Introduction to Estate Planning in a Nutshell
Authors:
Lynn, Robert J. / McCouch, Grayson M.P.
Edition:
7th
Copyright Date:
2019
20 chapters
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Chapter 1. The Estate and Estate Planning 1 51 results (showing 5 best matches)
- “Estate planning” refers to the process of ordering one’s property holdings and dispositions, while keeping in mind the possibility of retirement and the certainty of death. Estate planning draws on several distinct substantive fields of law, including property, wills, trusts, future interests, insurance, employee benefits, health care, and taxation. “Estate planning” is sometimes used as a synonym for “tax planning” or “business planning.” Although taxation and the existence of business interests are often an important part of an estate plan, the emphasis in this book is on estate planning in the more traditional sense, with allusions to taxation, business interests and other matters to the extent that they are necessary and helpful.
- Because the terms “estate planning” and “tax planning” are often used interchangeably, it is reasonable to think that the federal income, estate, gift, and generation-skipping transfer tax provisions of the Internal Revenue Code are the most important parts of federal law affecting the accumulation, management, and disposition of property during life and at death. But the significance of federal law for estate planning goes well beyond the obvious and direct impact of tax statutes.
- Similarly, a pension plan sponsored by an employer may allow a covered employee to designate one or more beneficiaries to receive benefits from the plan after the employee’s death. A valid beneficiary designation takes effect pursuant to the terms of the pension plan, and the benefits pass to the designated beneficiaries outside the employee’s probate estate.
- Estate planning in the more traditional sense is of special interest to the middle class, the well-to-do, and the wealthy because it deals with the conservation and transmission of wealth from generation to generation. Nonetheless, this area of the law should not be perceived as the preserve of practitioners who specialize in concocting elaborate tax avoidance schemes for rich clients. Most of estate planning is a part of basic legal literacy. A properly educated lawyer is expected to be acquainted with it. Although only a small portion of the practicing bar
- The materials in this book are prepared principally for a person who has had an introduction to property law, but who has not yet studied such subjects as trusts and future interests. It does not follow that this book purports to “cover” any subject fully. On the contrary, coverage with respect to most topics is selective, and is intended to acquaint the reader as quickly as possible with some of the key issues that arise in ascertaining a person’s existing property arrangements and in determining whether and how those arrangements might be modified to carry out the person’s intended disposition more reliably and efficiently. For example, a person might be required as a condition of employment to participate in a contributory pension plan. Although the employee cannot opt out of the forced saving that results from participation in the pension plan, he or she might nonetheless review the available choices under the plan for designating a beneficiary to receive distributions in the...
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Chapter 2. The Transfer of Property at Death by Will or Intestacy 25 54 results (showing 5 best matches)
- Estate planning is associated with death. If a person dies owning property that is subject to administration in the probate court, there is a “probate estate.” The assets constituting the probate estate are listed in an “inventory” prepared by the personal representative and filed in the probate court. The “net probate estate” consists of the assets, if any, remaining after payment of funeral expenses, administration expenses, creditors’ claims, and death taxes.
- It is sometimes said that a statute of descent and distribution creates an “estate plan by operation of law,” that is, that to the extent the net probate estate is not effectively disposed of by will, it passes according to statute. In this connection, one should note that the statutory scheme of intestate succession is extremely rigid; the heirs and their respective shares of the estate are determined based solely on status and family relationship, with little or no regard for other circumstances in a particular case. Suppose that A dies intestate at age 60, survived by his wife B and his only child C, leaving a net probate estate of $500,000. Under the Uniform Probate Code, B takes either all or part of the estate, depending on whether C is B’s child or her step-child. B’s intestate share is based on her status as A’s surviving spouse, regardless of whether B is old or young, rich or poor, or whether her marriage to A lasted for one month or several decades. C’s intestate share is...
- Intestacy: Estate Planning
- A specific gift refers to specific, identifiable property (for example, “I give my diamond brooch to A”). A general gift is a gift of a certain amount or quantity of property, usually money (for example, “I give $10,000 to B”). A residuary gift is a gift of the remaining property in the estate after all other gifts have been satisfied (for example, “I give the rest, residue, and remainder of my estate to C”).
- Where the assets of the testator’s estate are insufficient to satisfy all of the gifts provided in the will, the testamentary gifts are subject to “abatement”—that is, reduction. Assets may prove to be insufficient because the decedent depleted the estate before death through consumption or prior transfers, or because the debts, administration expenses and death taxes payable from the estate are unexpectedly large, or because a surviving spouse claims an elective share, or because a pretermitted heir claims a share of the estate. Testamentary gifts generally abate in the following order: first, residuary gifts, then “general” gifts, and finally “specific” gifts. . (Specific gifts are favored in abatement, but are vulnerable to ademption.)
