The Mississippi Legislature made some sweeping changes to Mississippi laws governing estates and trusts, as well as one significant change to real property law. With the passage of S.B. 2850 and S.B. 2851, Mississippi is set to get some much needed updates in these areas of law. Both bills were signed by the governor and the bills take effect July 1, 2020.
Chief among the changes, at least in the author’s opinion, is allowing ancillary probate administration for non-residents, the adoption of Article Five of the Uniform Trust Code, enacting a revocation by divorce statute, as well as updating some dollar figures for a few probate matters that have not been updated in quite some time. There are also some other important changes made by these bills.
Below is a summary of some of the more important changes made to the probate laws as well as brief discussion of other changes to estate and trust law. While a full discussion of each and every provision of the new laws is beyond the scope of this article, hopefully this article will serve as a helpful overview of the changes in the law.
S.B. 2850 Changes
Updated Dollar Figures
Small Estate Affidavit
An option for transfer property of a decedent in Mississippi without the necessity of probate is through an Affidavit of Successor, commonly referred to as the Small Estate Affidavit. The Small Estate Affidavit only applies when the decedent did not have any real property and personal property was below the threshold value set in the statute. S.B. 2850 amends Section 91-7-322 such that estates with a value of up to $75,000, not counting excluded property, may still qualify for this method of transferring property of decedent when the decedent did not have any real property. Prior to S.B. 2850, the dollar threshold was $50,000.
Muniment of Title
Similar to a Small Estate Affidavit above, Muniment of Title is a process whereby real property of a decedent can be transferred without the necessity of a formal probate proceeding. Muniment of Title differs from the Small Estate Affidavit in two key aspects: 1) it only applies to real property; and 2) the decedent must have had a Will, that is Muniment of Title is not applicable to someone who died intestate. S.B. 2850 amends Section 91-5-35 to allow a Will to be admitted as Muniment of Title for the purposes of transferring real property if the value of personal property of the estate does not exceed $75,000, not counting exempt property. Prior to S.B. 2850, the dollar threshold for personal property was $10,000. S.B. 2850 makes this change by referencing to the dollar value of Section 91-7-322, which as discussed above, was changed to $75,000. Prior to S.B. 2850, there was no reference the dollar value was set at $10,000 within the statute itself.
In addition to the dollar figure changes, S.B. 2850 also amends Section 91-5-35 to allow for the petition to be signed by the personal representative/executor named in the Will or all the beneficiaries and the spouse. Previously, the petition was required to be signed by all the beneficiaries and the spouse regardless and the personal representative/executor could not sign the petition.
Foreign Probate Issues
Application of Title 91
Title 91 of the Mississippi Code governs trusts and estates. Title 91 contains the laws governing Wills, the probate process, trust law, and many other areas of the law that are similarly related to trusts and estates. S.B. 2850 amends Section 91-1-1 such that Title 91 now only applies to decedents who were domiciled in Mississippi or nonresidents who owned an interest in real property located in Mississippi. Previously, Title 91 applied to all property located in Mississippi, both real and personal. Now with ancillary probate, discussed below, there is no need for Title 91 to govern personal property of a nonresident.
Venue of Wills
S.B. 2850 amends Section 91-7-1 governing the proper venue for probating a Will. Section 91-7-1 previously provided that Wills should be probated in chancery court in the county in which the decedent has a fixed place of residence, or if none, then the county in which the decedent owned an interest in real property, or if none and the decedent held only personal property, then in the county where the decedent died or where any part of such personal property was located. S.B. 2850 strikes the last part about personal property, and thus Section 91-7-1 only provides venue for decedents who were domiciled in Mississippi or owned an interest in real property located in Mississippi.
Recording of Foreign Wills
S.B. 2850 amends Section 91-7-33 covering the probate of foreign Wills in Mississippi to clarify that the statute only applies where the Will disposes of real property. Previously, this distinction was not present in the statute, but now personal property of nonresidents is covered under ancillary administration rather than the standard Mississippi probate process.
