CE 102-104 - Probate (Answer Key)

CE 102 Wills, Trusts, and Probate Administration I & CE 103 Wills, Trusts, and Probate Administration II & CE 104 Wills, Trusts, and Probate Administration III

Wills

Your will is an essential part of your estate plan. No matter what else you do to plan your estate, your will serves purposes that no other estate planning document can fill. Through your will, you can

Designate who will care for your minor children and their money
Detail your preferences for your funeral and the disposition of your body
Plan how your estate will pay your bills
Provide a backup plan in case something is accidentally left out of your estate plan or a bequest fails

Deciding Whether a Will Serves Your Needs

But what I’m asking is whether your estate plan can be managed with just a will. If you don’t have estate tax concerns, aren’t concerned about probate or having your will made part of public court record , and simply want your estate to be distributed to your heirs when you die , a simple will may be all you need.

Assets not covered by a will

Insurance, annuities, and retirement accounts with designated beneficiaries

Property with a right of survivorship

Joint bank accounts

Transfer-on-death accounts and titles

Exploring the Types of Wills

The statutory will

Statutory wills are often made available as fill-in-the-blanks forms.

The handwritten (holographic) will

A holographic will is written entirely in your handwriting and is signed by you, but isn’t witnessed .

A cousin of the holographic will is the oral will, sometimes called a nuncupative will , where there is no written document at all.

A will of your own

As a general rule, when you create a will, it’s sensible to

Follow state law formalities for the execution of your will. Otherwise, your will may be rejected by a probate court.
Whenever possible, keep your estate plan simple. Don’t complicate your will unless you’re truly convinced that the added complexity is necessary to your estate plan.

Other wills

But you can do a lot more with your will:

Testamentary and pour-over wills : You can create a trust with your will or direct your estate to put assets into a trust.
Joint wills : You can create a joint estate plan with your spouse and may also be able to make your joint estate plan legally binding even after your death.
Self-proving wills : You can add an affidavit to your will to simplify the process of submitting it to probate

Elements of a Will

To be effective, your will must describe who you are , what assets you have , who you want to receive your assets , and how your assets are to be divided . Beyond the basic elements, your will appoints a personal representative to administer your estate and can also appoint caregivers for your minor children.

Who you are

What are your assets

Part of the estate planning process is figuring out what you own. Your possessions will typically include

Personal assets
Real Estate
Insurance policies and annuities
Retirement plans

Who are your beneficiaries

You need to also consider the circumstances of your heirs. Young children may benefit from having their inheritances left to them in a trust , providing for their support and payment of educational expenses over the years. An heir who doesn’t manage money well may benefit from a spendthrift trust . An heir who receives public assistance due to a disability may benefit from a special needs trust .

What are your bequests

Avoid failed bequests

Your bequests may fail in one of two ways:

Your heir may die before you or may decline an inheritance.
You may leave a bequest of property that is no longer part of your estate when you die.

Creating a moral obligation or binding inheritance

Reference to a tangible personal property memorandum

Some states allow you to refer your will to an external document that lists items of personal property and who inherits them. This memorandum allows you to leave your household furnishings and personal possessions to specific people, change the list to add new items , remove things you no longer possess or change who gets what , without changing your will.

What happens with the residue (if any) of the estate

A residuary clause describes how those leftovers are to be distributed to your heirs. For example, “The residue of my estate is to be divided equally between my children.”

Payment of debts by the estate

Your estate is obligated by law to pay your debts . Your representative provides notice to your creditors , consistent with the laws of your estate, those creditors submit claims for payment, and your estate pays those debts found to be valid.

Describing your funeral and burial wishes

Designating a personal representative

Your representative also called an executor manages your estate in the probate court. This role is important and sometimes difficult, so you need to choose somebody who has the necessary interest and qualifications to administer your estate. You want somebody mature , financially responsible , and trustworthy .

Designating a guardian for any minor children

Your signature

After you finish drafting your will, you must sign and date it.