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Chapter 13. Federal Estate and Gift Taxation 325 120 results (showing 5 best matches)
- The wealth transfer taxes have no direct effect on the vast majority of the population—less than one percent of decedents each year leave taxable estates large enough to incur an estate tax liability. For those who do incur tax liability, however, the impact can be significant, both in terms of reporting and paying the taxes actually owed and in terms of planning to avoid or minimize those taxes.
- Overall, the rules concerning gift completion give the donor considerable flexibility. If the donor wishes to transfer property without incurring an immediate gift tax liability, the donor can retain a power of revocation (or some other power that prevents the transfer from being complete), though of course the property will eventually be subject to gift or estate tax when the retained power expires. Alternatively, the donor may prefer to pay a gift tax at the outset in order to avoid a subsequent gift or estate tax liability. This can be accomplished if the donor is careful to tailor any retained powers in a way that will not attract an estate tax at death. It is possible for the same transfer to give rise to both gift and estate taxes, but such an overlap is almost always undesirable and can usually be avoided through careful planning.
- Transfers made by one spouse to the other, during life or at death, are generally sheltered from gift and estate tax by a marital deduction. The marital deduction was originally intended to allow married couples in separate property states to enjoy the benefits of gift and estate “splitting” on roughly the same basis as couples in community property states. The amount of the marital deduction was originally limited to one half of the value of separate property transferred by one spouse to the other. In 1981, however, this limitation was removed, and today spouses can make unlimited transfers of property to each other during life or at death without incurring any gift or estate tax liability. Effective use of the marital deduction is of central importance in modern estate planning for married couples.
- Using the unlimited marital deduction, a married couple can easily avoid incurring any estate tax at the death of the first spouse simply by arranging for all of the decedent’s property to pass to the surviving spouse, but careful planning may be necessary to avoid wasting the decedent’s unified credit. In general, if both spouses are to make full use of their respective unified credits, it makes sense to ensure that each spouse will leave a taxable estate at least equal to the exemption amount. To achieve the desired result, two conditions must be met. First, each spouse should own property at least equal to the exemption amount. If one spouse is very wealthy and the other has negligible assets, the couple may rearrange their affairs, using inter vivos gifts (sheltered from gift tax by the marital deduction) to bring the poorer spouse’s estate up to the exemption amount. Even if both spouses have large estates, however, there is a second condition which must be met, namely, each...
- The final component of the federal wealth transfer tax system is the generation-skipping transfer (GST) tax. As its name implies, the GST tax is intended to ensure that wealth does not escape tax as it passes from one generation to the next. The GST tax reaches transfers that shift property to beneficiaries two or more generations below the transferor without attracting a gift or estate tax at the level of the intervening (or “skipped”) generation. The GST tax functions as a supplement to the estate and gift taxes, but it has its own separate exemption and rate structure. In large estates, the GST tax can have a significant impact on the planning and drafting of long-term trusts for successive generations of beneficiaries.
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Chapter 7. Social Security, Private Pension Plans, and Other Arrangements Based on Status 151 56 results (showing 5 best matches)
- To ensure that qualified plans fulfill their intended purpose of providing retirement benefits, the statute imposes restrictions (backed up by a 10% penalty tax) on distributions made to an employee before age 59½. Moreover, to prevent a defined contribution plan from serving as an open-ended tax shelter, the employee is generally required to receive at least a specified amount (the “minimum distribution”) from the plan each year upon reaching age 70½. (In some cases, the required minimum distributions may be deferred until the employee actually retires.) Any balance remaining in the employee’s account at death must be distributed to the employee’s designated beneficiary or to the employee’s estate within a limited period of time. . The minimum distribution rules do not prohibit larger or earlier distributions, if permitted by the terms of the plan; their purpose is merely to ensure that the employee’s entire interest in the plan will be distributed during the employee’s lifetime or...
- Suppose that a decedent owned so little property at death that there is no net probate estate. The decedent never had occasion to create survivorship arrangements or other will substitutes intended to avoid probate. The decedent had no coverage under Social Security or under a private pension plan, and carried no conventional life insurance.
