Non-Prostate (Introduction)
What is the function of will substitutes?
What are some examples?
Bonus: What type of law do will substitutes utilize?
Will substitutes enable an individual to pass assets to an intended beneficiary without use of the probate system.
- Life insurance policies
- Bank and brokerage accounts
- Employer-funded investment and retirement plans, and
- Joint tenancies
- Inter Vivos Trusts
Bonus: idk, not probate law lol
What is life insurance? Who can take take out a life insurance policy? Where do its proceeds go?
Life insurance is insurance on the life of a person. It generally takes the form of a contract that guarantees payment if the insured person dies.
Anyone who has an insurable interest in a person may take out a policy on that person’s life, although normally, the insured buys the policy on their own life.
The proceeds are paid to the primary beneficiary designated by the insured in the life insurance contract. If the primary beneficiary predeceases the insured, the death benefits will go to a secondary beneficiary, if the terms of the contract provide for one.
These beneficiaries are usually either teh wife of child of the deceased, and alternatively their estate.
What is an IRA?
What are the most common types of IRAs?
An IRA is a tax-advantaged retirement savings account that allows individuals to save for retirement while benefiting from certain tax perks.
Traditional IRAs are the most common type of IRAs. Contributions may be tax-deductible in the year they are made. That is, taxable income is reduced by the amount distributed. The money in the account grows tax-deferred until withdrawals are made, typically during retirement. At that time, the withdrawn funds are taxed as ordinary income.
Roth IRA is another type of individual retirement account that offers a different set of tax advantages compared to traditional IRAs. Contributions to a Roth IRA are made with after-tax dollars, meaning there is no immediate tax deduction when the contributions are made. However, the key benefit of a Roth IRA is that qualified withdrawals in retirement are entirely tax-free, including both contributions and earnings.
True or False: Tenancy in Common, Joint Tenancy, and Joint Tenancy with rights if survivorship all have counterparts in real estate that are more or less the same.
Bonus: What are the "four unities?"
True
Bonus: The requirements for creating a joint tenancy in real estate.
The unity of interest, the unity of title, the unity of time, and the unity of possession.
What does power of attorney allow an "agent" to do?
Bonus: is it revokable?
A power of attorney instrument authorizes one person to act on behalf of another person. Can be used for single transactions – such as by one spouse so the other spouse can act on her behalf in the sale of their home if she anticipates being out of town during the closing – or on a more comprehensive basis, allowing the agent to act for the principal in numerous categories of transactions when the principal is incapacitated.
Bonus: Yes!!!!
What is the difference between "pure" and "imperfect" will substitutes?
(a) “Pure” will substitutes, over which the owner has complete control until death, such as payable-on-death (“POD”) accounts, and which are “functionally indistinguishable from a will;” and
(b) “Imperfect” will substitutes, in which the owner cedes some control to a beneficiary, such as joint tenancies.
What are the two most common types of life insurance? What are they for?
A term life insurance policy protects the insured for an amount of time specified in the policy and expires thereafter. A term life insurance policy has no investment component, because the insured pays for the term-limited coverage while simultaneously consuming the coverage. Term insurance is cheaper when a person is younger and more expensive as a person ages. If the insured dies during the term period, the insurance company pays the face amount of the policy to the designated primary beneficiary. If the insured lives beyond the term period provided for by the terms of the policy, then no benefit is payable.
Permanent or whole life insurance is designed to provide coverage for the insured’s entire lifetime, and it pays out to the designated beneficiary when the insured dies. Unlike term life insurance, under this type of life insurance policy, the insured pays fixed-rate premiums until death, which are usually higher in cost than the rates associated with term policies. The insurance company will invest a portion of the insured’s premium payments, and income earned on the investment account can be used to pay premiums over time. The owner of the policy may borrow against the policy if the policy has an investment component to it.
What is a tenancy in common account?
A tenancy in common for a bank account is a rare form of multiple-party bank account. If one exists, the share of the account owned by the decedent is probate property.
What is Tenancy by Entirety?
What is the major difference between this and Joint Tenancy With Rights to Survivorship?
A more restrictive variation of joint tenancy is tenancy by the entirety. This ownership form is typically reserved for married couples (or those treated as married under state law), with the property considered as owned by the marriage.
A tenant by the entirety cannot unilaterally transfer any interest in the real estate or convert the tenancy into another estate, such as a tenancy in common, without sign-off from the other spouse
Jayda has severe dementia and has decided its about time to execute a power of attorney instrument to account for her declining mental state. Can she do this now that she has dementia?
Yes so long as she has capacity and is lucid whenever she makes the appointment.
What are the most common types of will substitutes?
There are five.
100 Points per answer.
(1) Life insurance policies;
(2) Retirement accounts;
(3) Joint bank accounts and joint brokerage accounts holding stocks and securities;
(4) Accounts or deeds with a pay-on death or transfer-on-death designation; and
(5) Inter vivos trusts.
Mr. hillman pays into a life insurance policy made for federal employers and that was created as an act of congress. Mr. Hillman failed to update his life insurance policy, which had listed his ex-wife, to give it to his new wife.
The law is his state says that all life insurance beneficiary statuses are revoked from spouses upon divorce. However, the federal law that created the policy says that the policy is to be paid out to teh listed beneficiaries and that state laws are preempted.
Who will get the payout form the policy upon Mr. Hillman's death?
