WILLS, ESTATES, AND TRUSTS
OUTLINE
PROFESSOR MOLITOR
HILARY 2005
BOOK: COURSEPACK
WEEK ONE
Commonly Used Terms
Testator – the person who writes the will
Intestacy – when you die without a will you look to statutes to determine what to do
Decedent – the dead person
Descendant – children and down
Heirs – people who are going to take your –property through intestacy
Devisees – people who are going to take your property through the will
Devise – the thing in your will that is given to the devisee
Testator – the person who wrote the will
Will – (EPIC 1108(b)) – the definition includes a codicil, a one page correction to a will. A codicil itself is a type of will so it must meet all the requirements in itself to be a valid will.
Settlor – the person who creates a trust
Res – the thing that goes into the trust
Trustee – has legal title to the res in the trust
Beneficiary – has equitable title to the res in the trust
General Property Law and donative Powers
The general rule is to honor the testator’s intent
A testator can impose any condition he wants upon the beneficiary as long as it does not go against public policy, is not illegal, or is not uncertain (Eyerman Case).
The Probate Process
The Estate and what goes into the estate
What goes into the estate
i. Things you owned at the time of your death.
ii. If you are tenants in common, your interest goes into your estate
What stays out of the estate
i. All of the will substitutes
Will substitutes
General
Joint Tenancy problems
i. Property held as joint tenants – each have an equal undivided interest. If one dies, the surviving joint tenant gets it all.
Tenancy by entireties
i. Property held as tenants by entirety – you must be married to hold property in this manner. The property goes to the survivor.
Life Insurance
i. Life insurance – automatically goes to the beneficiary
Revocable Trusts
i. Generally a res is irrevocable unless you set up the right to revoke it.
Gifts and gifts causa mortis
i. Another way to get property out of the probate process is to gift it away
1. For there to be a valid gift, there must be the following
a. Donor’s intent
b. Actual or constructive delivery
c. Acceptance
2. A gift causa mortis
a. You have a donor who believes death is imminent and he makes a gift to somebody and then the donor actually does die.
b. If you do survive, then the general rule is that the gift is automatically revoked, there is a minority view that says it is still revocable for certain amount of time, but not automatically.
Payment of priorities form the estate
EPIC 3805 tells us in what order the estate must pay its priorities. If there is enough money in the estate to pay all the claims, then it does not matter which order you pay them in.
EPIC 3805 – if the applicable estate property is insufficient to pay all the claims in full, the personal representative shall make payment in the following order of priority.
i. Costs and expenses of administration
ii. Reasonable funeral and burial expenses
iii. Homestead allowance
iv. Family allowance
v. Exempt property
vi. Debts and taxes with priority under federal law
vii. Reasonable and necessary medical and hospital expenses of the decedent’s last illness including a compensation of persons attending the decedent
viii. Debts and taxes with priority under the laws of the state.
ix. All other claims.
Intestacy in general
When does intestacy apply
i. If the decedent was a testator then you go the testacy route. If there was no will or the will was invalid then you go down the route of intestacy.
Statutory scheme
Who are the descendants
i. Children, parents, etc.
ii. The statute says that the biological children of the decedent are heirs.
iii. Adopted children hypos
1. Ex. 1 – Your biological mom is Sue and your biological dad is Tom. But, Sue marries Pete and Pete adopts you. If you die, only Pete and Sue can inherit from you. But you can inherit from Sue, Tom and Pete
2. Ex 2 – Your biological mom is Sue and your biological dad is Tom. They give you up for adoption. You can only inherit through intestacy from your adoptive parents, not your biological ones.
iv. A spouse is not a descendant. A descendant goes down in the family tree.
How do you survive the decedent
i. You must survive by 120 hours to be an heir
ii. They do not apply the 120 hour rule if the estate would escheat to the state. So, if the only reason why there is no one who survives the decedent is because of the 120 hour rule, then the court does not apply it.
iii. If the heir is in gestation at the time of the decedent’s death, they must be born and live for 120 hours to be considered an heir.
Who gets the intestate estate
The following is the order that intestacy follows
i. Surviving spouse
ii. Children and descendents
iii. Parents
iv. Descendants of parents
v. Grandparents
vi. Descendants of grandparents
vii. The state
The surviving spouse
i. EPIC 2102 tells us what the surviving spouse takes during intestacy
ii. If the decedent….
1. has no kids or parents, then the spouse gets it all
2. has all kids with spouse and there are no other kids of the surviving spouse what survive the decedent, then $150k plus half
3. if no kids but there are parents, then $150k plus ¾
4. If all of the decedent’s kids are kids of the surviving spouse and there are kids of surviving spouse but not decedent, then $150k plus half
5. If one or more but not all of the kids were not kids of the surviving spouse then $150k plus half
6. If none of the descendents of the decedent are those of the surviving spouse then $100k plus half.
iii. If you get divorced or annulled you are no longer a surviving spouse but if you get remarried against then you are a surviving spouse again
iv. If you are married but for one year or more before the death of the deceased person, you
1. was willfully absent from the decedent spouse
2. deserted the decedent spouse
3. Willfully neglected or refused to provide support for the decedent spouse if required to do so by law.
4. THEN YOU ARE NOT A SURVIVING SPOUSE.
WEEK TWO
Who gets the intestate estate?
