Allocating a Decedent's Joint Debts Secured by Jointly-Owned Property

One of the tasks that needs to be completed in the process of administering a decedent's estate is to determine what debts the decedent owed and arrange for payment of those debts. Sometimes, decedents may be joint obligors on a debt with another person, in which case the estate may be liable for a portion of the debt.

Under common law, even if the decedent was jointly obligated on a debt that was secured by property owned in joint tenancy, the estate still had an obligation to pay a share of the debt even though the underlying property passed in its entirety to the surviving joint tenant. The majority rule permits contribution by the estate to the surviving joint tenant, while the minority rule does not; however, the trend does seem to be towards the minority rule. In 1998, the Supreme Court of Rhode Island in Mellor v. O'Connor, 712 A.2d 375 (R.I., 1998), settled the issue in that state by rejecting the majority rule, holding that the surviving joint tenant was not entitled to contribution from the estate of the decedent for payment of a jointly executed promissory note secured by a mortgage on the property. For a critique of this decision, see this analysis by Patrick A. Randolph, Jr., then a professor at UMKC School of Law.

Section 2-607 of the Uniform Probate Code provides that a "specific devise [under a will] passes subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts." In other words, if a decedent's will leaves a property to a beneficiary, and the property is subject to a debt, the beneficiary is not entitled to contribution from the estate for payment of the debt.

In 2012, the Supreme Court of Montana in In re Estate of Afrank, 291 P.3d 576 (Mont. 2012), held that a debt encumbering property held in joint tenancy is not exonerated upon the death of one of the joint tenants, meaning that the surviving joint tenant is not entitled to contribution from the estate for a share of the encumbrance. While the property did not pass via will, the Court looked to Montana's Uniform Probate Code and applied the policy of nonexoneration to the case at hand.

This issue has not been decided in Utah, where presumably the majority rule under common law would prevail:

In a majority of jurisdictions the courts have taken the view, at least in the absence of evidence of other intention or special circumstances, that a surviving spouse is entitled to equitable contribution out of the estate of a deceased spouse, in reimbursement of the payment by the survivor of more than his equitable share of their joint obligation, even though the debt is secured by real property which was held by them as tenants by the entirety, and which, therefore, is wholly acquired by the surviving spouse as surviving tenant, leaving the estate of the deceased spouse with no interest therein. 76 A.L.R.2d 1004

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What is an Advancement?

In the estate planning and administration context, an advancement is a gift made to an heir prior to death that is treated as an advance on the heir's ultimate share of the estate. For example, if dad made a $50 advancement to son during his lifetime, died intestate with $100 to his name, and had three children and no spouse, the two children that had not received lifetime gifts would split the $100 equally. The $50 is treated as an advance on the son's ultimate inheritance; otherwise, the remaining $100 would be split three ways, with the son receiving in total a disproportionate share.

Under the Uniform Probate Code, a gift made prior to death is only treated as an advancement if accompanied by contemporaneous written documentation that the gift is to be treated as such. While the concept of an advancement can only technically apply where a decedent dies intestate and left documentation of intent to treat a gift as an advancement, my will and trust form language includes a provision confirming that any prior gifts are not advancements. It is important for clients to consider the impact that providing additional support and resources to one heir during life can have on all heirs upon death.

The comments to the Uniform Probate Code provide a good example of how advancements work, which I simplify here: G died intestate, survived by his three children, A, B, and C. G’s probate estate is valued at $60, but during his lifetime, G had advanced A $50 and B $10 and memorialized in writing that such gifts be advancements. Upon G's death, the first step in calculating the children's respective shares in G's estate is to add back the advancements, resulting in a theoretical "hotchpot" estate of $120 (60 + 50 + 10), of which the three children would be entitled to equal shares.

Because A has received an advancement greater than the share to which he is entitled, A can retain the $50 advancement but is not entitled to any additional amount. This leaves $70 (60 + 10) remaining in the hotchpot estate, of which B and C are each entitled to half. B receives $25 (having already received $10) and C receives the remaining $35. Had A and B's gifts not been treated as advancements, A would have received $70, B would have received $30, and C would have received $20 from G's estate (aggregating pre-death gifts with an equal share of the remaining estate). This example illustrates why it is important to consult with an estate planning attorney prior to making substantial, disproportionate gifts to heirs.

