TN 12 (01-15)

PS 01805.022 Maine

A. PS 15-036 Whether a “Lease for Life” Qualifies as a Life Estate Under Maine Common Law

DATE: December 2, 2014

1. SYLLABUS

This RCC opinion discusses whether a lease agreement with the duration of the lifetime of the tenant created a life estate under Maine common law. Under Maine common law, a life estate is a “freehold” estate, which may be created or transferred by will or by deed only. Therefore, a “lease for life” agreement does not constitute a life estate under Maine common law.

2. OPINION

Question Presented

Pursuant to POMS SI 01140.110B.3, you asked whether a lease agreement with the stated duration for the “lifetime” of the tenant created a life estate under Maine common law.

Short Answer

The lease agreement does not create a life estate under Maine common law.

Background

E~ is a Supplemental Security Income (SSI) recipient, as is her husband, F~. F~ was the sole owner in fee simple of real property located at ~~~~, ~, Maine. By warranty deed executed April **, 2014, F~ conveyed his fee simple ownership to L~ and C~ as joint tenants with rights of survivorship.

On May **, 2014, a “Lease Agreement” was executed between L~ and C~ as “Landlord” and E~ as “Tenant.” The Lease Agreement provides that the Landlord leases to the Tenant the premises conveyed to Landlord by F~ “for the lifetime of the Tenant.” The Lease Agreement further provides that the Tenant shall pay, as monthly rent, one-twelfth of the annual real estate tax for the leased premises and another parcel of land. The responsibility for paying all taxes, assessments, and other government charges on the lease premises belongs, however, to the Landlord. The Tenant is responsible for maintaining all appropriate property and liability insurance. Additional provisions of the Lease Agreement require the Tenant to keep the leased premises in good condition and repair, and to make no alternations, additions, or improvements to the premises without the prior consent of the Landlord. The Lease Agreement stipulates that the Landlord shall have reasonable access to the leased premises for the purpose of examining the same and making any necessary repairs or reconstruction. Finally, the Lease Agreement prohibits the Tenant from subletting any part of the premises or assigning the lease without first obtaining the Landlord’s written consent.

E~ currently resides on the leased premises.

Analysis

Under Maine common law, a life estate is a “freehold” estate, Babb v. Perley, 1 Me. 6, 10 (Me. 1820), which may be created or transferred by will or by deed. See Pratt v. Leadbetter, 38 Me. 9, 14 (Me. 1854) (recognizing the creation of a life estate through a will); Loud v. Poland, 126 Me. 45 (Me. 1927) (recognizing establishment of a life estate through a deed); C~ and G~, Maine Real Estate Law & Practice § 4.4 (2d ed. 2007) (explaining that a life estate “may be created by will or by a deed executed in the same manner as a deed of a fee.”).

In Calkins v. Pierce, the Supreme Judicial Court of Maine (SJC) addressed the question of whether a written agreement purporting to establish a lease of land for the life of the tenant created a life estate. See 92 A. 529 (Me. 1914). The SJC answered in the negative, holding that “a tenancy which operates as an estate for life, being a freehold, can only be passed by deed; that is, by writing under seal.” 1 Id. at 529 (internal quotations omitted). The Court also held, however, that the lease was a valid contract that entitled the tenant to possession of the property until her death, provided she performed her part of the contract. Id. at 529-30. In so holding, the Court noted the distinction between having legal title to a life estate and having the right of entry and possession on the land. Id. (quoting Hurd v. Chase, 62 A. 660, 660 (Me. 1905) (“It may be conceded that the plaintiff has the legal title to the life estate in the land… one may retain his title to real estate while debarring himself from right of entry and possession.”)).

Effective January 1, 1968, the Maine Legislature enacted the Short Form Deeds Act. The statute eliminated the common law requirement that deeds be sealed. See Me. Rev. Stat. tit. 33, § 774 (1967). Although a seal is no longer required of a valid deed, we have found no subsequent case law recognizing a lease agreement for the life of the tenant as establishing a life estate. In the absence of such case law, and in light of the terms of the Lease Agreement, we do not believe that the agreement created a life estate.

It is well established in Maine common law that the holder of a life estate may convey her interest in the property (i.e., her life estate) to another party. See, e.g., Midcoast Cohousing Land Acquisition, LLC v. Riverhouse Trust, 946 A.2d 421, 422-23 (Me. 2008); Hooper v. Leavitt, 73-74, 82 A. 547, 549 (1912); Wilson v. Curtis, 38 A. 365, 367 (1897). By contrast, the Lease Agreement specifically prohibits E~ from subletting the leased premises or assigning the lease without the prior written consent of the Landlord. This restraint on alienation is inconsistent with the basic principle, recognized by Maine common law, that the owner of a life estate has the right to transfer the life estate. It also highlights the distinction, recognized by the SJC in Hurd and Calkins, between owning legal title to a life estate—a freehold—and merely having the right of entry and possession of the property, characteristic of a leasehold.

Additionally, under Maine common law, the owner of a life estate is responsible for paying all taxes assessed on upon the estate during her tenancy. See Garland v. Garland, 73 Me. 97, 98-99 (Me. 1881); Varney v. Stevens, 22 Me. 331, 334 (Me. 1843). Here, although E~’s monthly rent included the prorated annual real estate tax of the property, the Lease Agreement specifically provides that the “Landlord shall pay all taxes, assessments or other governmental charges assessed or levied upon the Leased Premises during the term of this Lease.” (emphasis added). The retention by the landlord of the duty to pay taxes is another indication that the Lease Agreement established a leasehold, not the freehold life estate recognized by Maine common law.

Conclusion

The Lease Agreement does not establish a life estate under Maine common law.

Christopher Michaels

Acting Regional Chief Counsel

By: ____________________

Assistant Regional Counsel

B. PS 09-078 Request to Review Inheritance Laws for the Region One States

DATE: March 27, 2009

1. SYLLABUS

The opinion below is a survey of state laws regarding inheritances in the six states that compose the Boston Region. This opinion addresses several specific issues including when an inheritance is considered received for income counting purposes and how co-ownership of an inheritance affects resource counting. The opinion also addresses how the received date is affected when a will is contested or there is a lien or claim against the estate. Finally, the opinion addresses state law in each of the six states concerning nonprobated estates. While the opinion provides general guidance on these issues, complex inheritance cases will require additional guidance on a case-by-case basis, as state law treatment of inheritances is highly fact-specific.

