Is Probate Necessary?

Good question. The answer? It depends:

  • Did the decedent own probate property, that is, property that does not pass to heirs by deed, contract, title, beneficiary designation, account designation, POD or TOD account, trust, etc?
  • Did the decedent have creditors and outstanding debts?
  • Are any of decedent’s heirs or beneficiaries, even just one of them, a bit contentious, a bit entitled, or wondering why it’s taking so long to distribute the decedent’s property?
  • Did the decedent leave a will?
  • Is there any question in any one of the decedent’s heir’s or beneficiary’s mind about the will’s validity?
  • Did the decedent leave minor children and no spouse?
  • Did the decedent wish to disinherit his or her spouse or any other heirs?
  • Are there questions about who is and who is not an heir or beneficiary?
  • Do any of the heirs or beneficiaries distrust or have reason to distrust the decedent’s designated personal representative?
  • Is there real estate in the estate that the decedent didn’t own jointly with someone else?
  • Is the decedent’s probate estate worth less than $100,000.00 (Utah) or $200,000.00 (Wyoming)?

If you can answer No! to all of these questions, you may not need to probate the decedent’s will. If you answer Yes! to any of them, then you may need to probate the will. My plan is to review these and other questions in a series of post, so stay tuned.

Probate vs. Non-Probate Property: Which Property Can Pass Outside of Probate?

Probate is the legal process where a court proves, or validates, the decedent’s will; appoints his or her personal representative; and often oversees the collection, distribution, or sale of the decedent’s property. The probate property, that is. Thus, it is important for the practitioner to know the difference between probate and non-probate property. The easy, but unsatisfactory answer is that probate property is anything other than non-probate property. So what is non-probate property; that is, what property passes at death without a permission slip from the court?

Here’s another easy, but more instructive answer: non-probate property is property that does not pass under the decedent’s will.  As the list below illustrates, that could include a lot of property:

Non-Probate Property

Property that passes by beneficiary designation, which generally includes:

  • Life insurance policies (but see below),
  • Annuities,
  • Individual retirement accounts or IRAs,
  • Roth IRAs,
  • Employee Stock Ownership Plans or ESOPs,
  • Pension Plans, including
  • Defined Benefit Plans,
  • Money Purchase Plans,
  • 401(k) Plans,
  • 403(b) Plans,
  • Simple IRA Plans (Savings Incentive Match Plans for Employees),
  • SEP Plans (Simplified Employee Pension),
  • SARSEP Plans (Salary Reduction Simplified Employee Pension),
  • Payroll Deduction IRAs,
  • Profit Sharing Plans,
  • Governmental Plans under 401(a),
  • 457 Plans,
  • 409A Nonqualified Deferred Compensation Plans,
  • Payable-on-Death or POD Accounts,
  • Transfer-on-Death of TOD Accounts, including investment accounts,
  • Property that passes by deed, which includes:
  • Real estate owned in 1. joint tenancy with rights to survivorship (JTWS), 2. life estate where property passes to another upon death of life tenant, and 3. any property the decedent held in a life estate,
  • Property that passes by account designation, which includes: 1. Bank accounts owned jointly, and 2. brokerage accounts owned jointly,
  • Vehicles owned jointly,
  • Safety deposit boxes,
  • Other property that falls within the definition of a “non-probate transfer,” including ; 1. Insurance policies, contracts of employment, bonds, mortgages, promissory notes, deposit agreements, pension plans, trust agreements, conveyances, or virtually any other written instrument effective as a contract, gift, conveyance, or trust.
  • Property owned by a trustee of a trust. (Of course, if the decedent is the settlor of a trust, that trust will be subject to an administration somewhat similar to the administration that takes place in probate, but away from the prying eyes of both a judge and the public.)

Non-probate property bypasses Go, bypasses the court, and goes directly to the beneficiary, the joint account holder, the joint owner. Often the movement of the property from the decedent owner to the surviving owner is virtually seamless—well, painless anyway: beneficiaries file a death claim with the insurance company, attach a death certificate, and voila! the death proceeds appear. But often the movement requires a trip to the DMV. Even that need not be a chore. If the word “or” separated the two names on the title, the survivor doesn’t have to do anything; however, if he or she wishes to remove the decedent’s name off the title, then mailing or hand-delivering a “Vehicle Application for Title” to the DMV along with a check to cover the cost of removing the name, will do the job. If the word “and” separates the name, the survivor will also need to provide a death certificate.