S.B. 2851 Changes
Ancillary Probate Administration
Of all the changes made, the adoption of ancillary probate administration is perhaps the most needed. Mississippi was literally the last state in the United States to adopt ancillary administration, and many attorneys, including the author, have long expressed frustration over Mississippi’s lack of ancillary administration.
Historically, a decedent who was a non-resident of Mississippi and had real or personal property located in Mississippi was required to go through the full Mississippi probate process, absent some exception such as a Small Estate Affidavit or a Muniment of Title. S.B. 2851 now adds Section 91-7-501 through 91-7-523 which provides for ancillary administration.
Simplified Process for Collecting Debts Owed to or Personal Property Owned by a Non-Resident Decedent
Section 91-5-503 provides a simplified process for collecting debts owed to or personal property owned by a non-resident decedent. Under Section 91-5-503, such debts may be collected by or personal property may now be transferred to a foreign personal representative (that is an executor or administrator appointed by another state). For such transfer to be valid, the foreign personal representative is required to provide proof of his or her appointment in such other state and affidavit stating the following: 1) the dated of death of the non-resident decedent; 2) that no local administration is pending in Mississippi; and 3) the foreign personal representative is entitled to payment or delivery. The changes made by S.B. 2851 also provide a release where such payment is made in good faith (Section 91-7-505) and allow a creditor to prevent such transfer by notifying the debtor or the person in possession of the real property that such debt should not be paid or such property should not be transferred (Section 91-7-507).
Somewhat Simplified Process for Opening Estate of Non-Resident Decedent
Where Section 91-5-503 is not applicable or where the non-resident decedent owned real property in Mississippi, a probate process is still required, but is somewhat simplified under the new ancillary administration laws. Under Section 91-7-509, where there is no administration pending in Mississippi, a foreign personal representative can open an administration by filing authenticated copies of the Will and foreign letters testamentary. This simplifies the standard probate process by avoiding the petitioning process, any prove-ups that may be required to prove the Will is valid, and a hearing on the appointment of the personal representative and issuance of letters. However, a foreign personal representative who opens an estate under Section 91-7-509 is still subject to the standard estate administration requirements under Chapter 7 of Title 91 such as creditor’s notice requirements and periods and inventory and/or accounting obligations, if not waived.
Transfer on Death Deeds
S.B. 2851 enacts the Mississippi Real Property Transfer-On-Death Act by enacting Sections 91-27-1 through 91-27-35. In short, Mississippi now allows a grantor to prepare and file a transfer-on-death deed that transfer real property to the grantee only upon the grantor’s death. The deed is fully revocable during life and any property transferred pursuant to a transfer-on-death deed is still subject to the decedent’s creditors to the same extent as real property owned by the decedent at the time of death. Previously, the primary options for avoiding the necessity of probate for real property were life estate deeds or revocable trusts. Transfer on death deeds gives another, often simpler alternative with certain advantages to the other options. The new statute provides a form as well.
Article Five of the Uniform Trust Code
S.B. 2851 adopts Article Five of the Uniform Trust Code as part of the Mississippi Trust Code, Sections 91-8-501 through 91-8-508. Article Five covers creditors’ rights to a beneficiary’s interest in a trust. As part of this S.B. 2851 also repealed the Family Trust Preservation Act which was comprised of Sections 91-9-501 through 91-9-511. One specific item of note is that Article Five defines who will be considered the transferor of assets to a trust in determining whether a trust is considered self-settled, a major point of clarity versus prior law.
