Trusts and Estates Outline

Trusts and Estates Outline

Wills and Will Substitutes

I. What property is the property of the probate estate?
a. Probate Estate—“property that the decedent owns an interest in at their death that is subject to probate and distribution via intestacy.”
b. Restatement—Probate Estate—the estate subject to administration under applicable laws relating to decedents’ estates. The probate estate consists of certain property owned by the decedent at death and property acquired by the decedent’s estate at or after the decedent’s death.
i. Here, actual ownership, not ownership is substance, is required. Actual ownership must also be beneficial; non-beneficial ownership, such as that held by a trustee, is not sufficient.
ii. Property in which the decedent owned an interest immediately before death is not included in the probate estate if the decedent’s interest expires upon death, such as property in which the decedent possessed a life estate or a joint tenancy.
iii. Property included in the probate estate:
1. property in which the decedent has outright beneficial ownership, such as a fee simple interest in a home;
2. all of a spouse’s separate property and half of a spouse’s community property;
3. indefeasibly vested remainder—because the interest does not expire on the death of the decedent, the future interest is part of the probate estate;
4. contingent remainders that do not expire on the death of the decedent become part of the probate estate because they do not expire on decedent’s death, and thus the decedent’s estate retains a future interest;
5. Life insurance policies are part of the decedent’s estate only if the decedent named his estate as beneficiary of the policy;
6. Estate trust—where a decedent is an income beneficiary of a trust, and the corpus is payable to the decedent’s estate on the death of the decedent, the corpus is part of the probate estate;
iv. Property not included in the probate estate:
1. life insurance policies payable to a beneficiary other than the decedent’s estate;
2. contingent remainders that expire on the death of the decedent;
3. property held in a joint tenancy;
4. property held by the decedent in non-beneficial ownership, such as where the decedent is a trustee of a trust;
5. Revocable trust—a revocable trust is able to be revoked during the lifetime of the donor, and may be amended, modified, etc…the trust terms dictate the distribution of the trust property on death of the donor, and thus it is not included in the decedent’s probate estate as long as the decedent did not revoke the trust while alive.
v. Property Acquired After Death: a decedent’s probate estate may sometimes include property that was acquired after the decedent’s death.
1. Dividends, interest, and rents earned by assets of the decedent’s probate estate become part of the probate estate.
2. Posthumously awarded bonus—part of the probate estate even though the decedent has no contractual right to the bonus.
3. Devise “to the estate” of a deceased person—where another person devises property to the estate of another, that property becomes part of the decedent’s probate estate.
vi. Property acquired at the instant of death—included in the probate estate.
1. Ex=wrongful death recovery payable to decedent’s estate under a survival statute.
c. The net probate estate is the probate estate after deduction for family, exempt property, and homestead allowances, claims against the estate (including funeral expenses and expenses of administration), and taxes for which the estate is liable. Subject to overriding claims and rights provided by applicable law, such as the right of the decedent’s surviving spouse to take an elective share or to elect other marital rights, the decedent’s net probate estate passes to the decedent’s heirs or devisees by intestate or testate succession.
i. Taxes—Liability for the decedent’s income taxes for the year of death and for the estate’s income taxes falls on the decedent’s probate estate, as do any other taxes owed by the decedent at death, such as federal gift taxes and local real estate taxes, and any other taxes incurred by the estate.
ii. Family Allowance—the UPC’s family allowance is designed to provide the surviving spouse and minor dependent children a reasonable allowance out of the estate for their maintenance during the period of administration; the family allowance is not chargeable against any benefit or share passing to the spouse or children by intestate succession, by elective share, or by will, unless the will provides otherwise.
iii. Exempt property—UPC’s exempt property allowance protects certain property such as household furniture, automobiles, furnishings, appliances, and personal effects from the claims of creditors.
iv. Homestead—The UPC’s homestead allowance grants a lump sum payment.
II. Validity of Will Substitutes
a. A will substitute is an arrangement respecting property or contract rights that is established during the donor’s life, under which
i. The right to possession or enjoyment of the property or to a contractual payment shifts outside of probate to the donee at the donor’s death; and
ii. Substantial lifetime rights of domin