1. Chapter 24 Wills, Testaments, and Advance Directives

2. Estate Planning Estate planning – arrangements made to maintain and protect assets during and after a person’s life.

3. Last Will and Testament oWills nOriginally referred to as an instrument which disposed of real property (land and anything permanently attached to it). nToday a gift of real property in a will is known as a devise.  Maker of gift is devisor.  Recipient of gift is devisee.

4. Testament oTestament nOriginally referred to as an instrument that disposed of personal property (things other than real property). nToday a gift of personal property in a will is known as a bequest or legacy.  Person making gift is legator.  Recipient is legatee.

5. Last Will and Testament Today Today there is no distinction between a will and a testament, and terms are interchangeable.

6. Parties to a Will Testator – man who makes a will. Testatrix – woman who makes a will. Beneficiary – person who receives a gift under a will.

7. Will Terminology Testate – the state of a person who has made a will. Testamentary disposition – a gift of property to take effect upon death of testator.

8. Statutory Requirements oUniform Probate Code nAttempts to standardize and modernize laws relating to decedents (deceased persons), minors, and others who need protection. nAdopted by 16 states.

9. Valid Will Requirements Typical requirements for a valid will: – Eighteen years of age – Sound mind (also called testamentary capacity) – In writing – Signature of testator – Attestation and subscription – Testator’s presence – Two or more competent witnesses

10. Age Requirement oPeople become 18 on day before their birthday. oExceptions to requirement in some states for military personnel and married persons.

11. Sound Mind Requirement (Testamentary Capacity) oTo be of sound mind at the time of execution of the will testator must: nUnderstand nature and extent of property owned and their relationship to persons with a natural claim to estate. nBe free from delusions that might influence the disposition of their property. nBe able to comprehend that they are making a will.

12. Sound Mind Requirement oIn a will contest, proponent (party presenting the will to the court) has burden of proving testator was of sound mind.

13. Writing Requirement oWriting may be printed, typed, or holographic (hand written by testator).

14. Signature Requirement oSignature of testator: nNeed not be at the end of will document. nMay be in any form, including an X mark.

15. Competent Witnesses Requirement oCompetent witnesses nAny person of sufficient understanding and not a recipient of a beneficial devise or legacy under the will. nTwo or more are required.

16. Competent Witnesses Requirement Witnesses (cont’d) – May be precluded from taking any devise or bequest given in the will. – Some states allow witnesses amount of their intestate share (amount they would have inherited if decedent died without a will).

17. Attestation and Subscription Attest – to bear witness to testator’s signature. Subscribe – to write below or beneath.  Attesting witnesses (people who witness signing of a document) subscribe after testator signs.

18. Testator’s Presence Requirement oWitnesses must subscribe in the presence of the testator (within sight).

19. Right to Die Laws Right-to-die laws – Allow dying people to refuse extraordinary life- prolonging treatment. – Court encourages use of advance directives. – Euthanasia – controversial issue of hastening death of a terminally ill person or one in immense pain. 2006 Gonzales v. Oregon (546 U.S. 243).

20. Advance Directives oAdvance directives nWritten statements specifying whether people want life-sustaining medical treatment in the event of a terminal illness.

21. Types of Advance Directives oLiving will nWritten expression of desire for natural death. nAlso called directive to physicians, medical directive or health care declaration.

22. Types of Advance Directives oHealth care proxy nWritten statement authorizing agent or surrogate (person authorized to act for another) to make medical decisions. nAlso called a medical power of attorney.

23. Types of Advance Directives Durable power of attorney – Authorizes another to act on one’s behalf with language indicating it survives incapacity or takes effect upon incapacity (referred to as a springing power). – Not limited to health care issues in most states.

24. Chapter 25 Revocation, Lapses, and Ademption

25. Revocation oWills are revocable (capable of being revoked, or cancelled). oWills may be revoked in a number of ways.

26. Means of Revoking a Will oDestruction (burning, tearing, canceling, or obliterating) with intent to revoke will.

27. Means of Revoking a Will oExecution of a new will. oMaking a codicil (alteration or addition to existing will). nWill and codicil are read together as one instrument which has effect of republishing (reestablishing) the will.

