Intro to Wills and Nonprobate Property Flashcards
Remove non probate property before will
When distribute a decedent’s estate, must first distribute according to terms before distributing the rest under intestacy or under a will
Like when property passes via an inter vivo trust, survivorship rights, or other contractual rights
Will substitutes generally
Will substitutes include life insurance, joint tenancies or tenancies by entirety, inter vivo trusts, bank account trusts, deeds, contracts and inter vivos gifts
Will substitutes may enable individuals to avoid taxes and eliminate the cost and inconvenience of probate
Does not pass through probate and thus is not governed by the testator’s will or by intestacy
- removed first
Inter vivos outright gifts
If the decedent has already given the property away, it obviously will not pass under the decedent’s will or by intestacy
Inter vivos living trsts
Property that decedent has already transferred into an inter vivos trust will not pass through estate
- passes under terms of the trust
Future interests
Future interests pass to the named beneficiary and not through will
Tenancy in common
No survivorship rights
So the decedent’s share passes via decedent’s will or under intestacy
- probate is not avoided
Joint tenancy
Survivorship rights
Decedent’s share passes to the surviving joint tenant and not via intestacy or under the decedent’s will
Life insurance
Most widely used will substitute
Contract and the disposition of policy proceeds is governed by the contract
Includes contracts with death benefits
Bank arrangements
Bank arrangements, like Totten trusts, joint or survivor accounts, and payable on death designations, are also popular will substitutes
Totten trusts
Deposit of money in a bank account in “trust” for another person
The depositor retains complete control over the account during their lifetime and the transfer is complete upon their death
Accounts and not true trusts
Joint or survivor accounts
A bank account deposits in the name of two or more persons with right of survivorship is generally effective to give the survivor the absolute right to all of the money
Under UPC, creditors can reach the money in a joint account to the extend that the decedent deposited money in the account, if the other estate assets are insufficient to satisfy all claims
Even at common law, creditors can reach the joint account if it was opened for the dependents convenience and no survivorship feature was intended
Payable on death designations
Bank accounts and corporate securities may be held in payable on death form - property passes to the designated person upon owner’s death
Deeds
A deed deposited in escrow, with delivery conditioned upon the grantor’s death, may be a valid non testamentary transfer
If a deed, by its terms, is effective only upon the grantor’s death and has actually been delivered to the grantee - court may sustain the transfer as non testamentary by construing the deed as a present transfer of a future interest
- subject to life estate by the grantor
