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Wills, Trusts, and Estates
WMU-Cooley Law School
Foster, Dustin S.

Wills, Trusts, and Estates OUTLINE – Michaelmas 2009

I. WILLS AS A SUBJECT

A. The Law of Wills:

1. There is no federal code; statutes and common law determine the law of wills.
2. Michigan’s version of the Uniform Probate Code is called Estate and Protected Individual Code (EPIC), and is very typical.
3. What law applies? 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.

B. Four Underlying Principles Relating to Estate Distribution:

Courts like to give deference to a property owner’s intent; courts want to honor the property owner’s intent because the property owner has rights (within limits).

a. What kind of property do we own. Personal Property and Real Property. Personal property can be broken into tangible and intangible personal property.
b. Money cannot be left in a will for an unlawful purpose.
c. Property owners cannot violate public policy.
d. Eyerman v. Merchantile Trust Case: (will cannot call for illegal or anything against public policy)
i. Facts: Decedent’s will says to tear down the house and sell the land (with no reason left in the will). Two groups upset were the neighboring property owners. Neighbors want to prevent the house from being destroyed.
ii. 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 decedent provided a reason for her intent, the outcome may have been different.
iii. Definition of Public Policy: We will know it when we see it; it contradicts the morals of the time. Examples would include something that is arbitrary and capricious OR wasting of an asset with no good reason. TO FIND FOR PUBLIC POLICY, you must show that someone is going to be harmed.
iv. General Rule: Courts will allow a deceased person to direct their property in death; if they can direct the property in life, they can do it in death. Courts will defer to a decedent’s intent in terms of where they want their property to go after death.
v. Exception – Public Policy Exception: If it goes against public policy or is illegal (i.e. illegal, unconstitutional, or some other reason backed up by statute, case law, etc.), decedent’s intent is against public policy and will not be honored. Because it was wasteful and hurt the neighbors, they could not do this.
vi. Note: While living, a person may manage, use, or dispose of his property with fewer restraints than a decedent by will; the transfer of property in life is more broad; there are more restrictions in death.

The decedent is not available to testify (dead), so there is no expert on his/her intent, i.e. no expert to tell the court what the decedent intended.

a. Courts are suspicious of oral testimony of testator’s intent.

Courts will consider other reliable evidence to determine D’s intent.

a. The court must rely upon reliable evidence to determine what a person’s intent is.
i. The most reliable evidence is a person’s will.
ii. Beyond that, the court may look outside the will for additional evidence in certain situations.

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. The presumptions will be based on statutes or common law.

C. Property and Property Rights:

Types of Property:

a. Personal Property (two types):
i. Tangible Property: Car, Clothing, I-Pod, Computer
ii. Intangible Property: Bank Accounts, Patent Rights, Contract Rights, Retirement Plans, Life Insurance.
b. Real Property: House, Condo

Rights to Property:

a. Sell it
b. Give it away
c. Difference between a person’s ability to control disposition and use of property intent in life and after death:
i. In death, you are more restricted on how you can handle your property.
ii. If you have not designated a beneficiary, the state will step in via the laws of intestacy.

II. BASIC TERMINOLOGY

A. Probate:
1. Definition: The process of “proving” a will, or having it declared valid and effective following the death of the testator. It is the re-titling of assets.
2. Other Names for It: Testacy Proceeding.
3. EPIC 1107(k): A testacy proceeding is a proceeding to establish a will or determine intestacy.

B. Personal Representative:
1. Definition: 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.
2. 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.
3. 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.

C. Estate:
1. Definition: (Property of the decedent) 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 the property the decedent owns and has a right to at the time of death.
2. Note: 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, such as life insurance proceeds and property held in joint tenancy.
3. 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.
4. EPIC 1106(s), Property: “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.

D. Distributable (Net) Estate:
1. Definition: The amount that is available for distribution after any bills or priority claims are paid; you start with the gross estate and subtract any priorities to get the net estate.

E. Testate (Testacy):
1. Definition: To die testate means that the decedent has died leaving a will.

F. Testator:
1. Definition: A testator is 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.
2. Note: A decedent is a person who dies, and whether they are also a testator depends on whether they left a will or not.
3. EPIC 1107(l): “Testator” includes an individual of either sex.