2. OPINION

This memorandum is in response to your request for a survey of state laws concerning inheritances for Region One states for purposes of assisting your office in drafting a regional POMS supplement. While we have provided general answers to the questions you presented, we caution that state law treatment of inheritances is highly fact-specific. Therefore, for matters involving a will contest or a heavily indebted estate, your office will likely require additional guidance from the General Counsel's Office. Further, we note that any POMS supplement relative to the issues of income versus resource should include a clear distinction between when property is considered income and when it is considered a resource (i.e. the interest in inherited property would be considered received for purposes of income as of the date of death, and a resource in subsequent months). In addition, Social Security Ruling 97-1p specifies that "[t]he earliest point at which a cash inheritance can be used to meet food, clothing, or shelter needs is the point at which State inheritance laws permit the heir to spend it." Social Security Ruling 97-1p does not appear to contemplate the reality that, in each of the Region One states, an individual may convert into cash an interest in the ultimate distribution of a cash inheritance. However, the Ruling appears to recognize that an individual's "interest" in "inherited property other than cash" may be "convert[ed] . . . to cash." Thus, the explicit language of SSR 97-1p seemingly mandates that SSA treat cash differently from all other types of property. Below are our summary answers to your questions, as well as our analysis for each of the Region One states.

Massachusetts

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest, whether it is an interest in the actual property or a beneficial interest in the estate, as of the decedent's death. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of a beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

When real property is transferred by will, title does not pass until the will is probated, though the transfer of title relates back to the date of death. See Daley v. Daley, 14 N.E. 2d 113, 116 (Mass. 1938) ("Title to real estate devised by will passes directly, on probate of the will, to the devisee and relates back to the instant of the death of the testator."); New England Merchants Nat'l Bank of Boston v. Hoss, 249 N.E. 2d 635, 637 (Mass. 1969) ("A will has no legal effect, and no property passes under it, until it is probated."); Union Trust Co. of Springfield v. Nelen, 186 N.E. 66, 68 (Mass. 1933) ("It is settled law that as soon as a will of real or personal property is admitted and approved the probate relates back to the death of the testator, and affirms and fixes the title of the devise or bequest thereto from that date."). When an individual dies intestate (without a will) title to real property passes at death. See Russo v. Inzirillo, 277 N.E. 2d 302, 303 (Mass. 1971) ("The rule in Massachusetts in that title to realty of a deceased intestate vests immediately in the heirs and no distribution is required.").

Real property is transferred subject to any rights of a surviving spouse and children (see Mass. Gen. Laws c. 188, § 4; Mass. Gen. Laws c. 191, §15; Mass. Gen. Laws ch. 196, § 1) and to the decedent's debts and expenses of estate administration (see Mass. Gen. Laws ch. 202, § 1). Therefore, clear title to the real property is not actually transferred until the estate is settled. See 1 Belknap, Newhall's Settlement of Estates and Fiduciary Law in Massachusetts § 1:6 (West 5th ed. 1994 & Supp. 2007) (heirs or devisees cannot obtain good and clear, marketable title "until an estate has been officially administered and the creditor's claims are either satisfied or barred"); Sean M. Dunphy, Probate Law and Practice (21 Massachusetts Practice Series) § 17.3 (West 2d. ed. 1997) ( "Title to property becomes complete in heirs, devisees and legatees after full administration of an estate." ). An estate is not considered to be "fully administered" until the fiduciary's final account has been allowed by the probate court. See Union Mkt. Nat'l Bank v. Gardiner, 177 N.E. 682, 684-85 (Mass. 1931) (executor cannot be considered as having settled his executor's account until it is allowed by the probate court). Thus, regardless of whether real property is transferred by will or under the intestacy statute, where the transfer is subject to abatement or divestment, the value of an interest in real property before completion of estate administration would be difficult to determine.

When an individual transfers personal property by will or dies intestate, the personal property vests in the executor or administrator of the decedent's estate. See Kobrosky v. Crystal, 125 N.E. 2d 385, 391 (Mass. 1955) ("Title to personal assets vests in the administrator upon his appointment and relates back to the death of the former owner."); Boston Safe Deposit & Trust Co. v. N. Attleboro Chapter of American Red Cross, 111 N.E. 2d 447, 449 (Mass. 1953) (title to personal property passed to executor upon appointment); S.S. Pierce & Co. v. Fiske, 129 N.E. 609 (Mass. 1921) ("[t]he title to the personal property of a deceased person, from the time of his death vests in his executor or administrator, and no one else can maintain an action for it."). Upon allowance of the will or distribution of the intestate estate, title to personal property passes to the legatee or heir and relates back to the date of death. See Stuck v. Schumm, 194 N.E. 895, 898 (Mass. 1935) (intestate decedent's heirs "had no title to the personal property left by her until her estate was settled"); Busiere v. Reilly, 75 N.E. 958, 959 (Mass. 1905) ("[u]pon the allowance of the will her title related back to the death of the testatrix").

Until administration of the estate is completed, all that vests in the legatees or heirs is "the right to share in the personal property, subject to the payment of debts and charges of administration…." Harrison v. Stevens, 26 N.E. 2d 351, 353 (Mass. 1940). However, this qualified interest in the decedent's estate is assignable. Sec. Bank of N.Y. v. Callahan, 107 N.E. 385, 386 (Mass. 1915) (legatee transferred a qualified interest by assigning his interest in decedent's estate as collateral security for a debt). Thus, "[s]ubject to the claims of creditors and to administration expenses, such a right may effectively be disposed of before settlement of the estate by assignment." Harrison, 26 N.E. 2d at 353. Nonetheless, title does not pass free and clear until a final accounting has been filed and allowed by the probate court. See S.S. Pierce & Co., 129 N.E. at 610 (where final accounting of estate had not been filed in probate court, title to personal property did not vest in legatee even though the property had been in her possession for eighteen years). The right to personal property may also be subject to the rights of the surviving spouse or children. See Mass. Gen. Laws ch. 191, §15; Mass. Gen. Laws ch. 196, §§ 1-2). Therefore, prior to settlement of the estate, the value of an interest in personal property would be difficult to determine.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the probate court. Therefore, during the course of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

A will contest delays settlement of the estate, thus leaving the value of any interest in the estate uncertain. See Welch v. Adams, 25 N.E. 34, 38 (Mass. 1890) ("[w]here the settlement of an estate is delayed by legal controversy, and where funds are accumulated under such circumstances that they cannot be permanently invested, loss may be occasioned to the residuum of the estate."). Will contests may be settled before a will is allowed by way of a compromise as long as the parties are capable of contracting in their own interests or represented interests not in being. Mass. Gen. Laws ch. 204, § 15. The result of a will contest may be "quite contrary" to the terms of the will. Budin v. Levy, 180 N.E. 2d 74, 77 (Mass. 1962); see Boston Safe Deposit & Trust Co. v. Becker, 186 N.E. 2d 703, (Mass. 1962) (original will was "greatly altered" by the settlement compromise). Under such circumstances, court ratification of a compromise is not necessary. Manganiello v. Caggiano, 156 N.E. 2d 41, 43 (Mass. 1959). Rights established under a will compromise are wholly contractual rather than testamentary. Budin, 180 N.E. 2d at 77. The parties could obtain court ratification of a will compromise, and such ratification would render every clause of the compromise a judgment. Newburyport Soc. for Relief of Aged Women v. President & Fellows of Harvard Coll., 38 N.E.2d 669, 671 (Mass. 1941). Once a compromise is reached, the estate is administered in accordance with the compromise rather than the will. Brandeis v. Atkins, 90 N.E. 861 (Mass. 1910). Therefore, when a will is contested, the value of an interest in the estate would be difficult to determine until the will is compromised and the estate is settled.