28. Means of Revoking a Will oSubsequent marriage nIn some states, the marriage of a person after making a will revokes the will.

29. Means of Revoking a Will oDivorce or annulment after making a will nRevokes any gift to former spouse. nCancels nominations of ex-spouse as executor, trustee, etc., unless will says otherwise. nDoes not revoke entire will.

30. Failure of Legacies and Devises A gift made in a will may fail in two ways: – Lapse – when recipient (legatee or devisee) predeceases the testator. – Ademption – when the bequeathed item is not in existence at testator’s death.

31. Lapsed Legacies and Devises Lapsed legacy or lapsed devise – Bequest or devise has no effect. – Lapsed gift falls into residuary clause (clause leaving all the “rest, residue and remainder”). – If no residuary, lapsed gift passes according to laws of intestate succession (distribution of property of one who dies without a will).

32. Antilapse Statutes Antilapse statutes – minimize effect of lapses by allowing gift to predeceased relative to pass to their issue (children, grandchildren, etc.).

33. Ademption oAdemption (or advancement) nRight to receive gift is adeemed (taken away). oAdemption can occur in two ways: nSatisfaction (discharging a legal obligation by paying party what is due). nExtinction (destruction or disposal of a specific legacy by the testator during their lifetime).

34. Ademption (Cont’d.) oLegacies and devises are classified in three ways: nSpecific legacy - gift of a particular piece of personal property; nGeneral legacy - gift coming out of estate generally (usually money); or nDemonstrative legacy - a combination of the two.

35. Simultaneous Death Simultaneous death – When two or more people die in such a way that it cannot be determined who died first. – Property of each decedent is distributed as if they had survived unless will provides otherwise.

36. Slayer Statutes oSlayer statutes regard murderers as having died before their victims to prevent them from inheriting from someone they murdered.

37. Chapter 26 Principal Clauses in a Will

38. Will Clauses oA valid will is individualized and does not require a particular form. oThere are many common clauses in most wills prepared by attorneys.

39. Exordium Clause Exordium clause (publication clause) – Introductory paragraph with name and domicile (principal residence) of testator and revoking prior wills and codicils.

40. Debts and Funeral Expenses Clause oDebts and funeral expenses clause  Directive that just debts and funeral expenses be paid out of residuary estate (what remains after individual items are distributed).

41. Dispositive Clauses Dispositive clauses – name beneficiaries and state what each receives. – Gift to then living issue per stirpes (by right of representation) – children of deceased heirs inherit deceased parent’s share. – Gift to then living issue per capita (per head) – all living issue share equally.

42. Dispositive Clauses Incorporation by reference – reference to a list or other document makes it a part of the will.

43. Residuary Clause Residuary clause – disposes of testator’s remaining property.

44. Clauses Used to Appoint Separate clauses are used to appoint the personal representative, guardian, and trustee.

45. Personal Representative Executor (male) or executrix (female) -- personal representative of estate named in will. Administrator (male) or administratrix (female) – court-appointed person to administer estate of intestate

46. Guardian Guardian – person with duty of legal care and management of person or person and property of minor or incompetent. – Guardian ad litem – appointed to bring or defend a lawsuit – Conservator – person appointed for care and management of property (not person) of one who is incompetent.

47. Trustee Trustee – appointed in will to hold property for benefit of another where gift is left in trust.

48. Additional Will Clauses No surety on bond clause – provides that personal representative may serve without needing a surety (person to stand behind their obligation) on their bond (promise to pay amount of bond if duties are not faithfully performed).

49. Additional Will Clauses Fiduciaries powers clause – grant of specific powers and authority to fiduciaries (people in trust positions) such as personal representatives.

50. Additional Will Clauses Tax clause – establishes source for payment of death taxes (usually residuary estate). No-contest clause – disinherits anyone who contests provisions of the will (also called in terrorem clause).