- Although Workers’ Compensation benefits can mitigate the financial effects of a disabling injury upon a worker’s eventual estate at death, or perhaps even result in an increase in the value of the estate in the case of death from a covered accident, Workers’ Compensation laws are of little use in planning the affairs of one not yet injured. Unlike Social Security, which provides somewhat predictable disability and death benefits to and on behalf of fully insured workers, the amount of benefits, if any, receivable under Workers’ Compensation depends primarily on the jurisdiction in which the accident occurs, and may be determined by the nature of the accident, the type and extent of injury, the type of employment, the number of employees employed, and numerous other variables which may affect the amount of benefits and the period of time over which they are payable. In short, for estate planning purposes, receipt of any Workers’ Compensation benefits can only be classed as a...
- It is not feasible to consider (or even to list) all of the sources of benefits of the kind just mentioned. Rather, what follows is a very brief introduction to: (1) the program of “social insurance” widely known (and often poorly understood) as Social Security, which provides benefits to retired or disabled workers and their dependents and to surviving family members of deceased workers; (2) private pension plans, established by employers to provide benefits to employees during retirement; (3) individual retirement accounts; and (4) governmental arrangements that provide benefits to veterans of the armed services (as differentiated from retired career service personnel). A brief examination of these distinct programs and arrangements gives some notion of both the scope of the benefits they provide and of the complex rules governing eligibility and payment for participants and for their dependents and survivors.
- The Internal Revenue Code offers substantial tax benefits for retirement saving through qualified plans. An employer who makes contributions to a qualified plan on behalf of a covered employee is entitled to an immediate income tax deduction, but the employee is not taxable on any of the plan’s assets or income until he or she actually receives distributions from the plan. A qualified pension trust itself is exempt from tax, with the result that contributions to the trust fund and investment earnings thereon are sheltered from income tax until they are distributed from the plan.
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Chapter 9. Future Interests—An Introduction 221 77 results (showing 5 best matches)
- Although the creation of powers is customarily justified on the ground that powers permit flexibility in the disposition of property, powers sometimes serve other purposes as well. A special power may be framed so broadly that the holder can use the appointive property for virtually any purpose other than his or her own pecuniary benefit (“a power in B to appoint the property to any one or more persons other than B, B’s estate, B’s creditors, or the creditors of B’s estate”), yet the appointive property cannot be reached by the power holder’s creditors to satisfy their claims. This is true even if the special power is held by the same person who created it. Moreover, in the absence of statute, even a general power of appointment, if unexercised, does not subject the appointive property to claims of the holder’s creditors, unless the general power is held by the same person who created it. (However, if the holder of a general power exercises the power while insolvent, the holder’s...
- It is conventional to classify powers as “general” or “special.” Following the usage in the Internal Revenue Code, a general power is defined as one which may be exercised in favor of the holder, the holder’s estate, the holder’s creditors, or creditors of the holder’s estate. In other words, a general power is one that the holder can exercise for his or her own personal benefit, either during life or at death. Any other power is classified as a special (or “limited” or “non-general”) power. Thus, if A creates a trust to pay income to B for life, and gives B a power of appointment which can be exercised in favor of anyone in the world—other than B, B’s estate, or creditors of B or B’s estate—B holds a special power. (If B, B’s estate, or the creditors of B or B’s estate were included as objects, B would have a general power.)
- Today if A, the owner of land in fee simple absolute, conveys “to B for life,” A retains a reversion in fee simple in the land. (One might also say that A has a “fee simple subject to a life estate in B,” but that is not the conventional way of characterizing the matter.) B’s life estate is a present, possessory interest. A’s reversion is a future interest.
- If a life estate in land is conveyed or devised to [B], and by the same conveyance or devise, a remainder in the same land is limited, mediately or immediately, to the heirs of [B], . . . and the life estate and remainder are of the same quality, then [B] has a remainder in fee simple. . . . Simes, Handbook of the Law of Future Interests 45 (2d ed. 1966).
- Suppose that A bequeaths “$10,000 apiece to each child of B.” The only other dispositive clause of A’s will is a gift to C of the residuary estate. A dies survived by both B and C. If B has five children at A’s death, each takes $10,000. No child of B who is conceived after A’s death (and born alive) is entitled to share. To permit afterborn children to take would require a delay in distributing A’s residuary estate until B’s death, because until that time it is not possible to determine how much of the estate must be set aside to pay a $10,000 legacy to each of B’s children. It is presumed, therefore, that afterborn children of B are excluded from the class gift.
