CHAPTER 4

The Transfer of Wealth

OVERVIEW

This chapter considers the actual processes by which property is transferred, emphasizing transfers taking effect at death. We will consider both probate and nonprobate transfers and the law of intestate succession that serves as a guide where no other legally recognized guidance exists.

RATIONALE FOR PROBATE DISTRIBUTION

When a person dies, steps must be taken to transfer ownership of his or her property interests to the proper beneficiaries. Each of the 50 states and the District of Columbia has enacted a probate code that establishes the rules for transferring a decedent’s property. These codes serve a dual purpose; they attempt to protect both creditors of the decedent’s estate and assure that the appropriate beneficiaries eventually end up with the property after debts and expenses are paid. Where a will exists, the codes seek to assure that the nominated executor is appointed unless there is good cause for appointing someone else. The notice provisions seek to assure that the creditors have a chance to file their claims and that potential beneficiaries, including heirs that have been disinherited, are aware of the proceedings so that the interested parties can raise an issue if the will being offered for probate is not the last will or if there is some irregularity concerning the will being offered. The code sets forth the contents of the petition that starts the probate process and specifies the steps that the administrator must take from

start to final distribution. Of course, if there is no will, the probate procedures are still very much the same. The main difference is that the intestate succession laws serve as the guide rather than the will. Will or no will, most of the steps are the same. The notices, the marshaling of assets, the filing of an inventory, reports to the court, filing an accounting, and obtaining an order for distribution all have to be done.

NONPROBATE VERSUS PROBATE ASSETS

In a sense, the probate process stands last in line. Only that property for which there is no other mechanism of transfer is swept into the probate process. As discussed in the last chapter, the other mechanisms include certain title, contract, and trust arrangements. About all that is left, after the nonprobate mechanisms are taken into account, is property held in the decedent’s name alone, or held with others as tenants in common or with a spouse as community property. Even community property may avoid probate if it is left to the surviving spouse.

Like probate, the nonprobate mechanisms for transfer are sanctioned by law. However, they are subject to much less state supervision. With title held as tenancy by the entirety or joint tenancy, the right of survivorship results in the automatic transfer of ownership to the surviving co-tenants, with the right previously held by the decedent-owner ceasing immediately on death. This automatic transfer is said to be a transfer by operation of law. Although title may pass automatically, as a practical matter, additional steps may be necessary to clear title to joint tenancy property. The decedent’s name will need to be removed from the actual documents. Fortunately, this is usually processed quickly by the authorities (banks, motor vehicle bureau, etc.) when a surviving cotenant appears before them with a certified copy of the death certificate. For real estate, to satisfy title companies, the survivors will have to record, in each county where the jointly held land is located, a notarized “affidavit of death of joint tenant” verifying that the person identified in the attached certified death certificate was the co-owner of the parcels identified in the affidavit.

Property that, at the decedent’s death, is held in a revocable or irrevocable living trust is not held in the decedent’s name, but rather the legal title is in the name of the trustee. Since probate administration is concerned with transfer of property held in the decedent’s name (individually or concurrently), property held by a trustee is not subject to probate administration. If, in accordance with the underlying trust document, the trustor’s death triggers a transfer out of trust to the remainderman, the transfer process is uncomplicated. The trustee simply makes the distribution by deed or assignment, depending on the nature of the assets.

Where the decedent settlor (trustor) was serving as trustee at the time of his or her death, most state laws allow the successor trustee to immediately take over the administration of the estate. Hence no probate administration is required. The successor will have to establish for the benefit of those involved with the transfer process (e.g., brokerage houses, title companies, etc.) that the settlor is dead, by producing a certified death certificate, and that he or she is the successor trustee, by some reliable means such as an official photo identification (e.g., the successor trustee’s driver’s license). A reliable copy of the trust or a short form of the trust may have to be shown also.

Property owned by the decedent to be transferred at death into, rather than out of, a trust will be subject to probate administration. In such instances, the probate process is the funding mechanism for the trust. This will occur for all testamentary trusts because no separate trust exists prior to the death of the testator. Near the conclusion of the probate, the court order for distribution to the trustee has a dual purpose: (1) it serves as the trust funding mechanism, and (2) it serves as the trust document since the terms of the trust, taken from the will, are repeated as part of the order. Where real property is transferred pursuant to a probate order for distribution, whether to the trustee of a testamentary trust or to someone else, no deed is necessary. Rather, the executor records a certified copy of the order in the county where the real property is located. Generally, when a living trust is used, a probate is unnecessary. Nevertheless, the trustor will have created a pour-over will, so called because it scoops up assets left out of the trust and “pours” them into it. This “pouring” is done through the probate process, which concludes with an order for distribution to the trustee of the living trust. Of course, with the living trust, the order does not include the language of the trust because it is already in existence as a separate document.

Property disposed of by contract, including life insurance proceeds on the life of the decedent and retirement benefits, is not subject to probate administration because title to such assets is not held by the decedent. Instead, title is held by the insurance company or the pension fund, respectively, and each has agreed to transfer title directly to the named beneficiary at the death of the decedent. The insurance company or pension fund pays the named beneficiary in accordance with the payout option selected by the decedent or by the beneficiary. Note that the law sanctions the transfer by contract of only certain kinds of assets, mainly those that are closely connected to death (insurance) or retirement (pensions and the like).

Because the law does not sanction a general contract (as opposed to a trust agreement) as a testamentary transfer device, a person attempting to contract with a friend for the transfer of all his or her property after death would be unlikely to receive the cooperation of those entities holding the decedent’s personal property (e.g., banks, brokerage firms, etc.) or the blessing of title companies for transferring the decedent’s real estate. In addition to not avoiding probate, because the contract would not be executed with the formalities required of a will, it probably would not serve as a guide in the probate process either.^[1]

In contrast with title held in joint tenancy, title held by a decedent either as an individual, as a tenant in common, or as community property does not in itself create a mechanism (or guide) for title transfer. As a result, the states have established the probate process to transfer title, using either the decedent’s will or the laws of intestate succession as the guide.

Although it is difficult to gather accurate statistics, it is generally estimated that about half of all adults die without a will. In such circumstances, the state’s intestate succession laws will determine proper distribution of property for which there is no other guide for transfer. The mechanism for the intestate distribution is the probate process. In fact, probating an intestate decedent’s estate might be even more important than for a testate decedent, to ensure correct identification of heirs as well as to ensure distribution to them.

Figure 4-1 diagrams the probate and nonprobate interests of a decedent at the moment of death. The left side contains probate assets, including the decedent’s one-half interest in community property, the decedent’s interests in probate held in common with others, and the catchall--all other probate property owned individually by the decedent. This would include the value of life insurance on the life of another owned by the decedent. Of course, where there is co-ownership, the portion of the interest held by others, whether as tenants in common, joint tenants, or as community property, is not part of the decedent’s probate or nonprobate estate. One should also note that some community property states, such as California, no longer require a probate for property going to a surviving spouse, whether going to her (or him) by virtue of the decedent’s will or by intestate succession. Those states may require the surviving spouse to file a simple request for confirmation by the court of the survivor’s right to take the property, followed by notice to interested parties, then a hearing, and, finally, a court order granting the confirmation.

The right side contains the nonprobate property, including interests in living trusts that are revocable by the decedent, property held in joint tenancy or as tenants by the entirety, life insurance policies on the decedent’s life other than those payable to the decedent’s estate, and certain other nonprobate interests. Life insurance proceeds payable to the decedent’s (probate) estate must, by definition, be a probate asset, since the probate estate will collect the proceeds and hold them pending an order for distribution. Policies issued since World War II are not likely to be paid into the insured’s probate estate. In addition to having several layers of alternate beneficiaries, the policy will probably have a provision very similar to intestate succession designating the order of beneficiaries in the event that the named beneficiaries predecease the insured and only as a last resort have the proceeds payable to the decedent’s estate.

The logic of Figure 4-1 suggests a relatively straightforward procedure to determine which of a decedent’s assets will be subject to probate administration. First, list all the decedent’s property interests held immediately prior to death, including all insurance policies. Then delete from the list all assets for which there is a nonprobate mechanism of transfer, such as property in living trusts, joint tenancy property, and interests payable to a designated beneficiary, such as life insurance, pensions, and finally miscellaneous nonprobate interests such as Totten trusts. What is left should be the decedent’s probate estate, mostly property in the decedent’s name alone (including insurance on another’s life) or held with others as tenants-in-common, and for states that still require probate for community property even when it goes to the surviving spouse, the decedent’s half of the community property.

So far, we have seen how the decedent’s probate property is determined. The next logical step is to decide who will receive this property. For this, one first looks to the will. If there is no will, the state laws of intestate succession are applied. Details of these succession laws are covered next.

INTESTATE SUCCESSION LAWS

We have seen that a person who dies without a will is said to die intestate and that any probate property will then pass under the state’s laws of intestate succession. Further, a person receiving property under these laws is called an heir and is said to inherit the property.

In determining who should inherit, the members of the various state legislatures have used their knowledge of human nature (and a little intuition) to design estate plans for persons dying intestate. Thus, they usually give priority to the decedent’s spouse, next to the decedent’s issue, and, if there is neither spouse nor issue, then to the decedent’s other blood relatives, with priority given to the closest relatives. We will review the Uniform Probate Code’s version of intestate succession after we cover degrees of consanguinity (kinship) and several alternative patterns for allocating property among a decedent’s relatives. These concepts are relevant to both intestate and testate property distribution. They are important to understand although they are quite technical because they can make major differences in how money and property are distributed.

Degrees of Consanguinity

Degrees of consanguinity refers to the level of closeness in the blood relationship between a decedent and the decedent’s various relatives. As we have said, and as Figure 4-2 depicts, descendants (issue) of the decedent include children, grandchildren, great-grandchildren, and so on. Ascendants (ancestors) include parents, grandparents, great-grandparents, and the like. Descendants and ascendants of a person are said to be in the person’s lineal, or vertical line. The other relationships shown are collateral, meaning that they share with the person a common ancestor, but they are neither ascendants nor descendants of the person and thus are not in the person’s lineal or vertical line. For example, a nephew of a person is not his or her issue, but shares a common ascendant with the person, namely the person’s parent. Since a relative’s share of a person’s intestate estate is determined by the closeness of the relationship, the decedent is shown at the “center” of the lineal column of Figure 4-2.

