Wills, Trusts and Estate Planning Intestate Succession Unit 3

Testate vs. Intestate Succession Situation Parties Who Receive Deceased’s Property Deceased dies with a valid will Beneficiaries named in the will. Deceased dies without a valid will Heirs set forth in the applicable intestacy statute. If there are no heirs, the deceased’s property escheats (goes) to the state.

Historical Development of State Succession Statutes Male heirs inherited real property to the exclusion of female heirs unless no male heir existed. If there were two or more males who were equally related, the older male would inherit all the land. If there were no male heirs and several female heirs, the females shared equally.

Protection of the “Surviving” Spouse The surviving spouse was not considered an heir. But common law gave each spouse a marital estate in the lands of the other spouse. Widows – Dower Rights – life estate in 1/3 of the property owned by husband during marriage, even if property wasn’t owned by the husband at the time of his death. Widowers – Curtesy Rights – life estate in all the wife’s property, if a child was born to the marriage.

Protection of Surviving Spouse – Under Modern Law Dower and Curtesy have been mostly eliminated but the majority of states make the surviving spouse an heir under their descent and distribution schemes. States have also enacted specific marital property laws. Homestead and personal property exemptions are also available in most states.

Marital Property Statutes Separate Property – even if deceased left a will, a surviving spouse can elect to take against the will. The surviving spouse can obtain a share of the estate even if nothing is left to them under the will. Community Property States – the surviving spouse is protected against disinheritance because the surviving spouse already owns an undivided ½ interest in the marital property.

The Homestead Exemption The surviving spouse may be able to occupy the homestead free from the possessory claims of the true title holders as well as retain it exempt from the claims of the deceased spouse’s creditors. Homestead exemptions vary greatly from state to state.

Personal Property Exemptions The surviving spouse and minor children are frequently granted the right to retain certain personal property free from the claims of creditors. In some instances, their claim will be superior to the claims of will beneficiaries to whom the items were left.

The Basic Idea of Intestate Distribution After the decedent’s property is used to pay debts, taxes, funeral expenses, and administration expenses, the remainder, if any, is distributed to the decedent’s heirs. Non-probate assets, such as life insurance proceeds and survivorship bank accounts, are not affected.

Intestate Succession Laws Determined by state law called the intestate succession statute or statues of descent and distribution. Intestacy statutes vary substantially from state to state.

More Than One State Deceased lived in Nebraska where she owns a home, had a driver’s license, and paid income tax. She owned a cottage in Wisconsin and a condo in Florida. If she dies intestate, Nebraska’s statutes will determine how and by whom her house and personal property are inherited. Wisconsin’s statues will decide who receives the house, and Florida’s law, the condo.

Intestate Succession Laws Surviving spouse. Lineal descendants – blood relatives such as children, grandchildren and great-grandchildren. Lineal ascendants – blood relatives such as parents, grandparents and great-grandparents. Collateral Heirs – uncles, aunts, brothers, sisters, nephews, nieces, and so on.

Additional Considerations Adopted children – according to most state statutes are considered blood relatives of the adopted family. Persons related by marriage – not considered as part of intestate succession. Half-blood relatives – only considered part of intestate succession if related through the blood relative. Review particulars in your state statutes.

Surviving Spouse - Florida If there are no children - the entire estate. If the surviving children are of the deceased and the surviving spouse - $60,000 of the estate + one-half of the balance of the intestate estate. If the surviving children are of the deceased but are separate from the spouse - one-half of the intestate estate.

The Basic Distribution Scheme (when all Decedent’s children are alive) Each child receives an equal share. This is called per capita distribution. Per capita – equally to each person.

Multi-Generation Succession (when there are Predeceased Children) If some of the intestate’s children died before the intestate after having children who outlive the intestate, there are at least 3 methods states use when dividing property among descendants when different generations are involved. Per Stirpes (by Right of Representation) Per Capita with Representation Per Capita at Each Generation

Determining the Distribution Scheme in the Case of Multi-generation Succession Identify the Intestate’s Children Determine if Any Predeceased Child Left a Descendant who Outlived the Intestate. Ascertain the Governing State’s Method of Handling Multi-Generation Succession. per stirpes per capita with representation per capita at each generation

Per Stirpes (by Right of Representation) The intestate’s children are the root of the distribution process. Younger generation descendants divide the share their predeceased ancestor would have taken had he survived the intestate. In other words, the younger generation “represent” or stand in the shoes of the older generation.

