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Trust and Estates > Non-probate transfers > Flashcards

Non-probate transfers Flashcards

IRVT, Social Security, POD, etc. (69 cards)

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1
Q

What federal law preempts state law regarding certain accounts?

A

ERISA
a Federal law that preempts state law for pension accounts and life insurance.
(“but see eggelhof”)

This impacts how these assets are transferred upon death.

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2
Q

List the types of nonprobate transfers identified by Madoff.

A
  • Trusts
  • Life insurance
  • Bank Account
  • Pension/Retirement Plan
  • Joint Tenancy/other

These are key mechanisms for transferring assets outside of probate.

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3
Q

How do banks and mutual funds compete in probate?

A

They adapted financial intermediation to apply to death with minimal changes.

This allows for easier management of assets post-death.

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4
Q

What did the Restatement’s alternate explanation argue regarding nonprobate transfers and wills act formalities?

A

Nonprobate transfers generally do not require formalities to escape characterization as a will.

This shifts the focus to settlor intent rather than present transfer.

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5
Q

What is the nature of a revocable trust?

A

Revocable trusts resemble wills but can be amended or revoked by the donor and do not give beneficiaries rights until the donor’s death.

typically settlor is trustee, & beneficiary while alive, and then when they die, sucessor trustee steps in

This feature allows flexibility in estate planning.

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6
Q

What happens when a settlor sells property from a revocable trust?

A

The trustee only owes a duty to the settlor, allowing the settlor to sell property without breaching fiduciary duties.

(ie if the settlor, while alive is the trustee, she can sell her property and not be subject to fiduciary duties to the beneficiairy)

This was established in Fulp v. Gilliland case. & UTC 2-603

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7
Q

What is the traditional rule regarding the revocability of inter vivos trusts?

A

An inter vivos trust by written instrument is presumed irrevocable unless there is an express or implied revocation power.

This contrasts with the modern rule.

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8
Q

What does UTC § 602 state about the revocation or amendment of a revocable trust?(modern rule)

A

Inter vivos trust is revocable unless otherwise declared.

a revocable trust can be modified in revoked in any manner that manifests settlor intent unless the trust specifies how to revoke or amend

This provides flexibility in managing trust assets.

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9
Q

What is the implication of a beneficiary’s rights while a trust is revocable?

A

A beneficiary has no legally enforceable interest while the trust is revocable.

Trustee is subject to control of settlor, and only settlor may enforce trustee’s fiduciary duties. Trustee must obey settlor over fiduciary duties,

This means the settlor retains full control over the trust.

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10
Q

True or False: A beneficiary can compel a settlor-trustee to account for trust assets.

A

False

The settlor-trustee cannot be compelled by beneficiaries to provide information about the trust.

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11
Q

farkas case as to IVT

A

CT that allowed for transfers while alive,
through the present transfer theroy.

PTT: Validated revocable trusts by treating them as inter vivos (while living) transfers that gave the remainder beneficiary future contingency equitble interest.

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12
Q

What is the holding Patterson v. Patterson as to amendment of a trust?

A

If a trust does not specify the method of amendment or revocation to be used, the UTC allows any method which provides clear and convincing evidence of settlor intent.

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13
Q

What was the holding in State Street Bank and Trust v. Reiser as to creditors?

A

If a person places a property in revokable trust with power to amend or revoke and then dies, creditors can satisfy debts from the trust to clear debts against the estate

specific to RIVT’s not other non-probate transfers

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14
Q

What did the court hold regarding creditors and revocable trusts in State Street Bank and Trust v. Reiser?

A

Creditors can satisfy debts from assets in a revocable trust upon the settlor’s death

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15
Q

What is the traditional rule regarding creditors and revocable trusts?

A

Creditors had no recourse against property in revocable trusts unless the settlor was also a beneficiary

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16
Q

What is the modern rule regarding a settlor’s power of revocation and ownership?

A

The settlor’s power of revocation is equivalent to ownership and is subject to claims in life/death

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17
Q

What types of nonprobate assets can creditors reach, and waht can they not?

A

Can: Revocable trusts,

Cannot take: jointly held property, life insurance, savings bonds, or retirement benefits

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18
Q

What happens to nonprobate transfers if the probate estate is insufficient to pay debts?

A

Creditors can reach nonprobate transfers (RIVT)

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19
Q

What did the court hold regarding divorce, and a trust used as part of a testamentary scheme in Clymer v. Mayo?