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Control of Disposition of Remains

Anyone completing an estate plan should consider leaving written instructions regarding their wishes for their funeral and the disposition of their body. Section 3-701 of the Uniform Probate Code states that "a person named executor in a will may carry out written instructions of the decedent relating to the decedent’s body, funeral, and burial arrangements" prior to being actually appointed by a court. Most family disagreements over funeral-related matters that arise when a loved one passes away are resolved by negotiations amongst the family, sometimes with the assistance of experienced funeral directors and clergy. However, some disagreements, such as control over the disposition of the decedent's body, can be more serious and cannot be resolved without court intervention.

There is little uniformity among the states in this area. See generally Shawn Irwin Walker, Over My Dead Body: Preventing and Resolving Disputes Regarding the Disposition of the Dead, 43 ACTEC L.J. 385, 388 (2018). Utah is one of the states that has a "priority of decision" law, which is found in Part 6, Control of Disposition, of the Funeral Services Licensing Act. Section 58-9-601 of the Utah Code confirms the probate code concept that a decedent's written instructions concerning their funeral and manner of burial are enforceable but adds the requirement that such instructions be "acknowledged before a notary public or executed with the same formalities required of a will..."

Another interesting aspect of this law is the fact that the nominated personal representative under the decedent's will, depending on the circumstances, may not have first, or even second, priority to control the disposition of the decedent's body. The person with first priority is whoever is designated "in a written instrument, excluding a power of attorney..., if the written instrument is acknowledged before a Notary Public or executed with the same formalities required of a will..."

The person identified as "personal representative" in the decedent's will may appear to fit this description; however this section is clearly describing a distinct role because section 58-9-602(3) of the Utah Code identifies "the person nominated to serve as the personal representative of the decedent's estate in a will" as the one with third priority. Second in line is "the surviving, legally recognized spouse of the decedent, unless a personal representative was nominated by the decedent subsequent to the marriage, in which case the personal representative shall take priority over the spouse."

A few different measures could be taken in order to prevent disputes over the disposition of a body. First, individuals could specify in their will that they are designating their personal representative as the person with the right and duty to control the disposition of the body under Utah Code 58-9-602. Such designee should be aware of the scenarios under which they could lose their right of disposition and also the process for resolving disputes. Finally, individuals should leave notarized instructions to their next of kin specifying their funeral and burial wishes. 

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Utah Adopts Uniform Electronic Wills Act

Beginning August 31, 2020, pursuant to the Uniform Electronic Wills Act, Utahns have the option of executing a last will and testament without the traditional paper and ink and physical presence of witnesses. Before the adoption of the Electronic Wills Act, wills in Utah were generally required to (i) be in writing, (b) signed by the testator, and (c) signed by at least two individuals, each of whom signed within a reasonable time after witnessing the signing of the will. The Electronic Wills Act keeps each of these requirements but adapts them for a modern world.

An electronic will must still be "in writing," or more particularly, in "a record that is readable as text at the time of signing." A "record" includes electronically-stored information "retrievable in perceivable form." Importantly, a video or audio recording of the testator's last wishes does not constitute a will because the electronic files would not be "readable as text."

An electronic will must still be signed by the testator, but under the Electronic Wills Act, "signing" includes executing or adopting a tangible symbol or logically associating with the record a symbol or process with the intent of authenticating or adopting the record as the last will. The Electronic Wills Act is designed to be flexible enough so that no particular software or application is needed to adopt a will.

Finally, an electronic will must still be signed by two individual witnesses who observed the testator sign the electronic will, but such individuals need not be in the physical presence of the testator; electronic presence is sufficient. Under the Electronic Wills Act, "electronic presence" requires that the witnesses be "communicating in real time to the same extent as if the individuals were physically present." An electronic will may be simultaneously executed, attested, and made self-proving with the help of a notary public as described in Utah Code 75-2-1408.  This section expressly supersedes the Notaries Public Act, meaning that remote notarization appears to be permitted in the context of an electronic will.

Estate planning practitioners have resisted laws permitting electronic wills for many years, fearing that electronic wills would be more likely to result in contests and other estate controversy. While these concerns will likely persist, the current pandemic has clearly illustrated the need for an electronic wills option. Currently, Utah is one of only a handful of states have adopted an electronic will statute, but more states are sure to follow.

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Free, Simple Last Will and Testament Form

Below is a very simple form for a last will and testament that you are welcome to use for free, subject to this disclaimer and to the following: Executing a will does not guarantee that all, or even most, of your property will be subject to the will. A last will and testament will have no impact on property held in joint tenancy with a surviving tenant; retirement plans, brokerage accounts, and life insurance policies that have a valid beneficiary designation; pay-on-death bank accounts; and property titled in trust. A will alone will not allow your estate to avoid probate, and a will is only one component of a complete estate plan.