G. Will:
1. Definition: A will is an instrument or declaration by which one directs the disposition of one’s property after death; document that attempts to distribute an estate. No just passing property, can be appointing people.
a. Note: A will is, by definition, ambulatory, or subject to change until the death of the testator.
2. Other Names for It: Testament
3. EPIC 1108(b): “Will” includes, but is not limited to, a codicil and a testamentary instrument that appoints a personal representative, revokes or revises 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.

H. Devise (Devisee – person receiving the property):
1. Definition of Devise: A devise is a gift of real property under a will.
a. Bequest: A gift of personal property under a will, which is also known as a legacy.
2. Definition of Devisee: A devisee is a will beneficiary, who receives a gift of real property or other benefit under a will or trust.
a. Legatee: A legatee is a will beneficiary, who receives a gift/bequest of personal property under a will or trust.
3. 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.
4. 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.

I. Intestate (Intestacy):
1. Definition of Intestate: To die intestate means to die without a valid will.
2. Definition of I

6. Length of Administration Process: It usually takes a long time.
a. Find All the Property: The personal representative must find and collect all of the decedent’s property and determine what’s in the estate and what’s not (refer to step 5 and 6).
b. Ancillary Proceeding: Some property may be in another state, and the state where decedent died doesn’t have jurisdiction over it, so the other state will be provided the letters of administration, and the property will be collected.
c. Paying Bills: The personal representative has to pay the decedent’s bills out of the estate. For known creditors, send them a formal letter and pay the bill. For unknown creditors, post a notice in the newspaper telling everyone they have 4 months to make a claim for money owed to them. If they don’t file a claim within the time period, they lose their chance to collect.
d. Pay Estate Taxes
e. Render an Accounting: Lay out the assets and the debts; with whatever is left, it must be determined who it goes to.

E. Step Five: What Goes into the Estate?
1. Gross Estate: The estate includes anything that is owned by the decedent at the time of death.
2. Probate Estate: The probate estate does not include ALL the property that passes at the testator’s death.
a. Non-Probate Assets are not part of the probate estate, i.e. life insurance proceeds, property held with survivorship, like a joint tenancy or tenancy by the entirety.
3. Refer to Problems 1 and 2 from Class One for examples of what goes in and what stays out of the probate estate.

F. Step Six: Will Substitutes (non-probate assets) – What Does NOT Go into the Estate?
1. Right of Survivorship, i.e. joint tenancy or tenancy in the entirety.
a. Your right extinguishes when you die, and it goes to the other person.
b. This never comes into the estate.
c. Times you will see this is with real property and bank accounts.
2. Death Benefit and Life Insurance Policy:
a. If the death benefit is payable to someone other than the deceased or the estate, it is NOT part of the probate estate.
3. Retirement Account/Plans:
a. If you designate another person (not your estate) as a beneficiary, it won’t end up in the probate estate.
b. An example is an employment benefit or IRA with a named beneficiary.
4. Revocable Trusts:
a. People usually create trusts for the purpose of keeping it out of the probate estate; it is out of the eye of the public and serves as a will substitute.
b. Where you put your property in a trust but retain the right to revoke, a completed gift has not been made. Because you have the right to revoke, you have a reverter interest and the thought is that once you die, your right to revoke is extinguished and therefore the property is erased from your probate estate for probate purposes.
5. POD – payable on death, will be paid upon death.
6. Inter Vivos Gifts:
a. Anything you give away during your life is not part of the probate estate because you no longer own it when you die.
7. Gift Causa Mortis:
a. Gift causa mortis is not a will substitute, but acts like one because it takes the property out of the probate court.
b. Definition: A gift causa mortis is a gift made in contemplation of death that is revocable until the death of the donor and is automatically revoked (or remains revocable) upon recovery.
c. Elements: Note that it is the fourth element which makes it different from a regular, valid gift.
i. Donative Intent: Intent to make a gift
ii. Delivery
· Actual or Constructive