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Chapter 5. “Simple” Wills 87 77 results (showing 5 best matches)
- Be hesitant to create a legal life estate, or a legal life estate with a power to consume. Frequently the probate estate is so small that a legal life estate is altogether inadequate to achieve its intended purpose, quite aside from its other disagreeable characteristics. A power to consume provokes litigation. A testator with wealth sufficient to justify the creation of a life estate might consider creating a trust. (Nevertheless, if the testator insists on express provision in the will for successive enjoyment of an heirloom, the legal life estate with remainder may be appropriate.)
- For many people the will is an important dispositive document. For a person of modest or moderate means the will may well be the most important dispositive document in the estate plan. It certainly should not be assumed that if a person has little property, it is of little consequence whether or not he or she executes a will.
- Viewed solely from the standpoint of the devolution of the probate estate, the intestacy laws may in a particular case direct distribution in accordance with the preferences of the decedent. But a statutory distribution that is satisfactory to the prospective decedent at a particular time may become unsatisfactory a moment later if a beneficiary dies unexpectedly. For example, suppose that A, married to B, has no living parents or descendants. A has no will. If A were to die survived by B, all of A’s estate would pass to B under the applicable intestacy laws. But if A were to survive B and then die intestate, all of A’s estate (including property received from B) might pass to distant cousins for whom A cares nothing. Although it is possible that A might execute a will after B’s death for the purpose of leaving the estate to beneficiaries other than the cousins, it is better for A immediately to execute a will setting out an alternative disposition of the estate in case B...
- The will affords an opportunity to nominate an executor of the decedent’s choice to administer the estate. The person considered by the decedent to be suitable for the task of administering the estate may be someone other than the person entitled under state law to preference in appointment as administrator if the decedent were to die intestate. A will may also give the personal representative powers to administer the estate that are more extensive than those provided by statute, and the will may exempt the executor from the requirement (and expense) of furnishing bond.
- If a wealthy person dies intestate survived by a spouse and children, distribution of the estate among the surviving spouse and the children under the intestacy laws may cause no hardship because there is ample property to meet the needs of the surviving family members. But suppose the intestate decedent was a person of modest means. Requiring the surviving spouse to share a small estate with children may effectively deprive the spouse of property needed for the spouse’s support. Furthermore, if one or more of the children are minors, property passing to them under the intestacy laws may require a cumbersome and expensive guardianship, resulting in unnecessary depletion of a child’s estate. When a couple has little property, it is ordinarily preferable that the decedent’s entire estate pass to the surviving spouse on the reasonable assumption that the survivor will provide for others to the extent that he or she can.
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Chapter 6. Insurance 121 56 results (showing 5 best matches)
- The federal estate tax treatment of insurance proceeds on a decedent’s life is governed by . That provision applies the “incidents of ownership” test to determine whether life insurance proceeds payable to a beneficiary (other than the estate) are includible in the decedent’s “gross estate”—that is, the estate for federal estate tax purposes. (The gross estate may include, and commonly does include, property in addition to that included in the decedent’s probate estate.) The term “incidents of ownership” generally refers to the economic benefits of the policy, including the right to change the beneficiary of the policy, the right to surrender or cancel the policy, the right to assign the policy, the right to pledge the policy as security for a loan, and the right to obtain a loan from the insurer against the cash surrender value of the policy. If a decedent held any one or more incidents of ownership at death, the proceeds of the policy on his or her life are includible in the gross
- Estate Planning
- For a prospective decedent, insurance on his or her own life is important because it augments or creates an estate, using the word “estate” in the largest sense. Because the proceeds of a life insurance contract (the “policy”) are commonly payable under the policy directly to the surviving spouse of the insured decedent (the “life insured” or the “insured”), or to some other designated beneficiary (as differentiated from the estate of the insured), the proceeds ordinarily are not subject to administration as part of the decedent’s probate estate.
- Even if there is no need to create an instant estate, a person might sensibly consider buying life insurance to provide ready cash to meet obligations incident to death—for example, funeral costs, debts, family living expenses, and death taxes. Having cash available from insurance proceeds to make such payments may avoid a forced sale of estate assets under unfavorable market conditions.
- Although an absolute assignment of all rights in a life insurance policy may result from a sale to another, it is more likely to arise as a result of a gift. Here it is well to remember that a completed gift is not subject to revocation. Suppose that A, a widow, owns a policy of insurance on her own life. Wishing to exclude the proceeds of the policy from her gross estate for federal estate tax purposes, she gratuitously assigns all of her rights in the policy to her daughter B. B is married to C, and they have no children. B dies survived by A and by C. B’s will leaves her entire estate to her husband C. B’s estate includes the insurance policy on A’s life, and it is irrelevant that in assigning all rights in the policy A intended to benefit only B, not C.
