Wills & Estate Final Exam
Decedent Information Gathered from Family
- Bank accounts - Real estate - Stocks and bonds - Insurance policies - Income tax returns - Gift tax returns - Debts - Pension and profit sharing plans - Estate or trust - Any additional information regarding financial matters of decedent
Removal of Personal Representative
- Cannot resign without court's approval - Can be removed by court when it is best interest of estate * Mismanagement of estate * Disregarding court orders * Failure to perform 8 required duties * Breach of fiduciary duty * Bad character
Types of Charitable Trusts
- Charitable remainder trust: settlor or a beneficiary retains the income from the trust for a specific period (usually for life), after which the trust principal is given to a charity - Charitable remainder annuity trust: fixed amount of income is given to a beneficiary at least annually, and the entire remainder is given to charity
Crummey Powers
- Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968) - Gives beneficiary right to withdraw each year money contributed to trust - Withdrawal amount is amount of contribution to trust or $13,000 gift tax exclusion, whichever is less
Uniform Probate Code
- Designed to modernize and standardize laws relating to the affairs of decedents, minors, and certain others who need protection - Supervised administration: under continuing authority of the court - Unsupervised administration: occurs without court action unless requested by interested party
Donation of Anatomical Gift
- Donation by will - Donation by signed document - Donation by others
Anatomical Gift
- Donation of all or part of a human body that takes place after death - Uniform Anatomical Gift Act
Provisions
- Donor may revoke offer of anatomical gift - Designation of a gift of one organ does not restrict the use of other organs as donations after death - Hospitals are donees of anatomical gifts - Sale and purchase of organs prohibited - People acting in good faith cannot be held liable
How to Create Life Insurance Trust
- Establish irrevocable trust - Trustee purchases life insurance on settlor's life - Settlor contributes money each year to trust to pay life insurance premium - When settlor dies, proceeds of life insurance are paid to trust
Federal Courts Have no Jurisdiction to Probate Wills
- Federal cases involve in personam jurisdiction - Probate cases involve in rem jurisdiction
Steps Involved in Formal Probate Proceedings
- File petition with court - Give notice to interested parties - In testate estate, prove the will - Personal representative gives bond, unless waived - Court issues letters - File inventory
Protection of Decedent
- First determine if there is a will - If there is a will, turn over to probate court in the country in which decedent was domiciled * Specific time limit, usually 30 days - Failure to give will to probate court may be criminal offense
Steps Involved in Formal Probate Proceedings (Continued)
- Give creditors notice and deadline for making claims - Pay debts, taxes, and expenses - Make distribution to beneficiaries - File account with court
First Meeting
- If there is a will, determine whether personal representative is named in will - If there is no will, determine who should be personal representative - Make list of all living and deceased heirs, including full legal name and address - Make plan for keeping family informed
Uniform Transfers to Minors Act
- Kiddie tax: taxes unearned income of children under age 14 - Prevents using gifts to minors as tax shelters
Life Estate with Power of Appointment
- Leave property in trust to the surviving spouse for life and, upon the spouse's death, to whomever the surviving spouse appoints in a will - Can be done with either living trust or testamentary trust
Duties of Personal Representative
- Locate and read will, if there is one - Safeguard estate assets - Determine the decedent's heirs at law - Petition the court for probate of the will or administration of the estate - Gather and inventory all assets - Administer the estate
Registry of Probate
- Office where all probate activities are kept - In some states, this record keeping function is performed by the clerk of court
Ways to Distribute Property to Surviving Spouse
- Outright Gift - Life Estate with Power of Appointment - Credit-Shelter Trust - QTIP Trust
Duties of Personal Representative (Continued)
- Prepare tax returns - Settle all claims - Distribute the probate estate - Prepare the probate account - Obtain the final discharge
Charitable Trusts
- Property held by the trustee must be used for public charitable purposes - Cy pres doctrine: when charity ceases to exist, if court finds the settlor had a general charitable intent, the trust fund will be turned over to another closely related charity - Rule against perpetuties: charitable trusts can exist indefinitely, unlike private trusts
Uniform Laws