The most common method of measuring a relative’s degree of consanguinity to the decedent is to count the “steps” along degree lines, the lines shown linking the boxes. Degree lines run only between child and parent and parent and child. To find degree of closeness or consanguinity we first count ascendant lines to the common ancestor, then collateral. For example, the decedent’s brother is two steps from the decedent. We count one ascendant step to the common ancestor parent and then one collateral step to the brother. The decedent’s uncle is three steps from the decedent because we first count two ascendant steps upward to the common ancestor and then one collateral step to the uncle. Figure 4-2 can be helpful in determining relative closeness to the decedent of distant surviving relatives, especially in those states that have not adopted the more restrictive succession rules of the Uniform Probate Code. Generally, only persons of the same degree of closeness share an intestate decedent’s estate.

Per Stirpes Versus Per Capita

If an intestate decedent’s only heirs are one living son and two grandchildren who are the daughters of the decedent’s predeceased daughter, how much will each one inherit? Will they each inherit one-third of the estate, or will the son be entitled to a larger proportion because he is a closer descendant? The technical terms used to answer questions like these are per capita and per stirpes. Per capita is Latin for “by the head” and per stirpes is Latin for “by the roots.” A per capita distribution requires that all descendants receive an equal share of the property, or “share and share alike.” On the other hand, a traditional per stirpes distribution, also known by the more descriptive term by right of representation, gives larger distributions to descendants of a closer degree of consanguinity to the decedent. As if this were not complicated enough, the 1990 revision of the Probate Code uses a hybrid of per stirpes called “per capita at each generation per stirpes.” This form is the most complicated to understand but the most important because it is the most common. The examples below illustrate:

Consider the following family tree illustrated in Figure 4-3. Cross-marks in the diagram indicate descendants who have predeceased the decedent.

FIGURE 4 - 3 Example Illustrating Distribution by Per Capita and Per Stirpes

The decedent had the following descendants: Two daughters, D1 and D2, and four sons, S1, S2, S3 and S4. Only D1, S1, and S3 survived the decedent. D1 has three children, D1A, D1B and D1C, all alive. D2 is survived by three children, D2A, D2B, D2C, all alive, but the fourth child, D2D, predeceased the decedent, leaving no issue. S1 had only one child, S1A, who is deceased, but is survived by two children, S1A1 and S1A2. S2 had two children, S2A and S2B. S2A is alive. S2B is deceased, but is survived by two children, S2B1 and S2B2. S3 and his son S3A both survived the decedent. S4 and his child, S4A, predeceased the decedent. S4 left a spouse but no descendants.

All three rules of distribution, described next, share one basic characteristic: the same people receive a share of the estate. Only the various portions change depending on which rule is applicable. Under all three rules, as one goes down each line of descent, only the surviving members of the closest generation level receive a share. In other words, if an ancestor is alive then those in line below do not receive a share.

Thus, in our illustration, only the following nine descendants will receive property under any of the three rules: D1, D2A, D2B, D2C, S1, S2A, S2B1, S2B2, and S3. Why do the others receive nothing? Either because they did not survive the decedent (D2, D2D, S2, S2B, S4, and S4A), or because one of their ancestors (who were descendants of the decedent) survived the decedent (applies to D1A, D1B, D1C, S1A1, S1A2, and S3A).

It also follows that no property will be allocated to any family line if all descendants in that line have predeceased the decedent. For example, S4’s blood line (S4A) and S4’s spouse, receive nothing.

The three distribution rules differ, however, with regard to how much property each descendant will receive. The discussion below will analyze each rule separately. It is complicated but short, so read it very carefully. Once you “get it” it will not be hard to remember or apply any of the three rules.

Per capita. A per capita distribution simply requires that all eligible descendants receive an equal amount of the property. Thus, in the example, D1, D2A, D2B, D2C, S1, S2A, S2B1, S2B2, and S3 would each receive a one-ninth share.

Per stirpes: two forms. Historically, two different forms of per stirpes have evolved, traditional per stirpes and per capita at each generation per stirpes. Traditional per stirpes, also referred to as by right of representation, has been used for hundreds of years. Under it, surviving descendants of predeceased children may take unequally depending on how many in their family survive. Per capita at each generation per stirpes, which treats all members of each generation equally, has become more common since it replaced traditional per stirpes in the 1990 revision of the Uniform Probate Code.^[2] Compared to per capita, either form of per stirpes distribution gives a larger distribution to closer descendants than to those who are further removed.

Determining distributions under either form of per stirpes requires a two-step process. The first step is the same in both forms; the second step differs.

Traditional per stirpes. First, the property is divided into shares, one share for each surviving child and one share for each of the decedent’s predeceased children having living issue. Each surviving child gets his or her share directly. Second, the share for each predeceased child with living issue is divided equally among the issue - one share for each living child and one share for each predeceased child with living issue. Step two is just like step one but at the next generation. The process repeats until all the shares are taken. A share only goes to the next generation if the previous generation is not alive to take it. The next living generation is said to “represent” its parent.

$ In our example, each living child, D1, S1 and S3, will receive a one-fifth share and their descendants receive nothing.

$ D2 is a predeceased child with three living children and none who died with issue. Those three children will each take one-third of their mother’s 1/5 share or 1/15.

$ S2 is a predeceased child with one living child and one predeceased child with living issue. Thus, S2's share is divided in two; one share goes to his living son, S2A who gets ½ of his father’s 1/5 share or 1/10.

$ S2B is a predeceased child with living issue. His share is divided among his issue. Thus, his ½ of his father’s 1/5 share is divided between his two children who each takes 1/20.

Summarizing, a traditional per stirpes distribution of the decedent’s estate will be divided as follows:

D1, S1 and S3 1/5 each;

D2A, D2B, and D2C 1/15 each (i.e., 1/5 x 1/3);

S2A 1/10 (i.e., 1/5 x 1/2 ); and

S2B1 and S2B2 1/20 each (i.e., 1/5 x 1/2 x 1/2).

Per capita at each generation per stirpes. Per capita at each generation per stirpes distributes the property that goes to the decedent’s three living children the same as per stirpes. The difference is in the property that goes to the descendants of the decedent’s deceased children - grandchildren and great-grandchildren. The shares of those entitled to receive a portion of the estate at each generational level are combined and then divided equally.

First, the property is divided into shares, one share for each surviving child and one share for each of the decedent’s predeceased children having living issue. Each surviving child gets his or her share directly. Second, all the shares for the predeceased children having living issue are combined and divided equally among all number of living issue plus those who have died leaving issue at that generation. The living children take their share directly. The share for predeceased children goes to the next generation. The process repeats until all the shares are taken. A share only goes to the next generation if the previous generation is not alive to take it.

$ Thus, in the illustration, similar to traditional per stirpes, each living child, D1, S1, and S3 would receive a one-fifth share and their descendants receive nothing.

$ D2 and S2 died leaving issue. Their shares are combined and go to their combined descendants.

$ D2 has three living children and none who have died leaving living issue. S2 has one living child, S2A, and one predeceased child with living issue, S2B. The total combined number is 5. Thus, the four living children of D2 and S2 each get 1/5 of the combined 2/5, or 2/25. If they had descendants, their descendants would receive nothing.

$ The 2/25 share for S2B, a predeceased child with living issue is divided at the next generation. Since there is only one share to divide, and there are only two living issue to share it, each takes half their predeceased parent’s share, or 1/25.

Summarizing, a per capita at each generation per stirpes distribution of the decedent’s estate will be as follows:

D1, S1 and S3: 1/5 each;

D2A, D2B, D2C and S2A: 2/25 each; (2/5 x 1/5)

S2B1 and S2B2: 1/25 each. (1/2 x 2/25).

Notice that each eligible grandchild inherits the same amount (2/25s), rather than different amounts as in the case of traditional per stirpes. Whew!

Comparison of the three rules. One advantage of per capita at each generation per stirpes is that it gives equal shares to those who are equally related. One advantage of traditional per stirpes is that it passes the same share that the descendants would receive had their ancestors survived, and then died bequeathing the property to the next generation. One advantage of the per capita rule is that it treats everyone equally. This issue is important in planning because clients may strongly prefer one of these types of distribution over the others, and their will or trust document should reflect that preference.

Many people would prefer the per capita at each generation per stirpes method if it were explained to them so they could understand it. In contrast, most attorneys use estate planning books and estate plan drafting programs that use traditional per stirpes as the default rule. Most state intestate succession laws, including those that have adopted the UPC, use one of the forms of per stirpes.

All three distribution rules are similar in that they dispose of an intestate estate to the same descendants. For each, all descendants who are more remotely related to the decedent will not inherit if an ascendant in a generation closer to the decedent is alive. Preventing inheritance by more remote descendants has the advantage of reducing the number of heirs, thereby making inheritable property more marketable and minimizing the likelihood of inheritance by minors and the need for court-appointed guardians.

Finally, answering the question posed at the beginning of this section, under either form of per stirpes, the son would inherit one half and the granddaughters would each inherit one quarter of the estate. Under per capita distribution, each would inherit one-third.

Intestacy in UPC States

We are now ready to look at the rules of intestate succession used in states that have adopted the Uniform Probate Code. Note that the UPC uses the term descendant rather than issue, reflecting a modern trend to avoid a biological connotation and extend inheritance rights to adopted children.

The Code’s principal intestate sections, revised in 1990, are reproduced in Exhibit 4-1. In general, § 2-101 prefaces the next four sections, which specify actual succession. The intestate share of the surviving spouse is determined by referring to § 2-102 for common law states, or to § 2-102A for community property states. The intestate share of heirs, other than the surviving spouse, is determined by referring to § 2-103. Section 2-104 covers survival situations. Finally, if there are no “takers” under the above sections, § 2-105 requires a procedure called “escheat” whereby the property ends up going to the state of domicile. A more specific analysis follows the Code.

EXHIBIT 4 - 1 Intestate Succession under the Uniform Probate Code

2-101 Intestate Estate

(a) Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs as prescribed in this Code, except as modified by the decedent’s will.

(b) A decedent, by will, may expressly exclude or limit the right of an individual or class to succeed to property of the decedent passing by intestate succession. If that individual or a member of that class survives the decedent, the share of the decedent’s intestate estate to which that individual or class would have succeeded, passes as if that individual or each member of that class had disclaimed his (or her) intestate share.