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Chapter 8. Trusts—An Introduction 179 67 results (showing 5 best matches)
- A private express trust is a device whereby a trustee (who may be a natural person or a corporation authorized by law to act as trustee) holds legal title to property and manages the property for the benefit of one or more beneficiaries. The trustee usually has extensive management powers over the trust property, including powers of sale and investment. The trustee also has a fundamental fiduciary duty to administer the trust exclusively for the benefit of the beneficiaries, in accordance with the terms of the trust. In estate planning, the private express trust has long been used to conserve and manage property, and to transfer wealth from one generation to the next within a family. (By way of contrast, the charitable trust is used to provide funds to carry out charitable or public purposes, rather than for the benefit of private beneficiaries.)
- Suppose that A, while married to B, transfers property irrevocably in trust to pay the net income to A for life, and on A’s death to distribute the trust corpus to C. A dies survived by B and C, and leaves a will that makes no provision for B. The corpus of the irrevocable trust is not a part of A’s estate for probate purposes, nor in many states is it viewed as a part of A’s estate for purposes of determining B’s elective share if B elects under statute to take against A’s will. (The corpus is includible in A’s “gross estate” for federal estate tax purposes, however, under
- In many states a decedent’s surviving spouse is entitled by law to an elective share of the decedent’s estate, and the surviving spouse cannot be deprived of his or her elective share by the decedent’s will. A surviving spouse who is dissatisfied with the provision, if any, made for him or her in the decedent’s will might elect under statute to “take against the will” of the decedent and thereby acquire an elective share in the estate.
- The revocable trust is frequently used as a will substitute, not because it affords any tax advantage (for federal estate tax purposes, the transfer is treated as testamentary), but because using it reduces some expenses incident to administration of probate assets, and permits distributions to beneficiaries during the period when probate assets are being administered. (Assets transferred to the revocable trust during the settlor’s life are not part of the probate estate.) Perhaps more importantly, the revocable trust affords the settlor, while living, an opportunity to observe the results of making property arrangements that frequently remain in effect at his or her death, and that may endure during and after the administration of the probate estate. For example, A, the sole owner of securities, transfers them by a written deed of trust to her son C to manage, and to pay the net income first to A for life, then to B (A’s spouse) for life, then to D (the daughter of A and B) for...
- All the rest, residue, and remainder of my estate, including lapsed or failed gifts, I give, devise, and bequeath to T, in trust, to hold, administer, and distribute as provided in a trust instrument executed by me and agreed to by T, as trustee, on July 1, 20__, as the same may be amended in accordance with its terms, to be added to the corpus of the trust, and to be held, administered, and distributed as a part thereof.
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Index 393 33 results (showing 5 best matches)
Outline 8 results (showing 5 best matches)
Chapter 4. Community Property 71 22 results (showing 5 best matches)
- In a common law state, if A, married to B, by her earnings amasses property valued at $20 million and dies survived by B, all of the property is a part of A’s gross estate for federal estate tax purposes. In a community property state, if A, married to B, by her earnings amasses property valued at $20 million and dies survived by B, only one half of the property, being community property, is included in A’s gross estate for federal estate tax purposes. The other half of the community property already belonged to B from the time of acquisition during the marriage, and it does not “pass” from A to B at A’s death.
- deduction. For example, suppose that A, married to B in a community property state, by her earnings amasses property valued at $20 million. A has no separate property. A dies survived by B. A’s gross estate of $10 million consists solely of A’s one-half share of the community property. In her will, A leaves all of her property to B. The community property qualifies for the marital deduction, to the extent it is included in the decedent’s gross estate and passes to the surviving spouse absolutely (or by another qualifying form of disposition). Because there is no limit on the amount of the marital deduction, all of the property passing from A to B escapes estate tax at A’s death.
- Furthermore, community property is eligible for one significant federal tax advantage that is not available for separate property. For federal income tax purposes, property acquired from a decedent generally takes a “fresh start” basis in the recipient’s hands equal to the value of the property at the decedent’s death. . For this purpose, property is generally treated as acquired from the decedent if it is includible in the decedent’s gross estate for estate tax purposes. . For example, suppose that A and her husband B, domiciled in a common law state, hold Blackacre as tenants in common, each spouse having contributed $500,000 toward the purchase price many years ago. A dies survived by B, when Blackacre is worth $2 million. In her will, A devises her one-half interest in Blackacre (worth $1 million) to B. B retains his original cost basis of $500,000 in his half of the property, but he receives a fresh start basis of $1 ...-half share devised to him under A’s will. Thus, if B...
