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Trusts and Estates will substitutes, advancements, protecting the family > will substitutes, advancements, and protecting the family > Flashcards

will substitutes, advancements, and protecting the family Flashcards

1
Q

What are 4 main substitutes for Wills?

A

life insurance
pension accounts
joint accounts
revocable trusts

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2
Q

What is the rule of Transferor’s Intent as it relates to how a transferor wishes to transfer property?

A

transferor may choose to pass his property in death in either the probate or non probate systems or both

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3
Q

How does one make an effective lifetime gift?

A
  1. The donor must deliver the property with the intention to make a gift; note: constructive delivery can be used if physical delivery of the property is not practicable.
  2. The donee must accept it with the intent to accept it
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4
Q

How are lifetime gifts for minors handled according to the Uniform Gift to Minors Act?

A

the donor gives the property to a custodian who manages the property on the minor’s behalf. Custodian owes minor duty of loyalty.

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5
Q

T or F gifts under the UGMA are restricted to only one single minor in a single custodianship.

A

True

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6
Q

What is the most common probate avoidance device?

A

Joint interests devices such as joint tenancy

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7
Q

Explain joint tenancy as a probate avoidance device

A

A joint tenancy between 2 people only avoids probate once. When one dies (their interests disappears) the survivor of the joint tenancy becomes sole owner.

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8
Q

T or F a deed creating joint tenancy is revocable

A

False, a deed creating joint tenancy is irrevocable!

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9
Q

multiple party accounts (convenience accounts) presumes joint ownership unless?

A

clear and convincing evidence shows that the decedent did not intend to make a gift by putting another’s name on account.

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10
Q

briefly describe totten trusts, POD and TOD accounts

A

Totten trusts- depositor opens an account as trustee for someone else
POD-payable on death
TOD-transfer on death

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11
Q

What is the difference between joint tenancy and Tenancy by the entireties?

A

similar to joint tenants except that the tenants by the entireties must be married and neither can transfer his or her interest alone.

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12
Q

What are the characteristics of a Transfer on death deed?

A
  • deed is revocable and can be changed
  • owner retains control (no completed gift, no consequence)
  • allows property owner to name a beneficiary who will eventually be the owner when the original owner dies.
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13
Q

What are characteristics of lifetime trusts?

A

involves at least one person (trustee) holding property for the benefit of one or more persons (beneficiaries)

can be included in a will by provision or can avoid probate by creating a trust before death

allows one person to manage property for another. (can be used to avoid the need for guardianship).

A revocable trust can be valid to transfer property even though the trust may function like a will.

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14
Q

Why is it so easy to revoke a trust?

A

since the settlor retains the power to revoke the trust and still owns the property, way too easy to end the trust.

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15
Q

T or F creditors cannot reach the assets in a trust.

A

False, they can

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16
Q

under the UTC trust property is subject to creditor claims, but what must happen first?

A

after the settlor dies, subject to the settlor by providing an order of liability, creditors can reach the trust property held in the revocable trust but only after the settlor’s probate assets are exhausted.

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17
Q

Are revocable trusts considered assets of a bankrupt estate under federal law?

A

Yes

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18
Q

creditors are normally barred from reaching the proceeds of life insurance but what is the exception?

A

if the insurance proceeds are payable to the owner’s estate, the proceeds may be reachable by creditors of the deceased owner.

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19
Q

What is the benefit of a retirement fund?

A

it supplements the income people get from social security and other government plans.

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20
Q

What are two types of annuities (pension benefit)?

A

straight and refund

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21
Q

describe a straight annuity?

A

pays out funds until the death of one or more of the annuitants
no death benefit

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22
Q

What is a refund annuity?

A
  • guarantees payment of a stated amount.
  • If annuitant dies before the settled amount is paid, the balance is payable to his estate or a designated beneficiary.
  • can be for a term (if annuitant can terminate payments voluntarily) or for life
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23
Q

What is a public retirement plan?

A

plan that contributes to retirement through public funds. eg. social security

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24
Q

what are two types of private sector benefit plans?

A

Defined benefit and Defined contribution

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25
Q

a ______benefit establishes employee’s benefit according to a formula.

A

defined benefit

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26
Q

a defined _________ either requires or allows employer contributions. accounts are kept for each employee before retirement and whatever money accumulated within becomes available to the employee.

A

contribution

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27
Q

T or F Life time gifts are non-revocable

A

True

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28
Q

What are some similarities between Wills and non-probate devices?