2-102 Share of Spouse (Common Law States)

The intestate share of a decedent’s surviving spouse is:

(1) the entire intestate estate if:

(i) no descendant or parent of the decedent survives the decedent; or

(ii) all of the decedent’s surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent;

(2) the first ($200,000), plus three fourths of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent;

(3) the first ($150,000), plus one-half of any balance of the intestate estate, if all of the decedent’s surviving descendants are also descendants of the surviving spouse, and the surviving spouse has one or more surviving descendants who are not descendants of the decedent;

(4) the first ($100,000), plus one-half of any balance of the intestate estate, if one or more of the decedent’s surviving descendants are not descendants of the surviving spouse.

2-102A Share of the Spouse (Community Property States)

(a) The intestate share of a surviving spouse in separate property is:

(1) the entire intestate estate if:

(i) no descendant or parent of the decedent survives the decedent; or

(ii) all of the decedent’s surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent;

(2) the first ($200,000), plus three fourths of any balance of the intestate
estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent;

(3) the first ($150,000), plus one-half of any balance of the intestate estate, if all of the decedent’s surviving descendants are also descendants of the surviving spouse and the surviving spouse has one or more surviving descendants who are not descendants of the decedent;

(4) the first ($100,000), plus one-half of any balance of the intestate estate, if one or more of the decedent’s surviving descendants are not descendants of the surviving spouse.

(b) The one-half of community property belonging to the decedent passes to the surviving spouse as the intestate share.

2-103 Shares of Heirs Other than Surviving Spouse

Any part of the intestate estate not passing to the decedent’s surviving spouse under Section 2-102, or the entire intestate estate if there is no surviving spouse, passes in the following order to the individuals designated below who survive the decedent:

(1) to the decedent’s descendants by representation;

(2) if there is no surviving descendant, to the decedent’s parents equally if both survive, or to the surviving parent;

(3) if there is no surviving descendant or parent, to the descendant of the decedent’s parents or either of them by representation;

(4) if there is no surviving descendant, parent, or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, half of the estate passes to the decedent’s paternal grandparents equally if both survive, or to the surviving paternal grandparent, or to the descendants of the paternal grandparents or either of them if both are deceased, the descendants taking by representation; and the other half passes to the decedent’s maternal relatives in the same manner; but if there be no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the decedent’s relatives on the other side in the same manner as the half.

2-104 Requirement that Heir Survive Decedent for 120 Hours

An individual who fails to survive the decedent by 120 hours is deemed to have predeceased the decedent for purposes of intestate succession.

2-105 No Taker

If there is no taker under the provisions of this Article, the intestate estate passes to the state.

Intestate share to surviving spouse. In common law states, under § 2-102, the surviving spouse is entitled to all the decedent’s intestate estate if the decedent leaves no parent or descendant, or if the decedent does leave descendants, but neither the decedent nor the surviving spouse have other descendants (e.g., child of a former marriage). Alternatively, the spouse takes the first $100,000 to $200,000, plus a fraction of the rest ranging from one-half to three-fourths, depending on whether parents or descendants of the decedent and/or spouse survive. An example of § 2-102(3) is where the decedent and surviving spouse leave a child and the surviving spouse has a child from a former marriage. An example of § 2-102(4) is where the decedent leaves a child from a former marriage.

Under § 2-102A, the surviving spouse’s intestate share in community property states is identical to that for common law states, except for an additional provision for the distribution of the community property. Thus, that spouse takes the same share of the decedent’s separate property as he or she would take in a common law state. In addition, the surviving spouse is entitled to the decedent’s entire half of the community property.

Intestate share to others. According to § 2-103, other relatives of the decedent are divided into a hierarchical list of classes, corresponding to the degree of blood relationship to the decedent. Thus, to determine which class is entitled to succession of an intestate decedent’s property, one would move down the list, stopping at the first class containing at least one living member. Distribution would be made only to members within that class. A summary of this prioritized list follows:

1. Surviving descendants, per stirpes

2. Parents

3. Descendants of parents, per stirpes

4. Paternal and maternal grandparents and their descendants, one-half to each side, per stirpes

UPC § 2-106, not quoted above, requires a “per capita at each generation” form of per stirpes whenever descendants inherit by right of representation.

Under § 2-104, any heir must survive the decedent by 120 hours to take by intestate succession. This state-imposed survival requirement has the effect of avoiding double probate in some common accident situations.

Finally, under § 2-105, if none of the above relatives survive, then the decedent’s intestate property passes to the state, under the doctrine of escheat. In English feudal law, escheat meant that the feudal lord received a reversion in the property, either because the tenant died without issue or because the tenant committed a felony. In American law, escheat has come to mean a reversion of the decedent’s property to the state because no individual is “competent” to inherit. In most states, including California, there will be no escheat unless the decedent is not survived by any kin, no matter how remote the relationship. The UPC, on the other hand, limits inheritance to the closer relatives, under the arguable premise that more remote “laughing heirs” would be receiving a windfall not ever intended by the decedent. One wonders whether the typical decedent really would have preferred leaving property to the state or a favorite charity, rather than to some distant relatives. “Heir hunting” firms exist to locate beneficiaries who cannot be found by the estate’s personal representative. They routinely pull probate court files to see whether a missing heir is mentioned in the proceedings. If so, the firm will try to locate the missing heir and give the person the information necessary to claim the inheritance, but only if the heir agrees to pay a fee. The fee is usually a percentage (e.g., 25 to 33%) of the value of the inherited property.

The examples listed next illustrate the principles of intestate succession. In each case, assume that D is a decedent who died a resident of a common law UPC state, and owned $300,000 in property. Relevant UPC sections are given in brackets.

EXAMPLE 4 - 1. D is survived only by spouse and a cousin. His spouse will inherit all. [§ 2-102(1)(I)].

EXAMPLE 4 - 2. D is survived by spouse and their five children, one of whom has a daughter. The spouse will inherit all. [§ 2-102(1)(ii)].

EXAMPLE 4 - 3. Facts similar to Example 4-2, above, except that spouse also has a child of a former marriage. The spouse inherits $150,000 plus one-half of the rest, or a total of $225,000. Each of the five children inherits an equal share of the rest, i.e., $15,000. D’s granddaughter inherits nothing. [§ 2-102(3) and § 2-103(1)].

EXAMPLE 4 - 4. Facts similar to Example 4-2, above, except that decedent also has a child of a former marriage. The spouse inherits $100,000, plus one-half of the rest, or a total of $200,000. Each of the children inherits an equal share of the rest, i.e., $16,667 ($100,000 / 6). D’s granddaughter inherits nothing. [§ 2-102(4) and § 2-103(1)].

EXAMPLE 4 - 5. Facts similar to Example 4-2, above, except that spouse survived decedent by only five hours. The spouse will not inherit. Each of the five children will inherit one-fifth of the total, i.e., $60,000. D’s granddaughter still inherits nothing. [§ 2-104 and § 2-103(1)].

EXAMPLE 4 - 6. D is survived by parents and two children. The children take all. [§ 2-103(1)].

EXAMPLE 4 - 7. D is survived by spouse, a parent, and a sister. The spouse inherits $275,000 and the parent inherits $25,000. The sister receives nothing. [§ 2-102(2) and § 2- 103(2)].

EXAMPLE 4 - 8. D is survived by a sister and two nephews, the sons of D’s deceased brother. Based on the required per stirpes distribution, sister inherits $150,000 and each of the nephews takes $75,000. [§ 2-103(3)].

EXAMPLE 4 - 9. D’s closest surviving relative is a second cousin. All property will escheat to the state. [§ 2-105].

If the decedent had been a resident of a community property state, each of the above dispositions of the decedent’s individually owned property would still be correct. In addition, the decedent’s half of the community property would pass to the surviving spouse, with the result that the surviving spouse would all the community property.

Intestacy in Non-UPC States

The intestate succession laws in non-UPC states vary considerably, but all have a common thread; a spouse takes priority, followed by issue, and, if none, the more remote heirs’ interests are determined by degrees of consanguinity. For example, if an intestate decedent is survived by children but no spouse, the children usually take all. If the decedent leaves a spouse and children, the spouse and the children will usually share the property, with the spouse receiving one-third to one-half of the estate and the children the rest. If the decedent is survived by a spouse but no children, the spouse usually receives all. If, in addition to the spouse, the decedent’s parents are still alive, then in some states the spouse gets all, and in others, the spouse shares a portion with the parents. Since state’s intestate succession laws do vary, the reader is urged to make an independent investigation of the succession laws in his or her own state. One source is through the Washburn University School of Law’s website (http://www.washlaw.edu/ uslaw/statelaw.html).

Advancements

An advancement is a lifetime gift that the donor wants to have treated as an advanced distribution from the donor’s estate to be taken into account when the donor dies. Nearly all states have statutes spelling out what is needed to prove that such was the donor’s intent. Most states, including those adopting the UPC, require that the donor’s intent be in writing or that the donee acknowledge that the gift was understood to be an advancement. Where advancement occurs, the value of the gift when given is added to the net value of the decedent’s estate before determining intestate shares. The donee’s share is then reduced by the value of the gift. If the donee’s intestate share is less than the value of the gift, the donee does not have to return the excess, but will not otherwise share in the estate. The other heirs’ shares are redetermined excluding the donee and the gift to the donee.

EXAMPLE 4 - 10. Sherry died intestate, survived by her three children, Marie, Dean, and Barbara. Her estate was valued at $120,000. Two years before she died, Sherry gave Marie XYZ stock valued at $30,000. With the gift was a typed letter from Sherry saying that she knew Marie needed the income from the stock and she should not have to wait until Sherry died to get it, but Marie should understand that it would be taken into account when her estate was divided up. Even though the letter would not qualify as a will (it was neither holographic nor witnessed), the gift will be treated as an advancement. The children will inherit the following amounts: $20,000 to Marie and $50,000 each to Dean and Barbara, and the date-of-death value of the stock is immaterial. If Sherry’s gift had not been an advancement, each of the children would inherit $40,000. In either outcome, Marie will keep the $30,000 gift.

EXAMPLE 4 - 11. Same as before, except Sherry’s estate was valued at $45,000, not including the gift to Marie. When the gift is added back, each child’s share is $25,000. This is less than what Marie has already received. Therefore she receives nothing, the gift is ignored, and the $45,000 is split equally by Dean and Barbara.

The advancement rules apply only to intestate succession, on the assumption that a testator wishing to reduce a beneficiary’s share would do so in the will itself or by codicil. A handwritten statement evidencing an advancement may be treated as a holographic codicil in those states that recognize holographic wills.