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

As set forth above, transfers of real or personal property are subject to the claims of creditors. Therefore, the property could be subject to abatement or even complete divestment. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

As set forth above, good, clear marketable title is not transferred until administration of the estate is complete. Therefore, prior to that time, the value of an interest in property would be difficult to determine because estate debts have priority over transfers made under a will or the intestacy statute. Mass. Gen. Laws ch. 198, § 1; see also Mass. Gen. Laws ch. 202, § 1 (real estate may be sold to pay estate debts). Where the decedent leaves a will, absent a specific clause in the will, assets are used in the following order to pay debts, expenses and taxes:

o personal property (tangible or intangible) not specifically bequeathed; see Union Trust Co. of Springfield v. Nelen; 186 N.E. 66 (Mass. 1933);

o real property not specifically devised that would pass under the residuary clause of the will; Mass. Gen. Laws ch. 202, § 4; and

o real and personal property specifically bequeathed or devised, proportionally; Mass. Gen. Laws ch. 191, § 26.

Therefore, the potential for abatement or divestment of property would depend on whether the property is real or personal; and whether it was specifically bequeathed or devised or is simply a part of the residue of the estate.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership were not shared.

Analysis:

Co-owners may not have equal interests in property, and the nature of a co-owner's interest will depend on how the property is titled. See POMS SI 01110.510 (explaining the various types of property ownership). A beneficiary could petition for partition of real property under Mass. Gen. Laws ch. 206, § 13, or Mass. Gen. Laws ch. 241, § 1. A beneficiary may petition for partition even while settlement of the estate is still pending. O'Brien v. Mahoney, 60 N.E. 493, 494-95 (Mass. 1901).

5. What is the state law regarding nonprobated estates.

Probate of a will is necessary in order to establish transfer of title. Mass. Gen. Laws ch. 191, § 7; Shumway v. Hollbrook, 18 Mass. 114, 116-17 (Mass. 1822). A will has no effect, and no property transfers under it, until it is probated. New England Merch. Nat'l Bank of Boston v. Hoss, 249 N.E. 2d 635, 637 (Mass. 1969); see S.S. Pierce & Co., 129 N.E. at 610 (where final accounting of estate had not been filed in probate court, title to personal property did not vest in legatee even though the property had been in her possession for eighteen years).

Similarly, complete administration of an intestate estate is necessary in order to transfer good, clear title to intestate property. See Stuck v. Schumm, 194 N.E. 895, 898 (Mass. 1935) (intestate decedent's heirs "had no title to the personal property left by her until her estate was settled"); 1 Belknap, Newhall's Settlement of Estates and Fiduciary Law in Massachusetts § 1:6 (West 5th ed. 1994 & Supp. 2007) (heirs or devisees cannot obtain good and clear, marketable title "until an estate has been officially administered and the creditor's claims are either satisfied or barred"); Dunphy, Probate Law and Practice (21 Massachusetts Practice Series) § 17.3 (West 2d. ed. 1997) ("Title to property becomes complete in heirs, devisees and legatees after full administration of an estate.").

Massachusetts law provides for certain nonprobate transfers, including the nontestamentary transfer of ownership of certain securities, Mass. Gen. Laws ch. 201E, §§ 201, 302 and joint ownership of property with a right of survivorship. See, e.g., Mass. Gen. Laws ch. 167D, § 5 (bank accounts).

Massachusetts Uniform Probate Code:

On January 15, 2009, the Massachusetts legislature adopted the Uniform Probate Code, 2008 Mass. Acts Ch. 521, codified at Mass. Gen. Laws ch. 190-B, §§ 1-101 to 44 . Some of the Code's provisions are effective as of July 2009, while others do not take effect until July of 2011. The following provisions of the Massachusetts Uniform Probate Code are effective July 1, 2011, and address the questions raised in your Memorandum as follows:

1. When is an inheritance considered received for purposes of being counted as income?

Real and personal property devolves at death, but is subject to administration. Mass. Gen. Laws ch. 190-B, § 3-101. Therefore, just as under current Massachusetts law, the value of any such transfer prior to the completion of estate administration would be difficult to assess, as the property may be subject to abatement or divestment.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

If a will or intestate distribution is contested, property will not be distributed until the formal probate proceedings are completed. See Mass. Gen. Laws ch. 190-B, § 3-401 ("[a] previously appointed personal representative, after receipt of notice of the commencement of a formal probate proceeding, shall refrain from exercising the power to make any further distribution of the estate during the pendency of the formal proceeding."). Therefore, the value of any potential transfer would be difficult to assess during the course of a will contest.

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

A transfer under a will or under the laws of descent and distribution may be subject to allowances and exempt property, the rights of creditors, the elective share of a surviving spouse, and administration expenses. Mass. Gen. Laws ch. 190-B, § 3-101. Therefore, the value of any such transfer prior to the completion of estate administration would be difficult to assess, as it may be subject to abatement or divestment.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

As under current law, any transfer of property would be subject to the rights of co-owners. The representative of the estate has the power to petition the court for partition of property, "except as restricted or otherwise provided by the will, deed or other instrument creating a trust or by an order in a formal proceeding." Mass. Gen. Laws ch. 190-B, § 7-401(7). Also, the Massachusetts Uniform Probate Code does not appear to change current law providing that a beneficiary could maintain a petition for partition of real property under Mass. Gen. Laws ch. 206, § 13, or Mass. Gen. Laws ch. 241, § 1.

5. What is the state law regarding nonprobated estates.

Except a provided by Mass. Gen. Laws ch. 190-B, § 3-1201 pertaining to small estates, a will must be declared valid by an order of the probate court in order to be effective to prove the transfer of any property. Mass. Gen. Laws ch. 190-B, § 3-102. However, Section 3-102 further provides that a will which had not been probated may be admitted as evidence of a devise (transfer of decedent's realty) if: (1) no court proceeding concerning the succession or administration of the estate has occurred, and (2) either the devisee or the devisee's successors and assigns possessed the property devised in accordance with the provisions of the will, or the property devised was not possessed or claimed by anyone by virtue of the decedent's title during the time period for testacy proceedings. A duly appointed personal representative has exclusive authority to settle and distribute the property of a decedent's estate, either by the terms of a will or under the intestacy statute. Mass. Gen. Laws c. 190-B, § 3-701. However, Mass. Gen. Laws c. 190-B, § 3-901 provides:

In the absence of administration, the heirs and devisees are entitled to the estate in accordance with the terms of a probated will or the laws of intestate succession. Devisees may establish title by the probated will to devised property. Persons entitled to property by family allowance, exemption or intestacy may establish title thereto by proof of the decedent's ownership, his death, and their relationship to the decedent. Successors take subject to all charges incident to administration, including the claims of creditors and allowances of surviving spouse and dependent children, and subject to the rights of others resulting from abatement, retainer, advancement, and ademption.