Likewise, the surviving owner(s) of real property owned in a JTWS must take a few steps to terminate the decedent’s interest in the property under most states’ probate code, including filing an affidavit substantially similar to the statutory form in the county where the property is located and attaching a copy of the death certificate. (By the way, if the decedent owned real estate as a trustee of a trust, the successor trustee should file a similar affidavit along with a death certificate, indicating that the successor trustee has assumed the position of the deceased trustee with regard to the property.)

It should go without saying, but I’ll say it anyway: non-probate property will pass to the intended beneficiary, account holder, surviving owner notwithstanding what the decedent said in his or her will. In other words, the beneficiary designation, the deed, the POD/TOD, etc. controls the disposition of non-probate property, not the will.

Probate Property

If non-probate property includes everything on the list above, probate property includes everything else, including the following:

  • Life insurance/annuities payable to the insured’s estate,
  • Personal property—art, furniture, antiques, and the like—not jointly owned,
  • Real estate the decedent owns either as an individual or as a tenant in common,
  • Accounts owned individually by the decedent, including
    • Bank accounts,
    • Brokerage accounts,
    • Etc.
  • Any other property the decedent owned individually at death.

And if it’s probate property, the court will have some say about who gets what, governed by the decedent’s will of course.

The Attorney’s Job

The probate attorney’s or personal representative’s or PR’s job is to separate the non-probate wheat from the probate chaff. To do that, the attorney or PR should consult the relevant documents. That requires gathering account statements, life insurance policies, retirement plan beneficiary designations, titles, deeds, and the like to determine how the property is owned and who the beneficiaries are in the relevant cases. That may turn out to be more difficult than it seems, largely because you can’t be sure the decedent’s heirs know fact from fiction. Thus, don’t rely on the life insurance policy in the decedent’s file drawer to tell you who or what is the beneficiary. Ask the life insurance agent or call the company to get a copy of the most recent beneficiary designation. Call the title company to pull the most recent vesting deed. (You might even go further, some attorneys argue that there’s no need to record a deed to a revocable trust; thus, the most recent recorded vesting deed may not be the most recent deed.) In other words, check primary sources.

Trusts and the People Behind Them

First, let’s discuss the parties or positions in a trust. To form a trust, you need at fill at least three positions. Nowadays, you can have as many as two more:

One or more Settlors/Grantors/Trustors/Trust Makers. The person (or persons) who creates the trust, whether during his or her lifetime or at death. In Wyoming and Utah, Settlor or Grantor is the preferred term, though the other terms are used as well. The terms mean the same thing. Utah’s definition reads, “’Settlor’ means a person, including a testator, who creates . . . a trust.” In contrast, Wyoming’s definition reads, “’Settlor’ means a person, including a testator, grantor or trust maker, who creates . . . a trust.”

The perfect trustee?

One or more Trustees. A fiduciary (either an individual or an entity) named in the trust document who holds legal title to trust property for the benefit of the . . .

One or more Beneficiaries. Person or persons, entity or entities, charities or otherwise, for whose benefit the settlor created the trust in the first place. The beneficiary may have a present, future, vested, or contingent interest in trust property. Beneficiaries may be income or remainder beneficiaries. Settlors can be beneficiaries of their trust.

Trust Protector. Someone named in the trust other than trustee with powers granted by the trust document, often including a limited power to remove the trustee, appoint a replacement, add beneficiaries, and maybe modify the trust. In other words, a trust protector is someone a trustee should pay attention to. Modern trusts often have trust protectors (and advisors, see below) to add flexibility to the trust.

Trust Advisor. Though the term is sometimes used interchangeably with trust protector, a trust advisor is more of an advisor than an enforcer, guiding the trustee in the exercise of her powers. That said, the place to define these two terms is in the trust agreement.

First, here are three important definitions and four basic types of trusts, especially as to the taxation of trusts:

Complex trust. A trust that either retains all current income or distributes corpus or makes distributions to charitable organizations.