LEGAL RIGHTS OF OMITTED AND ADOPTED CHILDREN

After-born, Omitted Child

Occasionally, a parent dies leaving a will that was executed prior to the birth of a child. Will that after-born child receive anything? In most states, including UPC states,^[3] an after-born child is entitled to take the share he or she would have received had the decedent died without a will, unless any one of the following is true: (a) the omission was intentional; (b) the will left substantially all of the estate to the other parent; or (c) the testator made some other provision for “after-born” children.”

The child’s intestate portion can be the entire estate where the child has no brothers or sisters and the decedent-parent was unmarried, or it might be nothing, as in community property states where the surviving spouse inherits all the community property. In a community property state, the omitted child might have a claim to a share of the decedent’s separate property.

An Omitted Child

An omitted child is defined as any living child (or living issue of any deceased child) who was not provided for in his or her deceased parent’s will. This may occur because the child was born after the will was executed and the parent’s will did not have a clause providing for later born children, or the child may have been alive at the time the will was executed but the parent chose, for whatever reason, not to mention the child. While some states still permit an omitted child who was born at the time the will was executed to take an intestate share, others, including UPC states, do not. An omitted spouse, an omitted child, and the omitted issue of an omitted deceased child, are referred to as pretermitted heirs.

The most common planning strategy to avoid an excessive inheritance by after-born children is to treat them similar to other children by using class gift terminology. For example, by using the terms “descendants” or “issue” in the will or trust to designate the persons who will inherit, rather than specifically naming children, pretermitted child situations are avoided. Thus, property left to someone other than the children will avoid being reduced by an omitted heir’s claim.

Adopted Children

Most states (perhaps all), including those that have incorporated the UPC,^[4] treat adopted children the same as birth children of their adoptive parents for intestate succession purposes. So, an adopted child will inherit from the adoptive parents (and their blood relatives), and the adoptive parents (and their blood relatives) will inherit from the adopted child. Conversely, most states give the biological parents of a child adopted by another no rights to inherit by intestate succession from their biological child. Similarly, adopted children usually have no succession right to the interests of their biological parents. Called the “fresh start” policy, this rule, breaking inheritance rights between adopted children and their biological parents, reflects public policy belief that implementing a complete substitution of the adoptive family for the biological family is in the child’s best interest. Of course any of the parties can change the results by doing an estate plan that does not follow the intestate pattern, hence the biological parent who has established a relationship with her adopted child can leave that child property if she so chooses. If she does not so choose, and fails to mention the child, the child is not considered a pretermitted heir.

EXAMPLE 4 - 12. Sam and Sue placed their infant child, Gloria, up for adoption. She was adopted by Kevin and Kay. If Sam later dies intestate, in most states Gloria would not inherit any of Sam’s property. If Kay then dies intestate, Gloria would inherit equally with Kay’s biological children. If Gloria subsequently dies intestate, Kevin and Kay’s issue could inherit, but neither Sue, her issue, nor Sam’s issue would. Of course, any of these individuals may receive property if they are named in a given decedent’s will.

The fresh start rule does not usually apply in the case of a “stepparent adoption,” where an adult child is adopted by a stepparent, usually after divorce or after death of a biological parent. An exception is made, allowing inheritance by these adopted children from both their biological parents and their stepparents, reflecting public policy belief that such children will be better off maintaining contact with their biological relatives.

EXAMPLE 4 - 13. Mike was six years old when his biological parents, Edith and Frank, divorced. Edith subsequently married Archie, who adopted Mike. In most states, Mike will inherit from both Edith and Frank and from Archie.

Omitted heir situations have a peculiar consequence. They result in the limited application of the intestacy laws to a decedent who actually died testate (i.e., with a valid will). Another example of the need for intestacy proceedings when a valid will exists is the situation called partial intestacy, in which a will does not dispose of all the decedent’s probate property, as when it fails to contain a residuary clause. The latter is more likely to occur when a layperson does a holographic will than when an attorney drafts the will.

LEGAL RIGHTS OF OMITTED, DIVORCED, AND DISINHERITED SPOUSES

Omitted Spouse

A spouse is most likely to be omitted when the testator married after executing a will. The omitted or pretermitted spouse is generally treated in the same manner as an omitted child. In most states, the spouse takes an intestate share unless the omission was intentional or unless provision was made elsewhere for the spouse. And, as in the case of omitted children alive at the execution of the will, an omitted spouse whom the testator married before executing the will may or may not take an intestate share, depending on the applicable state law. In UPC states, that spouse would not take an intestate share.

EXAMPLE 4 - 14. Prior to Claude and Betty’s engagement, Claude prepared his only will. Claude died in a skiing accident on their honeymoon. In most states, since Claude’s premarital will does not provide for Betty and the omission appears unintentional, the will can be admitted to probate but Betty will receive her intestate share of Claude’s property. If, on the other hand, the will has provided for Betty, in some states she will receive just the amount devised to her, which could be more or less than her intestate share. In states that allow a surviving spouse to elect to

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claim a dower interest in lieu of the amount left by will, Betty could choose to take the dower share instead of what the will has provided for her.

Effect of Divorce

In most states, bequests to a spouse contained in a will executed prior to a divorce are automatically revoked by the dissolution of marriage, and, for purposes of the will, the surviving ex-spouse is treated as having predeceased the testator. Thus, in most situations, the property will pass to an alternate beneficiary, probably the decedent’s issue, if any. Interestingly, a divorce would not invalidate a bequest to relatives or friends of the ex-spouse.

In contrast to wills, a divorce in itself may not invalidate an existing provision designating the ex-spouse as a beneficiary in life insurance policies and retirement contracts.

Protection Against Disinheritance of Spouse

Can one spouse totally “disinherit” the other? Most states have laws designed to prevent this. States handle the potential problem of a penniless widow (or widower) by enforcing one or more of the following concepts: community property, dower and curtesy, the spousal right of election, family allowance, and homestead property.

Community property. As we have seen, community property states protect spouses by attributing to each spouse ownership of one-half of all property acquired by his/her efforts during the marriage while domiciled in a community property state. One would expect spouses to have nearly equal estates if they have been married most of their working years and they lived those years in community property states. Of course, a significant inheritance by one of the spouses will result in unequal wealth unless that spouse decides to convert the inherited property into community property. Recently married spouses or spouses that marry late in life, especially after retirement, may own little or no community property. The laws of the community property states do not require the decedent to leave the survivor any of the decedent’s half of the community property or any of his or her separate property. Nevertheless, some protection is available under the Retirement Equity Act of 1984, which provides that after a person is married for one year to an employee who is a participant in a retirement plan, the only payment option is a joint annuity unless the nonparticipant spouse consents in writing to some other option.

Dower and curtesy. Originating in English common law, a dower represented a surviving wife’s life estate interest in a portion of the real property owned by her deceased husband. A curtesy represented a surviving husband’s life estate in a portion of the real property owned by his deceased wife. These interests have all but disappeared from our legal landscape.

Spousal right of election. All common law states, except Georgia, have enacted legislation replacing dower and curtesy with a spousal right of election, which essentially gives a surviving spouse a choice. Either the spouse can “take under the will,” that is, accept the provisions of the deceased spouse’s will, if any, or the spouse can “take against the will,” that is, elect instead to receive a statutorily specified “elective share.” In most states, the “elective share” is equal to that share the spouse would have inherited had the decedent died intestate.

The elective share statutes are not foolproof for at least two reasons. First, a person may be encouraged by a wealthy fiancé to execute a premarital or post-marital agreement waiving, or greatly reducing, elective share rights. Such agreements are recognized in most states, provided that they are entered into freely, that they fully disclose both spouses’ finances without misrepresentation, and that they clearly spell out those elective rights to be waived. Second, lifetime giving strategies, either outright or in trust, may be successful in circumventing forced share litigation. While the courts in many states have tried to overcome these transfers, success has been spotty.

The elective share provisions of the Uniform Probate Code were revised in 1990 in an attempt to overcome these deficiencies by being more equitable and less arbitrary than elective share statutes predicated solely on intestacy. They allow the surviving spouse a sliding scale elective share. The share is equal to a percentage of the “augmented estate.” The augmented estate includes the probate estate plus the decedent’s interest in property characterized by right of survivorship (joint tenancy, etc.) held with a non spouse, proceeds on certain life insurance on the decedent’s life payable to a non spouse, and many transfers of property by the decedent during the two-year period preceding death if the decedent retained certain interests in the property transferred (such as assets transferred to a revocable trust). The new provisions allow shares ranging from 3 percent, if the spouses were married less than one year, to 50 percent for marriages of 15 years or more, with a minimum share of $50,000. These

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provisions tend to reduce the significance of the manner in which the decedent held title on the share the pretermitted surviving spouse is allowed to claim.

Family allowance. All states give the probate court legal authority to grant a family allowance to support the decedent’s spouse and minor children during the period of estate administration. This special award is needed because the court will ordinarily delay property distributions until it can determine that all debts can be paid. The family allowance takes precedence over claims by taxing authorities and unsecured creditors. Even a disinherited spouse or a dependent child might be given a family allowance. The size of the family allowance, which is usually paid in installments, will vary depending on the survivors’ needs and the size of the estate.

Homestead and other exempt property. Finally, most states protect surviving family members from losing certain property to the decedent’s unsecured creditors or by the terms of the decedent’s will. The homestead, as it is called, usually includes the family home and adjacent property, subject to maximum acreage limitations. Some state statutes may also exempt other property, such as household furnishings, a vehicle, wearing apparel, and the like. Depending on the state, such assets are offered the following protection: exemption from forced sale while the surviving spouse and the decedent’s descendants are minors, restriction from inter vivos alienation, testamentary disposition and intestate descent, and exemption from certain taxation. These statutes vary greatly from state to state. The UPC also grants a monetary homestead allowance of $15,000 for the spouse and $15,000 divided among all dependent minor children.^[5]

Thus, most states have laws that prevent the death of one spouse from impoverishing the surviving spouse. Surviving children are, however, generally not afforded the same protection. In some other countries, such as France and Switzerland, most of a parent’s estate must be left to the spouse and children. It may seem unfair that children in the United States are not similarly protected, since spouses have the ability to protect themselves when they marry but children have no choice when they enter the parent-child relationship. In addition, young children generally cannot support themselves. However, our society’s refusal to protect children likely stems from a policy interest in discouraging expensive guardianships on the assumption that the protected spouse will support the minor children. Nonetheless, this is not an ideal solution in a world filled with second

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and third marriages, where the surviving spouse and the decedent’s children may not be related.