- Because of this and other disparities in the federal tax treatment of married persons in common law and community property states, Congress in 1948 made the marital deduction a part of the federal gift and estate taxes, “gift splitting” a part of the federal gift tax, and “income splitting” a part of the federal income tax. These devices were intended to put married couples in common law states on a rough parity with those in community property states for federal tax purposes. Therefore, they are primarily of interest to taxpayers in common law states.
- Although it is conventional for purposes of considering marital property to classify states as “community property” or “separate property” states, even the community property states generally recognize common law forms of property ownership between spouses insofar as the common law forms are consistent with the community property system. For example, A, married to B in a community property state, might hold real estate as community property with B, and at the same time maintain separate property in A’s own name or in a tenancy in common or a joint tenancy with B. In community property states, as in common law states, it is essential to be familiar with the details of property law and practice in a particular jurisdiction in order to determine ownership and avoid or resolve disputes over property.
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Chapter 3. Survivorship Interests 53 25 results (showing 5 best matches)
- survivor arrangements should be confined to kinds of property and amounts of property which make sense both as part of an overall property disposition and from the standpoint of tax planning. The tax advantage of joint ownership with the incident of survivorship is often illusory, and unscrambling interests held in survivorship form can be troublesome, especially in the event of a disagreement between the parties or an unexpected early death. Generally speaking, from a tax planning perspective, couples of considerable means may find it desirable to equalize their respective individual holdings of property. Joint-and-survivor arrangements serve limited purposes. They do not defeat the tax collector. They might not defeat a surviving spouse seeking an elective share of the decedent’s estate. And the savings achieved in avoiding probate may not be worth the potential trouble caused by putting property in survivorship form.
- Just as one must consult applicable state or federal law with respect to the creation of joint ownership with the incident of survivorship, so too one should be aware of the gift and estate tax consequences of joint-and-survivor arrangements. The Internal Revenue Code includes both gift and estate taxes. A few states impose a gift tax on lifetime transfers, and a much larger number of states impose an estate tax or an inheritance tax on transfers at death. (Estate and inheritance taxes are commonly called “death taxes.”) In determining whether either a gift tax or a death tax applies to a transaction involving the incident of survivorship, one should pay particular attention to the kind of property to which the incident attaches. Interests in bank accounts may be treated differently from interests in land or other property. Thus, for example, if A using her own funds opens a joint-and-survivor bank account in the names of herself and her child B, there is no completed gift for gift...
- By way of contrast, suppose that A and B are siblings who own property as joint tenants with right of survivorship. A’s will leaves his entire estate to C. B’s will leaves her entire estate to D. A and B die simultaneously, and the simultaneous death statute applies. C takes one-half of the property under A’s will, and D takes one-half of the property under B’s will. But if A and B die under such circumstances that the statute does not apply, the survivor takes all of the property by virtue of the right of survivorship, and the property then passes to the beneficiary named in the survivor’s will.
- If the same person or persons are the successors of both joint tenants by will or intestacy, the ultimate disposition of the joint tenancy property is the same regardless of whether the simultaneous death statute applies. For example, suppose that A and B, husband and wife, own property as joint tenants with right of survivorship. A’s will leaves his entire estate to B if she survives him, and if she does not, to their only child C. B’s will leaves her entire estate to A if he survives her, and if he does not, to C. If A and B die in an airplane crash and the order of their deaths cannot be determined, the joint tenancy property passes to C (one-half from A and one-half from B under their respective wills). If A survives B but dies shortly afterward, so that the simultaneous death statute does not apply, A takes the property as surviving joint tenant, and it then passes to C at A’s death under A’s will.
- A disaffected spouse may use a joint tenancy with right of survivorship or some other kind of will substitute in an effort to disinherit his or her spouse. Whether the effort is successful is a matter of state law. In most separate property states, the surviving spouse’s elective share extends not only to the decedent’s net probate estate but also to property disposed of by various will substitutes, including joint tenancy with right of survivorship. For example, the Uniform Probate Code allows the surviving spouse to claim an elective share of an “augmented estate” which includes the decedent’s net probate estate and the decedent’s “nonprobate transfers” as well as certain property owned or transferred by the surviving spouse. to 2–207. For this ...Probate Code offer the surviving spouse a substantial measure of protection against disinheritance, with respect to nonprobate assets as well as probate assets. It bears emphasis that the position of the surviving spouse is not so...