51. Additional Will Clauses Testimonium clause (signature clause) – Precedes testator’s signature. – Declares that testator’s signature is attached. Attestation clause – Precedes witnesses’ signatures. – Recites that will was witnessed at testator’s request and signed by witnesses in testator’s presence and in presence of each other.

52. Additional Will Clauses Self-proving affidavit – allows will without testimony of witnesses if it contains a self- proof clause and no one objects.

53. Chapter 27 Disinheritance and Intestacy

54. Spousal Protection Against Disinheritance oState laws protect surviving spouses from disinheritance. oSurviving spouse may disclaim provisions of will and claim a statutory sum called elective share or forced share. nReferred to as a forced heir.

55. Spousal Protection – State Provisions Intestate share – Some states allow disinherited spouse to take amount they would have received if spouse had no will. Waive spouse’s will – Some states allow surviving spouse to petition to waive spouse’s will. – Must be done within 6 months after will is probated (proved and allowed by court).

56. Spousal Inheritance on Waiving a Will Typical formula: Deceased spouse survived by issue: Surviving spouse receives one-third of real and personal property, limited to $25, 000 outright and a life estate (ownership interest limited to person’s lifespan) in remainder. Survived by kindred (blood relatives), no issue: $25, 000 outright plus a life estate in one-half of remaining property. Survived by no issue or kindred: $25,000 outright plus one-half of remaining property absolutely.

57. Dower and Curtesy Developed at common law as a way to protect the spouse of one who owned real property. – Dower – the right of a widow to a life estate in one- third of real property owned by her husband during coverture (marriage). – Curtesy – the right of a widower, if issue of the marriage were born alive, to a life estate in all real property owned by his wife during coverture.

58. Pretermitted Children oPretermitted children (omitted from a will) receive nothing unless they can show the omission was unintentional. nBurden is on omitted child to show the omission was unintentional. nMust be done through a next friend (another person) because child cannot sue until reaching majority (becoming an adult).

59. Homestead Protection Homestead exemption laws – allows a head of household to designate a house and land as a homestead (property beyond the reach of creditors and claims of others provided the family uses it as a home).

60. Distinctive Relationships Relationships determine inheritance rights: – Half-blood relatives – one parent in common. May inherit equally to whole blood; one-half or only if no whole blood. – Adoption – legal relationship with natural parents replaced by similar rights and duties toward adoptive parents. Adopted children inherit from and through adoptive parents as descendents (those who are of the blood stream).

61. Distinctive Relationships Relationships and inheritance rights (cont’d): – Illegitimate children (also known as bastards and non-marital children). Inherit from mother and maternal ancestors. Inherit from fathers who marry mothers, acknowledge paternity, or are adjudicated fathers in a paternity proceeding (also known as an affiliation proceeding).

62. Intestacy Intestacy – dying without a will. – Personal property passes under law of state of domicile. – Real property passes under law where property is located.

63. Former Laws of Intestacy Laws of descent and distribution – former laws of inheritance, distinguished real property from personal property. – Real property descended to eldest son under doctrine of primogeniture. If parents had no sons, all daughters took property as a single heir (coparceners). – Personal property was distributed by the church.

64. Present Laws of Intestacy Present laws of intestate succession also distinguish real from personal property. – Real property – ownership is vested (fixed or absolute) in heirs at moment of death. – Personal property – passes to and is distributed by the administrator.

65. Intestate Succession Personal & Real Property Allotted to surviving spouse (if any) first. Balance to lineal descendants (direct downward line from decedent's children). – No lineal descendants – balance goes to lineal ascendants (direct upward line). – No living lineal relatives – balance goes to collateral relatives (siblings, aunts/uncles, cousins, etc.)

66. Rights of Surviving Spouse oSurviving spouse is typically entitled to: n1/2 of estate if deceased is survived by issue. nLump sum and 1/2 of remainder if kindred but no issue. nWhole estate if no kindred and no issue. nRights of other heirs, subject to rights of surviving spouse.