Next, we direct our study to the final major subject in this chapter: probate administration process.

PRINCIPLES OF PROBATE ADMINISTRATION

The principles underlying probate administration of an American decedent’s estate originated in England, where public officials and the Church of England took control of a decedent’s property, or at least supervised those individuals taking control, and then distributed it to the heirs and devisees. The word probate stems from the Latin word to prove, meaning to certify the validity of a will. When a will is “approved,” it is admitted to probate. Today, the term probate is seldom used in the restrictive sense of proving the validity of a will. In modern usage, probate refers to the entire court-related process of the administration of a decedent’s estate, including those estates of people who die intestate, and thus have no will to prove.

Probate has been said to have three main purposes. First, it protects creditors by mandating that valid debts of the decedent be paid. Second, it implements the dispositive wishes of the testator by supervising the distribution of estate assets to beneficiaries. And third, probate serves to transfer clear title to those who receive the property.

Presenting a comprehensive overview of the principles of probate administration in the United States requires generalization since each state has its own set of laws. There are, however, many similarities. Nearly all formal probate procedures have the following four attributes:

1. Appointment of the estate’s personal representative by the court.

2. Presentation of at least two petitions and at least two court hearings, for which written notice has been given to all interested parties. (Interested parties are those who could be affected by the probate process, including beneficiaries, creditors, and fiduciaries nominated in the will.) Notice to creditors is usually done through newspaper publication.

3. Issuance, by the court, of signed orders as a precondition to the performance by the personal representative of certain major steps, such as the sale of real property, payment of attorney’s fees, and distribution of probate property.

4. Review and approval, by the court, of one or more financial accountings and reports on significant matters of concern to the interested parties.

These requirements reflect the strong interest each state has in protecting creditors and beneficiaries.

In addition to providing these elaborate procedures, about half the states offer the option of less formal settlement procedures. These states have adopted all or most of the provisions of the Uniform Probate Code. Flexibility under the UPC enables the estate’s interested parties to choose whether to be extensively supervised by the court in the usual manner, to be supervised only with regard to certain specific acts, or to be almost totally unsupervised. While the states that do not allow for less formal administration might still allow for some degree of informality, most of their estates must follow the traditional formal procedures.

This section will examine the traditional approach and the flexible approach to estate administration, partly to show that their underlying philosophies are very different, and partly to give the reader an indication of the current trend in probate reform. Actually, this reform has influenced all states to some degree, including those offering much less flexibility. The traditionalist states are deregulating, but in a more fragmentary manner, as we shall see.

Substantial Formal Supervision: The Non-UPC Model

California is a non-UPC state. Below is a summary of its formal probate procedures to illustrate the major requirements of a formal probate. Most states have similar procedures but details will vary from state to state. In UPC states, the executor has the option of using the formal or informal method, unless the probate court registrar (clerk of the court) determines that there is a reason the probate should be formal.^[6] Sections of the California Probate Code are cited parenthetically and are at http://www.leginfo.ca.gov/calaw.html.

The formal probate process. After a person has died, the executor is expected to start the formal probate process as soon as is reasonably possible.

Petition for probate. The person nominated as executor is required to file a petition for probate within 30 days of gaining knowledge of the testator’s will and of his or her nomination. (§ 8001) The original will should also be filed with the

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clerk of the superior court in the county where the decedent resided. California law recognizes a tort cause of action that can be brought against a person for fraudulently destroying, concealing, or “spoiling” a will.

In addition, any person “interested” in the estate may make a similar petition (§ 8000). Where there is no will, hence no executor, the interested person is likely to be a close relative. Rarely is more than one petition filed. On filing the petition, the court clerk must schedule a hearing on the petition within 45 days (§ 8003). Ordinarily, the person nominated in the will to be executor files the petition, requesting (1) probate of the will, (2) letters testamentary, and (3) authorization to administer under the Independent Administration of Estates Act. Each request will be described briefly.

1. Probate of the will: If, after the hearing, the will is “admitted to probate,” that will is thereby considered to be the only valid will and, except in the most unusual circumstances, it will serve as the blueprint for distribution.

2. Letters testamentary or letters of administration: Also known as “letters,” this document, usually just one page long, contains the court’s formal identification of the person selected by the court as representative of the decedent’s estate. A court-certified copy of the letters empowers the personal representative to deal with third parties on behalf of the estate. They are called “letters testamentary” if the person selected was nominated in the decedent’s will, and “letters of administration” where the selected personal representative was not named in the will. Where there is no will, the personal representative is referred to as simply the administrator. The administrator is called an administrator with will annexed if there is a will admitted to probate but either no executor was named in the will (probably a homemade will done without attorney involvement) or neither the named executor nor the alternate executors were appointed by the court (perhaps they were unsuitable or unavailable).

3. Authorization to administer under Independent Administration of Estates Act: The California Probate Code allows a somewhat simplified formal probate administration. Essentially, it eliminates the requirement of obtaining court approval for many of the common transactions undertaken by the personal representative. However, some actions are not exempt and require either express court approval or written notice to all beneficiaries of a proposed course of action, giving them a period of 15 days in which to lodge an objection before the action is taken (§§ 10400-10600).

In addition to making these requests, the petition also makes several representations, including facts about the bond, the heirs, and the beneficiaries. A probate bond (also called a fiduciary bond) is required unless the will waives it or unless all potential beneficiaries agree to waive it (§ 8481). The bond protects the estate from a financial loss in the event of wrongful conduct by the personal representative. If the personal representative misappropriates estate property or loses it due to negligence, the bonding company must make the estate whole and then has the right to pursue the personal representative. This right of the bonding company to seek to recover from the personal representative any money it had to pay the estate is called a right of subrogation. Ordinarily, the bond amount will be equal to the total value of the personal probate property plus one-year’s estimated income from all of the probate property, but not real property because it is less vulnerable to misappropriation (§ 8482). The bond premium, typically one-half to one percent of the amount of the bond, is charged to the estate. The petition for probate must state either that the will waived the bond, that the beneficiaries all request the waiver of the bond (in which case the waivers should be filed with the petition), or that the requirements for a bond will be met. Where a bond is required, evidence that it has been issued is required before the court will issue letters. As a second representation, the petition for probate is required to identify all beneficiaries named in the will and any heirs at law even though not named as beneficiaries.

Two other forms are ordinarily filed with the court clerk at the time of filing the petition for probate. First, a Proof of Subscribing Witness is submitted, in which at least one witness to the will declares that he or she signed the original document, that the decedent appeared to be of sound mind and over age 18 at the time of the signing, and that the witness knows of no evidence that the will was signed under duress, menace, fraud or undue influence. If a witness cannot be found, or if all witnesses have died, proof can be offered by handwriting analysis. To make this task unnecessary, in the spirit of probate simplification, most states now recognize what is called a self-proved will, also called a self-executing will. This is a will containing a formal affidavit as part of the original attestation portion of the will, wherein the witnesses state that all formalities were followed. This statement will stand unless an interested party challenges the validity of the will. At a minimum, this generally eliminates the need to locate witnesses to attest to the will’s validity many years after the execution of the will. In some states, the affidavit creates a presumption that all formalities were correctly followed, thus putting the burden on any challenger to prove that such was not the case. The “Statement of Witnesses” clauses in the sample wills set forth in Exhibits 3-1 and 3-3 are self-proving.

The second form ordinarily filed along with the probate petition is the Notice of Petition to Administer Estate and contains the same information as the announcement notice that must be published (three times prior to the hearing) in a newspaper of general circulation in the city (or county) in which the decedent resided. Exhibit 4-2 shows an example of the information that might be found in a published notice.

The notices, both filed and published, are intended to announce the following to interested parties and to the public:

1. That a petition for probate has been filed.

2. That a hearing will be held.

3. That interested parties may attend the hearing to object to the granting of the petition.

4. That creditors must file claims against the estate within four months after the issuance of letters.

5. That anyone may examine the probate file.

6. That the petitioner is requesting authority to administer the estate under the Independent Administration of Estates Act.

Copies of the filed notice must be mailed to all heirs and potential beneficiaries at least 15 days prior to the date of the hearing (§ 8110).

The hearing. The initial “hearing” for any particular probate estate may last less than a minute. The judge gives anyone in the courtroom the opportunity to object. Objections are rarely raised. Grounds for objection include the allegation that a more recently executed will exists or that even though the will in question is the only one or the most recent one, it should not be admitted to probate because it was not properly executed due to the testator’s lack of capacity, undue influence, fraud, or mistake. If there are objections, the judge will set the matter for further proceedings to settle the dispute, which, if not immediately resolved, can turn into a will contest. If the petition for probate is granted, the judge signs an Order for Probate that states the court’s findings, specifically:

1. All notices have been filed.

2. The decedent died on the specified date.

3. The will in question should be admitted to probate.

4. The petitioner is the appropriate person to serve as the estate’s personal representative, either as executor or as administrator with will annexed.

Then, the Order usually requires that:

1. The will is admitted to probate.

2. The named personal representative is appointed.

3. A bond is (or is not) required.

4. The personal representative is (or is not) given authority to administer the estate under the Independent Administration of Estates Act.

5. Letters are issued (on the posting of the bond, if such is required).

Upon issuance of the Order for Probate, the personal representative secures his or her certified letters from the probate clerk, thus completing the first stage of the formal dealings between the personal representative and the court.

After the hearing. Next, usually in conjunction with the estate’s attorney, the personal representative undertakes the marshaling of estate assets and expected claims. Within three months of appointment, the personal representative must file with the probate court a formal document called Inventory and Appraisement. This form lists all probate assets showing their fair market value. The personal representative is permitted to determine the value of cash items (e.g., bank deposits, etc.). Other assets must be valued by an appraiser who, depending on state law, may be selected by the court from a list of court-approved independent appraisers. Finding a qualified appraiser may also be one of the duties of the personal representative.

The Inventory and Appraisement performs several important functions. First, it lists those assets for which the personal representative is responsible. Second, as a public document available for public inspection at the courthouse, it describes the contents of the probate estate to all interested parties, including potential heirs, legatees, devisees, and creditors. Third, it provides information to the court to determine, among other things, the proper fiduciary bond amount, the amount of the family allowance, and, if property is sold, the minimum bid that the court will approve. Finally, it may influence the taxing authorities with regard to valuation of assets included on the estate tax returns.