- Proposed by the National Conference of Commissioners on Uniform State Laws for adoption by state legislatures - Not required, only recommended - Not required, only recommended - Can be adopted in whole or in part
Pour-Over Trust
- Provision in a will in which the testator leaves a gift (often the residue of the estate) to the trustee of an existing living trust - Courts have conflicting views over validity of pour-over trusts - To avoid conflict, many states adopted Uniform Testamentary Additions to Trusts Act
Two Types of Implied Trusts
- Resulting trust: trust that is implied from the intentions of the parties that the person holding legal title is holding it for another's benefit - Constructive trust: trust that is created by operation of law when someone obtains legal title to property through fraud or other wrongdoing
Totten Trust
- Savings bank account opened in the name of the depositor as a trustee for another person - When depositor dies, money in the account belongs to the beneficiary
Uniform Simultaneous Death Act
- Sets forth rules to be followed when the passage of property depends upon the time of death, and no sufficient evidence can establish which person died first
Trust
- Settlor gives property to a trustee to hold in trust for the benefit of a beneficiary - Beneficiary also known as cestui que trust - Property held in trust known by sever names
Declaration of Trust
- Settlor transfers equitable title but retains legal title - Often called one-party trust
Conveyance in Trust
- Settlor transfers legal title to trustee - Setllor may retain or transfer equitable title
Purposes of Uniform Probate Code
- Simplify and clarify the law concerning the affairs of decedents, missing persons, protected persons, minors, and incapacitated persons - Discover and make effective the intent of a decedent in the distribution of property - Promote a speedy and efficient system for liquidating the estate of the decedent - Facilitate use and enforcement of certain trusts - Make uniform the law among the jurisdictions
Uniform Anatomical Gifts Act
- Testamentary donation of vital organs for medical research or transplant
Jurisdiction
- The power or authority of the court to hear or decide a case - In personam jurisdiction - Jurisdiction over the person - In rem jursidiction - Jurisidiction over the property
Sale of Real Property
- Title to real property owned by decedent vests in heirs immediately upon death - Title to personal property vests in the personal representative, who then distribute the property
Spendthrift Trust
- Trust containing a provision that protects the asset of the trust from creditors and from the beneficiary's reckless spending - Principal and interest of the trust cannot be reached by creditors until they are received by the beneficiary's reckless spending
Sprinkling (Spray) Trust
- Trust gives the trustee the power to determine how the trust's income or principal or both are to be allocated among a group or class of beneficiaries - Funds can be distributed according to need - Save income taxes of beneficiaries - Trustee has ultimate control
Testamentary Trust
- Trust property is bequeathed or devised in a will to a trustee for the benefit of a beneficiary - Takes effect after testator dies - Executor gathers assets and pays debt, taxes, and expenses - Executor then turns over assets of estate to trustee
Five Elements for a Valid Trust
- Trustor (also called settlor or grantor) - Trust property - Valid trust purpose - Trustee - Beneficiary
Right-To-Die Law
- U.S. Supreme Court first discussed in 1990 in Cruzan v. Director, Missouri Department of Health - Court recognized the common law right of a competent individual to refuse medical treatment
Qualified Terminable Interest Property (QTIP) Trust
- Used when the settlor wants to pass the entire principal of the trust to someone other than the surviving spouse, but wants the spouse to have the income from the trust for life - Decision to use QTIP trust made after death of decedent
Trust Formalities
- Usually written documents - Parol (oral) trusts dealing with personal property generally
Two Occasions When Court May be Petitioned to Open Safe-Deposit Box
- Will cannot be located and it is suspected it might be in safe-deposit box - Decedent shared box with another person, and that person needs something from box
Grounds on Contesting a Will
- Will not properly executed - Testator not of sound mind - Fraud
Advanced Directives
- Written instruments with directions for future medical care in the event a person is unable to speak for him or herself - Constitutional right - E.g., living will, advanced medical directive, power of attorney, health-care proxy
Executrix
A female nominated in a will of a decedent to carry out the terms of the will; a personal representative of an estate.
Legal Title
A form of ownership giving the trustee the right to control and manage the property for another's benefit
Administrator
A male appointed by the court to administer the estate of an intestate decedent.