The Massachusetts Uniform Probate Code provides for certain nonprobate transfers, including the nontestamentary transfer of ownership of certain securities, Mass. Gen. Laws c. 190B, § 6-307 and payment on death to a specified individual. Mass. Gen. Laws c. 190B, § 6-101.

Rhode Island

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest, whether it is an interest in the actual property or a beneficial interest in the estate, as of the decedent's death. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of an beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

Title to real property vests at death. See DiCristofaro v. Beaudry, 320 A.2d 597, 601 (R.I. 1974) ("Title to real property vests immediately upon a testator's death in the devisees"); Votolato v. McCaull, 96 A.2d 329, 331 (R.I. 1953) (a decedent's real estate vests immediately upon his death in his heir or devisee). However, in the case of testate property, vesting is subject to the will being approved by the probate court and recorded. R. I. Gen. Laws § 33-6-31. Further, real property of a testate or intestate estate is subject to the debts of the estate. Votolato, 96 A.2d at 331. An interest in real property is also subject to the rights of a surviving spouse under R. I. Gen. Laws §§ 33-10-4, 33-25-2 through 33-25-6. While an estate is being administered, real property remains subject to debts of the estate for two years and six months after publication of the notice of the qualification of the administrator or executor. R. I. Gen. Laws § 33-13-3. Therefore, clear marketable title is not transferred until two years and six months after publication of such notice, or upon the completion of estate administration, whichever occurs first. See Richard N. Morneau, The Law of Real Estate Titles, National Business Institute, Mastering Real Estate Titles and Title Insurance in Rhode Island (Apr. 14, 2004) (available on Westlaw at 12417 NBI-CLE 1, at *81-82). Estate administration is completed upon the filing of a final accounting or an affidavit of completed administration. R. I. Gen. Laws § 33-14-1.

With respect to personal property, equitable title vests in the legatee or heir at the time of death, but legal title vests in the administrator or executor upon appointment. Wick's Estate v. Stein, 266 A.2d 911, 914 (R.I. 1970). Once a will is proven, title to real or personal property relates back to the date of death. Coggeshall v. Home for Friendless Children, 31 A. 694 (R.I. 1894). Similarly, while personal property is not distributed until an intestate estate is settled, title to the property relates back to the date of death. Wilder v. Aldrich, 2 R.I. 518, 1853 WL 21, at *2 (R.I. 1853). There can be no exact determination as to the value of a possible gift or inheritance of personal property until the estate is administered and the property is actually distributed. Wick's Estate, 266 A.2d at 916. Personal property is subject to abatement or even complete divestment to pay debts of the estate and expenses of administration. R. I. Gen. Laws § 33-6-26. An interest in personal property is also subject to the rights of any surviving spouse or children under R. I. Gen. Laws §§ 31-3.1-37 and 33-10-1 through 33-10-3.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title to real or personal property is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the court. Therefore, in the event of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

Property cannot be transferred during the course of a will contest. See Bowen v. Corrigan, 132 A.2d 94, 96 (R.I. 1957) (a legacy of an annuity vested at death but could not be paid until the will contest was adjudicated and the will was probated). The court may authorize an executor to compromise a will contest, and the court may authorize and confirm any such compromise. R. I. Gen. Laws §§ 33-7-12, 33-7-13. If found by the court to be just and reasonable, the compromise shall be confirmed by the court and shall be binding on the parties. R. I. Gen. Laws §§ 33-7-16. An award or compromise of a will contest becomes embodied in the will and give effect to the award or compromise as if it was an original part of the will. Barber v. Westcott, 43 A. 844 (R.I. 1899). The estate is administered and disposed of according to the will as modified by the compromise. R. I. Gen. Laws § 33-7-17. Therefore, when a will is contested, the value of an interest in the estate would be difficult to determine until the will is compromised and the estate is settled.

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution

3 How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

Transfers of real or personal property are subject to the claims of creditors. Therefore, the property could be subject to abatement or even complete divestment. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

As set forth above, all transfers of the decedent's property are subject to the debts of the estate and expenses of administration. R. I. Gen. Laws § 33-12-1; see Votolato, 96 A.2d at 331; Haslam v. Alvarez, 38 A.2d 158, 160 (R.I. 1944). Therefore, the value of an interest in property cannot be determined until administration of the estate is completed. Wick's Estate, 266 A.2d at 916. Unless the decedent's will expresses a different intent, estate debts and administration expenses are paid first out of personal assets covered by the residuary clause of the will, and if such assets are insufficient, then out of general gifts and then by specific gifts. R. I. Gen. Laws § 33-6-26; Haslam, 38 A.2d at 160. If personal property held by the estate is insufficient, then real estate may be sold to pay the debts of the estate and expenses of administration. R. I. Gen. Laws § 33-12-4. Debts and expenses are paid out of real property in the residual estate first, followed by real estate that has been specifically devised. R. I. Gen. Laws §§ 33-12-2 and 33-12-5. Therefore, the potential for abatement or divestment of property would depend on whether the property is real or personal; and whether it was specifically bequeathed or devised or is simply a part of the residue of the estate.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership were not shared.

Analysis:

Co-owners may not have equal interests in property, and the nature of a co-owner's interest will depend on how the property is titled. See POMS SI 01110.510 (explaining the various types of property ownership). A beneficiary could also maintain a petition for partition of real property. R. I. Gen. Laws §§ 34-15-1 through 34-15-3.

5. What are the state laws regarding nonprobated estates?

A will has no effect until it has been proven to the satisfaction of the probate court, and until such time, intestacy is presumed. McSorely v. McSorely, 186 A.2d 573, 575 (R.I. 1962). Where the decedent dies intestate, if no administrator is appointed, heirs take title to real estate free and clear of creditors and funeral expenses six years after the date of death. R. I. Gen. Laws § 33-13-4; Allsworth v. Scully, 250 A.2d 369, 372 (R.I. 1969).

Rhode Island law provides for certain nonprobate transfers, including the nontestamentary transfer of ownership of certain securities, R. I. Gen. Laws §§ 7-11.1-8, 7-11.1-10; and joint ownership of property with a right of survivorship. See, e.g., R. I. Gen. Laws §§ 19-9-14 (bank accounts), 19-5-5 (credit union accounts).