Per Stirpes – Children and Grandchildren If Son One would have survived, Son One would have received ½ the estate. Because he predeceased the intestate, his ½ share is divided equally between his children. No share for Son Two because he had no heirs to represent him.

Per Stirpes – Grandchildren Although all takers are of the same generation, they do not receive equal shares. This approach stresses blood line over degree of relationship and may cause equally related individuals to be treated differently.

Per Capita with Representation The “root” is the generation nearest to the decedent with those who survive the instate. If all takers are of the same generation, they take per capita but … when the takers are of different generations, the share of the younger generation descendants is based on the share that the older generation would have received had the older generation survived the intestate.

Per Capita with Representation – Children and Grandchildren Although this is the same answer as under a per stirpes distribution, the reasoning is different. The key issue is the level at which the shares are divided, here it’s at the children level because it’s the first level with members who survived the intestate.

Per Capita with Representation – Grandchildren Because the level of grandchildren is the nearest generation to the intestate with survivors, it is the root generation. This approach is regarded as being fairer to both the intestate and the heirs than per stirpes and is the majority approach.

Per Capita with Representation – Children and Grandchildren from Multiple Predeceased Children Intestate’s property is divided into shares at the first generation with survivors, that is, children. The initial division is into quarters - one for each of the surviving children and one share for each of the deceased children who left surviving descendants.

Per Capita at Each Generation Newest approach – contained in the Uniform Probate Code. Equality among like-related persons is achieved. Basic plan begins with per capita with representation but once the division is done at the first generation with survivors, the deceased member’s shares are combined and distributed per capita among the younger generation heirs.

Per Capita at Each Generation - Children and Grandchildren from Multiple Predeceased Children The initial division is into quarters - one share for each of the surviving children and one for each of the deceased children who left surviving descendants. The shares of the predeceased children are combined, then equally divided among their children, intestate’s grandchildren.

Escheat No surviving heirs. Estate passes or escheats to the state. Life insurance will pass to named or contingent beneficiaries.

Tasks for this Unit Seminar Quiz Discussion Board Assignment

Your State’s Intestate Succession Laws For the first Discussion Question research your own state’s intestate succession laws and share how your state distributes property of a person who dies intestate. Discuss any provision of the intestate succession statute that you find interesting and provide the citation to your state’s statute.

Intestate Succession Process For the second Discussion Question go to LexisNexis and research your state statutes to see how the state treats illegitimate children in the intestate succession process. Report your findings and provide the citation to your state’s statute.

Discussion Board Instructions Post your thoughts and responses to the Discussion Board as to each question. Read and comment on posts from your colleagues. Do not hesitate to pose questions to your colleagues. Discuss constructively with your colleagues their posts and positions. Post as early in the week as possible to foster interaction

Property Distribution For this week’s writing assignment you will review the following article: Montana State University's article, "Dying Without a Written Will in Montana: Who Receives Your Property?" Then go to the Illinois General Assembly website and review the laws of succession of the State of Illinois.

Write three paragraphs based upon the following facts: The Lees, a family made up of a mother, father, and three children, live in Montana.  Mr. and Mrs. Lee have one child together. In addition, Mrs. Lee has one minor child from a previous marriage, and Mr. Lee has a minor child from a previous marriage.  All three children reside with the couple. Assume that one of the parents died today without a will, and his or her estate was valued at $250,000.  Devote a paragraph to each of the following questions: 1. Under the laws of Montana, how would the property be distributed? 2.  What would happen if this same family lived in Illinois?  How would the property be distributed?  3.  Do you prefer Illinois’ or Montana's statute? Why? Answer the questions in a brief short answer essay, being sure to fully explain your responses.

Next Week This week we addressed the Laws of Intestate Succession. Next week we will address Trusts.