Trusts and Estates Outline

ESTATES AND TRUSTS – De La Torre, Spring 2014

Probate Process

I. Introduction

a. Functions – Why have a probate procedure?

i. Used to determine a decedent’s estate and how to dispose of it

ii. Provides for evidence of transfer of title, from the decedent to the devisees

iii. Pays creditors, settles claims against the estate

b. Assets – How a decedent’s assets are distributed is generally determined

i. Will – First, by the decedent’s will, to the extent it covers the assets to be distributed, and then

ii. Intestacy – the state’s intestate statute, which covers all assets not disposed of by the will

c. Claims Against Estate – The process helps settle claims that creditors may have against the estate (outstanding debts of the decedent)

i. Process helps get debts paid

ii. Such claims may be barred by a statute of limitations

d. The Actual Process – Mechanics of probate

i. Statute – Set by each state’s probate statute

ii. Initiation – The probate process may be initiated if:

1. Testacy – If a will exists, probate is initiated by filing a petition for probate.

a. Statutes of Limitations – If a will exists or is found, it must be filed within a certain amount of time after death, or else it will be barred. The U.P.C. is three years, in Kansas it is a six month statute of limitation.

i. Determination of Descent – In kansas, this kicks in after six months. After an interested party files the petition, the court must determine the identity of heirs and issues. To do this, the court files a Decree for Publication of Notice.

ii. Non-Claim Statutes – Sets the time limit within which creditors may assert claims against an estate. If they do not, they will be barred from bringing claims. In Kansas, it is four months following the Publication of Notice.

2. Intestacy – If there is no will, probate is initiated by filing a petition for administration

3. Personal Representative – A personal representative must have control over the estate. If there is a will and it names the personal representative, that person is known as the executor or executrix. If the will does not name a personal representative, or if the decedent dies intestate, the court will appoint a personal representative known as the administrator of the estate.

a. Bond – Typically, a Personal Representative must post bond in the event they screw up, they may be personally liable to the estate. It’s a form of insurance for the personal representative.

iii. Administration/Execution Process – Once proceedings have been initiated, what is next:

1. Formal Probate (In Kansas)

a. Initiated by an “interested party” such as an executor, intestator of the decedent, devisee, or creditor of the estate

b. Petitions for administration (intestacy under KSA 59-2219), or probate (will under KSA 59-2220)

c. At end of paying creditors and distributing property, the personal representative will file a Petition of Settlement to close out the estate.

2. ALTERNATIVELY – Simplified Administration – Typically, an estate must qualify for simplified administration. IF it does, there are no hearings, no court orders until closing at the end of the probate process. Qualifications include:

a. There are no contested matters, whether it is a will or descent under the statute

b. Probable value of the estate (smaller estates will qualify more easily)

c. Solvency of the estate

d. Cost of formal probate vs. the alternatives

3. ALTERNATIVELY – Informal Administration – Also typically requires qualification. There is one hearing at the outset, the court orders payments to specific creditors. Otherwise there is no further judicial babysitting.

iv. Contesting a Will – Sometimes, interested parties will contest a will:

1. An attempt to prevent a will from being admitted to probate on grounds it was not properly executed (often an intestate heir will do this)

2. That a will admitted was actually superceded by another later will (often a devisee in the later will)

3. Standing – For a person to have standing to contest a will, the person must have a pecuniary interest in the estate

4. Limitations – A challenge to a will must be issued during the probate process before the will may be officially admitted to probate

a. EXCEPT – Fraudulent Concealment – If the actual will is purposely kept from the court, it may be admitted after probate process

II. Probate vs. Non-Probate Property – Only property which is probate property is subject to probate proceedings

a. Probate Property – property which will require either the will or statute (in event of intestacy) to distribute; most often it is what is determined by finding what remains after the non-probate property has already distributed itself.

b. Non-probate Property – By “distributed itself,” this means that there is some property that transfers immediately upon the death of the decedent and, because it does this by itself, does not require probate to determine who it goes to. Common forms of non-probate property:

i. Joint Tenancy Property – Any property, both real and personal. The decedent’s interest vanishes at death, and the survivor gets the whole property. It does not pass by will, but by the rules of joint tenancy.

ii. Life Insurance – Proceeds of a life insurance policy are paid by the insurance company to the beneficiary named on the policy. It does not pass by will, but by the insurance contract.

iii. Pay-On-Death Provisions – Any type of contract that has a pay-on-death provision will distribute decedent’s benefits of contract upon death. Common forms include pension plans, IRAs, 401(k)s, etc. It does not pass by will, but by the contract.

iv. Interests In Inter Vivos Trust – If there is a provision in a trust document that benefits of the trust will pass from decedent upon death to somebody else, the benefits do not pass by will or intestacy, but by the trust document.

1. EXCEPTION – Testamentary Trusts – If property is held in a testamentary trust created by the decedent upon his death,