Mr. hillman's ex-wife because the state law that would have given the money to his current wife is preempted.
What is a Joint Tenancy Account?
How much of the account is each tenant entitled to?
Can they ever lead to liability?
Provides each person named on the account with the right to make withdrawals while both (or all) are alive and, based on the assumption that it is a joint tenancy with right of survivorship, then provides that at the death of one joint tenant, the other joint tenant(s) becomes the owner(s) of the entire account.
They are usually entitled to however much money they put in, unless they can otherwise show evidence of fraud or until another tenant dies. - UPC
Can lead to liability if you take out more than you contributed. You would be liable to the contributor of the excess money you took out.
What is Texas law surrounding concurrently owned real property?
Say the rule for both Tenancy in Common and Joint Tenancy.
In Texas, concurrently owned real property can be held as a tenancy in common, which is the default for non-spouses.
For any joint ownership (such as joint tenants), specific language in the deed or a separate, signed survivorship agreement, recorded in the county records, is required to create survivorship rights.
Disputes can be resolved by a legal partition action to force the sale of the property and distribute the proceeds.
George has dementia and has given Dominick power of attourney. Consider the scope of Dominick’s authority.
A. Could he have changed George’s will? What duties does an agent owe to the principal?
B. Do you think the court would have found Dominick’s actions problematic if he had given himself a $10,000 gift? What about a $50,000 gift?
A. Probably not. The question is what “estate transactions” means. Changing a will is not a “transaction.” Moreover, whatever actions the agent takes must be in the best interest of the principal. Hence, Dominick would not have had the authority to change George’s will.
B. The statute enabling parties to create powers of attorney allows the attorney-in fact to make gifts to specified beneficiaries (including family members) “not to exceed $10,000 to each per year.” Such a gift seems permissible, although inadvisable, given Dominick’s role. $50,000 as a gift however would not be permissible.
What are some reasons to use will substitutes?
100 Points per answer.
To engage in sophisticated tax planning.
Allow an individual to continue to control assets during life.
Changing a will substitute does not require the same level of formality as changing a will.
Will substitutes, such as life insurance, provide financial benefits to the surviving beneficiaries.
They are not filed in court, but remain confidential.
Employers use will substitutes to clarify who will receive an employee’s benefits upon death.
Mr. Hillman pays into a life insurance policy made for federal employers and that was created as an act of congress. Mr. Hillman failed to update his life insurance policy, which had listed his ex-wife, to give it to his new wife.
The law is his state says that all life insurance beneficiary statuses are revoked from spouses upon divorce. However, the federal law that created the policy says that the policy is to be paid out to teh listed beneficiaries and that state laws are preempted.
Who will get the payout form the policy upon Mr. Hillman's death?
Mr. hillman's current wife because the state law automatically revoked his ex-wife's beneficiary status upon their divorce.
What is a Payable On Death Account?
Does it go through probate?
Does it create a vested interest?
A POD designation provides that any amount remaining upon the death of the account owner will be transferred to the POD designee.POD designations are generally only employed with single-party accounts; most multiple-party accounts are held in joint tenancy.
It does not go through probate and is directly transferred to the beneficiary
It does not create a vested interest.
What are the two main categories of trusts?
When do each of them vest?
A testamentary trust is created only by will, funded by the probate property of the estate, and comes into existence upon the death of the settlor/testator.
An inter vivos trust is created during the settlor’s life. Unless an inter vivos trust terminates upon the settlor’s death and distributes all of the property to the settlor’s estate, such a trust is a nonprobate transfer.
Anthony has been given power of Attorney by Gian. If Anthony dawgs Gian bad style in his capacity as an agent, what can he be liable for?
nThe Uniform Power of Attorney Act provides that an agent may be required to:
(1) restore the value of the principal’s property to what it would have been had the violation not occurred; and
(2) reimburse the principal or the principal’s successors in interest for the attorney’s fees and costs paid on the agent’s behalf.” UPOAA §117
He can also be criminally liable for any fraud committed during is rascally scheme.
True or False: Most nonprobate transfers are still subject to the estate tax.
A. What is a pension?
B. What does it mean that a pension must "vest" before it pays out?
A pension is a retirement plan in which a specific sum is paid every month to the retiree or the retiree’s beneficiary, should the retiree’s retirement fund outlive the recipient.
B. A retirement plan must vest before benefits are paid.
Vesting refers to the amount of time a participant must work before earning a nonforfeitable right to a retirement benefit.
Once the participant is vested, the accrued benefit is retained even if the worker leaves the employer before reaching retirement age.
What is a convenience account?
When are they useful?
A “depositor” (primary account holder) can create such an account for the limited purpose of giving a “convenience depositor” access to the funds in the account to make deposits and to withdraw funds only for the depositor and no one else.
They are useful whenever the depositor has a disability or is elderly and cannot reliable access the account themselvs
What is a revocable trust?
A revocable trust is the paradigmatic will substitute because the revocable trust is not asset specific like the other nonprobate devices and allows the settlor virtually complete control over the assets.
How is an agent different from a conservator? Name a few differences.
1. Conservators are always court appointed.
2. Conservators are appointed only upon incapacity of the principal, but powers of attorney can only be established while the principal has capacity;
3. Conservators are subject to court supervision, but agents are generally not; and
4. Conservatorships are relatively rare, while estate planners routinely include powers of attorney when developing plans for clients.