Surviving Spouses share
i. After the surviving spouse gets their share or if there is no surviving spouse, then where does the money go?
Where does the rest go?
i. Make the layers system with layers one, two and three
ii. Layer 1 – descendants
iii. Layer 2 – parents and descendants of parents
iv. Layer 3 – grandparents and descendants of grandparents
v. If there is anyone in layer one then they get it all, if not go to two.
vi. If there is anyone in layer two then they get it all, if not go to three.
vii. If there is anyone in layer three, then they get it all, if not it escheats to the state.
viii. Layer one
1. Descendants are children, grandchildren, etc.
2. If a child is adopted by a step-parent, the adopted child can still inherit form the biological father and the stepfather.
3. If there are descendants of the decedent, how do we give the estate away?
a. There are three ways
i. Per Stirpes
ii. Per Capita by per capita representation
iii. Per capita at each generation
4. Make sure to remember that a stock is a vertical part of the family tree and a generation is a horizontal part of the family tree.
5. To figure out any of these three ways, we ask the same questions
a. What is the root generation?
i. Per stirpies – always look at the first generation
ii. Both of the per capita systems – the root generation is the first generation with at least one survivor.
b. How do I divide up the pot?
i. Divide it up equally among the surviving descendants. All of the systems use this method.
ii. In dividing up, you divide up between all the warm bodies and the deceased with living descendants.
c. After we’ve paid people off and we have money left over is there going to be any recombining?
i. Yes in per capita by each generation but not in the other two systems.
ix. Layer two
1. If there is no one in layer one than we go to layer two
2. If a parent terminates parental rights they can not inherit form the child
3. If parent does not provide as required by law then they can not inherit from child.
4. Only use per capita with each generation do not use per stirpes or per capita with representation.
5. If there are surviving parents then all the money goes to the parents and they share equally. If it is only one surviving parent, then that parent takes it all.
x. Layer Three
1.
rviving spouse and minor or dependent children and those kids who were being supported by the decedent
The amount entitled to – it just says reasonable and can award up to $18k without court approval
To decide the amount, look at – the number of people being taken care of, how much assistance they need, other sources of income, and the amount of time it will take to distribute. All this is based on a subjective lifestyle.
Length of time – Only get it for one year.
What claims trump it?
i. Administration costs and expenses, funeral and burial and homestead allowance
Apples to both testate and intestate estates.
Exempt Property (EPIC 2404)
Who’s entitled to it? – surviving spouse and the decedent’s children
What is the amount? – not more than $10k
What does it include? – furniture, cars, furnishing, appliances, and personal effects.
What if there is not enough property to reach $10k? – they are entitled to other assets to make up the remaining amount and these items abate all except those claims that trump the exempt property
What claims trump it? – administration costs and expenses, reasonable funeral and burial, homestead allowance, and family allowance
Applies to both testate and intestate situations. You get the exempt property in addition to anything you get in the will or by intestacy.
What if the decedent had a will? – what if a piece of property is devised in a will but a child wants it? The kids are out of luck as long as the estate is sufficient to fulfill the $10k without that piece of property.
i. If it turns out that the estate is not sufficient, then the kids/spouse get the items devised in the will to fulfill the amount for homestead and exempt property.
What if there is a BMW worth $50k and there has only been $10k worth of payments so far?
i. They take it subject to the loan
ii. The value is the value at the time of death
If the only property is worth $20k you can still take it in exempt property, but you have to pay the estate the excess amount.
The protection of the forced share (EPIC 2202)
This comes out of the net-estate, not the prior claims portion. This occurs when a spouse is not provided for in a will or the other spouse dies intestate.
2202(1) deals with intestacy
i. you have two choices, you can either take what you would get through intestate succession or your dower (if you are a widow)
1. Dower – applies only to women
a. Get a life estate in 1/3 of real property owned by husband during the marriage, this includes property that was sold unless dower rights are released.
ii. If you are a male surviving spouse you can only choose what you would get under intestate succession.
iii. The wives basically get an extra choice.
2202(2) deals with testacy
i. What this section is trying to do is balance the testator’s intent and to protect the surviving spouse.
ii. The spouse has three choices
1. abide by the will
2. take ½ of the amount through intestate succession reduced by ½ of the value of all the property already derived
3. widow can take dower
iii. Example – The husband dies and leaves a net estate of $500k and a life insurance of $100k. Wife is left nothing in the will. So, if the woman takes the second choice, then she gets $150k+1/2(350)=325/2=162.50-(100/2)=112.5k
Protection of after-married spouses (EPIC 2301)
This occurs when someone executes a will,, then gets married and then does not execute a new will. There are however three exceptions
i. It appears that the will was made in contemplation of marriage
ii. The will should be effective notwithstanding marriage
iii. A transfer outside of the will.
We say that the surviving spouse get what you would normally get under intestate succession.
You start with the net estate and deduct what is left to the children born before the marriage and not children of the surviving spouse.
If there are no children then just give the wife what she would get in intestate.
If there is a will, which gives to kids then you take the net estate and minus amount that is devised to kinds and figure intestate succession from that amount.
Protection of after-born (or adopted) children (EPIC 2302)
It is easy to cut kids out of the will. But there are a couple exception