Executing a Valid Will

Choose the right witnesses

If someone challenges your will, your witnesses may be crucial to establishing the authenticity of your will and signature. What does that mean? It means that you want your witnesses to be

Credible
Available
Disinterested

Signing and executing your will

Although the specific requirements for execution are different from state to state, I suggest taking a conservative approach to executing your will. If you want to go a bit overboard:

Consider using three witnesses instead of two and make sure that they’re all legal adults.
Don’t use your heirs as witnesses.
Have a signing ceremony where all your witnesses in front of you and each other and your notary.
At your signing ceremony, complete a self-proving affidavit before a notary.

Trusts

What’s a Trust and Why You Need One

Any person who creates a trust is called the grantor . The grantor may also be referenced as the settlor or the donor of the trust. For example, when you create a revocable living trust. you are the grantor. You then transfer assets into the trust, which is managed by the trustee for the benefit of your beneficiaries .

Benefitting from Trusts

Not everybody needs a trust. Probate is often quite simple for smaller estates , and privacy concerns are often overblown. If you can achieve your estate planning goals with a simple will , you may want to stop there. As you review your estate plan, if your circumstances change, you’re free to create and execute a trust .

They’re flexible

You can provide for your incapacity

You can avoid taxes

Trusts can be a powerful tool to avoid estate taxes. Common trusts include

The marital deduction trust (A/B trust)
The Crummey trust
Irrevocable life insurance trusts (ILITs)

You can avoid probate

When you leave your estate to your heirs with a will or don’t create an estate plan at all, a probate court distributes your estate. Using a trust provides some significant advantages:

When you leave assets by will, your heirs have to wait months for the probate process to finish before your bequests are distributed to them. With a trust, your heirs may receive their bequests immediately.
If you operate a business, your trust can become effective during your incapacity or immediately upon your death, and your trustee can be authorized to immediately start managing your business affairs. With probate, your business may languish for weeks or months while your heirs petition the court to appoint somebody to manage your interests.
If you’re in an estate where your representative and the attorney for the estate are paid a percentage of the value of your estate, having major assets held by your living trust may significantly reduce the cost of probate.
You can usually avoid having a public probate record of assets that you distribute by trust.

A trust can help protect your privacy

A trust doesn’t need to go through probate. Thus, in most cases, the terms of the trust are never made part of a public record .

Selecting a Trustee

Questions to consider when selecting a trustee include

Is the person responsible with money and capable of managing money and other assets?
Is the person willing and able to carry out the terms of your trust?
If the person trustworthy and fully prepared to manage the assets of the trust solely for the benefit of the beneficiaries?
Does the person have time to manage your trust?
Is the person willing and able to provide regular accountings to the beneficiaries, consistent with state law and the terms of the trust?

Choosing Your Beneficiaries

Transferring Assets into Your Trust

A trust may be created to hold a specific asset , such as a house or life insurance policy. If maybe more general , created to hold whatever assets you transfer over to the trust. But whatever the design and purpose of your trust, for any assets you intend to include in the trust, you should define the powers of the trustee and how you ultimately want those assets to be distributed to your beneficiaries.

Staying in control

With many trusts, you may retain significant control over trust assets even after they’re transferred into your trust. If your trust is revocable <\u>, one obvious power you retain is the right to revoke the trust.

Giving (or limiting) your trustee powers

When you draft your trust, you may give the trustee very broad powers over the trust’s assets, or you may grant narrow powers. Powers commonly granted within a revocable living trust include

The power to manage and sell property, including real estate
The power to rent or lease real property
The power to borrow money for the benefit of the trust
The power to invest the assets of the trust
The power to litigate claims on behalf of the trust
The power to compensate professional, such as lawyers, accountants, and property managers who provide services to the trust
The power to make special distributions of the trust’s assets for the benefit of the beneficiaries (for example to help with a medical emergency)
The power to make certain gifts

Cancelling the trust

When you create a trust, you will create it either as a revocable trust or as an irrevocable trust.