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Chapter 12. Some Aspects of Fiduciary Administration 301 53 results (showing 5 best matches)
- The decedent may have been engaged in controversy at death, or controversy with respect to the estate may arise after death. Claims both by and against the estate may exist or arise. It is ordinarily desirable to give the executor power to exercise judgment with respect to such matters, and to compromise rather than litigate:
- The functions of a personal representative differ in several respects from those of a trustee. A personal representative finds and collects the decedent’s assets, preserves them during the time needed to determine and pay creditors’ claims and death taxes (if any), and ultimately distributes the net probate estate to the beneficiaries under the decedent’s will (or to the heirs in the case of an intestate estate). Administration of a decedent’s estate is ordinarily concluded within one or two years after the decedent’s death.
- To retain any property, real or personal, that my executor receives as a part of my estate, even though such property by reason of its kind, amount, or proportion to the total amount of my estate, would otherwise be considered inappropriate. To sell, exchange, lease, partition, give options upon, or otherwise dispose of any property, real or personal, in my estate, at public or private sale or otherwise, for cash or credit, upon such terms and conditions, and at such prices as my executor deems fit.
- The personal representative (executor or administrator) of a decedent’s estate, like the trustee of an inter vivos trust or a testamentary trust, is a fiduciary who holds and administers property that belongs to others. A lawyer aware of the substantive law on (say) trusteeship, is prepared in a general way to cope with problems arising out of administration of an estate. Moreover, a lawyer who never serves as a trustee or as the personal representative of a decedent’s estate may nonetheless advise or represent a trustee or a personal representative.
- , discovered a stolen Stradivarius violin among the decedent’s possessions. The executor negotiated the return of the violin to Lloyd’s of London (which had acquired legal title from the original owner upon payment of the instrument’s insured value following the theft), in exchange for a substantial finder’s fee. The court held that the executor was required to account for the finder’s fee as an asset of the estate. As a fiduciary, she could not appropriate for herself an asset that properly belonged to the estate. “No matter how the [violin] was obtained, it was a possession of the decedent’s estate, and once the [executor] chose to negotiate with Lloyd’s for the finder’s fee her fiduciary duty required that she negotiate on behalf of the estate, not herself.”
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Chapter 11. The Rule Against Perpetuities and Related Doctrines 271 50 results (showing 5 best matches)
- Because the Rule applies only to a narrow category of cases, do not create an interest that raises perpetuities questions of the more difficult kind where that serves no purpose. Suppose that A has an adult child B who is married to C. The lawyer learns that A wishes to create a life estate in B, followed by a life estate in C and a remainder at the death of the survivor of B and C to B’s issue then living. The lawyer could write “to B for life, then to B’s spouse for life, with remainder to B’s issue who survive B and B’s spouse.” A then dies survived by B, by C, and by their several children. Although the facts at the execution of the will may be such that the future interests can be confined as a matter of construction to a life estate in C and a remainder in B’s issue who survive B and C, the open-ended phrase “B’s spouse” invites treating the ultimate remainder as a gift to a class that might remain “open” (and subject to a condition precedent of survival) beyond the... ...to X,...
- Because the Rule applies only to future interests, do not create future interests unless they are essential to the plan of disposition. Generally speaking, persons of modest means seldom have occasion to make use of elaborate dispositions involving future interests, powers of appointment, or trusts (other than a simple revocable trust that functions as a will substitute). The lawyer preparing the dispositive instrument should use the simplest and most efficient means available to carry out the client’s intended disposition.
- If a future interest is not vested at the end of the 90-year period, § 3 of the Uniform Statutory Rule authorizes a court to reform the disposition “in the manner that most closely approximates the transferor’s manifested plan of distribution” and is within the 90-year wait and see period.
- involved a gift to a class of sub-classes, and under the “rule” of , a gift to a particular sub-class may be valid under the Rule Against Perpetuities in orthodox form even though the gift to another sub-class is void. For example, suppose that A creates a testamentary trust to pay the net income “to B for life, then in equal shares to the children of B for their lives, and on the death of each child, to pay that child’s proportionate share of principal to his or her issue then living, by right of representation.” A dies survived by B and by several of B’s children. “Children” is construed to mean “children of B whenever born.” Under the rule of , the remainder in the issue of each child is treated as a separate gift to a sub-class. Gifts that are bad under the Rule are separated from those that are good, and the latter are permitted to stand. Accordingly, the gifts to the issue of each child of B living at A’s death are valid (each child of B living at A’s death validates ...plan....