67. Chapter 28 Personal Representative of the Estate

68. Estate Settlement Personal Representative – appointed by the court to settle the estate and act in a fiduciary capacity (position of trust). – Appointing court may be called Surrogate’s Court, Orphan’s Court, Prerogative Court, Probate Court, Family Court, or Court of Ordinary.

69. Titles of Personal Representatives Executor or executrix – representative nominated in decedent’s will. Administrator or administratrix – person appointed by court to administer estate of intestate.

70. Successor Personal Representatives oIf a personal representative cannot fulfill their obligations, court appoints a new administrator referred to as a Successor Personal Representative under the Uniform Probate Code.

71. Types of Successor Personal Representatives  Administrator de bonis non (administrator d.b.n.) Appointed to complete settlement of estate where previous administrator died, resigned, or was removed.

72. Types of Successor Personal Representatives  Administrator cum testamento annexo (administraor c.t.a.) Appointed to administer testate estate where no executor is nominated or person nominated cannot serve. Also called administrator with the will annexed (administrator w.w.a.)

73. Types of Successor Personal Representatives  Administrator de bonis non cum testamento annexo (administrator d.b.n.c.t.a.) Appointed to replace previous executor or administrator c.t.a. who has died, resigned, or been removed.

74. Particular-Purpose Administrators Special Administrator – appointed by court to handle estate for a limited time. Public Administrator – official who administers estate of one who dies intestate with no relative or heirs entitled to act. Voluntary Administrator – undertakes informal administration of a small estate, known as summary administration.

75. Particular Purpose Administrators oAncillary administrator nAppointed by court to handle affairs of a decedent in a foreign state. oAdministrator pendent lite (pending suit) nTemporary administrator appointed by court to protect estate assets in a will contest (suit over allowance or disallowance of a will).

76. Particular Purpose Administrators Administrator ad litem (for the suit) – appointed by the court to supply a necessary party to a suit in which the estate has an interest. Executor de son tort – person who performs the duties of an executor without authority to do so.

77. Chapter 29 Settling an Estate

78. Petitioning the Court Petition is filed by interested party for allowance of the will (if one exists) and appointment as personal representative. – If decedent died testate – executor appointed in will files petition. – If decedent died intestate – heir (person who inherits property from estate), next of kin, or creditor files petition.

79. Petitioning the Court oHearing is held to decide the petition. nNotice of hearing goes to heirs at law (people who would have inherited if decedent died intestate). nCourt issues decree (decision of a court of equity) or judgment (decision of a court of law).

80. Fiduciary’s Bond Personal representative in fiduciary capacity (position of trust) must file bond (promise to pay if duties are not faithfully performed). – Sureties – stand behind personal representative’s debt.

81. Letters oCertificate of appointment is issued by court once personal representative files bond with sureties. nCalled letters testamentary in a testate estate and letters of administration in an intestate estate.

82. Inventory Inventory – document listing the assets of the estate. – Filed with court by personal representative. – Followed by waiting period during which creditors may file claims.

83. Federal Estate Taxes Federal Estate Tax – imposed when gross estate of deceased exceeds exempt amount. – Must be filed within 9 months. – Congress passed a late-term bill in 2010 which exempted the first $5 million of an estate from taxation. – Anything more that $5 million is subject to a 35% tax.

84. Federal Estate Tax – Gross Estate oGross estate of deceased includes: nIndividually and jointly owned real or personal property nLife insurance nInter vivos (between the living) trusts nGifts made in contemplation of death, or gifts causa mortis (made within 3 years of death).

85. Federal Estate Tax - Deductions oDeductions from gross estate: nDebts of decedent, nFuneral expenses, nAdministration expenses, nAmounts willed to charity nAmounts inherited by a surviving spouse (the marital deduction).

86. Federal Gift Tax Federal gift tax – a donor only owes gift tax unless the total amount of gifts made during the donor’s lifetime exceeds a $5 million tax credit. Tax credit is the sum of money used to offset what is owed in taxes.