This will form is not appropriate for every circumstance, and only a competent estate planning attorney can provide advice regarding your particular situation. Under Utah law, this will form will be unenforceable unless it is (1) completed and signed by you and signed by two adults who witnessed you sign the will or (2) entirely handwritten and signed by the you. While witnessed wills are preferred, I have kept this will form short enough that it can be handwritten, in which case no witnesses are required. Once complete, you will need to deposit your will in a secure location or with someone you trust to carry out your will.

Last Will of
[your name]
1. This is my Will. I revoke all prior Wills and codicils.

2. I nominate [name of person you want to be in charge of your estate] as my personal representative. If they do not serve, I nominate [name of alternate] to serve in their place.

3. I might prepare a separate written list of items of tangible personal property and designate who I want to receive such items. If I complete such a list, I give such items to the persons designated therein as the recipient of each such item.
This tangible property list is an optional document that is separate from your will; if signed, the list becomes incorporated into your will upon your death. It is a flexible option because if you change your mind about who you would like to receive a tangible item, you need not execute a whole new will, just update your list.

4. I give the balance of my assets as follows: Only chose one option
Option One: All to my surviving spouse; otherwise, to my descendants, by right of representation.
Option Two: All to my descendants, by right of representation.
Option Three: Equally to the following persons who survive me: [insert names of the beneficiaries of your estate]

Paragraphs 5 and 6 are only necessary if you have minor children
5. I nominate [name of person you want to be guardian of your minor children] as guardian of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

6. I nominate [name of person you want to be in charge your minor children's assets] as conservator of the estate of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

I execute this document as my Will on the _____ day of _______________, 20____, at _______________, Utah.

____________________
[Your Signature]

Unless your will is entirely handwritten, two adults who witnessed you sign your will must also sign.

Witnesses:

____________________
[Witness Signature]
[Witness Printed Name]

____________________
[Witness Signature]
[Witness Printed Name]

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Estate Planning Fundamentals

Every estate plan should include a last will, power of attorney, and health care directive; additional benefits can be realized by including a revocable living trust. Each document serves a particular and important purpose that cannot be served by any of the other documents; these purposes are described below.

A last will and testament specifies who will receive and who will manage and distribute your assets upon your death. It also names a guardian for your minor children. If you pass away without a will, you are said to have died “intestate,” and the laws of the state will determine who receives your assets. In addition, since all minor children under 18 years of age must have a guardian, a guardian will be selected for your children through a judicial process if you pass away without a valid will.

A will does not allow your estate to avoid the probate process; it simply gives directions to the probate court, and a will must be probated in order to be effective. Probate is the legal process for establishing the validity of your will and transferring your “probate property” in accordance with your will. However, incorporating a revocable living trust into your estate plan can allow you estate to avoid the probate process and achieve additional planning objectives.

A revocable living trust is essentially a contract whereby you, as “grantor,” transfer your assets to a “trustee” with specific instructions contained in the trust agreement describing how the trust assets are to be managed. You will typically serve as the initial trustee of your revocable living trust as well as the grantor, meaning that you retain complete control over all of your assets while you are living. A trust can be an especially useful tool for reducing estate taxes that would otherwise be owed or establishing protective trusts for the benefit of your descendants upon your death.

When the grantor of a trust passes away, the successor trustee distributes the trust assets according to the instructions in the trust agreement. This is the mechanism for avoiding probate; the successor trustee legally takes over the management and distribution of your estate. Any property transferred to your revocable trust will avoid probate. Note that some assets pass by operation of law without the need for a trust or probate; these include property held in joint tenancy with rights of survivorship, retirement plans and life insurance policies that have a beneficiary designation, payable-on-death bank accounts, etc.

If you have a revocable living trust, you still require a last will and testament just in case an asset remains in your estate upon death. If your plan includes a trust, your will is often referred to as a “pour-over” will since it simply directs that all of your assets be “poured-over” into your trust to be disposed in accordance with its terms.

A durable power of attorney authorizes whoever is named in that document to act on your behalf to the extent authorized in the document. This document is effective if you are physically or mentally incapacitated, but ends upon your death; this allows another individual to manage your affairs during any time that you are unable. A power of attorney may be drafted so that it is effective from the moment it is signed, or may become effective only if you become incapacitated. After death, the successor trustee of your revocable living trust (or the personal representative named in your will if you do not have a living trust) will possess the powers of management and the right to distribute your assets to your beneficiaries.

An advance health care directive specifies your preference for health care treatment, such as whether life support systems should be continued if there is no hope of recovery. It also appoints someone else to make these decisions for you if ill health prevents you from being able to specify your own wishes. An estate plan may include any number of addition documents, but these are the basics.

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