WILL, TRUSTS, ESTATES
LILY
SUMMER 2012
Generally
I. Probate Generally: Probate is the process of administering the decedent’s estate. The result of the process is that the property once owned by the decedent has passed to a new set of owners. Probate will identify the “beneficiaries” (those who receive property from the decedent’s estate) and how much of the estate they will get (the “shares”).
Three functions of probate:
1) Title clearing of property,
2) Pay off decedent’s creditors, and
3) Implementing decedent’s intent.
a. Benefits of Probate:
i. 1) Collecting assets and inventory so that we know what the decedent left behind.
ii. 2) Settling the decedent’s affairs such as paying off debt to creditors first.
iii. 3) Distribute money to the beneficiaries.
b. Problems with Probate: Probate can be endless! You have to present the will to court, file it to court, open it for a period of time to it being examined, if no one objects, will admitted, then executor appointed. This can be a long gap with no one in charge of assets and no one to make distribution. This is why there are allowances in state law for some money for family.
II. Ways to Avoid Probate: There are life-time transfers that can circumvent probate. There are four non probate succession instruments: 1) life insurance, 2) pension accounts, 3) joint accounts, and 4) revocable trusts (they become irrevocable upon D’s death). Benefits of doing this is that it can be much quicker and easier than probate. Most of the non-probate devices set up during life are very difficult to challenge at death & they are faster. Less likely that you will have delay or upset & many of the devices are exempt from creditor claims. These are listed in more detail below:
a. Joint Titling – you are a co-owner. When you die your interest goes 100% to the other co-owner(s).
b. Revocable Trust – during my life I can do anything I want w/ the property & I can take back the trust during my life as well, but if I don’t it will go to whoever I wanted & it preempts the intestacy laws.
c. Contractual Arrangement: Go to bank & open an account w/ you as owner but P.O.D. (Payable On Death) to X. This is recognized by law that X is entitled to receive the balance of the account when I die, but during my life I can do whatever I want w/ it. This is a non-probate arrangement to transfer one asset – what is in the bank account.
d. Life Insurance Policy – is also a contractual arrangement. Who gets this if you pay your premiums during life & the company does not go bankrupt? The recipient on the policy once you are proved dead & the recipient proves they are the person they purported to be. This may only take a couple of weeks, it goes to your beneficiary & not your creditors, they may be able to go after it but there is not system that holds up the distribution.
III. Freedom of Testation and Limits: Freedom to direct where property goes. Some limits on this à taxes limit how much property can give away (flat 45% federal tax if don’t plan around it). Another limit is public policy limits (some courts say cannot restrict marriage on condition to inherit).
a. Public Policy Limits: US National Bank v. Snodgrass: Condition that daughter not marry a Catholic is valid and does not violate public policy. The condition is valid because it does not impose an “unreasonable restriction.” However, note that other courts have held that conditions that are racist or conditions that are wasteful violate PP. On one hand, not entitled to it anyway, so should follow conditions. On other hand, cannot be too controlling from the grave.
IV. Descendants: This term applies to more than just children. It includes grandchild, great grandchildren, and those further down the line. Children are descendants but descendants are not necessarily children.
a. Lineal Descendants: “issue” – children, grandchildren, great grandchildren, etc
b. Lineal Ascendants: parents, grandparents, great grandparents, etc
i. Both this and lineal descendants are based on a “direct line” from decedent
c. Collaterals: Blood relatives that are neither an issue nor ancestors – brothers and sisters, uncles and aunts, nephews and nieces, cousins, etc.
i. A person and his collateral relatives are all lineal descendants from some ancestor
V. “Surviving” in CA: See rules below. However, CPC 6403 (120 hour rule) applies only to intestate succession. CPC 103 (divide CP and QPC evenly) applies to both intestate and testate succession. And CPC 220 (who died first) applies only to testate succession.
VI. Taxes: CA doesn’t have a death tax. Voter approved initiative. Still have federal.
Intestacy: Governed by UPC 2-104 and CPC 6403
I. Rule: Any part of D’s probate estate not effectively passed by will is subject to intestacy. These intestacy rules can always be preempted by making a valid will.
a. “Eligibles”: The probate system identifies eligibles that may be able to take the property. It then ranks the eligibles in the order that they would be able to take and it deals with the way that they would get it. These include: Blood Kin and a Spouse.
II. Intestacy Generally: Intestacy is the default system. A set of laws that lays out where property will pass to if the decedent dies without a will. These laws 1) identify who will take, and 2) how much these people will get (size of share).
a. Ways to Preempt Intestacy: There are two ways to preempt intestacy: 1) write a will, or 2) give away all property during life.
i. Negative Will: The negative will is used to disinherit intestate takers. D simply says “I don’t want “H” to inherit any of my property in intestacy.” In UPC statute but not in CA – but can get there by other means.