Simple trust. As described in tax law, a trust that must distribute all income at least annually and which doesn’t provide for charitable distributions.

Grantor trust. A trust over which the settlor (aka the grantor) retains power to revoke or to control trust property. Consequently, the settlor/grantor is taxed on trust income. Most living trusts are grantor trusts.

Living trust. Also known as an inter vivos trust, a living trust is one established and funded during the settlor’s lifetime as opposed to a testamentary trust (see below), which comes into being upon the settlor’s death. A living trust can be either revocable or irrevocable. The settlor of a revocable living trust is typically also the initial trustee of the trust.

Revocable trust. A living trust over which the settlor retains the power to revoke the trust.  

Irrevocable trust. A trust over which the settlor retains no right to revoke. Irrevocable trusts are generally used to remove assets out of the taxable estate of the settlor. Once a settlor dies, his or her revocable becomes irrevocable. Likewise, once the creator of a testamentary trust dies, his or her trust is irrevocable.

Testamentary trust. A trust created by will and which comes into being upon the death of the testator or maker of the will.

Now, in no particular order, here’s a brief summary of many of the trusts in use today:

Charitable trusts. A trust for the benefit of a charity (government, educational, religious, and similar institutions). There are a variety of charitable trusts, including a charitable lead trust (CLT)—defined as a trust for a fixed period, during which the charity receives the trust income and after which, the remainder goes to a non-charitable beneficiary—or a charitable remainder trust (CRT), which essentially reverses those roles.

Irrevocable life insurance trust (ILIT). An irrevocable trust designed to own life insurance, so the insurance remains outside the insured’s estate and free of estate tax.

Pet Trust. A trust established to take care of the settlor’s pets in the event of the settlor’s death or disability.

Firearms or NFA Trust. A trust to hold firearms generally and National Firearms Act firearms specifically. Such trusts allow for the sharing of NFA firearms without violating transfer rules governing NFA firearms.

Special Needs Trust (SNT).  A trust designed to hold assets for the benefit of a beneficiary whose disabilities may allow the beneficiary to receive public assistance for medical and other care expenses.

Standalone Retirement Trust (SRT).  A trust designed to receive “qualified retirement accounts” like IRAs, 401(k)s, etc. It can be either revocable or irrevocable, and it’s designed to allow trust beneficiaries to defer income tax on the account for as long as possible—i.e., stretch the IRA. SRTs can be either conduit trusts (distributions flow through them and out to the beneficiaries) or accumulation trusts (any trust that is not a conduit trust).

Grantor Retained Annuity Trust (GRAT). A special type of irrevocable trust. The settlor/grantor establishes the trust, puts property in, and takes back an annuity (calculated as a dollar amount) for a specific amount of time based on the value of the property in the trust.

Intentionally Defective Grantor Trust (IDGT). An irrevocable trust that removes the value of the trust assets out of the settlor’s estate but allows the grantor/settlor to continue to be treated as the owner for income tax purposes. A big advantage of IDGTs is that grantor/settlor can add value to the trust by paying the income tax due on trust income without those tax payments being treated as additional taxable gifts to the trust.

By-pass or Credit Shelter Trust. Also known as the B Trust that holds that part of the deceased spouse’s estate that is applied against the deceased’s applicable exclusion amount, thus protecting it from estate taxes.

Marital Trust. Also known as the A Trust, this trust holds the portion of the deceased spouse’s estate that qualifies for the unlimited marital deduction. That portion will later be included in the surviving spouse’s taxable estate. The Marital and Credit Shelter Trusts are generally created by the trustee of the settlor’s Revocable Living Trust or Testamentary Trust upon the settlor’s death.

Qualified Personal Residence Trust (QPRT). This trust works like a GRAT except that the property transferred into the trust is the Settlor’s personal residence. The Settlor retains the right to live in the home for a specified number of years. At the end of the term, the Settlor must move out or begin paying rent to the trust, which goes to beneficiaries entitled to the trust property after the initial term.