Estate Tax Apportionment
S.B. 2851 repeals the Uniform Estate Tax Apportionment Act codified as Sections 27-10-1 through 27-10-25, and in lieu, adopts the Mississippi Uniform Estate Tax Apportionment Act which is comprised of Sections 91-25-1 through 91-25-27. Where a Will contains an apportionment clause, such clause must now be respected. If the Will does not have an apportionment clause but a revocable trust does, then the clause under the revocable trust must be respected. So, under the new law, an apportionment clause in a Will trumps that of one in a revocable trust. Other dispositive instruments can provide for limited apportionment as well absent language in a Will or revocable trust. The new laws also provide for statutory apportionment where there is no apportionment clause. Pursuant to Section 91-25-27, these provisions do not apply to an estate of decedent who dies within one year of the adopting of the act, so technically it kicks into effect on July 1, 2021. In short, Mississippi updated its version of the Uniform Estate Tax Apportionment Act from a 1960’s version to the 2003 version which takes into account many law changes, utilization of different Will substitutes, and changes in estate and gift tax law.
S.B. 2851 repeals the Uniform Disclaimer of Property Interests Act codified as Sections 89-21-1 through 89-21-17, and in lieu, adopts the Mississippi Uniform Disclaimer of Property Interests Act (2002/2010) (note the “(2002/2010)” is part of the actual title of the law) via the adoption of Sections 89-22-1 through 89-22-35. The newly updated act covers additional issues not previously addressed by Mississippi law including disclaiming of powers over property and the effectiveness of a disclaimer. A big driving force behind the change is to not limit a disclaimer to a qualified disclaimer for tax purposes which generally must be made within 9 months of receiving the interest in the property. Newly enacted Section 89-22-29 still provides a safe harbor that provides that any disclaimer treated as a qualified disclaimer for tax purposes will also be treated as a disclaimer for state law purposes. However, the new law now allows for state law disclaimers which are not qualified disclaimers for tax purposes via new timing laws which no longer are tied to the 9 month requirement found in federal tax law which also previously applied to state law under 89-21-5 (now repealed). The new law also provides some additional clarity on form and effect of disclaimers.
Revocation by Divorce
Most states have provisions that, upon divorce, automatically revoke transfers to a former spouse, whether by Will, trust, or beneficiary designation, and revoke any appointment of such former spouse in a fiduciary role. With the codification of Sections 91-29-1 through 91-29-9, S.B. 2851 makes Mississippi one of these states. The new laws serve to effectively revoke any transfers to a former spouse, whether a probate or non-probate transfer. The new law covers transfers made by Will, in a trust, or through a beneficiary designation, and revokes fiduciary designations of a former spouse. The law also addresses the common issue of how to handle joint trusts in the event of a divorce. Under the new law, the trust is to be divided into two shares with each share consisting of the respective former spouse’s property, and the subsequently disposed of as if such other former spouse had not survived them.
The law only covers documents and designations made prior to the divorce. Thus, if a married couple divorces, the couple could still benefit each other and name each other as a fiduciary by executing new documents after the date of the divorce. Additionally, a subsequent re-marriage defeats the revocation.
Income and Principal Act
Allocation of Receipts from Timber Sales
S.B. 2850 revises Section 91-17-412 to provide that receipts from timber sales are to be allocated 80% to income and 20% to principal. Additionally, the new law adds a list of non-exclusive expenses that should be deducted such as management expenses, reforestation expenses, and timber stand improvement expenses. Prior to S.B. 2850, receipts from timber sales were allocated between timber sales based on the rate of growth of the timber stands, a difficult determination that opened the door for litigation between current and/or remainder beneficiaries. Additionally, rather than deducting expenses, the statutes required deducting a “reasonable amount” for depletion, another vague determination ripe for challenge.
Disbursement from Income
Section 91-17-501 states that 50% of the trustee’s compensation, 50% of other advisor’s or custodian’s compensation, and 50% of expenses for accountings and judicial proceedings are to be disbursed from income. S.B. 2850 adds a provision to 91-17-501 allowing a trustee to allocate more or less of these expenses between income and principal where such income or principal is insufficient to cover such allocations during the year. Again, the new law provides for some certainly in arriving at allocations, thus hopefully reducing related litigation.