A
  • reserves to the owner complete lifetime dominion
  • the power to name and change beneficiaries
  • the concepts like intent, protection v. fraud, relationships and client goals apply here.
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29
Q

Why is a joint tenancy a great option for non-traditional relationships?

A

not dependent on rules of intestacy!
joint ownership of property for people who would not normally have those rights such as non-married couples, sisters who live together, until recently same sex couples

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30
Q

Lifetime revocable trusts key terms (define)
Settlor
Property
Trustee

A

Settlor- still owns the property
Property- thing of interest in the trust
Trustee- cares for property and owes a fiduciary duty to the beneficiary

31
Q

What are the factors the court in Farkas used to determine whether instrument was a failed Will or a trust

A
  • whether interest was passed to beneficiary before the death of the donor (decedent)
  • whether there is control over the subject matter ( in a trust, a settlor can make himself sole trustee, reserve a life interest, and a power of revocation without making a trust invalid)
  • whether the testator conducts himself in accordance with the standards applicable to trustees generally and complies with fiduciary duty. (in a will the testator does not have a fiduciary duty to the recipients named in the will).
  • court also considers the formality of the transaction. Wills are very formal
32
Q

T or F, a settlor of a revocable trust can give himself a lot of control, but not total control or the trust will be invalid. Must give interest to someone else who he owes a fiduciary duty to.

A

True

33
Q

How can trusts be revoked?

A

Can be revoked by the settlor and methods of revocation in the document must be followed in order to revoke the trust.

34
Q

What are benefits of life insurance?

A

gives the beneficiary money to live on in case the policy owner dies prematurely.

chance to save money

35
Q

How does one create a pour over will

A
  1. Client creates a lifetime trust with nothing in it and names trustee as beneficiary of life insurance policies.
  2. Client creates a will naming trustee as residuary beneficiary
  3. After client’s death, will pours decedent’s residuary probate property and life insurance policy pours insurance proceeds into trust.
36
Q

When can the courts intervene and change a will when the testator can no longer do so?

A

Changed circumstances such as acts of the property holder, acts of beneficiaries, changes in property, and Lapse

37
Q

what are advancements?

A

gifts donor intends to be charged against the recipient. (applies to intestate succession- law).

38
Q

The court does a hotch potch calculation if there is an advancement. how is it calculated?

A
  1. The value of each advancement is is added to the total amount available for estate distribution
  2. the total (hotchpot) is then divided by the number of heirs in accordance with intestate statute.
  3. The court then credits each donee with gifts already received and distributes the rest of the property. (advancements themselves are not returned to the estate. the court only adds the value in calculating the the shares.
39
Q

What is satisfaction

A

The will’s law equivalent of an advancement.

40
Q

what is an example of satisfaction

A

Hugh’s will gives Melanie half of his estate and later gives her $5K intended to come out of her ultimate share, the other beneficiaries could force a hotchpotch calculation and credit Melanie with the $5K she already received.

41
Q

Donors can change gifts by divorcing the donee. what is a common example of this?

A

a husband and wife make a will, they divorce, and will is not changed and husband dies. There are statutes that would prevent ex-wife from taking from the Will.

42
Q

T or F, the automatic revocation provision of a will (divorce) is not limited to only the bequests of the former spouse but also bequests to a former spouse’s family members

A

True

43
Q

Shares can change by acts of the beneficiaries themselves . What is a common example?

A

Courts often deny beneficiaries their shares because of beneficiary’s misconduct. eg. beneficiary kills testator

44
Q

T or F beneficiaries cannot turn down inheritance or attempt to give away one not yet received.

A

False

45
Q

What are disclaimers used for?

A

used by beneficiaries to change the distribution of the estate or trust by refusing to accept its benefits.

Can be used to save taxes, avoid creditors, or allow others more needy to take the property.

46
Q

Changes in property can change shares. Define four classifications of gifts that can have this affect.

A
  1. Specific- gifts specifically identified eg. “my house” “my cross necklace”
  2. General- are legacies but do not need to be. eg. $3K to Marsha
  3. Demonstrative- a cross between specific and general gifts. Gifts intended by testator to come from a specific source but which can also come from a general estate assets. (eg. $6K to come first out of my credit union account but if the account is too small, my other funds.”

Residuary- “catch all” gifts. eg. “everything else I own”

47
Q

Why is it so important to distinguish specific gifts versus general gifts?

A

Different consequences. eg. the “specific” label is good for some accrued unpaid income, but can be bad if the question involves a gift of property which is not an estate asset at the testator’s death.

48
Q

What is the purpose of an anti-lapse statute?

A

to avoid gifts from failing

49
Q

What is an example of a lapse (gift failure) ?