Connecticut

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest, whether it is an interest in the actual property or a beneficial interest in the estate, as of the decedent's death. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of a beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

Under Connecticut law, legal title to real estate passes to beneficiaries at once upon the death of the owner, whether testate (by will) or intestate (by statute). Greene v. King, 132 A. 411, 413 (Conn. 1926). While the title to real estate immediately descends to the heirs or devisees at death, such title is subject to the right of administration. Sati v. Rago, 441 A.2d 615, 618 (Conn. 1982) ("Title to real property passes upon death to the heirs of the owner subject to the right of administration."). Such title is also subject to the right of the administrator to have possession, care, and control during settlement of the estate unless the probate court should order otherwise. Conn. Gen. Stat. § 45a-321. Thus, real property is transferred subject to the debts and expenses of the estate, see Zanoni v. Lynch, 830 A.2d 304, 312 (Conn. App. 2003) (quoting 33 C.J.S. 780, Executors and Administrators § 135 (1998) ("[U]nder the conditions and for the purposes prescribed by statute, as where the personal property is insufficient to pay the debts of the decedent's estate, his real property and interests therein may be regarded as assets to which his personal representatives may resort.")) and Conn. Gen. Stat. §§ 45a-162-169, 428, and to the rights of a surviving spouse and children during settlement, see Sklar v. Sklar's Estate, 357 A.2d 900, 902-04 (Conn. 1975), and Conn. Gen. Stat. §§ 45a-320, 45a-321. Therefore, clear title to real property is not transferred until the estate is settled, leaving it difficult to determine the value of the real property before such time.

In Connecticut, legal title to personal property is not passed to the beneficiary until distribution of the estate (whether by will or by statute); rather, title rests in the executor or administrator. See Blodgett v. Bridgeport City Trust Co., 161 A. 83, 88 (Conn. 1932) (stating that, until distribution, legal title personal property rests in the executor or administrator with an equitable right in the property accruing to the beneficiary upon the death); Appeal of Hale, 38 A. 392, 394 (Conn. 1897) ("The vesting of the strictly legal title in personal property is postponed until possession is given through the process of distribution."); Roorbach v. Lord, 4 Conn. 347 (1822) ("The title to personal property, on the death of the owner, vested in his executor or administrator and the heirs entitled to distribution had no right of possession until after distribution made."). Although the beneficiary does not have legal title, the beneficiary retains a right of property which can pass by sale, bequest, or descent. Blodgett, 161 A. at 88 (recognizing that while the beneficiary cannot convey title to a third party prior to distribution, the beneficiary may convey the interest he or she has); Appeal of Hale, 38 A. at 394 ("beneficiary has a right of property which, pending distribution, could pass by sale, bequest, or descent").

Like real property, personal property is subject to the debts and expenses of the estate, see Zanoni, 830 A.2d at 312 (quoting 33 C.J.S. 780, Executors and Administrators § 135 (1998) ("[U]nder the conditions and for the purposes prescribed by statute, as where the personal property is insufficient to pay the debts of the decedent's estate, his real property and interests therein may be regarded as assets to which his personal representatives may resort.")), and the rights of the surviving spouse and children, see Sklar, 357 A.2d at 902-904 and Conn. Gen. Stat. §§ 45a-320, 45a-321. Therefore, clear title to personal property is not transferred until the estate is settled, leaving it difficult to determine the value of the personal property before such time.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the probate court. Therefore, during the course of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

Under Connecticut law, when there is a will contest, while the interest in the property from the estate remains with the beneficiary, the value of the interest in the estate depends on the resolution of the litigation. See Eslami v. Eslami, 591 A.2d 411, 414-15 (Conn. 1991). The court may also authorize a compromise and settlement of a will contest. Conn. Gen. Stat. § 45a-151; see Adams v. Links, 145 A.2d 753 (Conn. 1958); Warner v. Warner, 1 A.2d 911 (Conn. 1938). A will contest, therefore, leaves uncertain the value of any interest in the estate until the resolution or settlement of the contest and the estate.

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

As set forth above, transfers of real or personal property are subject to the claims of creditors. Therefore, the property could be subject to abatement or even complete divestment. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

Title is not transferred absolutely until administration of the estate is complete. Before this time, transfers of real or personal property are subject to the claims of creditors. See Conn. Gen. Stat. §§ 45a-162-169, 428; see Zanoni, 830 A.2d at 312 (quoting 33 C.J.S. 780, Executors and Administrators § 135 (1998) ("[U]nder the conditions and for the purposes prescribed by statute, as where the personal property is insufficient to pay the debts of the decedent's estate, his real property and interests therein may be regarded as assets to which his personal representatives may resort.")). As beneficiaries take subject to the rights of creditors, the value of any interest in real or personal property may depend on the satisfaction of outstanding debts against the estate. In certain circumstances, a creditor may even pursue claims against a beneficiary after distribution of the estate. See Conn. Gen. Stat. §§ 45a-368, 45a-369. Connecticut law also provides a statute of limitations for certain claims against the estate and beneficiaries. Conn. Gen. Stat. § 45a-375. Homestead rights and some allowances for the spouse and children during settlement of the estate take priority over the claims of creditors. See Sklar, 357 A.2d at 902-03. Given that clear title is not transferred until administration of the estate is complete, valuation prior to such time (or prior to the time claims are no longer valid due to the statute of limitations) would be difficult.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership was not shared.

Analysis:

Co-owners may not have equal interests in property, and the nature of a co-owner's interest will depend on how the property is titled. See POMS SI 01110.510 (explaining the various types of property ownership). The executor or administrator of the estate and the owner or owners of the major portion of the other interest could petition for partition of real property, and the court may, in its discretion, order the property sold. Conn. Gen. Stat. §§ 45a-326, 45a-327. Therefore, the value of the interest in the property will be reduced if there are co-owners.

5. What is the state law regarding nonprobated estates.

If an estate does not have assets which exceed $40,000 and does not include real estate other than survivorship property, Connecticut law allows for informal administration pursuant to Conn. Gen. Stat. § 45a-273 without formal probate proceedings. Otherwise, probate of a will is necessary in order to establish transfer of title. See Conn. Gen. Stat. § 45a-283 ("Every person having knowledge of his designation in a will as an executor of a testator's estate shall, within thirty days next after the death of the testator, apply for probate of the will to the court of probate of the district where the testator was domiciled at his death."); see also Conn. Gen. Stat. § 45a-286 ("Any court of probate shall, before proving or disapproving any last will and testament, or codicil thereto, hold a hearing thereon . . . ."). Therefore, unless a will has been probated, it should not be used to determine an individual's interest in an estate.

When there is no will offered for probate, then the property devolves pursuant to the laws of intestacy. See Conn. Gen. Stat. § 45a-437. Connecticut has adopted a statutory procedure for the administration of an intestate estate. See Conn. Gen. Stat. § 45a-403. Once an administrator is appointed, disposition of the intestate decedent's estate is governed by the laws of descent and distribution. See Conn. Gen. Stat. §§ 45a-425-452. Thus, intestate estates are still subject to administration in the probate court. See Conn. Gen. Stat. § 45a-403.

There are also non-testamentary transfers that do not require probate. These include joint bank accounts, Conn. Gen. Stat. § 36a-290, transfer-on-death registration of securities, Conn. Gen. Stat. § 45a-468b, revocable living trusts, an annuity, a policy of life, health or accident insurance, bank accounts with payment on death or outright grant, see Conn. Gen. Stat. § 45a-578, joint tenancy with right of survivorship, Conn. Gen. Stat. § 47-14a, transfer-on-death registration for vehicles, Conn. Gen. Stat. § 14-16, an insurance, annuity or endowment contract, thrift plan, pension plan, profit-sharing plan, death benefit plan, stock bonus plan, employee stock ownership plan, or retirement plan, see Conn. Gen. Stat. § 45a-347.