Qualified Domestic Trust (QDOT). A form of trust that allows a taxpayer whose surviving spouse is a non-citizen to claim the marital deduction. To qualify, 1. at least one U.S. citizen must be a trustee, 2. the trust can’t allow distributions of principal unless the U.S. trustee has the right to withhold estate tax on the distribution, and 3. sufficient trust assets must be held in the U.S., among other things.

QTIP Trust. A trust that can hold qualified terminable interest property, property the settlor sets aside for the surviving spouse and which qualifies for the marital deduction.

Domestic Asset Protection Trust (DAPT). An irrevocable trust that allows a settlor to set aside assets in trust and protect those assets from creditor claims. The DAPT is established under the laws of states with favorable asset protection laws—Nevada, Alaska, South Dakota, Wyoming, and Utah, for example.

More than Just the Tetons: A New Chancery Court Makes Wyoming Well Worth Discovering

Geyser Basin, Yellowstone Park, Wyoming (like the title says, more than the Tetons)

But for the missing photo of the magnificent Tetons, volume 11, number 1 of the 2011 Wyoming Law Review might be mistaken for a sales piece published by the Wyoming Business Council—the state’s economic development agency. Two articles in the journal tout Wyoming’s business and trust friendly laws. “The Undiscovered Country: Wyoming’s Emergence as a Leading Trust Situs Jurisdiction,”[1] Christopher Reimer argues that the state’s laws on directed trusts, trust protectors, self-settled trusts, and private trust companies, among other tools justify that claim. A few pages earlier, Dale Cottam and four others make similar claims with regard to limited liability companies. Not only did the new 2010 Limited Liability Company Act (“LLC Act”) replace Wyoming’s original—and first-in-the-nation—act, they point out, it included some “home cooking” that makes the Cowboy State the place to be . . . organized.[2] Come for the Tetons; stay for the business and trust friendly laws and the lack of a state income tax.

Seven years later, Amy Staehr revisited that theme in her piece “The Discovered Country: Wyoming’s Primacy as a Trust Situs Jurisdiction.”[3] In it, she updates what Wyoming’s part-time legislature had been up to in the intervening years. Among other things, new legislation provided more privacy protection to trusts and better asset protection with a new Wyoming Qualified Spendthrift Trust. Likewise, limited liability companies could now have a more flexible management structure. The message was again clear: Yes, the vistas are expansive and the sunsets beautiful, but have you looked at our business and trust friendly laws lately? “I think it’s exciting what Wyoming’s trying to do with its laws,” says Michael Greear, a state representative and member of the state’s Chancery Court Committee. “Anything we do to get more business and still keep the population at 500,000 is all good.”

But there was a hitch: Wyoming’s court system. It had essentially two tiers: Nine District Courts of general jurisdiction and a Supreme Court, the state’s only appellate court. And only the Supreme Court reported its cases online. In 2019 it issued 151 opinions, just 3 of them involving trusts and businesses, down from the 159 it heard in 2018, again, only 3 of them dealing with trusts and businesses. In short, Wyoming had great new business and trust laws, but too few court opinions published online to help interested observers discern how Wyoming courts might interpret those laws, an essential ingredient to a stable climate for business entities and trusts.

It didn’t help that recently—and unfortunately—the Court’s 2014 GreenHunter Energy case put the fear of creditors into the hearts of businessmen and women. The case’s result was certainly just, but the rule of the case appeared to ignore new veil piercing provisions in the LLC Act. It’s worth noting that the Wyoming legislature did its part to provide stability. Almost immediately after the Court issued its opinion, the legislature amended the LLC Act to essentially reset the law clearly and unequivocally to pre-GreenHunter days.[4]

In its 2019 session, the Wyoming Legislature acted again, this time to increase the size and density of the paper trail created by Wyoming courts in hopes of becoming the Delaware of the West. Delaware has a Chancery court, its docket devoted to trusts and business; so should Wyoming. And voila! After a concerted effort by some forward-thinking legislators and a stroke of the Governor’s pen, Wyoming has a Chancery Court dedicated to hearing nothing but trust and business cases.  Senate File 0104, the bill that started it all, now sits ensconced as Chapter 13 of Title 5 of the Wyoming Code. Where the court will sit and when it will open is another matter. “Two things will dictate when the factory is up and running: the adoption of court rules and making sure we’ve got the IT—the caseload management system and e-filing—in place,” says Senate President Drew Perkins, sponsor of the bill.

