© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 1

WILLS, TRUSTS, AND ELDER LAW

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall

CHAPTER 52 CHAPTER 52

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 2

WillWill

A declaration of how a A declaration of how a

person wants his or her person wants his or her

property distributed after property distributed after

death.death.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 3

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 the testator’s property at the time of the testator’s death.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 4

Requirements for Making a Will

• Testamentary Capacity – legal age and “sound mind.”−Videotaping will signing may provide evidence

of sound mind.

• Writing – formal or informal, typed, or handwritten, on any paper.

• Testator’s Signature.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 5

Attestation by Witnesses

• Wills must be attested to by mentally competent witnesses.

• Most states require two or three witnesses.

• Most jurisdictions stipulate that interested parties cannot be witnesses.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 6

Codicil

• Legal way to change a will.

• Separate document must be executed to amend a will.

• Executed with the same formalities as a will.

• Must incorporate by reference the will it is amending.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 7

Revoking a Will

• A will may be revoked by acts of the testator.– If the testator intentionally burns, tears,

obliterates, or otherwise destroys it.– If testator executes subsequent will that

expressly revokes prior will.

• A will may be revoked by operation of law.– E.g., by divorce or annulment.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 8

Joint and Mutual Wills

Joint Will• A will that is executed by two

or more testators.

Joint Will• A will that is executed by two

or more testators.

Mutual Wills• Occur where two or more

testators execute separate wills that leave their property to each other on the condition that the survivor leave the remaining property at the time of death as agreed by the testators.

Mutual Wills• Occur where two or more

testators execute separate wills that leave their property to each other on the condition that the survivor leave the remaining property at the time of death as agreed by the testators.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 9

Special Types of Wills

• Holographic Will– Will that is entirely handwritten and signed by

the testator.

• Noncupative Will– Oral will that is made before a witness during

the testator’s last illness.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 10

Simultaneous Deaths

• 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 survived.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 11

Undue Influence

• Occurs where one person takes advantage of another person’s mental, emotional, or physical weakness and unduly persuades that person to make a will.– May be proven by circumstantial evidence.– Videotaping will signing may provide evidence

that signing was voluntary.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 12

Probate

• Process of a deceased’s property being collected, debts, and taxes being paid, and the remainder of the estate being distributed.

• Probate Court supervises the administration and settlement of an estate.– State court

• Appoints personal representative to administer estate– Executor named in will.– Administrator appointed if died intestate.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 13

Types of Testamentary Gifts

Bequest

Specific Gift

General GiftResiduary Gift

Devise

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 14

Per Stripes Distribution

• A distribution of the estate that makes grandchildren and great-grandchildren of the deceased inherit by representation of their parent.– They split what their deceased parent would have

received.

• If their parent is not deceased, they receive nothing.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 15

Per Stirpes Distribution

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 16

Per Capita Distribution

• A distribution of the estate that makes each grandchild and great-grandchild of the deceased inherit equally with the children of the deceased.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 17

Per Capita Distribution (continued)

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 18

Ademption and Abatement

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.

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 the 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.

Abatement

• If the property the 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.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 19

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 intestacy statute.

If there are no heirs, the deceased’s property escheats (goes) to the state.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 20

Trust

• One person transfers title to property to another person to be held and used for the benefit of a third person.

• Trust Corpus – the property held in trust.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 21

Parties to a Trust

• Settlor or Trustor – person who creates a trust.

• Trustee – person who hold legal title to the trust corpus and manages the trust for the benefit of the beneficiary or beneficiaries.

• Beneficiary – person for whose benefit a trust is created.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 22

Parties to a Trust (continued)

Equitable title to the trust corpusEquitable title to the trust corpus

Legal title to the trust Legal title to the trust corpuscorpus

Manages the trust Manages the trust for the benefit of the for the benefit of the beneficiary or beneficiary or beneficiariesbeneficiaries

SettlorSettlor TrusteeTrustee

Beneficiary Beneficiary or or

BeneficiariesBeneficiaries

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 23

Express Trust

• A trust created voluntarily by the settlor.– Inter Vivos Trust (Living Trust) – a trust that

is created while the settlor is alive.– Testamentary Trust – a trust created by will.

Trust comes into existence when the settlor dies.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 24

Implied Trusts

• A trust that is implied by law or from the conduct of the parties.– Constructive Trust – an equitable trust that

is imposed by law to avoid fraud, unjust enrichment, and injustice.

– Resulting Trust – a trust that is created by the conduct of the parties.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 25

Special Types of Trusts

• Charitable Trusts – created for the benefit of a segment of society or society in general.

• Spendthrift Trusts – designed to prevent a beneficiary’s personal creditors from reaching his or her trust interest.– All control over the trust is removed from the

beneficiary.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 26

Special Types of Trusts (continued)

• Totten Trusts – 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.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 27

Termination of a Trust

• A trust is irrevocable unless the settlor reserves the right to revoke it.

• Generally, a trust either:– Contains a specific termination date, or– Provides that it will terminate upon the

happening of an event.

• Upon termination, the trust corpus is distributed as provided in the trust agreement.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 28

Living Trusts

• A method for holding property during a person’s lifetime and distributing the property upon that person’s death. – Also called a grantor’s trust and revocable

trust.

• The grantor is the person who creates a living trust. – Also called a trustor.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 29

Living Trusts (continued)

• Used to avoid probate.

• Do not have any effect on amount of estate taxes or income taxes.

• Do not allow grantor to avoid creditors.

• Like wills, set up by lawyers; may be challenged upon grantor’s death.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 30

Funding and Operation

• Grantor transfers title to property to trust.

• Trust revocable during grantor’s lifetime.

• Trust names trustee, normally grantor.– Should also name successor trustee.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 31

Beneficiaries

• Income Beneficiary: Person who receives the income from the living trust during his or her life. – Usually the grantor.

• Remainder Beneficiary: Person who receives the assets of the living trust upon the death of the grantor.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 32

Living Will and Health Care Directive

• Document stating which lifesaving measures the signor does and does not want.

• Proof of patient’s wishes regarding medical treatment.

• May name health care agent to make health decisions.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 33

Right to Die Issues

• U.S. Supreme Court has upheld Oregon Death with Dignity Act, which allows physician assisted suicide.

• Clears way for states to enact such laws if they choose.