Probate

“What is the difference between a Will and a Trust?”  In many ways these Estate Planning Documents are very similar in what they accomplish the major difference is how the goals are accomplished.

Both Distribute an Inheritance At Death

Both a Will and a Trust distribute property upon the death of its maker.  The major difference is how we get to the point where the property is distributed.

Five Major Differences Between a Will and a Trust

  1. A Will requires a probate court and judicial oversight to work.  A Trust requires no oversight by a court or judge.
  2. A Will distributes property without restrictions which allows somebody as young as 18 with full access to an inheritance.  A Trust can control the timing of distributions.
  3. A Will does not protect an inheritance from claims of your kid’s creditors.  A Trust can be structured to protect an inheritance from a kid’s creditors and predators.
  4. A Will does nothing until the maker dies.  A Trust is a living document which allows the person in charge the ability to manage the assets and make distributions to beneficiaries.
  5. A Will becomes public record that anybody can snoop to see how much is in an estate and who ended up with your assets.  A Trust is a private document and few of its details require public disclosure.

Todd’s Story

Todd’s father passed away.  He was named Trustee of this father estate.  While he was cleaning out the house a passerby inquired whether the home would be for sale.  He was able to accept an offer and close that very same month.  If the property was left in a Will nothing could happen until there was approval of a probate court.  Instead of one month he would have had a delay of up to 6 months and incurred attorney, publication, appraiser and filing fees.  Todd was glad to avoid those troubles.

How a Will Works

A person makes a will by drafting and signing a written document.  It must clearly be a statement of the person’s “Testamentary Intent”.  In other words, it must state to whom property is to be given after their death.  There are also strict rules on how the document is drafted and witnessed.  If any of these are messed up then it is not a valid will.

A Will is a Lazy Document

After a Will is created it lays around and waits for its maker to die.  None of its provisions becomes effective until the person dies.  For instance, if the plan is to give land to a son, he does not own it yet.   There is a a further requirement that a Probate Court determines that the Will is valid.

Once a Will is approved by the Court then it must be administered according to Probate Procedure.  This includes:

  • Filing a copy of the Will with the Court (making available for the public to see online)
  • Notifying all heirs (relatives who could inherit)
  • Notify all legatees (persons given something in the will)
  • Publish notices in the Newspaper
  • Appointing an Executor (the person in charge of collecting assets, paying claims and distributing assets)
  • Posting a Bond (a fund used if the Executor misbehaves
  • Sending notices and receiving claims from creditors
  • Report all of the assets (publicly available)
  • Provide and accounting
  • File a report of distribution (the public what everybody receives under the will)
  • Pay fees for attorneys, court clerks, mailing, publication and bonds
  • Keep in mind that this is just a snapshot of what is involved in a simple case.

A probate procedure can take nine months to several years to complete.

How does a Trust Work?

In the simplest terms, a Trust is a vehicle that holds assets in the name of the Trustee.  Imagine a child’s Radio Flyer wagon.  When things are placed in it the wagon “owns” them.  The kid pulling the wagon gets to decide what gets put into it.  He also writes a Rule Book that describes when and how things are taken out of it.  He pulls the handle so he is in control.  Someday he will not be able to pull the handle because he dies or loses the ability to manage it.  The Rule Book states who picks up the handle and what is to happen with the things in the wagon.  Unlike the Will, the Trust works without the need for a Probate Court of Judicial Oversight.  In Todd’s story, he picked up the handle and managed the property quickly and efficiently.

 

What Happens When Somebody Doesn’t Like A Will?

If a Last Will and Testament once existed but cannot be found, the law presumes that it was destroyed by its maker.  If there is no Will, property is distributed according to intestacy statutes.  Somebody who is written out of a Will may have an incentive to destroy it if they would get more under the intestacy statute.

Isabel’s Story

Isabel was a retired librarian and an author of children’s books.[i]  She never married or started a family.  She had some nieces and a nephew, but she wanted to leave everything to her church.  Her attorney prepared the paperwork.  The attorney kept a copy of the Will and sent the original home with Isabel.    Isabel stored it in an unlocked cabinet.

Meddlesome Niece Disinherited

Isabel had one niece who interfered with her affairs.   At one point the niece stayed at Isabel’s home while she was away and removed  Isabel’s private financial records without her permission. This upset Isabel who had her attorney demand return of the records. The niece also suggested that Isabel move into a nursing home.  Eventually, Isabel refused to speak to her.

Disinherited Niece, Did She Destroy the Will?

After Isabel died the original Will was nowhere to be found.  This would be great for the niece because if the Will disappeared , there would be a presumption that Isabel destroyed it and the niece would inherit under the intestacy statutes.  Isabel’s caretaker implied that the niece had a hand in the Will’s disappearance.  When the attorney produced a copy of the Will, the niece fought it.    The fight went up to the Pennsylvania Supreme Court.

The Court did not have direct evidence that the niece destroyed the Will.  But the Court’s opinion  stated,

“With that said, we do acknowledge that the potential for fraud is an appropriate concern in developing legal rules applicable to lost wills. “

Attorney’s Copy of Will Accepted

The evidence showed that the Attorney kept a copy of the Will.  He had been in regular contact with Isabel through the years and assisted her with changes to it.  He also visited here within a few weeks of her death.  Surely Isabel would have informed her attorney if she wanted to change or destroy her Will. These unique facts overcame the presumption that a lost Will was destroyed and the attorney’s copy was accepted.  The niece got nothing.

