52 Ch Wills and Trusts
State laws protect wishes that individuals have outlined as well as provide guidance for what to do with a person's property if the person did not express his/her wishes Estate Planning The Process by which an individual decides what to do with his/her real and personal property during and after life Encourages individuals to make decisions about issues that frequently arise at the end of life o What do to with a persons body organs after death?
The Uniform Probate Code Laws that govern issues related to estate planning vary from state to state Uniform State Laws o Ex: Uniform Probate Codeprovides guidance in the area of estate planningcovers a wide rage of topics (wills to gifts to life insurance) Tools of Estate Planning Wills and trusts are the most important tools of estate planning o Will is a legal document that outlines how a person wants his/her property to be distribute upon death o Trust allows a person to transfer property to another person, and this property is used for the benefit of a third person Why Individuals engage in estate planning Want to make sure they provide for their family financially after their death Arrange property in ways that reduce taxes preserve family wealth To promote family harmony For nontraditional family's, careful estate planning can provide benefits that resemble those provided by marriage Legal Issues Related to Wills
People die without wills
Intestacy Statues If a person dies without a will, state laws outline how the persons property will be distributed o These laws are called intestacy statues Address issues such as rights of a surviving spouse State laws vary regarding the amount a surviving spouse inherits when a spouse dies intestate The surviving spouse usually splits real and personal property with children of the marriage, children not of the marriage, and the deceased parents o When a person dies without a will, we say that the person died intestate
Requirements for a LEGALLY VALID Will Testator: person who writes the will Must meet 4 requirements to be valid 1. Testamentary Capacity: the person must be old enough to write the will (18 years old) and be sound of mind 2. Writing a. Exceptions to wills in writing (special kinds of wills) a.i. Oral: a will that the testator declares verbally during his or her last illness, in front of witnesses, who later write the person's wishes a.ii. Holographic: a will that the testator writes or signs in his/her own handwritingusually states do not require witnesses because when the entire will is in handwritten, there is less chance of fraud or forgery a.iii. Mutual: a will that two or more testators execute in which they leave property to each other as long as the survivor agrees that when he/she dies, the remaining property will be distributed according to a plan created by all testators 3. Testator's Signature: the person writing the will must sign it 4. Attestation: witnesses must attest to the willa witness must witness the signing of the will and then sign as a witness at the end of the document a. A person who will receive property under a will, a beneficiary, cannot be a witness b. Witnesses also must be of sound mind Grounds for Contesting a Will When a person with standing (an interest in a will, such as the potential beneficiary) has doubts about whether a particular will is legally valid, he or she may contest the will Usually, wills are contested in 2 circumstances a. If she believes that the will does not meet the four criteria outlined b. If she believes that although the will is technically valid, the testator was a victim of fraud/undue influence b.i. Fraud occurs when the testator relied on false statements when he made the will b.ii. Undue influence occurs when the testator wrote the will under circumstances in which a person he trusted took advantage of his weak physical or emotional condition to persuade him to write the will in a particular way Changing a will Wills are ambulatory (testators can change them) o People change their wills through codicils (separate with documents new provisions that outline changes to the will) o Must go through same procedures to make valid codicil as those followed in making the original will
Revoking a Will Cancelling a formal will (physically destroy it then execute a new will that made it clear that he had already revoked the previous will) Settlement of an Estate Personal representative: when someone dies, they are chosen by the testator o The collect the testators property, pay debts and taxes, and make sure the remainder of the estate is distributed o Makes sure that gifts of real and personal property go to the correct beneficiaries, a person who will inherit under a will The processes of settling an estate is known as probate o Property a person owns that does not become a part of estate is nonprobate property Life insurance with named beneficiaries, pension plan distributions, property held in certain kinds of trusts Trusts as Estate Planning Tools How and Why individuals create Trusts Settlor: creates the trust Trustee: who a settlor delivers and transfers legal title property to o Holds property and uses it for the benefit of the third person, beneficiary 2 components 1. Income: paid to an income beneficiary (may or may not have access to the trust corpus) 2. Trust corpus: the property held in trust, while the income is generated by the trust through interest or appreciation a. when the trust is terminated, a remainderman gets the trust corpus Reason to create Trust o Wants to protect another person/animal o To prevent individuals from getting access to certain assets o To avoid paying taxes (charitable trust to avoid federal estate tax) Basic Kinds of Trusts Express Trust o Trust the settlor creates either while he/she is alive (living trust) or by will (testamentary trust ( o Usually written and called trust instruments or agreements Implied Trust o Involuntary trusts because courts, rather than settlors, create them o Courts create them in 2 situations Express trusts fails and the court can imply a trust from certain behavior (resulting trust) Occurs when the law steps in to protect someone from fraud or other wrongdoing (constructive trust)hold property in trust for its rightful owner Family incentive Trust
o Responds to certain concerns raised by wealthy businesspersons who worry
about what their wealth might do to their families Can promote the kind of behavior that matters to them How Trusts are terminated Settlors aren't allowed to revoke trusts unless he/she reserves a right to revoke the trust Usually trusts include a provision that specifies the date on which the trust will terminate o Alternatively, the trust document states that the trust will terminate when an event happens (ex: remainderman reaches a certain age) End of Life Decisions Advance Directives Right to die: refers to a persons right to place limits on other peoples efforts to prolong her/his life o Advance directives: a person can express his/her wishes regarding these limits through advance directives Living will, healthcare proxy, durable power of attorney o Living will: allows them to express their wishes Usually he/she's wants to make sure they die a natural death o Healthcare Proxy: outlines principal agent relationship Some states have passed laws that allow an agent to make medical decisions for a principal who is unable to participate in medical decisions o Durable Power of Attorney: written document executed when the principal is in good mental health that allows an agent to make medical decisions for the principal at some later date when the principal can no longer make decisions Alzheimer's disease Much like healthcare proxy Anatomical Gifts 18 years or older may give all or any part of his/her body to a donee on death Organ donor card Before deciding to donate an organ, individuals need to know all the risks, including financial risks It is possible that insurance companies, labeling organ donation as a preexisting condition, will deny health insurance to organ donors or seek high insurance premiums from individuals who have