57-1-2 Words of inheritance not required to pass fee. The term “heirs,” or other technical words of inheritance or succession, are not requisite to transfer a fee in real estate.
The Rights of Heirs under a Trust or Will
Sooner or later many people find that they are going to inherit money or assets from a relative or friend’s trust or estate and that is usually a bittersweet discovery. They have lost a loved one or a good friend but are also going to receive an asset, usually tax free that can make a huge difference in one’s life. It is a gift of love from someone who often was an important part of life and that gift is often a very emotional event. And then the weeks, then months pass, and the asset somehow is not transferred and seems mired in various court or tax issues that delay the actual transfer. What was a gift from a friend or loved one becomes a matter requiring complex documentation, many meetings, letters or discussions, costs for attorneys and accountants, executors, trustees and even filing fees for courts. It may seem that the executor or trustee or legal and accounting professionals are grasping what they can from this gift of love. For many heirs, frustration and often anger mounts. We hear it all the time. What began as a gift ends up as a complicated and, at times, an apparent expensive exercise of bureaucratic inefficiency. Often the heirs have goals and plans for the inheritance that are delayed or made impossible as the probate process slogs along. The executor or trustee seems disinclined to move it along with efficiency yet seems to want his or her fees promptly. Tensions rise.
Probate versus Trust Administration
Probate: This is the public legal process by which a decedent’s property is distributed to the specified heirs under court supervision. An executor (if there is a Will) or administrator (if they die without a Will) is appointed by the court and that executor/administrator has the obligation to account for all assets, pay all creditors, pay all taxes, and, with court approval, make a formal accounting and then pay the remainder to the specified heirs. If there is a Will, the Will will specify the heirs. If there is no Will, the law will specify who inherits what. The executor or administrator receives a fee for his or her services, usually specified in a schedule published by the court and is allowed extraordinary fees if particular services are required, such as commencing litigation or selling real property. The executor or administer has a fiduciary duty to the heirs and is personally liable for failure to perform. The process is a public one with documents filed with the court and available in the court records. Normally, an accounting is filed within a year and the probate is closed with the court approving the final accounting and distribution one to two years after the probate begins. If taxes are due the probate will remain open for at least a year since there are tax advantages in that approach. Estate taxes are only due of the assets are substantial (over five million if a single person, over eleven million for a couple) but income tax returns may have to be filed for the estate. Attorneys are usually hired by the executor or administrator to handle the various legal filings and an accountant as well to help with the accounting and tax returns. The attorney’s fees are also set by court schedules with extraordinary fees available if there is litigation or complex business aspects to the estate. Accountants are usually paid their normal hourly fees.
Trust Administration: If one has a trust, normally there is no public probate process and the terms of the trust appoints the trustee or trustees, describes their duties, describes what fees they are entitled to, and provides for distribution of assets either outright or in trust both during the life of the creator of the Trust (the “Settlor”) and after the death of the Settlor. Trust administration is often faster than probate, but taxes still must be paid, and attorneys and accountants are usually retained by the trustee. Trustees have fiduciary duties to the beneficiaries of the trust and while there is no probate filed, the court is available to enforce the terms of the trust.
Basic Rights of Heirs
An heir is commonly thought of as someone who receives money or property from a person who has died. In legal terms, heirs are the next of kin and are the people who would normally benefit if the person died without leaving a will (died “intestate.”) The succession of intestate heirs is based on direct descendants, such as children or grandchildren. Other relatives, such as sisters and brothers, or aunts, uncles, nieces, nephews, and cousins, are called collateral heirs. If there is a written will, it specifies who will inherit and it often is not the people that would normally inherit intestate. A trust has “beneficiaries” rather than heirs, but they are treated the same as heirs in a will with their rights and inheritance being spelled out in the trust instrument.
