Trusts and Estates
LAWYERS, ESTATES, AND TRUSTS
An Overview of Intergenerational Wealth Transfer
A. Probate
1. The Process
Probate systems collect the assets of decedents, satisfy creditors, resolve conflicts among beneficiaries, and distribute what is left to the appropriate persons or institutions.
a. Subject to Probate.
Property that the decedent held alone or as a tenant in common is subject to the system. Joint tenancy (or tenancy by the entirety) property, life insurance proceeds on the decedent’s life, and property in lifetime trusts are all outside of probate. Depending upon local rules, the decedent’s half of community property may or may not pass through probate.
b. Personal Representative
When a person dies and a decision is made to probate his estate, someone—usually a family member—will petition a court in the decedent’s state of domicile to appoint a “personal representative” to handle the work. Executors (if there is a will) and administrators (if there is no will) are the most common types of personal representatives.
c. Supervised Estates
Though local practice will vary, administration of a court-supervised estate generally looks like this:
Upon appointment of the personal representative, the court issues appropriately titled “letters” to evidence the individual’s authority. The personal representative then contacts banks, stock transfer agents, and the like, to collect the decedent’s assets. An inventory is filed and creditors are notified. If known or reasonably ascertainable creditors are given actual notice, their claims may be cut off if the creditors don’t file promptly. See Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478 (1988).
Next, estate administration enters a holding period. Appraisals are made; tax forms are filed; sometimes property is sold to pay creditors or because no one wants it. There may be a will contest or litigation about the will’s meanin
int tenant dies. Because the survivor no longer shares ownership with the one who has died, the decedent effectively has transferred wealth at death without the need of probate Funds paid by a third party (like a life insurance company) at the death of someone are often treated as contract rights of the beneficiary, rather than property of the one who died. “Payable-on-death” and “transfer-on-death” bank and brokerage accounts reach the same result.
C. The Uniform Codes and the Restatements The Uniform Probate Code (UPC) and the Uniform Trust Code (UTC) offer statutory language and commentary to state legislatures considering reform (and indirectly influence court decisions). The Restatements of Property and of Trusts provide guidance to courts (and indirectly influence legislatures).
