Chapter 52Chapter 52Wills and TrustsWills and Trusts

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Estate Planning Estate Planning (Definition):(Definition):

Process by which an individual Process by which an individual decides what to do with his/her decides what to do with his/her

real and personal property during real and personal property during and after lifeand after life

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The Uniform Probate The Uniform Probate CodeCode

Guides states in developing Guides states in developing laws related to estate laws related to estate

planningplanning

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Important Estate Planning Important Estate Planning ToolsTools

Will: Legal document that outlines how a Will: Legal document that outlines how a person wants his/her property distributed person wants his/her property distributed on deathon death

Trust: Allows a person to transfer Trust: Allows a person to transfer property to another person; property used property to another person; property used for benefit a third personfor benefit a third person

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Reasons Individuals Engage In Reasons Individuals Engage In Estate PlanningEstate Planning

To provide for their family financially after their To provide for their family financially after their deathdeath

To reduce taxes and preserve wealthTo reduce taxes and preserve wealth

To promote family “harmony”To promote family “harmony”

To allow individuals in non-traditional family To allow individuals in non-traditional family relationships to gain benefits of traditional family relationships to gain benefits of traditional family relationshipsrelationships

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Intestacy Statutes Intestacy Statutes (Definition):(Definition):

Outline how a person’s Outline how a person’s property will be distributed if property will be distributed if

he/she dies without a willhe/she dies without a will

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Requirements For A Legally Valid Requirements For A Legally Valid WillWill

Testamentary Capacity: Person must be old Testamentary Capacity: Person must be old enough to write will, and must be “of sound enough to write will, and must be “of sound mind”mind”

Document in writing (usually a typed, written Document in writing (usually a typed, written instrument)instrument)

Testator’s Signature (including initials on each Testator’s Signature (including initials on each page)page)

Witnesses (who “attest to” the will)Witnesses (who “attest to” the will)

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Exhibit 52-2: Special Kinds Of Exhibit 52-2: Special Kinds Of WillsWills

Oral Will: Will that testator declares verbally Oral Will: Will that testator declares verbally during his/her last illness, in front of witnesses, during his/her last illness, in front of witnesses, who later document testator’s wisheswho later document testator’s wishes

Holographic Will: Will that testator writes and Holographic Will: Will that testator writes and signs in his/her own handwriting; usually states signs in his/her own handwriting; usually states do not require witnesses, because when entire do not require witnesses, because when entire will is in handwriting, less chance of fraud/forgerywill is in handwriting, less chance of fraud/forgery

Mutual Will: Will that two/more testators execute Mutual Will: Will that two/more testators execute in which they leave property to each other, in which they leave property to each other, provided the survivor agrees that when he/she provided the survivor agrees that when he/she dies, remaining property will be distributed dies, remaining property will be distributed consistent with plan created by all testatorsconsistent with plan created by all testators

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Legal Issues Related To WillsLegal Issues Related To Wills Grounds for contesting will: Grounds for contesting will:

Will fails to meet legal requirementsWill fails to meet legal requirements

Testator a victim of fraud/undue influence Testator a victim of fraud/undue influence

Changing will: By writing a will codicil (wills are “ambulatory”, Changing will: By writing a will codicil (wills are “ambulatory”, meaning testators can change them)meaning testators can change them)

A “codicil” is a separate document with new provisions that A “codicil” is a separate document with new provisions that outline changes to willoutline changes to will

Testator must satisfy same procedures to make a valid codicil Testator must satisfy same procedures to make a valid codicil as those followed in making original willas those followed in making original will

Revoking will: Most common method is destruction of willRevoking will: Most common method is destruction of will

Settlement of estate: By way of a personal representative Settlement of estate: By way of a personal representative (executor/executrix), through process known as probate(executor/executrix), through process known as probate

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Creation of A TrustCreation of A Trust

Person who creates trust (settlor) delivers and transfers Person who creates trust (settlor) delivers and transfers legal title to property to another person (trustee), who legal title to property to another person (trustee), who holds the property and uses it for benefit of third person holds the property and uses it for benefit of third person (beneficiary)(beneficiary)

Trusts are usually created through formal, written Trusts are usually created through formal, written documentsdocuments

Common trust components:Common trust components:

Trust Corpus: Property held in trustTrust Corpus: Property held in trust

Income Corpus: Trust income generated through interest Income Corpus: Trust income generated through interest and/or appreciationand/or appreciation

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Types of TrustsTypes of Trusts

Express:Express:

Living Trust: Created when settlor Living Trust: Created when settlor is alive is alive

Testamentary Trust: Created Testamentary Trust: Created through a willthrough a will

Implied: Created by courtImplied: Created by court

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Termination of Termination of TrustTrust

Through provision in trust Through provision in trust which either indicates date which either indicates date

on which trust will terminate, on which trust will terminate, or specifies an event that will or specifies an event that will

terminate trustterminate trust

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End-Of-Life Decisions: “Advance End-Of-Life Decisions: “Advance Directives”Directives”

Types of advance directives (through which Types of advance directives (through which person can express his/her wishes about efforts person can express his/her wishes about efforts to prolong life, and the “right to die”) include:to prolong life, and the “right to die”) include:

Living WillsLiving Wills: Allow individuals to express their : Allow individuals to express their wishes regarding extent of medical treatment wishes regarding extent of medical treatment desired if they are in an accident or suffer from a desired if they are in an accident or suffer from a life-threatening illnesslife-threatening illness

Health Care Proxies/Durable Powers of AttorneyHealth Care Proxies/Durable Powers of Attorney: : Allow individuals to make medical decisions for Allow individuals to make medical decisions for othersothers

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The Uniform The Uniform Anatomical Gifts Act Anatomical Gifts Act

(UAGA):(UAGA):Provides that any individual 18 Provides that any individual 18 years old/older may give all/any years old/older may give all/any part of his/her body to donee on part of his/her body to donee on death; such donations are called death; such donations are called

“anatomical gifts”“anatomical gifts”

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The Convention Providing for The Convention Providing for a Uniform Law on the Form a Uniform Law on the Form

of an International Will of an International Will (1973)(1973)

Sponsored by International Institute for Sponsored by International Institute for Unification of Private Law (UNIDROIT); Unification of Private Law (UNIDROIT);

protects wills written in other protects wills written in other countries, provided the wills follow a countries, provided the wills follow a

particular formatparticular format

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