A person who receives property or a share of an estate under a will or trust has certain rights as soon as the will is probated, or the Settlor dies. Probate is designed to protect the rights of will beneficiaries. A trust beneficiary has the right to receive the share entitled in a timely manner and to receive written notice of the all substantive trust proceedings. A wise executor or trustee will provide ongoing reports to heirs and beneficiaries and, if the estate will take years to settle, will ask the court to allow preliminary distributions to the heirs. The fiduciary should promptly answer questions from the heirs as to status and the assets in the estate. Once the probate process has completed payment to creditors and taxes due as well as the accounting, distributions to heirs should promptly follow. While the trust document normally describes the process required of the trustee, the beneficiaries are also entitled to information as to assets, state of administration, and prompt payment of sums due them under the trusts.
A beneficiary may ask the executor for an account of what actions the executor has performed for the estate. Any such report should be in writing, and the executor or trustee should be expected to provide supporting papers, such as receipts or canceled checks for payments, proof of asset transfers and statements from any estate bank accounts. The supporting papers must conform to the information the executor or trustee provides.
Executor or Trustee Compensation Approval
Beneficiaries have the right to object to the level of compensation an executor or trustee requests for services but assuming those requests are within the guidelines set by the court or trust instrument, such objections are unlikely to be approved by the court. Note that many executors do not wish to be paid since often it is a relative who acts as executor and they may waive compensation either due to family connections or because such compensation is taxable, and they may rather just inherit their share. In trusts, the compensation is normally set in the terms of the trust but if the terms are generic “reasonable” or “appropriate,” then the court is available to review and, again, conforming to the court schedule is usually required.
Fairness to Beneficiaries and Heirs
The will or trust beneficiaries are entitled to an executor or trustee who performs duties fully and honestly and without favoritism. An executor must not act in a way that harms the estate or favors one beneficiary over another, behave in a dishonest or illegal manner or fail to abide by the legal obligations. An heir may petition the court if he or she believes the executor or trustee has failed to perform duties properly but note that the burden of proof is on the petitioner. Courts give executors and trustees discretion as to many decisions and will not normally replace business judgment of the executor or trustee with the court’s own. But self-dealing or using trust resources for improper purposes is something courts will not allow. Remedies can be extreme, including personal liability of the fiduciary, removal of the fiduciary, etc.
Heirs can seek relief from the court via use of a petition during the pendency of the estate, or later, a complaint for breach of fiduciary duty if the wrongdoing is discovered after the estate is closed. Such a process can be expensive and prior to filing a petition or suit, careful analysis of the potential causes of action should be conducted by competent legal counsel in the venue of the estate. A trustee is subject to court review if a beneficiary claims wrongdoing and that can occur during the time of the trust or thereafter, subject to the statute of limitations. Each heir is owed a fiduciary duty by the executor or trustee. Each heir is owed an accounting and information as to actions occurring in the estate or trust and each heir is owed prompt distribution of his or her inheritance. But the heir must act to protect his or her interest and that may mean filing a petition in a court of law seeking relief.
Inheritance Law and Your Rights
Inheritance law governs the rights of a decedent’s survivors to inherit property. Depending on the type of inheritance law your state has, a surviving spouse may be able to claim an inheritance despite what you may have written into your will. This statutory right of a surviving spouse hinges on whether a state follows the community property or common law approach to spousal inheritance. Children, and sometimes grandchildren, also have a right to claim an inheritance when a parent or grandparent dies.
Inheritance Law in Community Property States
Community property is generally property acquired by either spouse during the marriage. This includes income received from work, property bought during the marriage with income from employment, and separate property that a spouse gives to the community. A spouse retains a separate interest in property acquired through the following methods:
• Inheritance or a gift
• Acquisition of the property prior to the marriage
• An agreement between the spouses to keep the property separate from the marriage community.
In a community property state, each spouse owns a one-half interest of the marital property. Spouses have the right to dispose of their share of the community property in whatever way desired. A deceased spouse, for instance, can elect to give his or her half of the community property to someone other than the surviving spouse. Spouses cannot give away the other spouse’s share of the community property, however. A provision in a prenuptial agreement may also change a spouse’s right to distribute the property. A spouse has the sole right to dispose of their separate property. A deceased spouse can distribute both their separate property and their share of the community property in a will.
