Transmission of Wealth Outline

 
TRANSMISSION OF WEALTH HATFIELD WINTER 2016
 
1)      Introduction –
a)     Definitions
i)       General Terms
(1)   Administration: Managing decedent’s property so that all the decedent’s property to pay off decedent’s debts and then to distribute to the heirs or beneficiaries
(2)   Administrator: Person in charge of administering estate of intestate decedent (compare with executor. See representative)
(3)   Escheat: Intestate decedent’s estate to pass to the state when there are no heirs to inherit the property (p47)
(4)   Estate: Just means property
(5)   Executor: Person in charge of administering estate of a testate decedent
(a)    Executor responsibilities:
(i)     Collects (“marshals”) assets
(ii)   Detail on list (“inventory”) that are public
(iii) Pays decedent’s debts/taxes (hospital, etc)
(iv)  Distributes the leftovers to named persons in the will
(6)   Fiduciary: One who owes a high level of duty to another (executors/administrators/trustees)
(7)   Issue: A lineal descendant
(8)   Nonprobate Asset: Asset of decedent that passes through a will
(a)    Examples: Joint tenancies with right of survivorship, contracts
(9)   Personal Representative: Generic term for someone in charge of administering estate of decedent. Same as administrator and executor
(10)                       Power of appointment: Provision in Will or similar document granting an individual the power to direct trust assets at termination of the trust to himself, estate, or another individual or group named in the Will or similar document
(11)                       Power of attorney: Document granting authority to act on one’s behalf creating an agency relationship between the two. Grantor is the principal and grantee is the agent
(12)                       Probate Asset: Asset of decedent that passes through intestate succession or through a will through executor
(a)    4 steps (listed above)
(i)     Find (“Marshall”)
(ii)   List (“inventory”)
(iii) Pay debts
(iv) Distribute to
(13)                       Probate: A judicial method of transferring and administering wealth at death
(14)                       Tenancy in common: A method of co-ownership between 2 or more persons under which the interest of a deceased co-owner passes in accordance with her will (if no will, the laws of intestate succession applies)
 
ii)    Wills Terms
(1)   Attestation: When you watch someone sign a will
(2)   Beneficiary: Person who receives property (real or personal) under will
(3)   Beneficiary designation:
(4)   Bequest: A gift of personal property in a will
(5)   Devisee: A person designated in a will to receive a devise p42
(6)   Devise: A gift of real property in a will
(7)   Legacy: A gift of money in a will
(8)   Testate succession: Passage of property under decedent’s will
(9)   Testator; testatrix: Person who dies/writes a valid will
(10)                       Will: A written or oral declaration directing on who will own the property upon the decedent’s death
 
iii)  Trusts Terms
(1)   Beneficiary: Person receiving the title to trust property and the right to benefit from the settlor’s instruction  
(2)   Inter-vivos: A living trust
(3)   Non-testamentary trusts: Living trusts or inter vivos trusts. These are trusts created during the life of the grantor; they are effective when created or upon the occurrence of a specific event stated within the trust document.
(4)   Principal: Property conveyed in trust form
(5)   Settlor/Grantor: Person making the trust to give the property
(a)    **Note: A person can wear a “settlor/grantor” and “trustee” hat
(6)   Testamentary trust: A trust established under a will; effective at death of testator
(7)   Trust: Property conveyance where owner divides title into legal and equitable interests. Trusts are a relationship between the trustee, beneficiary, and grantor/settlor with a fiduciary duty on the holder of the legal title to dealt with the estate for the benefit of the holder.
(a)    A trust is neither a contract (needs no consideration) nor entity.
(b)   Can begin while alive
(8)   Trustee: A trusted person who holds legal title to estate and has a fiduciary duty to manage the property according to the settlor’s instructions and applicable trust law
(a)    **Note: A person can wear a “settlor/grantor” and “trustee” hat
 
iv)   Intestate Terms
(1)   Affinity Relationship: Relationship by marriage (relatives such as in-laws)
(2)   Ancestor: Related to the decedent in an ascending lineal line (grandpa)
(3)   Collateral Relative: A relative that isn’t in a lineal line
 
(a)    Example: Siblings, nieces and nephews are not in the same lineal line and are therefore not collateral relatives
(4)   Consanguineous Relationship: A biological or blood relative
(5)   Descent: Succession to real property
(6)   Distribution: Succession to personal property
(7)   Heir: One that inherits intestate
(8)   Intestate: Dying/passage of property without a valid will
 
b)     Distributing Property – The central issue is “who gets the property?'
(1)   4 different ways (hierarchy): (1) Beneficiary designations (will substitutes); (2) Trusts (will substitutes); (3) Wills; and (4) Intestacy (statutory/public will)
 
(a)     Will substitutes:
(i)     GR: No strict formalities, unlike a will. Four main types: (1) insurance policies, (2) retirement accounts, (3) bank accounts w/ rights of survivorships, and (4) trusts.
 
(ii)   Two Types:
1.      Beneficiary designations (will substitutes)
a.       Rule: An instrument naming a beneficiary of an insurance or other nonprobate transfer at death
b.      Must include beneficiary’s identification and name
i.        Example: 401(k)
c.       Beneficiary overrides the Will for administrative purposes, but the designation doesn’t affect the will
 
2.      Trusts (will substitutes)
a.       Rule: Express trust, private or charitable, with additions thereto, wherever and however created
b.      Neither a contract nor entity
c.       A relationship between parties:
i.        Trustee
ii.      Beneficiary
iii.    Settlor/Grantor
 
(b)     Wills
(i)     If there’s a mistake in the will à Intestacy is triggered
(ii)   Needs to be in writing and needs witnesses
(iii) Includes executor who marshals, lists inventory, and distribute
(iv) Not necessary, but helpful
 
(c)      Intestacy (statutory/public will)
(i)     A statutory will where the court will assign an administrator who is responsible to the courts
c)     Testamentary Freedom —  “Control from the grave”
i)       GR: We honor the intent of the decedent or testator
ii)    Feinberg v. Feinberg
(1)   Facts: Grandfather put in will that he did not want non-jews to benefit
(2)   Rule: When a will’s clause does not violate public policy nor is capable of producing harm, the clause is valid
 
2)     Professional Responsibility (PR)
a)     GR: The primary rule of PR is to ensure that a lawyer is acting competent and diligent. The standard for a lawyer is to be reasonable/prudent.
(1)   When an attorney violates PR, that gives room for
(a)    Suspension
(b)   Sanctions
(c)    Disbarred
 
ii)      A lawyer is an advisor and shouldn’t be executors because it’s not our skill sets. W