The Act mandates $1,500,000.00 of initial funding for the court and contains a broad outline for how the court should operate, among other things. In April 2019, the Supreme Court issued an order establishing the Chancery Court Committee to fill in the details of that outline. Justice Kate Fox was appointed its chairperson. “She gets two thumbs up,” Greear says. “She put together a great committee.”

The Committee did its job, particularly in developing court rules. Finally on January 7, 2020, an email went out to the Wyoming Bar, asking for comments on the proposed rules. The comment period ends on May 15, 2020, and final rules will go into effect six months later on November 15, 2020. That date makes sense because there is still a lot to work through, according to Justice Fox. That includes the rules, but also who the judges will be and where their court will sit. “The plan is to appoint judges with expertise in the statutory areas, much like in Delaware. Wyoming Chancery Court judges must be experienced or knowledgeable in the subject matter jurisdiction of the court,” she explains.

The court’s jurisdiction includes everything from breach of contract to fraud and misrepresentation, from statutory violations of laws governing asset sales and protecting trade secrets to transactions involving the Uniform Commercial Code and the Uniform Trust Code. Disputes concerning employment agreements, insurance coverage, and dissolution of corporations, LLCs, and other entities can all be heard by the Chancery Court. The statute says the Court “shall employ “alternative nonjury trials, dispute resolution methods and limited motion practice and shall have broad authority to shape and expedite discovery,” [5] a good idea, given that the new law requires “effective and expeditious resolution of disputes,” a term of art that means a majority of the actions filed in the court must be resolved with 150 days of filing. “The sponsors of the bill view the Chancery Court as kind of a business draw,” Fox says. “A speedier court with more particular [business and trust] expertise should be attractive to businesses who are considering incorporating in or coming to Wyoming.”

As for where the court will sit, “it will likely be in Casper or Cheyenne, just because they are bigger,” she continues. “But it’s also possible, depending on the case and where the parties are, that the judges could be mobile and hear cases in places like Jackson.”

The smart money is on Casper. It’s centrally located, new money was recently appropriated for a new state office building there, and it has good air service. “Last week I had meetings in New York with our investment bankers,” says Greear, who lives in Worland, Wyoming, where he’s the CEO of Wyoming Sugar Company. “I flew out of Casper, had a nice dinner in New York, met with my bankers and was home the next day. United and Delta service Casper really well.”

Perkins, who lives and works in Casper, hopes there will eventually be one or more courts outside of his hometown, maybe one in Cody or Sheridan and one in Cheyenne, for example. “That’s my vision for it, anyway. The idea is not about having the court in Casper; it’s about having the court available for quick resolution.”

As they say, time will tell. The job now is to get the first court up and running with a judge knowledgeable about business and trust law expeditiously issuing opinions. The hope is that, when published, those opinions will consistently and clearly demonstrate how things are done in the Wyoming. And done right, it’s all good—for the Equality State and the businesses that locate there.

[UPDATE] After this story went to press at the ABA, the Wyoming legislature failed to fund a variety of construction projects during the recent legislative session, including the construction of the Chancery Court in Casper. With the COVID-19 pandemic and the drop in oil prices, even Drew Perkins, a sponsor of the Chancery Court, thought it good to wait and watch.


[1] Pg. 165 (2011).

[2] “The 2010 Wyoming Limited Liability Company Act: A Uniform Recipe with Wyoming ‘Home Cooking,” pg. 49 (2011).

[3] Wyoming Law Review, Volume 18, Number 2, pg. 283.

[4] See “Wyoming Supreme Court Upholds Decision to Pierce the Veil of Single-Member LLC,” Rutledge, Thomas; November 13, 2014, https://kentuckybusinessentitylaw.blogspot.com/2014/11/wyoming-supreme-court-upholds-decision.html (accessed 2/26/2020); and “Wyoming Cleans up Veil Piercing in LLC Act,” Fershee, Joshua; March 29, 2016, https://lawprofessors.typepad.com/business_law/2016/03/wyoming-cleans-up-veil-piercing-in-llc-act.html (accessed 2/26/2020).