Inheritance Law in Common Law States
Unlike a surviving spouse in a community property state, a spouse is not entitled to a one-half interest in all property acquired during the marriage. In a common law state, both spouses do not necessarily own the property acquired during marriage. Ownership is determined by the name on the title or by ascertaining which spouses’ income purchased the property if a title is irrelevant. If, for example, only one spouse takes the title to a property, the spouse with the name on the deed owns the house even if the other spouse actually paid for it. A surviving spouse in a common law state has protection from complete disinheritance, however. Every common law state has different guidelines, but most common law states’ inheritance law allows the surviving spouse to claim one-third of the deceased spouse’s property. A deceased spouse can choose to leave less than a state’s mandated inheritance right, but the surviving spouse may make a claim with the court to inherit the predetermined amount. The will is carried out according to the decedent’s wishes if the surviving spouse agreed in writing to accept less than the statutory amount or the surviving spouse never goes to court to claim the legal share.
Inheritance Rights of a Spouse after Divorce
Once a divorce becomes final, many states automatically revoke gifts made in the will to the ex-spouse. In other states, a divorce has no effect on gifts to the ex-spouse. It is best to create a new will after a divorce becomes final to prevent an unintentional gift to a former spouse.
Inheritance Rights of Children
Unlike a spouse, a child generally has no legally protected right to inherit a deceased parent’s property. The law does protect children when an unintentional omission in a will occurs, however. The law presumes that such omissions are accidental — especially when the birth of the child occurred after the creation of the will. Depending on whether a spouse survives the decedent, the omitted child may inherit some portion of the deceased parent’s estate. If the omission was intentional, though, the will should expressly state this.
Rights and Liabilities of Heirs
No one is an heir to a living person. Before the death of the ancestor, an expectant heir or distributee has no vested interest but only a mere expectancy or possibility of inheritance. Such an individual cannot on the basis of his or her prospective right maintain an action during the life of the ancestor to cancel a transfer of property made by the ancestor.
Gifts and Conveyances in Fraud of Heirs
A person ordinarily has the right to dispose of his or her property as he or she sees fit, so that heirs and distributees cannot attack transfers or distributions made during the decedent’s lifetime as being without consideration or in fraud of their rights. For example, a parent during his or her life can distribute property among his or her children any way he or she wants with or without reason, and those adversely affected have no standing to challenge the distribution. One spouse can deprive the other of rights of inheritance given by statute through absolute transfers of property during his or her life. In some jurisdictions, however, transfers made by a spouse for the mere purpose of depriving the other of a distributive share are invalid. Whether a transfer made by a spouse was real or made merely to deprive the other spouse of the statutory share is determined by whether the person actually surrenders complete ownership and possession of the property. For example, a husband’s transfer of all his property to a trustee is void and illusory as to the rights of his surviving wife if he reserves to himself the income of the property for life, the power to revoke and modify the trust, and a significant amount of control over the management of the trust. There is no intent to part with ownership of his property until his death. Such a trust is a device created to deprive the wife of her distributive share. Advancements or gifts to children, including children by a former marriage, which are reasonable in relation to the amount of property owned and are made in Good Faith without any intent to defraud a spouse, afford that spouse no grounds of complaint. Good faith is shown where the other spouse knew of the advancements. If a spouse gives all or most of his or her property to the children without the other spouse’s knowledge, a rebuttable presumption of fraud arises that might be explained by the children.
Debts of Intestate Estate
Heirs and distributees generally receive property of their ancestor subject to his or her debts. The obligation of an heir or distributee to pay an ancestor’s debt is based upon his or her possession of the ancestor’s property. All property of an intestate ordinarily can be applied to pay his or her debts, but, generally, the personal property must be exhausted first before realty can be used.
Rights and Remedies of Creditors, Heirs, and Distributees
The interest of an heir or distributee in the estate of an ancestor can be taken by his or her creditors for the payment of debts, depending upon the applicable law. Advancements received by an heir or distributee must be deducted first from his or her share before the rights of creditors of the heir or distributee can be enforced against the share.
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When you need legal help with real estate law in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506