Chapter 24 Wills, Estates, and Trusts

1. Chapter 24Wills, Estates, and Trusts Lesson 6-1 Legal Consequences of Death

2. Death and the Law • When a person dies, the law looks for his or her instructions to resolve some basic legal issues that arise. • These issues include how the debts of the person who dies are to be paid and what is to be done with the remaining property. • Decedent – The person who dies.

3. Death and the Law • The necessary instructions are found either in the wishes of the decedent as expressed in a will, in statutes (if the decedent did not leave a will), or in both.

4. Death without a Will • Those who die without a valid will are said to have died intestate. • The courts appoint a personal representative know as the administrator (if male) or administratrix (if female) to take charge of the intestate’s property. • Estate – Property of the deceased

5. Death without a Will • The representative uses the estate to pay all debts, including the costs of administering the estate. • The remainder of the property will then be distributed in accordance with the state’s intestacy statute. • Statutes vary from state to state.

6. Death without a Will • Generally, the surviving spouse will receive 1/3 to 1/2 of the estate and the remainder will be divided equally between the children or grandchildren. • If there are no children or grandchildren, then the decedent’s parents or siblings will receive the remainder.

7. Death with a Will • It is usually much to the advantage of all concerned if the decedent dies testate – leaving a valid will. • A will is a legal expression, usually in writing, by which a person directs how her or his property is to be distributed after death.

8. Death with a Will • The maker of the will is called the testator if male and the testatrix if female. • With a will, a person can direct his or her estate to where they can do the most good. • A will also allows its maker to name a personal representative – executor if male and executrix if female – to carry out the directions in the will.

9. Death with a Will • Living Will is a term used for a document directed to attending physicians regarding a person’s choices about the use of life-support systems in treatment for terminal illness or vegetative state. • Don’t mix the two up.

10. Creation and Execution of a Valid Will • To counteract the possibility of forgery, the law has strict requirements regarding the preparation and execution of valid wills. • To be valid, a will must conform to the state laws regarding creation and execution. • Most basic requirements in almost ever state are on page 361 and 362.

11. Amendment of a Valid Will • A will takes effect only upon the death of the maker. • It can be changed or canceled at any time during the maker’s life. • It is important that the maker of a will keep it current. Marriage, divorce, birth of children, and other significant changes should be reflected by amendments.

12. Amendment of a Valid Will • Codicil – a formal, written, and witnessed amendment. • A codicil must be executed with the same formalities as a will.

13. Special Types of Wills • Holographic Will – is valid without witnesses. • One that was written entirely by the decedent’s own hand and signed by him or her. • Nuncupative Will – Oral will recognized in some states if proclaimed during the maker’s last illness or by service personnel on active duty.

14. Revocation of a Will • A will is subject to partial or total change at the desire of the testator and is only intended to take effect upon the testator’s death. • A will can be completely revoked.

15. Distribution of the Estate • Whether a person dies with or without a valid will, a probate court will supervise the handling of the decedent’s estate. • First item of business on the executor’s or administrator’s list is to offer proof of death to the courts. • Death Certificate • Official notification of death from armed services • Testimony of presence in a disaster for unidentified bodies or irretrievable bodies.

16. Distribution of the Estate • If a person simply vanishes without a trace, after several years he or she can be declared dead under the Enoch Arden Laws. • This law was named for a poem by Tennyson about a seaman who returns home after a long absences to find his widow married to another. • Time required is either 5 or 7 years of absence in most states.

17. Distribution of the Estate • After proof of death, duties are: • Assembling, preserving, inventorying, and appraising the assets of the estate and collecting the debts owed to it. • Giving public notice of the estate and the necessity for filing claims against it within the statutory period • Paying valid claims against the estate • Distributing the remaining property according to the will or statute.

18. Distribution Without a Will • Laws vary from state to state • Read the state of Hawaii’s laws of intestate on page 364.

19. Distribution With a Will • If there is a valid will, its terms are to be 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 such as a surviving spouse may elect to receive 1/3 or 1/2 of the property.

20. Distribution With a Will • The most complex will related issues is the split of property among the lineal descendants. • Children, grandchildren, surviving spouse. • If there are no inheritors, the property of the deceased escheats or reverts to the state unless otherwise stated in a will.

21. Chapter 24Wills, Estates, and Trusts Lesson 6-2 Trust

22. Creation of Trusts • Trust – when the transferee of the property is a separate entity under the law, a trust has been created. • A trust can be created to accomplish any conceivable legal purpose. • Trustee – the legal entity that has the title to the subject property • Trustee must accomplish the trust’s objectives

23. Creation of Trusts • Settlor – the creator of a trust • Beneficiary – the party for whose benefit the trust is managed in accordance with the settlor’s wishes. • Trustee has a fiduciary duty requiring the highest care and loyalty to the beneficiary. • Trustee cannot cause the beneficiary to acquire liability to third parties.

24. Creation of Trusts • Go to page 367 and discuss the tables for per stripes and per capita divisions of an estate. • Trustees have the right to be paid for their services. • Probate courts will determine how much the trustee’s fee might be. • Settlor may also detail in the trust document how much the trustee will receive.

25. Types of 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 directions in his/her will. • Charitable trust – A trust created for the fulfillment of an altruistic purpose.

26. Types of Trust • Private trust – a trust created for a private purpose. • Spendthrift trust – private trust that protects the beneficiary’s interest in the subject property from the beneficiary’s creditors. • All these trust are written or oral statements in terms stated by the settlor and are all known as express trust.

27. Types of Trust • Implied trust: • Resulting trust – trust formed when the entity intended to receive the benefit of an express trust cannot do so. • Constructive trust – trust created to require a person holding property to transfer it to another because retention of the property would be wrongful and unjust enrichment of the holder.