Wills, Estates, and Trusts

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Chapter 24Chapter 24 Slide Slide 11

Wills, Estates, and Trusts

24-124-1 Legal Consequences of Death

24-224-2 Trusts

CHAPTER 24

Lessons



Legal Consequences of Death

Explain why an orderly distribution of a decedent’s estate is necessary

Discuss the benefits of making a willDescribe how a valid will is made

LESSON 24-1

GOALS



DEATH AND THE LAW

Death without a willDeath with a will

Creation and execution of a valid willAmendment of a valid willSpecial types of willsRevocation of a will



Someone dies -- ?

Decedent – person who is deceasedWhat does the law do?

Looks for instructionsHow are debts to be paid?Remaining property?

Will – written document which state wishes of the deceased (how property is to be divided)



No Will

Intestate – dying without a willProbate Court – settles the affairs

appoints a personal representativeADMINISTRATOR (male)ADMINISTRATIX (female)

Estate – property of the deceased

No Will = large administrative expenses and large estate taxes



No Will

Intestacy Statutes – dictates how property will be dispersed

1/3 or ½ to spouseremainder among children

No surviving children/grandchildren – decedent’s parents

Parents deceased – decedent’s sisters & brothers and their children



With a Will

Testate – dying with a valid WillTestator – maker of the Will (male)Testatrix – maker of the Will (female)Allows the deceased to decide how

property will be divided instead of intestacy statutes.



With a Will

Executor (male) Executrix (female)personal representative of deceased

Can be exempt from posting bond (paying the court $ to ensure the duties are properly performed)

Appoint guardian for minor children guardian can also be exempt from posting bond



Living Wills

Directions to physicians on choices regarding life-support treatment for

terminally ill vegetative state

Durable Power of Attorney – confers the power to an individual to make health care decisions on your behalf



Rules on creation and execution of a valid Will

There are strict state laws that govern: how wills are created how wills are executed

1) Testatrix/Testator must have Testamentary Intent (clear intention to create a will)

no deception present

2) Testamentary Capacity – understand clearly what you are giving and to whom



3) Writing –

signature witnessed by 2-3 adults

witnesses not in will

witnesses aware the document is a

will

Must be at least 18 years of age.



Amendment

Wills become effective when the person dies.

Can be changed at any time before the person dies.

Codicil – formal, written, and witnessed amendment.



Special Types of Wills

Holographic Will – written by decedent’s own hand and signed

Nuncupative Will – oral will / during maker’s last illness or by service personnel on active duty.



Lee was fatally injured in a car accident. As she was dying – she told 3 witnesses

she was making a will.She wanted her paintings collection to go

to her good friend, Anne.In a State that allows nuncupative wills, if

the witnesses’ testimonies were properly and promptly reduced to writing, Lee’s dying wish as to the disposition of her property would be carried out.



Revocation of a Will

As long as the Testator/trix has testamentary intent and capacity, the will can be amended.

Revoke a Will – destroy / deface marriage / adoption (not divorce; but divorce

settlement can alter a will)



Revocation of a Will

Written revocation – in new will, write:

“I hereby revoke all prior wills, . . .”



Procedures for Estate Resolution

After decedant dies –

-- Administrator must bring proof of death to the appropriate court (probate/surrogate)

death certificate

official notice from armed services

disaster recovery testimony




If a person just vanished –State can declare dead under “Enoch

Arden laws” (after 5 – 7 years)

-- Organizing all assets and debts

-- Give public notice of the estate and necessity for filing claims against it within the statutory period (six months)




-- Paying valid claims against the estate

-- Distributing the remaining property according to the will or statute

Administrator is personally liable for failure to reasonably carry out the duties.



Distributions Without a Will

Hawaii as an example:Person dies intestate (one or more

children, no spouse) – children inherit equal shares

Person dies (spouse + children) – spouse gets ½ and rest divided equally among children



Person dies (spouse, no children) – spouse gets ½ and parents of the deceased receive the remainder. If parents are deceased brothers and sisters



Distributions with a Will

Terms of the Will are followed.There may be statutory provisions

allowing certain relatives to override the will’s terms and receive more of the estate than the will provided.

i.e. some states – surviving spouse may elect to receive ½-1/3 instead of the will’s provision.



DIVISION OF $1,800,000 ESTATE

John(testator—deceased)

Robin

Marie (deceased)

Grant (deceased)

John’s ChildrenJohn’s ChildrenHarold

Maynard

Scott

Alicia (deceased)

Guy

Damon

Oliva

GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren

Molly

Morris

Alex



DIVISION OF $1,800,000 ESTATE PER STIRPES

Robin


Marie (deceased)

Grant (deceased)

Molly

Morris

Alex

Harold

Maynard

Scott

Alicia (deceased)

Guy

Damon

Oliva

John’s ChildrenJohn’s Children GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren($0)

($0)

($300,000)

($200,000)

($200,000)

($200,000)

($600,000)

($150,000)

($150,000)

($0)



DIVISION OF $1,800,000 ESTATE PER CAPITA

Robin


Marie (deceased)

Grant (deceased)

Molly

Morris

Alex

Harold

Maynard

Scott

Alicia (deceased)

Guy

Damon

Oliva

John’s ChildrenJohn’s Children GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren($180,000)

($180,000)

($180,000)

($180,000)

($180,000)

($180,000)

($180,000)

($180,000)

($180,000)

($180,000)



No Inheritors

Property of the deceased “escheats” or reverts to the state.



Trusts

Explain the usefulness of trustsName and describe the various types of trustsDistinguish between express and implied trusts

LESSON 24-2

GOALS



DISTRIBUTION OF A DECEDENT’S ESTATE

Procedure for estate resolution



What’s your verdict

Pedro buys a vacation home as a way to “keep the family together”.

Didn’t want the property to be split up and sold when he dies.

Pedro wants the vacation home to remain as a “family gathering place.”

What can he do?



CREATION OF TRUSTS

A trust is a legal device used to transfer the immediate control of property to another party.

A separate legal entity.



Creation of Trusts

Trustee – legal entity that has title to property.

Settlor – person who creates the trust

Beneficiary – person for whom the trust has been set up



Creation of Trusts

Trustees have the right to be paid for managing the trust.

NJ – 5%-7%



TYPES OF TRUSTS

Express TrustInter vivos trustTestamentary trustCharitable trustPrivate trust

Spendthrift trust

Implied TrustResulting trustConstructive trust



Inter vivos trust

A trust created during the lifetime of the settlor.



Testamentary trust

A trust created after the death of the settlor in accordance with his/her wishes.



Charitable trust

A trust created for altruistic purposes.Raise money to help build shelter for

homeless.



Private trust

A trust created for a private purpose.One type Spendthrift Trust -

protects the beneficiary’s interest in the property from potential creditors.

Beneficiary cannot have any control over the trust.



Express Trusts

Written or oral statements made by the settlor where terms are explicitly stated by the settlor.



Implied Trusts

Resulting Trust

-- Entity intended to receive the benefit of an express trust cannot do so.

Resulting Trust formed to hold the property for its original owner.

What’s your verdict – Oliver formed charitable trust to install air conditioning in local high school.

Transferred property to be sold for for the cause.

School building burned down.



Implied Trusts

Constructive Trust

-- Created to require a person holding property to transfer it to another b/c retention of the property would be a wrongful and unjust enrichment of the holder.

Property obtained via fraud, duress, etc.

Wills, Estates, and Trusts

Documents

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