A

They can be revoked by a divorce.

When Mayo and James divorced, she changed the beneficiary designation for her life insurance, but not trust.

Because will and the trust were to be used in the same testamentary scheme.

this case did not use the UPC rule, which now applies to funded and not funded RIVT’s

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20
Q

What does UPC § 2-804 state regarding dispositions to former spouses?

A

It revokes a disposition to a former spouse in deed, will, trust, or other will substitute

(but for egglehoff)

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21
Q

What is the prevailing view regarding capacity for revocable trusts compared to wills?

A

Capacity for revocable trusts is the same as making a will

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22
Q

True or False: The court in Clymer v. Mayo treated the trust and will as separate entities.

A

False

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23
Q

What is the rationale for applying abatement/ademption rules to revocable trusts?

A

They resemble wills

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24
Q

What has replaced the will as the central instrument for death transfer?

A

Revocable trust

Revocable trusts allow for the consolidation of probate and nonprobate dispositions.

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25
What is a pour-over will?
A will that devises the probate estate to the trustee of a revocable trust It allows the assets of the probate estate to be added to the trust estate.
26
What are the two theories used to validate probate property in the context of pour-over wills?
* Incorporation by Reference * Acts of Independent Significance
27
What does the Incorporation by Reference theory require in relation to IRVT & pour over will
A will can incorporate by reference a document in existence at time will is executed, but not amendments to document made after will is executed. This theory makes trust testamentary not inter vivos.
28
What is the significance of the Acts of Independent Significance theory with IRVT & Pour over wills?
Trust does not have to be in existence when will is executed, but trust must exist and **must have property in it prior to testator’s death**. (funded) The assets poured over from settlor’s probate estate to trust, like assets settlor earlier transferred to trust, subject to terms of trust.
29
What is a limitation of incorporation or independent significance regarding pour-over into trusts?
Neither allows a pour-over into an unfunded revocable trust drafted or amended after the execution of the will.
30
What does the 1990 UTATA allow regarding pour-over wills?
It allows a pour-over will to be executed into a trust that does not yet exist as long as the trust is created before death. UTATA allows unfunded revocable trust that will receive a pour-over will. ## Footnote purpose is to avoid probate
31
What are the advantages of using revocable trusts over wills?
* Avoid probate * Privacy * Continuity in property management * Better for multistate estate planning * Harder to set aside for lack of capacity/undue influence
32
What is a downside of using a revocable trust?
May lose the advantage of subsidiary law of wills ## Footnote Nonclaim statutes do not apply to revocable trusts.
33
How do revocable trusts facilitate property management?
They allow the settlor to select a third party to manage the trust.
34
What is the primary advantage of funded revocable trusts in terms of incapacity?
They can plan for incapacity by naming successor trustees.
35
What are the two main types of life insurance?
* Term Life * Whole Life
36
What is a Term Life insurance?
A term policy is a contract that obligates insurance company to pay named beneficiary if insured dies within policy’s term (1-30 years). It is less expensive because it has no savings or cash surrender feature.
37
What does Whole Life insurance combine?
Life insurance with a savings plan. more expensive bc it lasts till death
38
What was the holding in Cook v. Equitable Life Insurance Policy?
A holographic will is insufficient to change an insurance policy if the policyholder did not take steps to change it before dying. an attempt to change via will "without more" is not sufficent
39
What are the key advantages of pension and retirement accounts?
* Tax-deferred contributions * Earnings accrue and compound on a tax-deferred basis * Taxed at a lower rate for retirees
40
What is a Defined Benefit Plan?
Retirees get regular pension check for either life (life annuity)
41
What is a Defined Contribution Plan?
An account where both employer and employee contribute, and the employee makes investment decisions. On retirement, employee controls size/timing of dust subject to spousal protection and mandatory withdrawals. Remainder passes via probat
42
What is an Individual Retirement Account (IRA)?
A retirement account not established by an employer, based on a contract between the account holder and a custodian.
43
What governs most pension and retirement accounts?
ERISA (Employee Retirement Income Security Act).
44
What was the holding in Nunnenman v. Estate of Grubbs?
A testator can change the beneficiary of an IRA account by will if the will sufficiently identifies the policy and shows an intent to change the beneficiary. **Madoff: Note this is unique to Arkansas.**