87. State Death Taxes State death taxes may be imposed on the estate or on heirs to estate. – Estate taxes – imposed on decedent’s estate. – Inheritance taxes – imposed on a person who inherits from decedent’s estate.

88. Distribution and Accounting Distribution – after taxes and debts are paid, assets are distributed according to will or intestate laws. Accounting – first and final account is prepared, detailing amounts received and distributed by administrator.

89. Contesting a Will Will may be contested on following grounds: – Will was improperly executed. – Testator was of unsound mind. – Will’s execution was obtained by fraud or undue influence.

90. Contesting a Will – Burden of Proof If grounds are for improper execution or unsound mind – proponent (one offering will for probate) has burden of proof. If grounds for contest are fraud or undue influence – person claiming fraud or undue influence has burden of proof.

91. Chapter 30 Trusts

92. Trust Trust – right of ownership to property held by one person for the benefit of another. – Legal title (full, absolute ownership) is separated from equitable title (the right of beneficial enjoyment) in the property. – Property held in trust is called corpus, trust res, trust fund, trust property or trust principal.

93. Parties to a Trust Person who establishes trust – called the settlor, grantor, trustor, or donor. Trustee – person who holds legal title for the other’s benefit is the; corporations and banks can be trustees as well. Beneficiary – person who holds beneficial title (also called cestui que trust).

94. Testamentary Trusts Testamentary trust – created by a will; comes into existence on death of testator.

95. Living Trusts Living trust (or inter vivos trust) – created by settlor while alive and established by a document called a trust deed or trust indenture. – Conveyance in trust – settlor conveys legal title to trustee for benefit of another. – Declaration of trust – settlor declares in writing they are holding legal title for benefit of another.

96. Living Trusts – Types Irrevocable living trust – settlor loses complete control over corpus during lifetime and cannot make changes. Revocable living trust – settlor may rescind or make changes at any time.

97. Spendthrift Trust Spendthrift trust – designed to provide a fund to maintain a beneficiary who spends improvidently. – Restricted or disallowed in some states.

98. Charitable Trusts Charitable trust (or public trust) – established for charitable purposes. – Beneficiary must be uncertain to settlor. – Not affected by rule against perpetuities (provides that interest in property is void unless it vests not later than 21 years after some life in being, plus gestation period, at time of trust’s creation) – can last forever. – Vest means that a future right or benefit becomes presently owned

99. Charitable Trusts – Types Charitable remainder trust – donor or a beneficiary retains income for life after which corpus goes to charity. Charitable remainder annuity trust – fixed amount of income given annually to beneficiary, remainder to charity). Charitable remainder unitrust – fixed percentage of income given annually to beneficiary with remainder to charity.

100. Cy Pres Doctrine Cy pres doctrine (as near as possible) – when original purpose of a trust can no longer be fulfilled, court allows trust fund to be held for a closely related purpose.

101. Sprinkling Trust Sprinkling trust (or spray trust) – allows trustee to decide how much goes to each beneficiary. – Also called discretionary trust.

102. Implied Trust Implied trust – arises by implication of law from conduct of parties. Two kinds: – Resulting trust – arises where transfer of property is made to one person but purchase price is paid by another. – Constructive trust – imposed by law to avoid unjust enrichment when legal title was obtained by fraud.

103. Precatory Trust Precatory trust – an express trust that sometimes arises from polite language used in a will.

104. Pour-Over Trust Pour-over trust – provision in a will leaving a bequest to a trustee of an existing living trust. When testator dies, will pours the gift into trust.

105. Marital Deduction Trust Marital deduction trusts make maximum use of marital deduction to federal estate tax. – Credit-shelter trust, A–B trust, bypass trust or exemption equivalent trust – reduce taxation of second spouse to die by limiting their estate to non-taxable amount. – Qualified terminable interest property ( QTIP) trust – gives all trust income to surviving spouse for life with principal passing to someone else on spouse’s death.