Distributing trust assets

As with your will, when you draft your trust, you get to pick where your money goes. You may impose limits on gifts, such as when trust income or assets will be distributed to your beneficiaries.

Putting Your Trust into Effect

Once you have drafted your trust, you must execute it. That is to say, you need to sign and date it in front of witnesses to make it legal and effective . I suggest having a signing ceremony where the following people are present:

You
Your chosen trustee
Three witnesses (in most states, two will suffice, but having an extra witness never hurts)
A notary public

When the Trust Ends

You should provide for how the trustee will distribute any remaining assets of your trust after distributing all specific gifts. Even if you don’t think your trust will have any remaining assets, the unexpected can happen.

Probate Administration

Your estate is the total amount of property you own at the time of your death. Probate is the process through which a court confirms the validity of your will and supervises the settlement of your estate .

Navigating Probate Court

The probate court’s actions include

Receiving your will and entertaining any challenges to its validity
Appointing a personal representative (also known as an executor) for your estate
Supervising the actions of your representative
Requiring that legally interested parties (your legal heirs) are notified of the proceeding
Settling disputes between people who claim to be entitled to your assets
Overseeing the payment of debts owed by your estate
Approving the distribution of your estate’s assets to your heirs

Discovering How Estate Size Affects Probate Procedures

Probate for small estates

Some estates have very limited assets, perhaps just a few thousand dollars, so it may be possible to seek disposition of personal property without administration by a probate court. The person who pays the final expenses of the estate, such as medical bills or funeral costs, submits a simple petition to the court requesting reimbursement, along with

The decedent’s death certificate
Paid bills claimed for reimbursement
Documentation describing the asset to be released
A copy of the decedent’s will (if one exists)

Probate for larger estates

Large estates continue to require formal administration , in which a personal representative is appointed to act on behalf of your estate. This process typically takes between six months and two year , depending upon the size and complexity of your estate.

Understanding the Role of the Personal Representative

The personal representative is typically required to be a legal resident of the state where your estate is probated or to be a close relative. The personal representative is often referred to as the executor or executrix of your estate. Your representative is required to act in the best interest of your estate and can be held financially responsible for mismanaging the assets of your estate.

The following sections describe some of the representative’s responsibilities in more detail.

Giving notice to legal heirs

Collecting property for distribution

Notifying and paying creditors

Distributing bequests

Hiring a Lawyer

In many probate cases, the lawyer’s role is largely advisory. In more complicated cases, the lawyer may have to help with court proceedings or defend against a will contest. Services the lawyer typically provides include

Helping your representative understand her duties
Helping your representative understand and interpret the provisions of your will
Drafting deeds and conveyances required by the state

Overseeing Probate: The Judge

The probate court judge appoints your representative, oversees the probate proceedings , and approves the distribution of assets from your estate. If any motions are brought before the court, such as a request for an interpretation of the language of your will, or if a will contest occurs, the probate court judge presides over the litigation .

Avoiding Will Contests

When a will contest succeeds, the most common outcomes are for the court to

Disallow part of your will, but leave the remaining provisions in effect
Disallow your will in favor of a prior will
Disallow your will and treat you as having died intestate (with not will)

Validity

The first class of challenge to a will claims that your will isn’t valid. The most common claims relate to the execution of the will:

You did not sign the will.
The will was improperly witnessed.
The will was not properly notarized.

Another set of claims relate to the validity or authenticity of the will itself:

The will is a forgery.
The will submitted to the court isn’t your most recent will. If proved valid, the newer will replaces the older will.

Mental incapacity

The most common allegations of incapacity are that

You weren’t mentally competent when you signed your will.
You were under the influence of alcohol or drugs when you signed your will.

Undue influence

When evaluating allegations of undue influence, a court’s considerations include

Your relationship with the person alleged to have exerted undue influence
What motive may have existed to apply undue influence
What opportunity the person had to exert undue influence
Your ability to resist the alleged influence
Whether the provisions of your will are consistent with the claim of undue influence
Any connection between the alleged undue influence and the terms of your will