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Wills and Estates
WMU-Cooley Law School
Torielli, Gina M.

Wills, Estates, and Trusts – Spring 2011 Outline                        Professor Torielli
 
Basic Terminology
·         Probate
o    The process of “proving” a will, or having it declared valid and effective following the death of the testator
o    Also known as a testacy proceeding
o    EPIC §1107(k)
§  A testacy proceeding is a proceeding to establish a will or determine intestacy
·         Personal Representative
o    The person appointed by the probate court to administer the estate of a decedent
§  It is the executor of a will or administrator of an intestate estate
§  In other words, the personal representative is assigned to stand in the place of the decedent
o    Duties
§  The personal representative collects and inventories the estate’s assets, invests or manages them to the extent necessary, gives all required notices to interested parties, sees that taxes are paid and creditor’s claims are satisfied or rejected, and distributes the remaining assets to legatees or heirs
o    EPIC §1106(n)
§  “Personal Representative” includes, but is not limited to, an executor, administrator, successor personal representative, and special personal representative, and any other person who performs substantially the same function under the law governing that person’s status
·         Estate
o    Either the total property of a decedent that passes by will or intestate succession, or the nature and extent of an interest in real or personal property
§  In other words, it is all property the decedent owns and has a right to at the time of death
o    The estate does not necessarily encompass all the property that passes at the testator’s death
§  Usually only the probate estate is included
§  It thus excludes so-called non-probate assets
·         EXAMPLES
o    Life insurance proceeds
o    Property held in joint tenancy
o    EPIC §1104(b)
§  “Estate” includes the property of the decedent, trust, or other person whose affairs are subject to this act as the property is originally constituted and as it exists throughout administration
o    EPIC §1106(s)
§  “Property” means anything that may be the subject of ownership, and includes both real AND personal property OR an interest in real OR personal property
·         Distributable (Net) Estate
o    The amount that is available for distribution after any bills or priority claims are paid
o    You start with the gross estate and subtract any priorities to get the net estate
·         Testate (Testacy)
o    To die testate means that the decedent has died leaving a will
·         Testator
o    A person who has died leaving a valid will
§  The term is used also to refer to one who has executed a will but is still alive
o    A decedent is a person who dies, and whether they are also a testator depends on whether they have left a will or not
o    EPIC §1107(l)
§  “Testator” includes an individual of either sex
·         Will
o    An instrument or declaration by which one directs the disposition of one’s property after death
§  Document that attempts to distribute an estate
§  A will is, by definition, ambulatory, or subject to change until the death of the testator
o    Also known as a testament
o    EPIC §1108(b)
§  “Will” includes, but is not limited to, a codicil and a testamentary instrument that appoints a personal representative, revokes or reviews another will, nominates a guardian, or expressly excludes or limits the right of an individual or class to succeed to the decedent’s property that is passing by intestate succession
·         Devise (Devisee)
o    Devise
§  A gift of real property under a will
§  Bequest
·         A gift of personal property under a will, which is also known as a legacy
o    Devisee
§  A will beneficiary, who receives a gift of real property or other benefit under a will or trust
§  Legatee
·         A will beneficiary, who receives a gift/bequest of personal property under a will or trust
o    EPIC §1103(m)
§  “Devise” means, when used as a noun, a testamentary disposition of real or personal property and, when used as a verb, to dispose of real or personal property by will
o    EPIC §1103(n)
§  “Devisee” means a person designated in a will to receive a devise
§  For the purposes of Article II, for a devise to a trustee of an existing trust or to a trustee under a will, the trustee is a devisee and a beneficiary is not
·         Intestate (Intestacy)
o    Intestate
§  To die intestate, means to die without a valid will
o    Intestacy (Intestate Succession)
§  Intestacy refers to the passage at death of the property of a person who has died without a valid will
o    The rules of intestate succession (or intestacy) are set out in each state’s probate code
§  Intestacy laws provide a statutory estate plan, generally intended to pass property as the average intestate would have wished
o    EPIC §2101(1)
§  Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this act, except as modified by the decedent’s will
·         Decedent
o    A person who has died without a will
§  EXAMPLE: a person who has died intestate
o    Deceased
§  A person who dies with a will or where it is unsure if they have a will
·         Heir
o    A person who is entitled to another’s real property by intestate succession
§  Take under the laws of intestacy where there is no will or the property is not included in the will
o    Those entitled to another’s personal property are the intestate’s distributes or next-of-kin
§  Michigan does not make the distinction between real and personal property
·         Many modern statutes use the term “heir” to designate the intestate takers of any type of property
o    EPIC §1104(m)
§  “Heir” means, except as controlled by §2720, a person, including the surviving spouse or the state, that is entitled under the statutes of intestate succession to a decedent’s property
·         The “heirs” must survive the decedent in order to take under the laws of intestacy
o    Heir Presumptive
§  A person who would inherit from another if the latter died intestate
§  This is what the heir is called when the decedent is still alive
o    Heir Apparent
§  One who certainly will inherit when and if another dies intestate, needing only to survive the intestate
·         Descendant / Issue
o    Issue refers to a person’s descendants, consisting of one’s children, grandchildren, and so forth down through later generations
§  Descending line
o    Issue never includes relations by marriage, although it does include adopted and illegitimate descendants
§  There is a difference between heirs and issue because a spouse can be an heir, but not an issue
o    EPIC §1103(m)
§  Descendant means, in relation to an individual, all of his/her descendants of all generations, with relationship of parent and child at each generation being determined by the definitions of child and parent obtained in this act
·         Ancestors
o    A person’s parents, grandparents, and so forth up through the prior generation
o    A person related to another only by marriage is not considered an ancestor
 