Connecticut has also adopted the Uniform Disposition of Community Property Rights at Death Act, Conn. Gen. Stat. §§ 45a-458-466, which provides for certain disposition of property in situations where personal or real property was acquired under the law of a community property jurisdiction (Connecticut is not a community property jurisdiction). Generally, upon death of a married person, one-half of the property to which these statutes apply, is the property of the surviving spouse and "not subject to testamentary disposition by the decedent or distribution under the laws of succession of this state." Conn. Gen. Stat. § 45a-461.

Vermont

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest, whether it is an interest in the actual property or a beneficial interest in the estate, as of the decedent's death. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of an beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

Under Vermont law, "the legal title of real estate owned by a person at the time of his death passes immediately to his heirs or devisees, subject to the lien of the administrator or executor thereon for payment of debts, expenses of administration and other expenses legally chargeable against the estate, in case the personal property in the estate is not sufficient for that purpose." In re Challahan's Estate, 52 A.2d 880, 883 (Vt. 1947); see also Lysak v. Grull, 812 A.2d 840, 843 (Vt. 2002) (recognizing that legal title to real property vests in heirs immediately at death, subject only to liens and legally enforceable debts). Real property is transferred subject to the debts and expenses of the estate, see In re Challahan's Estate, 52 A.2d at 883, and to the rights of a surviving spouse and children, see 14 Vt. Stat. Ann. §§ 401-408, 461-475, 551-559; 27 14 Vt. Stat. Ann. §§ 101, 105. Therefore, clear title to real property is not transferred until the estate is settled, leaving it difficult to determine the value of the real property before such time.

Title to personal property is held by an executor or administrator as a trustee for the heirs or legatees who hold equitable title. See In re Challahan's Estate, 52 A.2d at 883 ("[t]he legal title to his personal property goes to his administrator or executor, not in his own right but for a special purpose and as trustee for the heirs or legatees who hold equitable title."); In re Clark's Estate, 136 A. 389, 391 (Vt. 1927) ( "While under our law an executor or administrator holds the title to personal property, he holds it not in his own right, but as trustee for a particular purpose."). An heir or devisee takes a vested interest in an estate, including personal property, at the time of death. In re Challahan's Estate, 52 A.2d at 884. The rights and title of such distributees in the property do not originate at distribution but are derived from the decedent - by will or under the statute of distribution. Id. Whether or not such an individual will receive the property depends on whether there are sufficient assets in the estate to cover the legal charges against it. Thus, there is a "possibility coupled with an interest in the [decedent's] estate" at the time of death, and such interest is a property right which can be sold or assigned. Id. An interest in the personal property is subject to the debts and expenses of the estate, see Id. at 883, and to the rights of a surviving spouse and children, see 14 Vt. Stat. Ann. §§ 401-408, 461-475, 551-559; 27 Vt. Stat. Ann. §§ 101, 105. Ultimately, prior to settlement of the estate, the value of an interest in personal property would be difficult to determine.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title to real or personal property is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the court. Therefore, in the event of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

A will has no effect until it has been proved and allowed in the probate court, or by appeal in the superior court or supreme court. 14 Vt. Stat. Ann. § 101. A will contest would delay such approval. Will contests may be settled before a will is allowed by way of a settlement agreement. See In re Everett's Estate, 257 44 A.2d, 149, 150 (Vt. 1945). Therefore, if there is a will contest which delays approval of the will, the value of any interest in the estate will remain uncertain until the resolution or settlement of the contest and the estate.

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

Transfers of real or personal property are subject to the claims of creditors. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

Transfers of both real and personal property are subject to the claims of creditors. In re Challahan's Estate, 52 A.2d 880, 883 (Vt. 1947) ("the legal title of real estate owned by a person at the time of his death passes immediately to his heirs or devisees, subject to the lien of the administrator or executor thereon for payment of debts, expenses of administration and other expenses legally chargeable against the estate, in case the personal property in the estate is not sufficient for that purpose"); see also Fletcher v. Ferry, 917 A.2d 937, 940 (Vt. 2007) ("a distributee has no right of action to compel delivery to him of title or possession of such property until it has been determined that, after the payment of debts due from the estate and all other legal charges against it, there remains property for distribution."). Claims can also be compromised by the executor or administrator if in the best interest of the estate. 14 Vt. Stat. Ann. § 1213. There are also statutes of limitations for claims against estates. See 14 Vt. Stat. Ann. §§ 931, 1202-1203. Homestead rights and some allowances for the spouse and children take priority over the claims of creditors. See 14 Vt. Stat. Ann. §§ 404-406, 1207(a); see also John P. Cain, Spouse's Elective Shares, National Business Institute, The Probate Process from Start to Finish in Vermont (2004) (available on Westlaw at 15778 NBI-CLE 89, at *99). Given that title is not transferred absolutely until administration of the estate is complete, valuation prior to such time (or prior to the time claims are either compromised or no longer valid due to the statute of limitations) would be difficult.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership was not shared.

Analysis:

Co-owners may not have equal interests in property, and the nature of a co-owner's interest will depend on how the property is titled. See POMS SI 01110.510 (explaining the various types of property ownership). Under certain circumstances, a probate court may order partition of property. See 14 Vt. Stat. Ann. §§ 1729-1741 (procedures and circumstances under which partition is allowed).

5. What are the state laws regarding nonprobated estates?

If an estate does not have assets that exceed $10,000 and does not include real estate, Vermont law allows for informal administration pursuant to 14 Vt. Stat. Ann. §§ 1901-1903 without formal probate proceedings. Otherwise, a will has no effect until it has been proved and allowed in the probate court, or by appeal in the superior court or supreme court. 14 Vt. Stat. Ann. § 101.

When there is no will offered for probate, then the property devolves pursuant to the laws of intestacy. See 14 Vt. Stat. Ann. § 551. Under Vermont law, if a person dies intestate, administration will be granted pursuant to 14 Vt. Stat. Ann. § 903, and an executor shall administer the estate of the testator not disposed of by will. 14 Vt. Stat. Ann. § 930. Once an administrator is appointed, disposition of the intestate decedent's estate is governed by the laws of descent and distribution. See 14 Vt. Stat. Ann. § 551-559. Thus, intestate estates are still subject to administration in the probate court. Again, if an estate does not have assets which exceed $10,000 and does not include real estate, Vermont law allows for informal administration pursuant to 14 Vt. Stat. Ann. §§ 1901-1903.

There are also non-testamentary transfers that do not require probate. These include, but are not limited to, payable on death accounts, 8 Vt. Stat. Ann. § 14205, joint account with right of survivorship, 8 Vt. Stat. Ann. § 14204, revocable living trusts, and joint tenancies with right of survivorship.

