Methods of Property Transfer at Death, Characterisitics and Consequenses of Property Titling and Estate Planning Documents

Question 1

Transfers through the probate process

Answer 1

• probate: process for orderly distribution of property to one or more beneficiaries
  Characteristics
  -court supervision
• filing of claims against the estate by creditors
• publication of last will and testaments

Question 2

Testamentary distribution

Answer 2

• testator: person making will
• will creates testamentary transfers
• probate is process transfer is accomplished
• testamentary trust doesn’t do through probate, passing through will goes through probate

Question 3

Intestate succession

Answer 3

• if no will is found, decedent died intestate

Question 4

Advantages of probate

Answer 4

-administration of the estate (court supervision)
- marshalling of all assets (inventory/ valuation)
- paying of bills and resolving credit issues
- overseeing distribution of the estate as directed by will or intestacy law

Question 5

Disadvantages of probate

Answer 5

• loss of privacy
• possibility of a will contest
• court costs and delay
• ancillary probate (multiple states)

Question 6

Assets included in probate estate

Answer 6

• singly owned assets (fee simple)
• property held by tenancy in common (TIC)
• community property (half at first death)
• assets designating beneficiary as estate of insured

Question 7

Ancillary probate administration

Answer 7

• will can dispose property interests located in state of decedents residence (domicile)
• cannot dispose real estate out of domicile unless there is a separate ancillary probate

Question 8

Probate avoidance strategies

Answer 8

• revocable trusts
• operation of law: JTWROS
• contract: beneficiary arrangements in LI policies, annuities, IRA, qualified plans
• deed of title
• gov savings bonds (co-ownerships)

Question 9

Election against the will (elective share)

Answer 9

• surviving spouse who has not inherited a certain minimum by state law has right to take a share of spouse estate
• property and amount depends on state

Question 10

The uniform simultaneous death act (USDA)

Answer 10

• any persons who die within 120 hours of each other are deemed to predecease one another
• prevents property of first deceased having to pass to second deceased before going to beneficiaries

Question 11

Revocable living trusts

Answer 11

• can be altered or cancelled by grantor
• funded
• can include provisions that specify management by successor trustee
• trustee authority recognized in all states and enforced
• continues after death

Question 12

Totten trust

Answer 12

• revocable trust in bank account in which depositor is named as trustee for another’s benefit
• depositor retains right of withdrawal until death
• when depositor dies account passes to beneficiary
• operate in few states

Question 13

Payable/ transfer on death accounts (POD/TOD)

Answer 13

• funds deposited for benefit of another
• depositor has complete control over the funds
• funds transferred at death

Question 14

Community property vs noncommunity property

Answer 14

community property
- 9 states
- both spouses own a separate undivided and equal interest in property ( each spouse owns one half)
- even if only one spouse is working its all marital
- all property acquired during marriage is community property
- no survivorship rights so a will is needed and property will be subject to probate

Question 15

Community property interests

Answer 15

• income earned by spouses or only one spouse
• appreciation on solely owned property attributed to contributions of nonowner spouse
• separate assets that have been comingled with community assets

Question 16

Noncommunity property interests (in community states)

Answer 16

• property received as a gift by one spouse
• property inherited by one spouse
• income earned prior to marriage
• interest earned on separate assets held by one spouse as sole owner

Question 17

Tax advantages of community property

Answer 17

• community property gets a full (100%) step up in basis (LTCG only) in entire property if at least one half of the whole property is includible in the deceased spouses gross estate

Question 18

Sole ownership

Answer 18

• subject to probate and can be disclaimed
• outright ownership or fee simple

Question 19

Joint tenancy with right of survivorship (JTWROS)

Answer 19

• not subject to probate and can be disclaimed
• spouses, parents and child, children, siblings, business partners
• joint tenants must be adults
  characteristics
• property shared by several adult owners
• control, ownership, enjoyment shared equally
• income is split equally
• upon death of one tenant, share passes to other tenants
• property not controlled by terms of will or probate

Question 20

JTWROS and estate tax

Answer 20

Non-spouse tenant
- full value of property is included in gross estate of first to die unless the survivor can establish ownership through consideration at some point
- keep records to prove amount contributed
- gift doesnt count as contribution

Spousal tenant
- when first spouse dies, gross estate must include one half property as FMV on date of death

Question 21

Tenancy by the entirety

Answer 21

• not subject to probate and cannot be disclaimed
• only between spouses
• transfer or severance can only occur with mutual consent
• property equally divided like JTWROS for tax purposes
• protected from claims of each spouse’s separate creditors but not from claims of both spouses creditors

Question 22

Tenancy in common

Answer 22

• subject to probate and can be disclaimed
• property can be owned unequally by several owners in undivided interest
• interest is not equal
• entitled to division of income according to respective interest
• free to transfer shares to other parties
• no survivorship rights
• doesnt avoid probate

Question 23

Trust ownership

Answer 23

• fiduciary arrangement where one person (trustee) holds the title to property subject to the obligation to accumulate or distribute income or principal for the benefit of another
• legal title

Question 24

Wills

Answer 24

• disposes of an individual property when dead
• died testate

Question 25

Legal requirement - wills

Answer 25

• to be legally enforceable must conform to specific legal requirements of the state its created
• must be in writing and witnessed

Question 26

Attestation clause - wills

Answer 26

• some states require attestation clause to validate will
• states that will was validly executed and witnessed

Question 27

Modifying or revoking a will

Answer 27

• amended or revoked at any time
• minor changes made by adding a codicil
• to revoke, new will must state that prior will is revoked
• can be revoked by tearing or destroying
• divorce may or may not revoke parts of the will

Question 28

Avoiding will contests

Answer 28

• arguments presented in probate court
• videotape will execution if capacity is going to be questioned
• no contest clause can be added - anyone who contests loses rights to property

Question 29

Powers of attorney

Answer 29

• written document which one person uses to empower another to act on their behalf

Question 30

Testamentary trust

Answer 30

• created by will
• designates trustee, names beneficiaries, directs how trust should be administered
• becomes effective only if will creating trust is submitted to probate (trust itself doesnt go through probate)