Chapter 15: Wills & Insurance

1. Chapter 15: Wills & Insurance

2. What You’ll Learn • How to describe what happens when someone dies with and without a will • (p 783) • How to outline the legal procedures that apply when someone dies owning property (p. 785)

3. Why It’s Important Knowledge of wills and estates will help you when the time comes in your life.

4. Section Outline Making a Will Who May Make a Will Formal Requirements of a Will Revoking or Changing a Will

5. Section Outline Family Protection Protection of Spouses Protection of Children Dying Without a Will Settling an Estate

6. Pre-Learning Question What is a will?

7. Making a Will A will is a document that is signed during your lifetime that provides for the distribution of your property upon death. Each state has it own requirements for making a will.

8. Making a Will A person who dies with a will is said to die testate and is called a testator (male) or testatrix (female).

9. Making a Will • A gift of personal property that is made by will is called a bequest, or legacy. • A gift of real property that is made by will is called a devise in most states.

10. Making a Will • Those who receive property by will are referred to as beneficiaries. • The term heir refers to one who inherits property under a will or from someone dying without a will.

11. Who May Make a Will Any person of sound mind who has reached the age of adulthood (eighteen years) may make a will.

12. Formal Requirements of a Will To be valid, a will must conform exactly to the law of the state where it is made. A will that is legally made in one state will be recognized as valid in every state.

13. Formal Requirements of a Will • With some exceptions, a will must be in writing. • It must be signed and witnessed by the number of witnesses required by state law.

14. Pre-Learning Question What do you think it means to revoke a will?

15. Revoking or Changing a Will In some states, a will may be revoked by • Burning, tearing, canceling, or obliterating the will with intent to revoke it • Executing a new one • Marrying after the will was created

16. Pre-Learning Question How are families protected when someone dies?

17. Family Protection State laws contain provisions designed to protect surviving family members when a spouse dies.

18. Family Protection Some states provide for a family allowance, or money taken from the decedent’s estate to meet the family’s needs while the estate is being settled.

19. Family Protection Another family protection is the homestead exemption, which puts the family home beyond the reach of creditors up to a certain limit.

20. Protection of Spouses A surviving spouse who doesn’t like the provisions of a deceased spouse’s will may choose to take a different portion of the estate set by state statute.

21. Protection of Children Children who can prove that they were mistakenly left out of a parent’s will are protected by the laws of most states. Children who are intentionally left out do not have this protection.

22. Protection of Children Adopted children are treated, in most states, as though they were the naturally born children of their adoptive parents. They inherit from the adoptive parents rather than from their natural parents.

23. Pre-Learning Question What happens if you die without a will?

24. Dying Without a Will A person who dies without a will is said to have died intestate. The deceased’s personal property is distributed according to the laws of intestate succession of the state in which the deceased was domiciled.

25. Dying Without a Will In contrast, the real property passes according to the law where the property is located.

26. Dying Without a Will In general, the surviving spouse is entitled to one-third or one-half of the estate. The balance of the estate is usually divided equally among the deceased’s children.

27. Dying Without a Will If any of the deceased’s children are deceased, the estate is distributed in the following order. • Decedent’s grandchildren • Decedent’s parents

28. Dying Without a Will • Decedent’s brothers and sisters • Children of decedent’s brothers and sisters • Decedent’s aunts and uncles • Decedent’s cousins

29. Pre-Learning Question What legal procedure takes place to distribute assets when a person dies?

30. Settling an Estate When people die owning assets, their estate must be probated; that is, it must be settled under the supervision of the probate court.

31. Settling an Estate First, the probate court establishes the validity of the will. A will usually names a personal representative called an executor (male) or executrix (female) to carry out the terms of the will.

32. Settling an Estate If there is no will, or if the executor or executrix named in the will fails to perform, someone must petition the court to settle the estate. That person is called an administrator or administratrix.

33. Settling an Estate The executor or administrator gathers the estate assets, pays the debts and taxes, and distributes the remainder of the assets according to the terms of the will or state law.

34. Read the following scenario and answer the questions below. Petunia Appleby died without a will. Her husband, Clark, had preceded her in death, and they had no children.

35. Petunia had a sister, Daisy, and a brother, Duke. Daisy was still living, but Duke was dead. He had three children, all of whom were still living.

36. Both of Petunia’s parents were dead, but she had one living uncle, Trey. Trey had two sons, both living. After Petunia’s debts and taxes are paid there is $1,000,000.

37. Who inherits from Petunia, if you follow the general guidelines from the text?

38. ANSWER Daisy and Duke’s three children.

39. How much does the heir or heirs inherit?

40. ANSWER Daisy inherits $500,000, and Duke’s three children divide the other $500,000 ($166,667 each).

41. Who is the executor of the estate? How do you know?

42. ANSWER There is no executor because there was no will naming an executor.

43. Section 36.2Assessment Reviewing What You Learned • What are the formal requirements of a will?

44. Section 36.2Assessment Reviewing What You Learned Answer Must conform exactly to the law of the state where it is made to be valid (in writing, signed, and witnessed).

45. Section 36.2Assessment Reviewing What You Learned • How can a will be changed or revoked?

46. Section 36.2Assessment Reviewing What You Learned Answer (1) Burning, tearing, canceling or obliterating the will with intent to revoke; (2) executing a new one; and (3) subsequent marriage. A codicil is a formal document used to supplement or change an existing will.

47. Section 36.2Assessment Reviewing What You Learned • Explain how surviving families are protected legally when a spouse dies.

48. Section 36.2Assessment Reviewing What You Learned Answer Some states provide for a family allowance (money taken from the decedent’s estate for the family to meet its needs while the estate is being settled).

49. Section 36.2Assessment Reviewing What You Learned Answer The homestead exemption puts the family home beyond the reach of creditors up to a certain limit.

50. Section 36.2Assessment Reviewing What You Learned • What happens when a person dies without a will?