Maine

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of a beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

In Maine, real and personal property "devolves" at the time of death to the decedent's beneficiaries, whether devisees (where a decedent leaves a will) and/or heirs (where a decedent dies intestate or leaves a will that does not fully dispose of his property). See Me. Rev. Stat. Ann. Tit. 18-A, § 3-101. However, beneficiaries take subject to any homestead allowance, any exempt property and family allowance, the rights of creditors, the elective share of the surviving spouse, and the expenses of administration. Id.

Until the termination of appointment, the personal representative of the estate has "the same power over the title to property of the estate that an absolute owner would have," albeit in trust for the benefit of creditors and beneficiaries or heirs. Id. § 3-711. Moreover, the personal representative is entitled to retain possession of property until distribution (though he or she has discretion to surrender possession earlier, if the property is unnecessary for administration). Id. § 3-709. Thus, the personal representative may dispose of assets as necessary for the benefit of the estate, id. § 3-715, subject to certain statutory guidelines regarding the order of abatement, see id. § 3-902. Practically speaking, this means that an individual may ultimately not receive property which a will purports to devise to him or her. Instead, the individual may receive the value of the property, part of the value of the property, or even nothing at all.

Maine has traditionally distinguished between a beneficiary's interests in real versus personal property. Under a long line of cases exemplified by Desmond v. Persina, 381 A.2d 633 (Me. 1978), title in real property vests in a beneficiary at the time that a will is "allowed" by a court, id. at 637. However, that title then "relates back" to the death of the testator. Id.; accord Champagne v. Fortin, 402 A.2d 471, 472 (Me. 1979); Bourgeois v. Sprague, 358 A.2d 521, 522 (Me. 1976); Butts v. Fitzgerald, 121 A.2d 364, 366 (Me. 1956). In contrast, with respect to personal property, a beneficiary merely enjoys a "vested right to the distribution of so much of the personal estate as remains after administration." Whiting v. Farnsworth, 81 A. 214, 215 (Me. 1911) (emphasis added); accord Strout v. Lord, 69 A. 694, 695-96 (Me. 1908); see also In re Morine's Estate, 363 A.2d 700, 703 (Me. 1976) (explaining that an executor has naked title to a decedent's personal property); Strout v. Burgess, 68 A.2d 241, 256-57 (Me. 1949) (holding that legal title in stock passed to personal representative upon death of decedent). Again, valuation may prove difficult or impossible.

These distinctions are preserved in Maine's tax code. Under Maine law, tax may be assessed on the real property of a decedent against the beneficiaries or the personal representative. See Me. Rev. Stat. Ann. Tit. 36, § 559. However, with respect to personal property, tax may only be assessed against the personal representative until he or she gives notice that the property has been distributed to the beneficiaries, at which point the tax becomes their responsibility. Id. § 605.

Maine law specifically authorizes prospective beneficiaries to disclaim a devise or inheritance. Me. Rev. Stat. Ann. Tit. 18-A, § 2-801

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the probate court. Therefore, during the course of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

Distributions may not be made pending a will contest. See Me. Rev. Stat. Ann. Tit. 18-A, § 3-401. Thus, a beneficiary will not receive whatever property he might be entitled to during this period. With respect to real property, title still "relates back" to the date of death of the decedent. Regarding personal property, the beneficiary continues to have an expectancy interest in the ultimate distribution. In either case, however, valuation might prove difficult in situations involving a plausible will contest because the beneficiaries remain subject to partial or even total divestment.

Beneficiaries are entitled to settle the will contest among themselves, subject to the approval of the probate court. See Me. Rev. Stat. Ann. Tit. 18-A, § 3-1101. Such a settlement is binding upon "those unborn, unascertained[,] or who could not be located." Id. Non-party creditors and taxing authorities, however, retain their rights against the estate. Id. Typically, a court should approve a properly presented compromise agreement provided that it was made in "good faith" and the effect upon "parties represented by fiduciaries or other representatives [i.e., minor children or incompetent adults] is just and reasonable." Id. § 3-1102. Even absent court approval, agreements to settle a will contest are binding upon the signatories, provided that the basic requirements of any contract are met. See, e.g., Pelletier v. Noel, No. Civ. A. CV-04-225, 2005 WL 2708667, at *2-3 (Me. Super. 2005) (unpublished) (citing Benner v. Lunt, 136. A. 814 (Me. 1927)); accord Butler v. Hardy, 576 A.2d 202 passim (Me. 1990). "The settlement of [a] contemplated will contest," however, "does not bar a claim for intestate property." Strout v. Chesley, 132 A. 211, 214 (Me. 1926).

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution

Where there is any uncertainty, operations should contact OGC for advice regarding the specific factual circumstances at hand.

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

As set forth above, transfers of real or personal property are subject to the claims of creditors. Therefore, the property could be subject to abatement or even complete divestment. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

Beneficiaries take subject to the rights of creditors. Me. Rev. Stat. Ann. Tit. 18-A, § 3-101. Therefore, the value of any devise or inheritance may be reduced by the personal representative's satisfaction of the estate's outstanding debts (as well as payment of the expenses of administration). Id. Indeed, in some circumstances, a creditor may pursue satisfaction of a debt against the beneficiary even after distribution of the estate. Id. § 3-1004.

Certain property may be more or less likely to be used to pay off debt, a process called abatement. Id. § 3-902. Maine provides some background rules for the order of abatement, though the terms of the specific will in question govern. Id. Moreover, homestead rights and support allowances during administration trump the claims of creditors. Id. § 3-807.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership were not shared.

Analysis:

Where two or more beneficiaries are entitled to undivided interests in property, either the personal representative of the estate or a beneficiary may pursue partition of the property. Me. Rev. Stat. Ann. Tit. 18-A, § 3-911. In such situations, the court may order the property sold if there is no other convenient solution. Id. In any case, the value of the property to the beneficiary will be reduced in light of interests of the co-owner.

Ownership may or may not be equally apportioned. For calculating value, one should typically multiply the value of the property by the fractional interest of the beneficiary.

5. What is the state law regarding nonprobated estates.

Summary Answer:

An unprobated will may serve as evidence of a devise, assuming that certain statutory criteria are met. Maine also permits individuals to collect relatively small amounts of personal property by affidavit. Otherwise, legal title to property passes to the heirs upon the death of the testator, even absent administration.

Analysis:

In order to have legal effect, a will must ordinarily be declared valid by an informal order of probate or an adjudication of probate. Me. Rev. Stat. Ann. Tit. 18-A, § 3-102. The limitations period in which an individual may initiate a testacy proceeding is typically three years. Id. § 3-108. However, an unprobated will may still serve as "evidence of a devise if (1) no court proceeding concerning the succession or administration of the estate has occurred, and (2) either the devisee or his successors and assigns possessed the property devised in accordance with the provisions of the will, or the property devised was not possessed or claimed by anyone by virtue of the decedent's title during the time period for testacy proceeding." Id. §3-102. Thus, in Maine, failure to probate a will does not necessarily equate to intestacy.