 
Wills as a Subject
The Law of Wills
·         There is no federal code – statutes and common law determine the law of wills
·         Estates and Protected Individual Code (EPIC)
o    Michigan’s version of the Uniform Probate Code
·         What law applies?
o    In general, the law that is applied to the decedent’s estate is the law of the state where the decedent was domiciled at the time of death
 
Four Underlying Principles Relating to Estate Distribution
1.       Courts like to give deference to a property owner’s intent
o    Courts want to honor the property owner’s intent because the property owner has rights (within limits)
§  Money cannot be left in a will for an unlawful purpose
§  Property owners cannot violate public policy
o    Eyerman v. Mercantile Trust
§  Facts
·         Decedent’s will says to tear down the house and sell the land
o    With no reason as to why left in the will
§  Holding
·         This is against public policy
·         Rights of the decedent are balanced against public policy to not leave a gap in the neighborhood and depreciate adjoining property values
·         It is a waste of an asset, with no apparent good to come out of it
·         If the decedent provided a reason for her intent, the outcome may have been different
§  Definition of Public Policy
·         We will know it when we see it
o    It contradicts the morals of the time
·         EXAMPLE: something that is arbitrary and capricious, OR wasting of an asset with no good reason
§  General Rule
·         Courts will allow a deceased person to direct their property in death
o    If they can direct the property in life, they can do it at death
·         Courts will defer to a decedent’s intent in terms of where they want their property to go after death
§  Exception – Public Policy Exception
·         If it goes against public policy, decedent’s intent is against public policy and will not be honored
o    EXAMPLE: illegal, unconstitutional, or some other reason backed up by statute, case law, etc.
§  While living, a person may manage, use, or dispose of his property with fewer restrictions than a decedent by will
·         The transfer of property in life is more broad
·         There are more restrictions in death
2.       The decedent is not available to testify (dead), so there is no expert on his/her intent
o    EXAMPLE: no expert to tell the court what the decedent intended
o    Courts are suspicious of oral testimony of the testator’s intent
3.       Courts will consider other reliable evidence to determine the decedent’s intent
o    The court must rely upon reliable evidence to determine what a person’s intent is/was
§  The most reliable evidence is a person’s will
§  Beyond that, the court may look outside the will for additional evidence in certain situations
4.       When there is no reliable evidence, or the court doesn’t feel confident due to ambiguity in the will, then the court has to make presumptions
o    The presumptions will be based on statutes or common law
 