45
What was the main issue in Engelhoff v. Engelhoff?
The issue was whether a state revocation law could allow children to recover life insurance proceeds when the ex-spouse was still listed as the beneficiary after the divorce.
46
What was the court's holding in Engelhoff v. Engelhoff?
ERISA includes an expansive preemption rule that supersedes all state laws that relate to any employee benefit plan. so here despite the divorce, the first wife got the retirement benefits retirement benfits subject to ERISA do not comply with wills rules
47
What was Justice Breyer's dissenting concern in Eggelhof?
Concern about harm to common law and implications for state laws like the Slayer Rule. Also allows divorcee to get more than share from divorce court.
48
What did the 1969 UPC authorize regarding POD designations?
POD designations in all contracts ## Footnote Almost every state has followed suit.
49
What happens to a joint bank account when one party dies?
All goes to the surviving party, but it will not pass through the first decedent’s probate plan ## Footnote If the survivor owns all of it, it bypasses probate.
50
In an agency account, what can an agent do?
Access property for the benefit of the principal ## Footnote An agent can only do what a principal can do.
51
What was held in Varela v. Bernachea regarding joint bank accounts?
A gift of funds to the other person is presumed unless rebutted by clear and convincing evidence. joint bank account is viewed as a gift upon death
52
What is a Joint Tenancy (JT)?
A form of property ownership where most homes are held ## Footnote Upon death of one, the property passes to the other.
53
What happens to a decedent's interest in a Joint Tenancy upon their death?
The decedent's interest disappears, and surving party is seen as owning the whole tract of land.
54
Can a person revoke a transfer of land into a Joint Tenancy during their life?
No, they cannot revoke the transfer or cancel the interest given to the other Joint Tenant.
55
What must happen to pass property in a Joint Tenancy?
The Joint Tenancy must be severed and then converted to a tenancy in common.
56
What is a consequence of severing a Joint Tenancy?
Exposes individuals to creditor claims.
57
What is conservatorship?
Typically the default plan for a person who is deemed incapacitated who has not accounted for otherwise. Conservatorship involves a court-appointed individual managing the affairs of an incapacitated person.
58
What powers does a conservator have?
Broad powers to manage the person's affairs as if they were a trustee, including fiduciary duties of loyalty and care. ## Footnote The conservator's powers are extensive to ensure the well-being of the incapacitated individual.
59
What evidence is required for a court to appoint a conservator?
Clear and convincing evidence showing the person has a limited ability to receive and evaluate information or make decisions, and that appointment is necessary to avoid harm. ## Footnote This standard of evidence is higher than the preponderance of evidence standard used in many civil cases.
60
What is guardianship?
Involves more limited power and substantial judicial involvement compared to conservatorship. ## Footnote Guardianship procedures are elaborate due to the deprivation of liberty it entails.
61
What initiates the guardianship process?
Begins when an interested party petitions the court. ## Footnote The petitioning process requires a formal request to the court, highlighting the need for guardianship.
62
What is a revocable trust in the context of capacity?
Avoids probate and provides continuity in property management held in the trust during incapacity. but only to the items that are funded/ in the trust,
63
What is a power of attorney?
Creates an agency relationship where the agent has written authorization to act for a principal. Agent under a power of attorney, traditionally called an attorney-in-fact has power to do anything for principal ## Footnote outlines in an written instrument.
64
When does a power of attorney terminate?
Terminates on incapacity, unless a durable power is used, which is effective until the principal dies. ## Footnote This distinction is crucial for ensuring continuity in decision-making during incapacity.
65
What are the two types of power of attorney?
* Springing Power: Effective on Incapacity. * Current/Standing Power: Effective immediately on Signing. ## Footnote Current/Standing Power is the statutory norm and is preferred for its immediacy.
66
What is an advantage of a durable power of attorney?
Allows a person to maintain legal/equitable ownership of assets while delegating a defined scope of authority to an agent. ## Footnote This delegation helps avoid legal complications where an incapacitated individual cannot represent themselves.
67
In re Estate of Kurrelmeyer
POA allows agent to make a trust on behalf of the principal Majority: requires it expressly laid out in words otrust minority: embedded power for any one wiht POA
68
adanced directives
* where you leave your instructions as to what you want * problem: can be difficult to imagine all of the various things that could happen to you
69
proxy directives
assign someone to make the health care decsions for you

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