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Chapter 52
Wills, Trusts, and Estates
Learning Objectives
List and describe the requirements for making a valid will
Describe the different types of testamentary gifts Identify how property is distributed under intestacy
statutes if a person dies without a will Define trust and living trust and identify the parties to
a trust Describe living wills and health care directives
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Key Terms
Will: declaration of how one wants property distributed after death
Testator/testatrix: the person who makes a will Beneficiary: a person or organization designated in
the will that receives all or a portion of testator’s property at the time of the testator’s death
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Will
Requirements for making a will: Testamentary capacity: testator must have been
of legal age and “sound mind” when the will was made
Writing: wills must be in writing to be valid Testator’s signature: testator’s signature must
appear at the end of the will
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Will
Attestation Action of a will being witnessed by two or three
objective and competent people Codicil
Separate document that must be executed to amend a will, with the same formalities as a will
Revocation Termination of a will by acts of the testator
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Will
Joint wills Executed by two or more testators
Mutual wills Two or more testators execute separate wills that
make testamentary dispositions of their property to each other
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Will
Uniform Simultaneous Death Act Provides that if people who would inherit property
from each other die simultaneously, each person’s property is distributed as though he or she had survived
Probate Process of a deceased’s property being collected,
debts and taxes being paid, and the remainder of the estate being distributed
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Special Types of Wills
Holographic wills Entirely handwritten and signed by the testator
Nuncupative wills Oral wills that are made before witnesses Also called “dying declarations” or “deathbed
wills”
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Testamentary Gifts
Devise: a gift of real estate by will Bequest: a gift of personal property by will Specific gift: a gift of a specifically named piece of
property General gift: a gift that does not identify the specific
property from which the gift is to be made Residuary gift: a gift of an estate left after the debts,
taxes, and specific and general gifts have been given
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Testamentary Gifts
Per stirpes distribution Distribution of an estate in which grandchildren
and great-grandchildren of the deceased inherit by representation of their parent
Per capita distribution Distribution of an estate in which each grandchild
and greatgrandchild of the deceased inherits equally with the children of the deceased
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Exhibit 52.3 - Per Stirpes Distribution
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Exhibit 52.4 - Per Capita Distribution
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Testamentary Gifts
Ademption If a testator leaves a specific devise of property to
a beneficiary, but the property is no longer in the estate when the testator dies, the beneficiary receives nothing
Abatement If the property a testator leaves is not sufficient to
satisfy all the beneficiaries named in a will and there are both general and residuary bequests, the residuary bequest is abated first
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Intestate Succession
Situation Parties who receive deceased’s property
Deceased dies with a valid will
Beneficiaries named in the will.
Deceased dies without a valid will
Heirs set forth in the applicable state intestacy statute. If there are no heirs, the deceased’s property escheats to the state.
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Irrevocable Trusts
Trust: legal arrangement established when one person transfers title to property to another person to be held and used for the benefit of a third person
Settlor: person who creates a trust Trustee: person or an entity that holds legal title to a
trust corpus Trust corpus: property and assets held in trust
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Irrevocable Trusts
Income beneficiary of a trust: person or an entity to be paid income from a trust
Remainder beneficiary of a trust: person or an entity to receive the trust corpus upon the termination of a trust
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Exhibit 52.5 - Trust
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Irrevocable Trusts
Inter vivos trust Trust that is created while the settlor is alive Settlor transfers legal title of property to a named
trustee to hold, administer, and manage for the benefit of named beneficiaries
Testamentary trust Trust created by will Comes into existence when the settlor dies
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Special Types of Trusts
Constructive trust Equitable trust that is implied by law to avoid
fraud, unjust enrichment, and injustice Resulting trust
Trust that is implied from the conduct of the parties
Charitable trust Created for the benefit of a segment of society or
society in general
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Special Types of Trusts
Spendthrift trust Designed to prevent a beneficiary’s personal
creditors from reaching his or her trust interest Totten trust
Created when a person deposits money in a bank account in his or her own name and holds it as a trustee for the benefit of another person
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Living Trust
Method for holding property during a person’s lifetime and distributing the property upon that person’s death
Does not reduce estate taxes Does not reduce the grantor’s income taxes Does not avoid creditors Subject to property division upon divorce Does not avoid controversies upon the grantor’s death
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Funding and Operation of a Living Trust
To fund a living trust, grantor transfers title to his or her property, called trust corpus, to the trust
Living trust is revocable during the grantor’s lifetime A living trust names a trustee who is responsible for
maintaining, investing, buying, or selling trust assets Trust should name a successor trustee to replace the
grantor-trustee if the grantor becomes incapacitated or too ill to manage the trust
Income and remainder beneficiaries
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Undue Influence
One person takes advantage of another person’s mental, emotional, or physical weakness and unduly persuades that person to make a will
Persuasion by the wrongdoer must overcome the free will of the testator
A will may be found to be invalid if it was made as a result of undue influence on the testator
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Case 52.1: Undue Influence
Case Medlock v. Mitchell Web 2006 Ark. App. Lexis 320 (2006) Court of Appeals of Arkansas
Issue Has Jerald rebutted the presumption of undue
influence?
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Living Will and Health Care Directive
Living will States which life-saving measures the signor does and does
not want Health care directive
The maker names someone to be his health care agent to make all health care decisions
Right to die Terminally ill person may make a decision to end his or her
life
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Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 26
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