 

Maintenance  Agreements:

Isabel’s attorney kept in contact with her throughout her lifetime.  He made changes to her Will as her needs and wants changed.  He intervened when the niece took Isabel’s documents.  The attorney and his client had an understanding that kept communications open.  Maintenance Agreements are designed to keep communications open and expenses to a minimum, they can include:

  • Regular Estate Plan reviews

  • Access to attorneys for routine questions without bills

  • Assistance and advice when assets or family situations changeSafe bank and key to the safe

  • Notary services

  • Enrollment in Living Will registries such as Docubank

  • Newsletters Covering Legal Topics

  • Trust protector or oversight

  • A seamless transition to estate administration

  • Assistance in the event of incapacity or incompetency

  • Storage of Wills, Trusts & Powers of Attorney to prevent fraud and abuse

  • Provide word processing changes

Modern maintenance agreements are a way to keep estate plans current.   The client receives representation on a regular schedule at a fixed cost. Issues are dealt with as they arise.  This ultimately saves the client money.

Where Should I Store the Will?

This is a question that is often asked.  Many clients wish to lock the Will in a safety deposit box at the bank.  Others keep their Estate Plans at their home.  Isabel’s case demonstrates the difficulty a Court faces when the original is lost and a copy of a Will is produced.  Some courts provide a way to have a Will filed for use in the future.

Should My Attorney Keep My Will?

Many attorneys offer to store Wills, Trusts, Powers of Attorney and other Estate Planning Documents as part of a maintenance program.  The safekeeping reduces the risk of mischief by unhappy family members.   Documents are kept in a fireproof safe or in a bank’s vault.  The problem with keeping the Will or Trust in the client’s safety deposit box is the risk of the document becoming inaccessible without an order from a probate court.   Also, the person retrieving it may “lose” it if the provisions are unfavorable.

The full case can be seen in here:  In re Estate of Wilner

See also Writing the Kids Out of the Will

 

[i] Her works include “B is for Bethlehem”, “A Garden Alphabet” and “The Baby’s Game Book”.

 

 

What did Wiley Want to Happen?

Wiley  had three kids Curtis, Pam and Janet. He also had a stepson named Jeffery. Wiley opened a bank account and designated that upon his death the funds should be paid to his son Curtis.  Court recited the facts as follows:

At some unspecified time, or times, Father told Curtis and Pam that he wanted his assets divided equally among his “kids.”   Insofar as Pam knew that included Jeffrey.   A document signed by Father, but which did not qualify as a last will, was discovered.   This document states that Jeffrey is a stepson and expresses Father’s desire that Jeffrey receive $100.00 and that the other children share equally in his assets.

Wiley died and Curtis divided the funds between himself Pam and Janet but gave nothing, not even the $100.00, to Jeffery.

 

How Spoken Words Caused An Inheritance Dispute in Probate Court

Jeffery sued to get his inheritance. On appeal the Court recognized that oral will must be presented in probate court.  This was not done nor would it have been worthwhile to present. Oral Wills or “Nuncupative Wills” are only available in extremely limited situations for service-members serving and dying in a conflict.  In fact, the conditions are so stringent that Oklahoma has no reported cases of a valid soldier’s will.  Wiley obviously did not meet any of the criteria. What was the end result? Jeffery received nothing.

Did the Bank Account Disrupt the Estate Plan?

The court also noted that even if the oral expressions were a valid Will, it could not change the payable-on-death designation on the bank account.  In other words, since Wiley designated that Curtis as the payable-on-death beneficiary it would not matter what any Will said.  Curtis did not have to share the funds with his sisters.

From facts in the case it appears that Wiley wanted to provide something to Jeffery.  But what he did was entirely ineffective.

Did Wiley Understand What He Did?

It is difficult to say what Wiley’s wishes were.  A payable-on-death bank account is paid to the beneficiary named in it.  It does not matter what any other document, will or trust says.  It certainly does not matter what owners says about the money in the POD account.  The cold hard facts are that the bank is obligated to pay the money to the beneficiary who can do whatever he wishes with the funds.

Read the case In re Wiley .

Lessons from the Wiley  Case:

  • In order to have a valid Will it must meet the statutory requirements. Even a signed document may not do the trick unless it complies with the law.
  • Oral expressions, wishes, instructions or demands are meaningless as they pertain to your estate plan.
  • It is important to understand how beneficiary and payable-on-death designations affect your distribution plan.

What Should You Do to Make Sure Your Assets are Distributed According to Your Wishes?

Knowing how probate, non-probate, beneficiary designations, deeds and other benefits are structured determine how, to whom and when your assets will be distributed is important.  It is important to self-educate seek competent advice.  Be sure to download my Estate Planning Answer Guide.

 

Every case is different and laws vary by State.  Anyone with a will, trust or inheritance dispute should have their facts reviewed by an attorney.  This case describes the laws and facts presented in an Oklahoma Court.
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