Wills and Trusts

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


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


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Chapter 52Wills and TrustsCopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Estate Planning (Definition):Process by which an individual decides what to do with his/her real and personal property during and after life52-2The Uniform Probate CodeGuides states in developing laws related to estate planning52-352-4Important Estate Planning ToolsWill: Legal document that outlines how a person wants his/her property distributed on deathTrust: Allows a person to transfer property to another person; property used for benefit a third person52-5Reasons Individuals Engage In Estate PlanningTo provide for their family financially after their deathTo reduce taxes and preserve wealthTo promote family “harmony”To allow individuals in non-traditional family relationships to gain benefits of traditional family relationshipsIntestacy Statutes (Definition):Outline how a person’s property will be distributed if he/she dies without a will52-652-7Requirements For A Legally Valid WillTestamentary Capacity: Person must be old enough to write will, and must be “of sound mind”Document in writing (usually a typed, written instrument)Testator’s Signature (including initials on each page)Witnesses (who “attest to” the will)52-8Exhibit 52-2: Special Kinds Of WillsOral Will: Will that testator declares verbally during his/her last illness, in front of witnesses, who later document testator’s wishesHolographic Will: Will that testator writes and signs in his/her own handwriting; usually states do not require witnesses, because when entire will is in handwriting, less chance of fraud/forgeryMutual Will: Will that two/more testators execute in which they leave property to each other, provided the survivor agrees that when he/she dies, remaining property will be distributed consistent with plan created by all testators52-9Legal Issues Related To WillsGrounds for contesting will: Will fails to meet legal requirementsTestator a victim of fraud/undue influence Changing will: By writing a will codicil (wills are “ambulatory”, meaning testators can change them)A “codicil” is a separate document with new provisions that outline changes to willTestator must satisfy same procedures to make a valid codicil as those followed in making original willRevoking will: Most common method is destruction of willSettlement of estate: By way of a personal representative (executor/executrix), through process known as probate52-10Creation of A TrustPerson who creates trust (settlor) delivers and transfers legal title to property to another person (trustee), who holds the property and uses it for benefit of third person (beneficiary)Trusts are usually created through formal, written documentsCommon trust components:Trust Corpus: Property held in trustIncome Corpus: Trust income generated through interest and/or appreciation52-11Types of TrustsExpress:Living Trust: Created when settlor is alive Testamentary Trust: Created through a willImplied: Created by courtTermination of TrustThrough provision in trust which either indicates date on which trust will terminate, or specifies an event that will terminate trust52-1252-13End-Of-Life Decisions: “Advance Directives” Types of advance directives (through which person can express his/her wishes about efforts to prolong life, and the “right to die”) include:Living Wills: Allow individuals to express their wishes regarding extent of medical treatment desired if they are in an accident or suffer from a life-threatening illnessHealth Care Proxies/Durable Powers of Attorney: Allow individuals to make medical decisions for othersThe Uniform Anatomical Gifts Act (UAGA):Provides that any individual 18 years old/older may give all/any part of his/her body to donee on death; such donations are called “anatomical gifts”52-14The Convention Providing for a Uniform Law on the Form of an International Will (1973)Sponsored by International Institute for Unification of Private Law (UNIDROIT); protects wills written in other countries, provided the wills follow a particular format52-15

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