During the creditors’ claim period, which in most states lasts for four months after the date the letters are issued, each creditor is expected to file with the court or personal representative a document called a creditor’s claim form. Failure to file within the claim period will bar later collection, unless an exception is allowed (§ 9100). Exceptions include:

1. Creditors who did not have actual knowledge of the proceedings (§ 9103).

2. Taxes owed (taxing authorities are not subject to the creditor’s period (§ 9201)).

Availability of a shortened creditor’s period is said to be a major advantage of the probate process compared to other mechanisms for the transfer of a decedent’s estate, at least for estates that anticipate potential problems with creditors.

During estate administration, the personal representative is responsible for handling the financial affairs of the estate, such as:

1. Paying bills (rent, utilities, property insurance premiums)

2. Accumulating liquid assets so that large bills can eventually be paid (e.g., taxes and legal fees)

3. Protecting estate assets from exposure to loss by insuring and safeguarding them

Distribution of estate assets. The net estate will be distributed to the beneficiaries only after all matured debts and taxes, except the federal estate tax, have been paid. However, a partial distribution to beneficiaries may be made on court approval of a Petition for Preliminary Distribution. Ordinarily, this petition is filed only after the end of the creditor’s period. Further, the court must be satisfied that the distribution can be made “without loss to creditors or injury to the estate or any interested person.” No more than 50 percent of the estate can be distributed in a preliminary distribution (§§ 11620-24).

“Final Distribution” is made upon approval of a petition at a hearing, after the court determines that all current debts and taxes have been paid (§ 11640). At the same time, the judge normally approves a final estate accounting, attorney’s fees, and executor’s commissions (§§ 12200-252). The accounting may be avoided by waiver of all the beneficiaries (§ 933). After distribution and the payment of fees, the executor requests and receives a final discharge (§§ 12200-252).

The entire formal probate administration procedure takes from eight to 24 months in most cases.

Attorneys’ fees for California probate administration work are determined by statute, in the absence of a different agreement by the parties. Statutory probate fees are summarized in Table 4-1.

TABLE 4-1 California Statutory Probate Fees

Probate Estate		Rate	Cumulative: Estate/Fee
First	$15,000	4.0%	$15,000	$600
Next	$85,000	3.0%	$100,000	$3,150
Next	$900,000	2.0%	$1,000,000	$21,150
Next	$9,000,000	1.0%	$10,000,000	$111,150
Next	$15,000,000	0.5%	$25,000,000	$186,150
Over	$25,000,000	Reasonable amount set by the court

California Probate Code § 10810.

These fees are based on the gross probate estate, not net of liabilities, plus gains from the sale of assets, plus income, and less losses from the sale of assets. Gains and losses are based on the date-of-death appraised values. California executors are entitled to the same amount (§ 10800) as shown above for attorneys. California is one of the states that has statutory fees. In most states, probate administration fees must simply be “reasonable” and specific amounts or percentages are not mandated. In other states, probate fees must be “reasonable,” but not in excess of a certain percentage (e.g., Iowa sets an upper limit of 2 percent times the value of the probate estate).

EXAMPLE 4 - 15. California attorney Spector works with executor Gregory to probate a $500,000 estate. Included in the estate is a house worth $200,000 that has a $150,000 mortgage. Both the attorney and the executor receive a fee of $11,150 based on the gross (not the net) value of the estate. [4% * $15,000 + 3% * $85,000 + 2% * $400,000]. Additional fees will be allowed for “extraordinary services” such as sale of real property, estate litigation, and preparation of tax returns. Note that the combined charge is 4.46% of the gross value of the probate estate.

Sometimes attorneys are asked by survivors to act as both estate attorney and executor. Whether they will receive a full double fee will depend on several factors, including state law and the attitude of the specific probate judge. Some states, including California and New York, have made this “double dipping” illegal in the absence of prior court approval. In other states, probate judges frequently reduce the fee in such situations. A possible solution is for persons to negotiate probate fees with the estate planning attorney while they still can, so the chore does not fall on the shoulders of grieving survivors. The probate court would probably nullify an agreement that called for fees in excess of the court’s own guidelines or in excess of the fees set by statute.

Summarizing the essential components of formal supervision: Formal probate in most non-UPC states requires at least four document filings (petition for probate, a certification establishing that notice of death has been published, an inventory and appraisement, and a petition for authority to make a final distribution), requires at least two formal court hearings (one for the admission of the will to probate and to appoint the personal representative, and another to approve the final accounting and the request for authority to distribute the estate), one newspaper publication of notice, and at least one accounting (unless it is waived by all estate beneficiaries). Many states have acted to simplify probate administration, a major example of which is outlined next.

We now turn to the second major type of state probate supervision, the flexible approach under the Uniform Probate Code. A discussion of one non-UPC state’s less comprehensive attempt at simplifying probate procedures can be found in Appendix 4A.

Estate Administration in UPC States: A Study in Flexibility

Personal representatives in non-UPC states usually must use formal probate, although summary probate procedures may be available for smaller estates and for property passing outright to the surviving spouse.

In contrast, probate procedures in a UPC state are much more flexible, allowing interested parties to select the degree of supervision they desire. The basic choices are three: complete court-supervised administration; totally unsupervised (informal) administration; or a combination of unsupervised and supervised administration. The UPC also provides a simple summary procedure for estates worth less than $5,000. It is similar to California’s affidavit-of-right procedure, described in Appendix 4A. In most states, modest estates can be settled without any administration.

Complete court-supervised administration. Some complex or unusual estates in UPC states may be subject to supervised administration. UPC supervised administration is a bit less regulated than a non-UPC supervision such as California’s formal continuing court supervision probate. The personal representative is given greater freedom to act independently. Usually, there is no court involvement between the time letters are issued and the time the personal representative petitions the court for closing of the estate. Most personal representatives of estates in UPC jurisdictions choose not to be subject to supervised administration. Occasionally, an interested party will have reason to lack trust and request it because he or she wants notice of what the personal representative is doing. In contrast, probate administration in non-UPC states, as we have seen, requires court approval of all major transactions.

Informal and formal administration. In UPC jurisdictions one of two types of procedures is followed: informal or formal administration.

Informal administration procedures usually require no court appearances and very little notice. The application for informal appointment is the simplest way for a personal representative to be appointed. The prospective personal representative files an application with a court registrar, whose role is administrative rather than judicial. Once appointed, the personal representative has the powers needed to perform the job, including the power to deal with creditors and distributees. The personal representative is required to give notice of the appointment to all heirs and devisees by ordinary mail within 30 days of appointment. Within three months, the personal representative must prepare an inventory of the estate and mail it to all parties requesting it. The entire inventory can be valued by the personal representative unless an interested party objects.

Even with informal administration, the personal representative must give formal newspaper notice, similar to the procedure for a formal probate, in order to limit the creditor’s claim period to four months from date of first publication. Without published notice to creditors, the limitations period usually runs to three years after the date of the decedent’s death.

Six months after appointment, the personal representative can apply to the registrar to close the estate. After another six months, assuming no one has lodged an objection, the personal representative is discharged from all liability except due to fraud or other major offenses. Unless the newspaper notice was given, distributees of estate property will continue to be liable for estate debts until the later of three years after date of the decedent’s death or one year after the date of the distribution.

Formal administration procedures under the UPC include the petition for formal testacy (proving the will), petition for formal appointment of the personal representative, and petition for formal closing. Each is undertaken in a manner similar to that for supervised administration and requires giving proper notice to interested parties, filing a petition with the court, and appearing at a court hearing.

During informal proceedings, a dissatisfied interested party can petition the court for a formal resolution of a controversy, whereupon the matter will be taken up “in” court. Once the dispute is settled, administration can resume in informal proceedings “out” of court. The UPC’s unique method of settling disputes has been described as an “in and out” method.

In addition to the right to petition the court, interested parties have other protective remedies, including the right to request that the personal representative obtain a bond even though it was waived in the will, the right to request a restraining order to keep the personal representative from doing some specific act (such as selling a family heirloom), and the right to demand notice by receiving a copy of any filings or orders in connection with the estate. With the exception of the right to notice, the requests are subject to the court’s discretion.

We can now see the relationship between informal and formal proceedings under the UPC. At each significant step in the probate process, the interested parties can elect a different degree of supervision. For example, the probate process may begin with an application for informal supervision of the personal representative. Then a controversy may arise that requires court resolution. Finally, the personal representative may feel compelled to file a formal petition for closing. Only rarely will an interested party petition for completely supervised administration. Generally, it is the desire of all beneficiaries to minimize judicial supervision, because supervision tends to delay distribution.

The movement toward reduced court involvement in estate administration has spread to many non-UPC states, due in part to the influence of the UPC. As illustrated in Appendix 4A, traditional states have moved to reduce court supervision by adopting summary procedures, set-asides, and procedures to reduce the personal representative’s court reporting requirements. The overall effect of all state deregulation has been to reduce court congestion considerably.

The next chapter will require a change of focus, from the qualitative to the quantitative. It will be the first of four to introduce the principles of taxation.

QUESTIONS AND PROBLEMS (To find state probate codes, see question 3.)

1. True or false: A decedent’s intestate property does not go through the probate administration process. Explain.

2. What goals do states seek to accomplish through their respective probate codes?

3. Describe your state’s laws covering inheritance by intestate succession. They are usually found in a chapter of that state’s probate or estates and trusts code. The names for these codes vary, for instance: Decedent’s Estates, Guardianships, Protective Proceedings and Trusts (Arizona); Estates, Powers & Trusts (New York); or Probate Code (California). (See http://www./piperinfo.com/state)

If your state is unavailable, describe the UPC rules using South Dakota’s Uniform Probate Code, Title 29A. Go to http://www.lexislaw.com/Resources/ and click on “South Dakota Codified Laws.”

4. (a) Use South Dakota’s law to answer the following: if a person dies intestate, all other things being equal, what is the priority as to whom the court will choose as administrator? (b) Use California law to decide this issue: Laura died, leaving a valid holographic will that failed to name an executor. The estate is worth approximately $400,000. The will leaves $25,000 to Laura’s only daughter, Janet, and the residue is left 40% to grandson Kirk, who is sixteen, and 60% to her nephew Brian. Both Brian and Janet filed petitions to administer the estate. No one contests the validity of the will, nor does anyone claim that there was undue influence. Who is likely to prevail? Explain.

5. Consider the relationships between an individual (i.e., anyone) and various relatives. For each of the following state whether the person is an ascendant, a descendant, a collateral relative, or none of the above; and give the degrees of consanguinity: (a ) great-grandfather; (b) husband; (c) first cousin twice removed; (d) grandchild; and (e) nephew.