1. Rule: This is UPC 2-101. Can remove someone from intestate succession via a negative will. Treat it as if that person disclaimed their share.
b. Arises When: Arises when someone did not make a will, the will made does not include certain assets, or the will made was invalid.
c. Intent of Decedent: As much as possible, intestacy statutes are the legislatures’ belief of what the D would intend if he had made a will. They try to be an expression of most Ds intentions.
d. Prefer Wills: Although you can have a will that is very specific and doesn’t give away all of your property, rather the will apply to all of property.
e. Rigid Rules: Note that these are rigid rules. Intestacy doesn’t ask “who has need.” Just gives based on the rules.
f. Parentelic System: Priority is given to nearer ancestors and their descendants over more remote ancestors – without regard to degree of consanguinity
i. Issue (children) come first, then parents and their kids, then grandparents and their kids.
ii. The UPC follows this system
g. Gradual System: Priority is given to relatives who have the nearest degree of consanguinity. Each generation counts as a degree.
i. Parents and children are one degree, grandparent to grandchild is two degrees, brothers and sisters are second degree, first cousins are fourth degree
ii. See chart on page 54.
h. Standing: Persons designated by statute as intestate successors are entitled to notice of probate proceedings and have standing to contest the decedent’s will
i. Next of Kin: The living blood relative nearest to the decedent in degree of consanguinity. Representation is usually not allowed for remote relatives.
III. UPC Intestacy Rules:
a. Rule: Any part of estate not disposed of by will passes through intestacy. UPC 2-101.
i. Unborn Heirs: A person in gestation is treated as living when D dies if the baby lives for 120 hours or more after birth. UPC 2-108.
ii. Two Lines of Relation: A person related to D through two lines only gets one share. However, that person gets the larger of the two shares that they are entitled to. UPC 2-113.
b. Step One – Surviving Spouse’s Share: The first step is to determine the spouse’s share. UPC 2-102. Note the use of “surviving” descendants and not just descendants. Already identified eligibility that spouse takes first – but policy decides how
. CPC 100 (CP); CPC 101 (QCP). Apply CPC 103 above if both die.
1. SS Owns it: This half of the CP is owned by the SS. So even if the SS cannot inherit for some reason (like killed the D) – that SS still gets half of the CP because SS owns it. Cant will away SS’s share!
2. Contract Around it: Note that the parties can agree within themselves to do otherwise. They can contract around the community property distribution provision.
3. Definitions: CP = any property acquired during the marriage in CA – with limited exceptions – gifts and inheritances are exceptions. QCP = property coming under jurisdiction of CA court at time that would have been community if spouses acquired it in CA during marriage. Acquired by one of them while in non CA and non CP state. SP = anything have before marriage and gifts and inheritance got in marriage
a. Presumption: CA law presumes that property held by the spouses is CP – start form this idea, but you can back off this.
b. Notes from class: Community Property with Survivorship = form of title that would go automatically to the SS. This is a NON-PROBATE transfer. TOD = Transfer on death.
iii. Spouse’s Portion of D’s Estate: As for the SS’s share of D’s separate property, SS gets:
1. Of D’s Portion of Community Property: the SS gets all of D’s share of the CP. She gets his full 1/2 share! CPC 6401(a). Also applies to his share of QCP – she gets that too! CPC 6401(b).
a. Entire Community!: Therefore, if D dies intestate, the SS gets the ENTIRE share of CP (SS half under 100 and D’s half under 6401).
2. Of D’s Portion of Separate Property 6401(c).
a. Entire Estate: SS gets the entire estate of D’s SP if there is no issue (anywhere down line), parent, brother, sister, or issue of a deceased brother or sister
i. Broader: Goes down forever on bro and sis line so broader than UPC version looking at SS’s share b/c UPC only looked at descendant and parents.
b. Half of the Estate: SS gets half of the estate if 1) D left only one child or the issue of one deceased child. Or if 2) D left no issue but left a parent or a parent’s issue (bros, sis, their kids and down) (doesn’t have to be an issue of both parents).
c. Third of the Estate: SS gets a third of the estate if 1) D left more than one child. Or 2) D left more one child and the issue of one or more deceased children. Or 3) D left issue of two or more deceased children.
c. What SS Did Not Take – What’s Left Over: Whatever SS did not take (or if no SS) passes though CPC 6402. Once one person found in order, then stop and that group or person gets 100%.
i. Issue of the decedent. Issues take equally if all the same degree of kinship to the D (like if all kids). If unequal (like some kids and some grandkids), those of more remote degree (like the grandkids) can take though section 240 (representation).
ii. If no surviving issue, the decedent’s parents take it equally. If only one alive, that parent gets it all. Note does not mention representation here, so don’t use it.
iii. If neither above, to the issues of the parents (can be issue of just one parent). Issues take equally if all same degree of kinship to the D. If unequal degree, those of more remote kinship can take under 240 (representation),