Ancillary Administration
Administration of an estate in a state other than where the decedent was domiciled but where the decedent owns property
Heirs
All persons who inherit property from decedent's estate, whether testate or intestate
Administrator Ad Litem
Appointed solely for the purpose of a lawsuit other than a will contest
Health-Care Proxy
Authorize agent or surrogate to make medical treatment decisions for the principal in the event of the principal's incapacity
Unsupervised Administration
Begins formally but becomes less supervised by court once personal representative is appointed
Irrevocable
Cannot be revoked or changed by the settlor
Letter of Administration
Certificate of appointment of personal representative in intestate estate
Letters Testamentary
Certificate of appointment of personal representative in testate estate
Surety Bond
Contains the signature of individuals or insurance companies (sureties) that promise to pay bond if fiduciary does not perform duties
Petition for Administration With the Will Annexed
File if someone other than the person nominated as personal representative is the petitioner seeking the appointment
Protection of Property
File inventory of estate with court
Patient Self-Determination Act
Health-care facilities that participate in Medicare and Medicaid are required to advise patients of their right to sign advance directives for health care decisions
Petition for Administration
Intestate cases
Executor
Male nominated in a will by a testator to serve as personal representative and carry out the directions in the will
Probate Court
Many states establish separate court and empower it with probate jurisdiction
Registry of Deeds
Office where deeds, mortgages, and other real estate documents are kept
Public Administrator
Official appointed to administer the estate of an intestate decedent when no one appears who is entitled to act as administrator
Surrogate Decision-Making Laws
Permit a close relative or friend to make health-care decisions for patients who have no advance directives
Beneficiary
Person for whose benefit trust was created
Heirs at Law
Persons entitled to inherit from someone under the law of intestate succession
Durable power of attorney
Power of attorney with language indicating that the power is to survive incapacity or become effective when the principal becomes incapacitated
Marital Deduction
Property passing from decedent to surviving spouse is not taxable
Probating a Will
Providing or establishing before the probate court that document being offered for official recognition as the will of the decedent is in fact genuine
Administering an Estate
Settling and distributing the estate of a deceased person
Revocable
Settlor has the right to revoke or change the terms of the trust prior to death
Charitable Remainder Trust
Similar to annuity trust but income beneficiary must receive a fixed percentage of the value of trust property
Outright Gift
Surviving spouse has full access and control to trust property
Administrator Pendente Lite
Temporarily appointed to preserve assets of estate when there is a will contest
Petition for Probate
Testate cases
Equitable Title
The right of the party who holds the equitable title or beneficial interest to the benefits of the trust.
Supervised Administration
Under continued surveillance of court
Voluntary Executor
Undertakes the informal administration of a small estate if there is a will
Voluntary Administration
Undertakes the informal administration of a small estate if there is no will
Power of Attorney
Written instrument authorizing another person to preform certain specified acts on one's behalf
Bond
Written promise by the personal representative to pay the amount of the bond to the court if the representative does not faithfully perform his or her duties
Administratrix
a woman who has been appointed by the court to settle an estate
Settlor
creator of a trust
Trustee
- A person of trust who holds property in trust for the benefit of one or more beneficiaries - A fiduciary (trusted person) required to perform all trust duties according to the terms of the trust and law with loyalty, honesty, and good faith
Executor De Son Tort
- Acts like an executor or administrator, but without legal authority - Many states refuse to recognize - Other states recognize only to make person liable for assets intermeddled
Priority of Decedent's Debts
- Administration expenses - Funeral expenses - Debts and taxes with preference under federal law - Medical expenses from last illness of decedent - Debts and taxes with preference under state law - All other claims
Administrator With the Will Annexed
- Also called administrator cum testamento annexo - Appointed to adminster a testate estate in which no executor is nominated, or named executor declines the nomination or dies or is disqualified before being appointed
Administrator of Goods not Administered
- Also called administrator de bons non - Appointed when an administrator does bot fully perform the task of settling an estate - Uniform Probate Code uses the title "successor personal representative
Implied Trust
- Also called involuntary trust - Operation of law rather than express intent of settlor - Has no writing requirement
Credit-Shelter Trust
- Also known as A-B trust, bypass trust, exemption equivalent trust - Deceased spouse's estate passes to a trust rather than to the surviving spouse - Reduces the possibility of the surviving spouse's estate being taxable when he or she is deceased
Living Will
- Also known as directive to physician, medical directive, health-care declaration - Written expression of one's wishes to be allowed to die a natural death and not be kept alive by heroic measures or artificial means - U.S. Living Will Registry
Informal Proceedings
- Also known as independent probate - May be followed in most states when someone dies owning assets below a specific value or when there is no reason to have the court supervise all aspects of the estate's settlement
Living Trust
- Also known as inter vivos trust - Become effective during settlor's lifetime - May be revocable or irrevocable
Formal Proceedings
- Also known as probate in solemn form - Conducted before judge with notice to interested persons
Express Trusts
- Also known as voluntary trust - Created in explicit terms - Either written or oral - Must include four elements - Competent Settlor - Provision for trustee - One or more beneficiaries
Contesting a Will
- Appearance - File affidavit of objection or caveat, depending on state law
Special Administrator
- Appointed to handle the affairs of an estate for a limited time for a special purpose - Duties are to collect and preserve the assets of the estate until the executor or administrator is appointed
First Meeting (Continued)
- Attorney explains probate process to family - Determine if any assets require immediate attention - Paralegal records pertinent information gathered from family
Personal Representative
- Authorized to administer the estate of the deceased whether the deceased died testate or intestate