6. State who is “closer” to a person (i.e., any individual) and state for each relationship the degrees of consanguinity, her: a. son or brother, b. grandchild or aunt, c. grandparent or sister.

7. Describe one characteristic that is common to all three rules of distribution discussed in this chapter.

8. Widow Anna died testate. She had three sons and one daughter. Her second son died ten years before her, but his two children have survived. Her daughter died three years ago and left one child. Describe how Anna’s property will be distributed to her descendants if her will says to my issue by (1) per capita distribution, (2) traditional per stirpes, and (3) per capita at each generation per stirpes.

9. Bachelor Harry has an interest in a house, some furniture, a car, some common stock, and a life insurance policy on his life. The car is in joint tenancy with his mother. The house is in trust, and the trust instrument says “for Harry’s use for life, then to cousin Joe.” The life insurance policy names his cousin, Joe, as the beneficiary. Harry owns the furniture and the policy as an individual. With regard to the stock, Harry is an equal tenant in common with Sam. Harry’s will says “I leave my car, my stock, my life insurance proceeds and my house to Betty.” It has no other dispositive provisions.

a. Assuming that Mother and Joe are Harry’s only living relatives and that Betty is a close friend, who will receive what if Harry dies?

b. What will be included in Harry’s probate estate? His non-probate estate? His testate estate? His intestate estate?

c. Who will be an heir? A legatee? A devisee?

d. In your state (or under the UPC, if state law is unavailable), will your answers to the above questions change if Harry was also survived by a son? Why or why not?

10. Bob died leaving no will. At the time of his death, Bob owned his home in joint tenancy with a close friend, John. He was also the sole owner of a car, a racing horse, and a $50,000 savings account. Bob is survived by his mother, an uncle and two cousins. Assuming UPC state law, who is entitled to Bob’s property?

11. When he executed his will, Frank and Joan had two young children, Mattie and Ned. Frank’s will left half his property to his wife Joan and half to their daughter Mattie. A year after the will was signed, Pam was born into the family. Today, Frank cannot for the life of him figure out why he left half his estate to his little daughter, none to his son, and just half to his wife. Frank says he wants to leave all his property (worth $180,000) to Joan when he dies, and if she predeceases him, then to his issue by right of representation. (a) From an estate planning standpoint, what is the first thing he should do? The second and third things? (b) How would his estate be shared if he died now without changing his will? Apply your state law or, if unavailable, South Dakota’s UPC.

12. When George was an enlisted man in the Army, he went to the base legal officer and signed a simple will leaving everything to Lucy, his mother. George, now a civil engineer, recently married Karla. George would like his wife to receive most of his estate (estimated worth of $500,000–not counting a pension death benefit equal to 40% of his salary that would be paid monthly to Karla). Since he has been helping his mother out financially over the years, he would like his mother to receive about $300 per month for her lifetime. (a) From an estate planning stand point, what is the first thing he should do? (b) How can he accomplish the goal of helping his mother? What more do you need to know about this goal? (c) How would his estate be shared if he died now without changing his will? Apply your state law or, if unavailable, the UPC.

13. Explain how to determine whether the property is subject to probate administration.

14. Matthew, a wealthy man, died when his private plan crashed. His friend Janet is named in his will as executor. Based on the laws of your state, or the UPC, what are the major steps that Janet should undertake from the time she learns of Matthew’s death through to the close of the probate?

15. Find, cutout or photocopy (especially if it is not your newspaper), and bring to class a newspaper published “notice” of petition to administer an estate. [You might call a law office to find which local papers are most likely to publish these notices.] What is its purpose?

16. Attend a probate hearing. Give the date of attendance, a brief summary of what you observed, and the types of matters considered by the court.

17. It is generally said that formal probate in a non-UPC state places a greater burden on the executor than would be the case in a UPC state. Give a couple of examples of differences between the two types of codes that support that proposition.

18. (a) What is the purpose of the “inventory and appraisement?” (b) What is the purpose of the creditor’s claim? Who files it?

19. (a) What is meant by “the personal representative of the estate?” In situations where the representative is referred to as “administrator,” does that mean the decedent died intestate? Explain. (b) Ordinarily, what must the personal representative accomplish before a judge will permit final distribution under supervised probate?

20. Describe what is meant by “letters” in the probate process. What kinds of letters are there? How long is this document likely to be?

21. a. To what extent do the laws of intestate succession seem inefficient for parents of minor children?

b. To what extent does a will leaving everything outright to the surviving parent solve the problem? To what extent do you think such a will fails to solve it?

c. What might be a better solution?

22. (a) In considering the rights of children who are not left any part of their parent’s estate, why do some states allow claims by omitted after-born children (i.e., born after the will was executed) but not by omitted children who were already born when the will was executed? (b) What is the logic behind limiting omitted children born after the will was executed to a share no greater than that of their siblings born when the will was executed?

23. Charlie died intestate. His estate is valued at $400,000. He is survived by his four children: Matt, Chris, Joe and Doug. Five years before Charlie died, he gave stock to Joe valued at $60,000. If this gift is considered an advancement, how much would each of his children receive? If this gift is not considered an advancement, how much would each child receive? What determines whether it was an advancement?

24. Ralph has two children, Betty and Bill. Bill wants to start a company and asks Ralph to give him an advancement of $100,000. Ralph’s intent that the gift is an advancement is recorded in writing. What will each child receive if: (a) Ralph died intestate with an estate of $500,000? (b) Ralph died intestate with an estate of $150,000? (c) Ralph died with a valid will that left his estate to his issue by right of representation?

25. (a) Using the California Statutory Probate Fee table, determine the attorney’s and executor’s fees in the following: The decedent had these probate assets: A house worth $250,000 that had a $200,000 mortgage; a car worth $15,000 with a $10,000 lien for a car loan, a brokerage account (stocks and bonds) worth $100,000, and miscellaneous household furniture valued at $25,000. There was credit card debt of $6,000 and total accounting fees of $1,000 for preparing the decedent’s last 1040 and the estate 1041. (b) What percentage are the total attorney and executor fees as compared to the gross value of the probate estate? Of the net value of the probable estate?

26. One day, Mark learned that his biological mother, Nancy, died in a plane crash. He also learned she was very wealthy and did not mention him in her will. He went to court claiming he was her child and had records and DNA evidence to prove it. He seeks to receive his share of the $1.2 million estate. Besides Mark, Nancy left one daughter with no children and two grandchildren from a predeceased son. (a) How much of the estate will Mark receive, assuming that Mark was adopted by the Smith family at his birth? (b) How much would Mark receive if he was never adopted, but had grown up in foster homes?

27. Denise died recently. Determine what portion, if any, of each item described below is a probate asset.

a. An automobile, held jointly with Jake.

b. A money fund account, owned by Denise as an individual.

c. A life insurance policy (L1) on Denise’s life, owned by Denise. Herb is beneficiary.

d. A life insurance policy (L2) on Denise’s life, owned by her. James, the sole beneficiary, died three years ago.

e. A life insurance policy (L3) on Herb’s life, owned by Denise, who is also beneficiary.

f. Common stock, owned by the trustee of a living trust. At the moment of her death, Denise was trustor, trustee, and one of the beneficiaries. Herb was the remainderman.

g. Commercial real estate owned in common by Denise (40%) and Herb (60%).

h. Defined benefit pension plan. Denise was participant, and Bob is named surviving beneficiary.

i. Residence, owned by Denise and Herb as community property.

28. John died intestate, survived by his mother Jan, his wife Alice, and their young child Jenny. His estate consists of the following assets: 1. A home placed in joint tenancy with Jan before he married Alice. 2. Corporate bonds held as community property with Alice. 3. Shares of common XYZ stock held as separate property. 4. A life insurance policy with his friend Carl as the beneficiary. 5. A store owned as tenants in common with Paul, his business associate. 6. A car and a checking account, both in join tenancy with Alice. 7. A transfer-on-death savings account naming Jenny as transferee.(a) Which assets are probate estate assets and which ones are nonprobate assets? (b) Who would receive each of the above five assets? (c) How should the savings account (item 7) be handled?

APPENDIX 4A

SUMMARY PROBATE PROCEEDINGS IN CALIFORNIA: ONE NON-UPC STATE’S ALTERNATIVES TO FORMAL PROBATE

As we have seen, formal probate typically requires at least four document filings, two formal court hearings, one newspaper publication of notice, and at least one and possibly two accountings. Although these procedures were designed to protect estate assets and ensure their proper distribution, many are considered unnecessary in simple estate situations. Over the years, both UPC and non-UPC states have simplified probate procedures for less complicated estates.

This Appendix will summarize the progress of probate simplification in California, a state that has not adopted the UPC. Presently, California has two major types of “summary probate,” neither of which requires newspaper notice and both of which require not more than one petition and hearing. The two types, discussed next, are the affidavit of right and the summary distribution to the surviving spouse. As you read this, keep in mind that many UPC states have procedures similar to these.

Affidavit of Right

The affidavit of right is a procedure that permits the settlement of a decedent’s affairs more rapidly than formal probate. It is available if the gross estate (real and personal property) does not exceed $100,000 in value after excluding all property for which there is some other (non-probate) mechanism of transfer. Property in trust, joint tenancy property, life insurance going to named beneficiaries, and Totten trust accounts do not count as part of the $100,000. Also not counted toward the $100,000 limit are motor vehicles and mobile homes, $5,000 in salary, and any property subject to a summary distribution to the surviving spouse (a proceeding described below). The affidavit of right method of transferring property without any court involvement only applies to a decedent’s right to money, tangible personal property, or evidences of a debt, obligation, interest, right, security, or chose in action. The procedure differs slightly if real estate is involved and does require minimal court involvement.

