are permanently unconscious state and at least 2 physicians agree that there is no hope for you

§ Direct hospital to remove life support if conditions are met

§ Options

§ Direct hospital what to do

§ Allow holder of HCPOA to make the decision

§ Tell them to let you live as long as possible

o Lawyer’s Professional Responsibility

§ Introduction

· Issues come up when a lawyer represents a client (decedent) but also may have a duty to either another person (spouse, child, etc) or a duty to an intended beneficiary (anyone in will)

§ Conflicts of Interest (Fiduciary Duty to Another Client)

· Defined

§ Conflict of interest arises when attorney or firm owes a fiduciary duty to the client (decedent) but also owes a fiduciary duty to another party that raises a conflict

· General Rule on Conflict of Interest (ABA)

§ Lawyer should not represent a client if the representation of that client will be directly adverse to another client unless;

§ Lawyer reasonably believes representation will not be adverse and

§ Both clients consent after consultation

§ Lawyer shall not represent a client if the representation of that client may be materially limited by lawyer’s responsibilities to another client or to a third person; unless

§ Lawyer reasonably believes representation will not be adversely affected; and

§ The Client consents after consultation

· Example

§ Two clients of same firm decide to get married (male extremely rich)

§ Want attorney(s) from firm to represent each of them for prenuptial or will creation

§ Would be conflict of interest

§ Male interest à retain as much of his wealth as possible for his family

§ Female interest à gain as much of husband’s wealth as possible for her family

· Representing Spouses

§ Many lawyers won’t represent both husband and wife when it comes to wills

§ Some lawyers will represent both

§ Require both to sign engagement letter (Show and Tell Letter)

§ There is no conflict now, I will represent both

· But if conflict arises, I will withdraw

· If we find information that is damaging to one or the other, we will disclose that information

· If you tell us something, we will reveal it to the other

§ Competing interests

§ Maintaining confidentiality w/ client vs. disclosure of information to other

§ Example

§ Represent Husband & Wife in will making: learn Husband has illegitimate child

· Learn from child’s mother (whore husband had fling with) about child

§ Options

· Make Husband tell wife

· Tell wife yourself

· Aband

uctive delivery

· 3) Acceptance by the Donee

§ Acceptance is the key to the gift requirement

§ Donee must actually accept gift for the transfer to be completed

§ Other Rules and Notes on Gift Transfers

· Irrevocability

§ Gifts must generally be irrevocable to qualify as inter-vivos gift to avoid probate

· Gifts Causa Mortis

§ These are gifts given by donor while on deathbead to the donee

§ Exception to the rule of irrevocability if donor unexpectedly recovers, donor can revoke

· Annual Exclusion

§ Government doesn’t care if you stay under this amount

§ Currently under $13,000/person/year

§ If you go over, there is a reporting requirement

· Lifetime Exclusion

§ $5 million

§ No gift taxes if under limit

· Basis Rules

§ Carryover: If you purchase a property and the value goes up on it and you SELL it (ONLY applies to sell), there is a capital gains tax (difference between what you paid and what it sold for) on the seller.

§ CARRYOVER continues until there is a SELL or DEATH

§ EX: If you buy something in 1910 for $1,000 and gift it through the family, in 2010, if it’s worth 1 million, the seller would be taxed on the difference.

§ MUST be:

§ Before Death

§ SELL property


§ Stepped-Up

§ Gift at Death

§ What is the basis worth @ time of death.

§ No Carryover

· Exceptions

§ Spousal transfers, charity, education bills, medical expenses directly to institution.

o Transfers via Joint Interests w/ Rights of Survivorship (JTWROS): Non-Probate Transfer

§ Defined

· People own equal interests in asset and remainder passes automatically upon death of the other

· Avoid the probate process b/c decedent’s interest terminates, remainder passes automatically

§ Applied

· Generally applies to houses and real property

· Not restricted to real property, though: Can be bank accounts, etc.

§ Reasons for JTWROS Assets

· 1) Elderly depositor creates account b/c they can’t do the banking, want someone to help, give that other person access to the account

· 2) Depositor wants to ensure account passes to joint account holder without having to go through probate, but doesn’t want joint account holder to have access to money until after death

· 3) Depositor wants to give joint account holder all of the rights associated with joint ownership

§ General Principles

· JTWROS generally speak for themselves (non-probate transfer automatically upon death)

· Challenger can overcome JTWROS status, prove intent was not present to create transfer

· Depositor can also revoke survivorship provision during lifetime, remove the joint account holder

§ Intent of Creator is Key

· Must consider the intent of the creator of the account

· If intended to create asset that would pass directly (intent to avoid probate)

§ Court will treat as JTWROS and allow to pass automatically

· If intended to give someone else access to accounts to help pay bills (usually elderly)

§ Court may allow a challenge to the automatic transfer, make account probate account