[5] Wyo. Stat. § 5-13-111

I wrote the piece above for the April, 2020 issue of The LLC & Partnership Reporter, a publication of the ABA.

Ashton Kutcher Has a Good Idea?

He has, if you think leaving nothing to your children when you die is a good idea.

“My kids are living a really privileged life, and they don’t even know it,” Ashton said during an appearance on Dax Shepard’s podcast, Armchair Expert. “And they’ll never know it, because this is the only one that they’ll know.”
“I’m not setting up a trust for them,” he continued. “We’ll end up giving our money away to charity and to various things.”

We’ll see. It’s not like he and his wife Mila Kunis are cutting off their children entirely.

Rather than just giving his kids money, Ashton Kutcher, who is also an investor, said he’s planning to make his children work for a living. He said he’d be a potential backer for their future businesses, but they’d have to pitch him just like everyone else does.


“If my kids want to start a business, and they have a good business plan, I’ll invest in it. But they’re not getting trusts,” the 40-year-old actor confirmed.

The proof will be in whether the two stars actually treat their kids’s pitches “just like everyone else.” Either way, Ashton’s idea is not a bad idea; it’s simply one among many ideas about how best to treat our children when we die and if we’re rich enough that what we do with our money matters to our children.

Seminar this Wednesday: Estate Planning for Blended Families

I’ll be presenting a seminar at the Orem Public Library on Estate Planning for Blended Families.
When                 Wed, April 5, 7pm – 8pm
Where                Orem Public Library, Media Auditorium (map)
Description       Couples with blended families face special challenges when it comes to making sure that stocks, bonds, real estate, and other property and family heirlooms go to the right persons at the right time when a spouse dies. This seminar will address such issues and discuss ways to solve them, using wills, trusts, and other estate planning documents.
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Hope to see you there.

So You’re the Trustee of Your Parents’ Trust . . .

If you’re already or soon to be a trustee of a family trust you might want to read my new piece on Medium: Trustee Much? 5 Ways to Avoid Sibling on Sibling Mayhem.

What Do You Do When You Can’t Find the Decedent’s Will?

If the title of this post describes you, you might want to read my post at Medium.com.

Celebrity Estate Planning Mistakes that Keep on Giving–to the Wrong Person

My dad was a life insurance salesman. I remember rummaging around in his sales materials and finding a service he subscribed to that reported on the estate tax problems of the rich and famous and even the not-so-famous. He used the  reports to make the point that his prospective clients needed to do some estate and insurance planning, so their families wouldn’t face similar fates.

I was reminded of this when I stumbled upon this 2013 article from Forbes, “Monumental Estate Planning Blunders of 5 Celebrities.” The piece details the woes of rocker Jim Morrison, Rat Pack icon Sammy Davis Junior, hotelier Leona Helmsley,  QB Steve McNair, and, my favorite sad story, actress Marilyn Monroe:

Some celebrities have erred by not going far enough with their estate planning. For instance, famous actress and model Marilyn Monroe left most of her estate to her acting coach, Lee Strasberg.

“She left him three-fourths of her estate, and when he died, his interest in Marilyn’s estate went to his third wife, who did not even know Marilyn. Marilyn’s mistake was not putting her assets in trusts,” says Nass.

Strasberg’s third wife, Anna, eventually hired a company to license Monroe’s products, which involved hundreds of companies including Mercedes-Benz and Coca-Cola. In 1999, many of Monroe’s belongings were auctioned off, including the gown she wore to President John F. Kennedy’s birthday party, for more than $1 million. Strasberg ended up selling the remainder of the Monroe estate to another branding company for an estimated $20 million to $30 million, according to a remembrance of the star by NPR in 2012.

It’s unlikely Monroe would have wanted someone she didn’t know to profit so handsomely from her belongings. A trust would have provided for Strasberg while he was alive and then after his death could have directed the remainder of her estate to someone of her choosing.

Yes, I imagine was very unlikely that she wantedStrasberg’s 3rd wife to laugh all the way to and from the bank. But poor planning allowed that to happen.

Like Sand through the Hourglass

At least one soap opera had a happy ending.

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