- A lawyer engaged in trusts and estates work should know enough about the Rule Against Perpetuities to avoid violations of the Rule in drafting instruments, and to recognize violations of the Rule when examining instruments drawn by others. In both connections, the lawyer should be informed about relevant changes in the Rule brought about by legislatures or judges in recent years, but he or she should not assume that modification of the Rule in orthodox form appreciably affects the matter of drafting. Regardless of modification, the prudent lawyer drafts to comply with the requirements of the Rule in orthodox form. A limitation that is bad under the Rule in orthodox form may be saved under a “wait and see” or “cy pres” version of the Rule, but compliance with the Rule in orthodox form makes it unnecessary to test the validity of a disposition under a relaxed form of the Rule and may avoid the expense of litigation.
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Chapter 10. Charitable Trusts 263 13 results (showing 5 best matches)
- Occasionally a donor attempts to achieve a charitable purpose with inadequate resources. The
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- Although as a matter of the traditional substantive law on charitable trusts, a great variety of activities have been deemed charitable under state law, there is currently a factor at work that unquestionably affects both the language by which gifts to charity are created, and the characteristics attached by donors to such gifts. Under the federal income, gift, and estate taxes, deductions are available to donors with respect to qualified charitable gifts. The income of charitable trusts and foundations may be wholly or partially exempt from income tax. Under state law, charities may be eligible for property tax exemptions. Donors are aware that just as the general law of trusts (and nonprofit corporations) favors gifts to charity, the tax laws encourage such gifts as well. Preferential tax treatment may induce donors to make larger or more frequent charitable gifts than they would otherwise have done, and the requirements of tax law may have an important bearing on the terms, size,...
- Listing generally accepted charitable purposes such as “supporting religion” or “promoting health” fails to reveal the wide range of purposes that judges have found to be “charitable.” It is true that a valid charitable trust could be established by a simple testamentary statement: “I leave all of my estate in trust for charity.” But only an extensive (and not very rewarding) examination of cases gives one an
- A trust is “charitable” if it is created to support religion or education, to promote health, to relieve poverty, or to perform an act that the general government itself might perform (such as maintaining a park for public use). Although individuals can and do benefit from charitable trusts, such trusts are both condoned and encouraged because of the benefits they provide to the general public. A characteristic common to charitable trusts is the absence of personal profit—charitable trusts exist to promote the general good, not to enrich individual beneficiaries. It does not follow at all that the charitable trust device (or the non-profit charitable corporation) has never been abused. On the contrary, there are numerous reported cases documenting misuses of the charitable trust. But it has worked reasonably well over several centuries, and it imparts a richness and diversity to American life that would be sorely missed if charitable trusts disappeared.
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Preface iii 4 results
- This book is a revised edition of a work which first appeared in 1975. It is intended for law students, lawyers, and non-lawyers who are interested in the areas of wills, trusts, future interests, fiduciary administration, insurance, pensions, and federal estate and gift taxation.
- Citations are few. In a short volume of this sort, it is not feasible to give sufficient citations to satisfy a specialist without distracting and discouraging the non-specialist. Fortunately, there are several excellent treatises directed to the former, and we have therefore chosen to try to assist the latter.
- Because each chapter stands as much as possible as a separate unit, we have included no internal cross-references, and occasionally a particular topic is discussed more than once. Successive chapters do, however, tend to build on preceding chapters. Therefore, before reading (say) Chapter 8 on trusts, it is helpful to have a working knowledge of the material presented in Chapters 1 through 5.
- A special word of acknowledgment is due to Professor Robert Lynn, the original author of this book, who passed away in 2008. During a long and distinguished career, he was universally admired and respected for his scholarly erudition and practical wisdom. In addition, he was a beloved teacher renowned for his gentle wit and patient, courteous nature. He is remembered with affection and gratitude by colleagues, friends, and former students.
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Table of Cases xiii 2 results
- Publication Date: March 11th, 2019
- ISBN: 9781642425987
- Subject: Estate Planning
- Series: Nutshells
- Type: Overviews
- Description: This Nutshell presents an introduction to basic concepts and techniques of estate planning. Subjects covered include transfers of property at death by will or intestacy; inter vivos gifts; survivor interests; revocable and irrevocable trusts; community property; life insurance; retirement, disability and death benefits; charitable trusts; future interests; fiduciary administration; and federal estate and gift taxes.