For non-real estate assets, an affidavit signed by the “successor of the decedent” is presented to the person or institution holding the property. That party is then required to turn ownership of the property over to the person with the claim. The successor of the decedent is the person with the most legitimate claim to the property. He or she may be an executor named in the decedent’s will, the trustee (if there is a pour-over will), or in the case of intestacy, a guardian (on behalf of a minor), or one of the heirs claiming on his or her own behalf. Forty days must have lapsed since the decedent’s death, and the affidavit must state that no probate has started and that the total property being claimed by this method does not exceed $100,000. It must also state the basis for the person’s claim that he or she has the right to the possession of the property. A certified copy of the decedent’s death certificate is attached to the affidavit. The recipient of the property is liable for any liens or taxes that are associated with the asset. Of course, if the property is being collected by an executor or trustee, he or she must then make transfers in keeping with the controlling document, i.e., the will or the trust. (§§ 13100-13116)

The affidavit of right for real property can be used to claim real estate that belonged to the decedent, but only for property up to $20,000 in value. The claimant must wait six months after the decedent’s death before presenting an affidavit similar to the one discussed for personal property. This one must be presented first to the superior court, together with a petition requesting certification. The claimant’s signature must be notarized. In addition to the death certificate, an inventory of all the decedent’s real property must be included in the petition and an appraisal of the property must be attached. If the testator had a guardian or conservator at the time of his or her death, that person must be given notice of the petition. If the paperwork appears to be in order, the court clerk will issue a certified copy of the affidavit, which the claimant must then record (without all the attachments) in the office of the county recorder for the county where the property is located. The recorded affidavit serves as a quitclaim deed from the decedent to the persons designated in the certified affidavit as the successors of the decedent (§§ 13200-13210). Note that this is done without a court hearing.

Summary Distribution to Surviving Spouse

Married spouses in California frequently own separate and community property that, at death, passes outright to the surviving spouse, either because the spouse was named in the will or by the laws of intestate succession. In two important ways, California probate law has simplified the administration requirements of such property.

Property Held as Community or Quasi-Community Property

Similar to the affidavit of right discussed above, the surviving spouse who succeeds to the decedent spouse’s community property or quasi-community property, either by will or by intestate succession, can claim it by affidavit. Quasi-community property is that property that would have been community property except for the fact that it was acquired while the couple was living in a non-community property state. There is a 40-day waiting period, but the spouse does not have to seek court certification of the affidavit even if real property is involved. If real estate is involved, the affidavit must be notarized so that it can be recorded in the county where the real estate is located. Unlike the affidavit of right discussed above, there is no upper dollar limit. A person other than the surviving spouse can stop the transfer of title by recording, with the county recorder, a notice of the existence of a competing claim. Generally, such a claim is based on the existence of a will leaving an interest in the property to the person giving notice (§§ 13500-13545).

Summary Distribution Petition

Second, the surviving spouse can elect what is called summary distribution, which is one that follows a court hearing for the purpose of obtaining written confirmation by the court that such property has in fact passed to him or her. This may be helpful to clear title. At the hearing, if there is no objection, the judge confirms that the property is, in fact, either community or separate property, and that it should, in fact, pass to the surviving spouse. The judge signs an order confirming these findings. A summary distribution petition may be filed regardless of the amount or type of other property owned by the decedent at death. Formal probate may be required for other assets. Further, an affidavit of right and a summary distribution petition may both be used in the same estate for different property, provided that all the requirements are met. Thus the spouse may claim bank accounts by use of a simple affidavit and the summary court proceeding to confirm his or her rights in real estate or in a business (§§ 13500-13660).

Attorney fees for handling a summary distribution for the surviving spouse are not set by statute. In practice, these fees are substantially less than those for formal probate. one-third of the statutory fee is an amount commonly charged and many attorneys will do this for an hourly fee that is substantially less for large estates. Even less is charged for helping with the affidavits needed for a spousal set-aside without a petition for summary distribution.

ANSWERS TO QUESTIONS AND PROBLEMS (odd numbered only)

1. False. To be intestate is to die leaving probate property that is not disposed of by a valid will. Thus, by definition, intestate property is probate property. Logically, one could argue that intestate property needs probating even more than property disposed of by will, since a legal process is needed to help determine who is to receive the property, as well as to ensure that the intended beneficiaries will actually receive it.

3. Under the UPC, as in non-UPC states, succession is determined by first recognizing the interest of a surviving spouse and next by the degree of kinship. Thus, generally, the surviving spouse takes all if there is no surviving issue or parent of the decedent. If there is surviving issue or parent, the spouse will probably share the estate with them. And if there is no surviving spouse, issue, parent, issue of parent, grandparent, or issue of grandparents, then the property escheats to the state.

5. (a) great-grandfather: ascendant (3); (b) husband: none of the above; (c) first cousin twice removed: collateral (6); (d) grandchild: descendant (2); and (e) nephew: collateral (3) .

7. Under all three rules (per capita, traditional per stirpes, and per capita at each generation per stirpes), the intestate estate is passed to the same descendants. Notice that one inherits only if those above him or her (that is those in closer relationship) in the line of descent are deceased. Although the same people inherit, the difference in the three rules is found in the amounts allocated to the various descendants.

9. a. Based on the procedure described in the text, first the nonprobate assets should be considered. Disposal instruments for them supersede the will. Accordingly, the life insurance proceeds will go to Joe, as named beneficiary. The house will pass to Joe, under the terms of the trust. The car will go to Mom, by right of survivorship under joint tenancy. The remaining assets (interest in the common stock, furniture) are probate assets. The stock will pass to Betty, under the will. And finally, the furniture will pass by intestacy to Mom, Harry’s closest surviving relative.

b. In Harry’s probate estate: furniture and stock. In Harry’s nonprobate estate: house, car, and life insurance proceeds. In Harry’s testate estate: stock. In Harry’s intestate estate: furniture.

c. Mother is the only heir. An heir is a beneficiary who would receive property that passes by intestacy. Betty is the only legatee. A legatee is a beneficiary, under a will, of a gift of personal property. Technically, no one is a devisee; that is, a recipient, by will, of real property.

d. If Harry is also survived by a son, in most states, including those adopting the UPC, descendants will inherit before parents. Thus, the son, rather than his mother, will likely inherit the furniture. Also, in some states, the son would receive the stock, under the rule that an omitted child takes an intestate share of the entire probate estate.

11. (a) Frank should immediately revoke his present will. In most states, intestate succession would give everything to his wife, Joan. He might also want to do a holographic will naming Joan as the executor and leaving her his estate, with their issue as alternate beneficiaries. He should also name guardians for the children. Finally, he should have an attorney draft a will and/or trust to provide for long-term management in the event that both he and his wife die while the children are young. (b) Ned, possibly, and Pam, definitely, are pretermitted heirs. State laws vary but Pam would have a claim for an intestate share of the estate and, given that Mattie was given a significant share of the estate, Pam would probable receive a portion of the estate. In those states that allow claims only by after-born children, Ned would not have a claim. If Ned was mentioned in the will, but left nothing, it is unlikely that he would have a claim under any state’s omitted heir statute.

13. Determining whether the property is subject to probate administration is a relatively straightforward procedure. First, list all the decedent’s property interests held immediately prior to death, including all insurance policies. Then delete from the list all assets for which there is a nonprobate mechanism of transfer, such as property in living trusts, joint tenancy property, and interests payable to a designated beneficiary, such as life insurance, pensions, and finally miscellaneous nonprobate interests such as Totten trusts. What is left should be the decedent’s property interests subject to probate administration, mostly property in the decedent’s name alone or held with others as tenants-in-common, and for states that still require probate for community property even when it goes to the surviving spouse, the decedent’s half of the community property.

15. The notice of death and petition to probate an estate should be available in the legal notices section of most local newspapers. However, some newspapers are more popular than others because of cost. Smaller circulation newspapers that meet the minimum subscription requirements for state or local law regarding legal notices may have more notices published in them than do better-known newspapers with wider circulation.

17. In a UPC state the executor is generally allowed to sell property, even real estate, without getting court authority for each sale, whereas, in non-UPC states the executor may have to get authority for each sale and may even have to bring the terms of the contract of sale to the attention of the court for final approval. Indeed, for certain types of sales, e.g., real estate, the law might require a hearing where other prospective buyers have an opportunity to over- bid the initial buyer (the one whose contract is brought before the court). Obviously, in the latter case the executor’s acceptance of an offer to purchase must be conditioned on the court’s giving its approval and on no one over bidding the original purchaser at the hearing.

The executor in a UPC state can make limited distributions and pay debts without seeking prior court approval, and then report these transactions at the time of his or her final report. In a formal non-UPC probate, the executor is expected to get court authorization before doing these things.

19. (a) The personal representative of the estate is the person appointed by the probate court to act on behalf of the decedent’s estate. He or she is given (pays a couple of bucks, actually) “letters” from the court (certified by the clerk of the court) that verified the person’s appointment. This allows the person to represent the estate in the sense of being able to collect assets and pay the debts of the decedent. If the term administrator is used, it means that the person appointed was not named as the representative in the decedent’s will. If someone named in the will serves, he or she is called the executor. Someone other than an executor serving may be due to the person dying intestate (hence no will to nominate anyone), or all the persons nominated in the will are unable or unwilling to serve, or the will fails to nominate anyone. If there is a will admitted to probate but someone other than an executor is serving, then the person is called “the administrator with will annexed.” (b) Before final distribution is allowed, the personal representative must give a full report and an accounting that shows that all approved debts have been paid and that the estate is ready for final settlement. Generally, that is also the time to request authority to pay the fees of the representative and the attorney.

21. a. Parents of minor children may find the UPC intestacy laws undesirable because guardians of the children’s estates must be appointed. This will occur under the UPC only if one or both of the parents have children by a former marriage (actually, if there are children not of the marriage). In many non-UPC states, children will inherit even if there are no children from a prior marriage.

b. A will leaving everything outright to the surviving spouse may prevent guardianship proceedings, but its assumption that the surviving spouse will take care of all children may not be correct if the spouse is not the parent of the decedent’s children or if the survivor has children by a prior marriage. Further, the spouse could remarry, diverting assets intended for the children. Finally, the surviving spouse could die before the children reached adulthood, thus creating the need for guardianships.

c. A better alternative would be providing for a trust for the benefit of the children. Trustees are subject to less court supervision and can use discretion in sprinkling trust income unequally according to the children’s needs. Guardians are required to treat each child equally. Finally, trustees are usually granted broad powers and great autonomy in managing trust assets, making a trust more efficient than a guardianship.

23. If the $60,000 gift was considered to be an advancement, Joe would receive $55,000 ($460,000/4 = $115,000, less the $60,000 already received). His siblings would each receive $115,000. If the $60,000 gift was not considered an advancement, each child (including Joe) would receive $100,000.

25. (a) The fees are based on the value of the gross probate estate ($390,000), not the net value. The fees are $8,950 for the executor and the same for the attorney for a total of $17,900. (b) This is 4.6% of the gross probate estate. The net value of the estate is $155,100 ($390,000 - $200,000 -$10,000 - $6,000 - $1,000 - $17,900) and the percentage is 11.5%.