The period in which a beneficiary may seek to recover improper distributions of property is three years from the date of death, absent fraud. Id. § 3-1006. The limitations period for a creditor is nine months. Id. Thus, an apparent heir in possession of property more than three years after the death of the decedent--even absent heirship proceedings--will have little practical risk of divestment. Title will have passed by operation of law upon death of the decent. Of course, particularly with respect to real estate, the title situation may be muddy due to the lack of formal proceedings, requiring a suit to quiet title. See, e.g., Reed v. Tracy, 435 A.2d 745 passim (Me. 1981).

Additionally, Maine permits a beneficiary to collect personal property by affidavit, which must aver that: (1) the net value of the estate does not exceed $20,000; (2) thirty days have passed since the death of the decedent; (3) no proceedings to appoint a personal representative have been initiated; and (4) the person is entitled to the property in question. Me. Rev. Stat. Ann. Tit. 18-A, §§ 3-1201, 3-1202.

Finally, Maine provides for certain nonprobate transfers. For example, Maine recognizes joint ownership with a right of survivorship, id. § 6-104; provisions guaranteeing payment on death to a specified individual, id. § 6-201; and the nontestamentary transfer of ownership of certain securities, id.§§ 6-301 through 6-312.

New Hampshire

1. When is an inheritance considered received for purposes of being counted as income?

Summary Answer:

A beneficiary has some alienable property interest, whether it is an interest in the actual property or a beneficial interest in the estate, as of the decedent's death. This interest would constitute income as of the date of death, and a resource in subsequent months. Determining the market value of a beneficiary's interest in an estate prior to settlement of the estate may be difficult since the property may be sold or the interest in the estate may be expanded to cover the expenses and obligations of the estate. If the estate has little or no debt, the beneficiary's interest may be fairly easily determinable at the date of death. But if the estate is heavily indebted or the amount of indebtedness is unknown, the beneficiary's interest may be so speculative as to render it without any fair market value.

Analysis:

Title to real property vests immediately with the beneficiaries upon the death of the decedent. See Fleming v. Aiken, 327 A.2d 724, 726-27 (N.H. 1974). However, the beneficiaries remain subject to divestiture should liquidation of the property prove necessary to satisfy the debts of the estate and expenses of administration. Id.; accord N.H. Rev. Stat. Ann. §§ 554:17, 554:19, 561:1, 561:17, 561:18. Title to personal property vests in the beneficiaries only upon distribution, after payment of debts and the costs of administration. See Caskey v. State, 43 A.2d 768, 769 (N.H. 1945); accord N.H. Rev. Stat. Ann. §§ 554:19, 561:1, 561:18. A beneficiary does, however, accrue a beneficial interest in the estate from the time of death. Tsiatsios v. Tsiatsios, 744 A.2d 75, 78-79 (N.H. 1999). Again, assessing the value of such an interest might prove difficult in situations where the worth of an estate is unclear. Specific bequests should typically be valued

A beneficiary may choose to disclaim his or her interest in a bequest or inheritance. See N.H. Rev. Stat. Ann. § 563-B:1. In such a situation, no income should be considered received.

New Hampshire law specifically authorizes beneficiaries to disclaim a devise or inheritance. See N.H. Rev. Stat. Ann. § 563-B:1. Following a disclaimer, New Hampshire treats the beneficiary as having predeceased the testator. Id. § 563-B:4.

2. If the terms of the will are contested, does this affect the date that an inheritance is received?

Summary Answer:

Clear title is not transferred until a compromise agreement is reached or the will contest is otherwise resolved by the probate court. Therefore, during the course of a will contest, the value of an interest in the estate would be difficult to determine.

Analysis:

The value of any interest prior to the resolution of a will contest because distribution may not occur without approval of the probate court, giving rise to the possibility that the interest will turn out to be of significantly discounted value or even worthless. Also, note that a settlement agreement approved by the probate court may substantially alter the terms of a will or the ordinary course of intestate succession. See Stevens v. Clough, 47 A. 615, 615-16 (N.H. 1900). Compromise agreements--even absent court approval--are generally permissible as long as they are in the best interest of the estate. See Burtman v. Butman, 54 A. 2d 367, 415-17 (N.H. 1947). Thus, will contests and associated settlements may fundamentally alter the value of a beneficiary's interest in an estate.

Of course, given that SSR 97-1p proscribes counting the value of a cash inheritance until distribution, a will contest would naturally prevent the cash inheritance from being counted until such distribution.

3. How does a lien or claim filed by a creditor against the estate affect the receipt of an inheritance?

Summary Answer:

As set forth above, transfers of real or personal property are subject to the claims of creditors. Therefore, the property could be subject to abatement or even complete divestment. As a result, the value of an interest in real or personal property prior to the completion of estate administration would be difficult to determine.

Analysis:

A beneficiary takes subject to the rights of creditors. Therefore, a claim filed by a creditor may reduce or even eliminate the value of a bequest or inheritance. See N.H. Rev. Stat. Ann. §§ 554:19, 561:17 (providing order of abatement and charges to the estate). However, the allowance provided during administration to the surviving spouse takes precedence over the rights of creditors. See id. § 554:19. Moreover, a beneficiary may have certain homestead rights that, in certain situations, trump the rights of unsecured creditors. See id. §§ 480:1 through 480:9.

4. What is the effect of an inheritance being counted as a resource if there is a co-owner?

Summary Answer:

A beneficiary takes subject to the rights of co-owners. Therefore, while the property might still be considered a resource, the value of that resource would be less than if ownership were not shared.

Analysis:

In certain circumstances, a beneficiary could petition to partition any real property. See N.H. Rev. Stat. Ann.. §§ 547-C:1 through 547-C:30. Ownership may or may not be equally apportioned. For calculating value, one should multiply the value of the property by the fractional interest of the beneficiary.

5. What are the state laws regarding nonprobated estates?

In New Hampshire, unprobated wills have no legal effect. See N.H. Rev. Stat. Ann. § 552:1. Thus, an unprobated will should not be used to calculate an individual's interest in a decedent's estate. As a background rule, then, such property devolves according to the laws of intestacy. See id. § 561:1. Heirs and devisees, however, frequently divide a decedent's assets among themselves without resort to probate, see, e.g., Stevens v. Meserve, 73 N.H. 293 (N.H. 1905), and a probate court need not necessarily approve a compromise agreement to render it enforceable, see Burtman, 54 A. 2d at 415-17. Also, one should keep in mind that New Hampshire recognizes several different types of non-testamentary transfers, for which probate is wholly unnecessary. See, e.g., N.H. Rev. Stat. Ann. § 563-C:10 (certain securities); In re Estate of McIntosh, 773 A. 2d 649, 477-78 (N.H. 2001) (life insurance, joint bank accounts with right of survivorship, and annuities).


Footnotes:

[1]

A seal is a “design embossed or stamped on paper to authenticate, confirm, or attest; an impression or sign that has legal consequence when applied to an instrument.” Black’s Law Dictionary 1376 (8th ed. 2004).


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PS 01805.022 - Maine - 02/02/2015
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