A

James leaves Kerry a car in his will but she dies before him. At common law gift would fail

50
Q

How do anti-lapse statutes prevent lapse?

A

they prevent lapse in the sense that they identify alternative takers.

51
Q

There is a presumption against advancement. A lifetime gift is only an advancement when?

A

donee acknowledges gifts as an advancement (writing that acknowledges advancement)

Donor indicates in contemporaneous writing. (eg. Birthday card with money and card that says this is an advance on your inheritance.)

52
Q

For Wills, there is a presumption against satisfaction unless testator’s contrary intent can be established. What are three forms of proof of intent contrary to the presumption?

A
  • statement in the will itself
  • writing by donor contemporaneous to gift
  • written statement by donee/devisee acknowledging satisfaction of devisee.
53
Q

what is the basic idea or purpose behind anti-lapse statutes?

A

Affectuates intent if Will is silent as to alternative taker/devise and gift is to lineal descendants, their descendants get substitute devise

54
Q

When will the anti-lapse statute not apply?

A

If the Will displays a contrary intent of the testator (indication that the gift shouldn’t go to the next descendent by the anti-lapse statute), then the anti-lapse statute will not apply.

55
Q

What is a valid expression of contrary intent for purposes of anti-lapse statues in Minnesota?

A

the words “if she survives me.” If it doesn’t specify an alternative devise, the gift will lapse.

56
Q

T or F, under the UPC words of survivorship “if she survives me” in the absence of additional evidence, a sufficient indication of contrary intent to hold off the anti-lapse statute. So if no alternative named, anti-lapse statute applies.

A

True

57
Q

what are steps to determine elective share?

A

Step 1: Calulate augmented estate(includes any property touched for the last two years)

Step 2: Determine the marital property portion by multiplying the appropriate percentage based on the length of the marriage. see p. 323

Step 3: Multiply the marital property portion by 50% to determine the elective share.
If the amount is less than $75K, add “supplemental elective share” to bring the amount up to $75K.

Step 4: Identify the property used to satisfy the elective share. Use property the spouse already has first. If not enough, use property received by will or will substitutes benefiting the survivor.

58
Q

How is the augmented estate calculated?

A

Add decedent’s net probate estate
to value of non-probate transfers decedent made to others and value of non-probate property going from decedent to spouse to value of the spouse’s property (including what would have been included among the surviving spouse’s non probate transfers to others if the spouse had been the decedent. )

59
Q

T or F, certain people have a right to get a share of the estate regardless of Testator’s intent.

A

True

60
Q

T or F you can disinherit your spouse.

A

False, you cannot disinherit your spouse!

61
Q

A spouse will be allowed to election of marital property unless?

A

they agree to waive their marital rights in a prenuptial agreement.

62
Q

T or F Protective and elected share statutes override the Testator’s intent

A

True

63
Q

What is the basic rule regarding forgotten spouses and children ?

A

pretermitted or forgotten spouses and children are guaranteed a minimum share if they are omitted from the will.

64
Q

Which pretermitted relatives are protected?

A

spouses, children, birth or adopted, and in some states other descendants.

65
Q

what affect can other evidence of contrary intent have on pretermitted relatives’ shares?

A

They could lose their shares (shares are intestate)

66
Q

Who pays the forgotten spouses and children?

A

Generally, the child takes the will property away from beneficiaries except the surviving spouse.

67
Q

T or F, under the UPC, a pretermitted spouse can take away property form the Testator’s children before the marriage.

A

False, a pretermitted spouse cannot take property from the testator’s children unless the children are also the spouse’s children.

68
Q

In Minnesota, what categories of pretermitted relatives are protected?

A

surviving spouse, married to spouse after the will was made but not changed

Testator’s children born or adopted after the execution of the unchanged will.

69
Q

What kinds of evidence of contrary intent precludes the application of the statutes that applies to pretermitted relatives?

A

look for Testator’s statement or amount of non-probate transfer

70
Q

From what devise does the money come to pay the pretermitted relatives?

A

residuary estate, general, demonstrative, specific devises.

71
Q

What are major differences between Spousal election and Omitted relative statutes?

A

Spousal election v. Omitted relative statutes
-must elect - automatic no need to elect
-language in will -language in will CAN defeat
cannot defeat pretermitted share
elective share

72
Q

T or F, even if omitted from a Will on purpose, a spouse still has the right to elect their spousal share

A

True, you cannot disinherit your spouse!

73
Q

T or F, you cannot disinherit your children

A

False, you can!

Trusts and Estates will substitutes, advancements, protecting the family (1 decks)

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