Property and Property Rights
·         Types of Property
o    Personal Property
§  Tangible Property
·         EXAMPLE: car, clothing, laptop
§  Intangible Property
·         EXAMPLE: bank accounts, patent rights, contract rights, retirement plans, life insurance
o    Real Property
§  EXAMPLE: house, condo
·         Rights to Property
o    A person can …
§  Sell it
§  Give it away
o    Difference between a person’s ability to control disposition and use of property intent in life and after death
§  In death, you are more restricted on how you can handle you

d to this set up
§  Holding
·         Court said that this looked like the decedent had a plan
o    There was clear and convincing evidence of his donative intent, constructive delivery, implied acceptance, fear of imminent death, and then eventually dying from the same thing he feared
§  Courts generally dislike taking testimony regarding intent and usually defer to the valid, written will, as opposed to other language
·         But, the court will sometimes take into consideration the wishes of the decedent
o    Refer to class one problem 3
·         Step 7 – Payment of Claims
o    The following statutes tell us what gets paid out and in what order
§  EPIC §3805 – Creditor’s Claims
·         If the applicable estate property is insufficient to pay all claims and allowances in full, the personal representative shall make payment in the following order of priority
o    Each level must be paid in full before you move to the next level
o    Order of Priority
1.       Costs and Expenses of Administration
·         This ensures that someone will make this process happen
·         EXAMPLE: court fees, legal fees, accountant, etc.
2.       Reasonable Funeral and Burial Expenses
3.       Homestead Allowances
·         Protection for the immediate family
·         For support of the dependent surviving spouse and/or minor children
·         For the surviving spouse and/or minor children
o    $15,000
§  If there is no spouse, the children split the allowance
4.       Family Allowances
·         For support of the dependent surviving spouse and minor children while estate is in probate
·         Up to $18,000 annually
5.       Exempt Property
·         For surviving spouse and/or children
·         $10,000 net of encumbrances
6.       Debts and Taxes with Priority under Federal Law
7.       Reasonable and Necessary Medical and Hospital Expenses of the Decedent’s Last Illness
·         Including a compensation of the person/people who attended to the decedent
8.       Debts and Taxes with Priority Under other Laws of this State
9.       All Other Claims
·         Creditors get paid before the devisees/heirs get any money
·         EXAMPLE: Visa bill, judgment from a successful lawsuit
·         The remainder is distributable net estate
·         A preference shall not be given in the payment of a claim over another claim of the same class
o    A claims due and payable is not entitled to a preference over a claim that is not due
o    EXAMPLE: if there are three people in one class, and only $30,000, each would get 1/3, or $10,000
·         Even if a trust is not in your probate estate for division to devisees, it may be pulled in to cover unpaid costs
o    EXAMPLE: cover the deficiency though EPIC §7501
§  EPIC §7501 – Claims Against a Decedent’s Revocable Trust
·         The property of a trust where settlor has given himself the right to revoke the trust is subject to all of the following
o    BUT ONLY to the extent that the settlor’s property subject to probate administration is insufficient to satisfy the following expenses, claims, and allowances
§  The administration expenses of the settlor’s estate
§  An enforceable and timely presented claim of a creditor of the settlor
·         Including a claim for the settlor’s funeral and burial expenses
§  Homestead, family, and exempt property allowances
 
Intestacy
·         When does intestacy apply?
o    EPIC §2101 – Intestate Estate
§  Any part of the decedent’s estate not effectively disposed of by a will passes by intestate succession to the decedent’s heirs as prescribed in this act
·         UNLESS modified under the decedent’s will
§  The law will distribute to the appropriate people under intestacy
·         UNLESS there is a negative bequest
o    A negative bequest allows a person to disinherit a person who would normally inherit under the laws of intestacy
o    EXAMPLES OF SITUATIONS WHERE INTESTACY IS APPLIED
§  Where there is no will
§  When there is a will that doesn’t pass all the property
·         Which can be avoided by adding a residuary clause
§  When there is some part of the will that is deemed ineffective
§  When there is a negative bequest
o    The state legislature has determine what the average person would have wanted to do with their estate if they died