1. Wills, Trusts, and Living Wills
Business Law

2. Will
A declaration of how a person wants his or her property distributed after death.

3. Key Terms
Will – declaration of how one wants property distributed after their death.
Testator – 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.

4. Requirements for Making a Will
Statute of Wills – a state statute that establishes the requirements for making a valid will.
Testamentary Capacity
Writing
Testator’s (mark) Signature
Witnesses (Calif.)

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 (beneficiaries) cannot be witnesses.

6. Codicil A separate document that must be executed to amend a will.
It must be executed with the same formalities as a will.
The codicil must incorporate by reference the will it is amending.

7. Revoking a Will A will may be revoked by acts of the testator.
A will is revoked if the testator intentionally burns, tears, obliterates, or otherwise destroys it.
A properly executed subsequent will revokes a prior will if it specifically states that it is the testator’s intention to do so.

8. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
Joint and Mutual Wills
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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

9. Special Types of Wills Holographic Will Noncupative 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.

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.

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.
The persuasion by the wrongdoer must overcome the free will of the testator.

12. Probate
The 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 (Superior) court
Appoints personal representative to administer estate
Executor named in will
Administrator appointed if died intestate

13. Types of Testamentary Gifts
Devise
Bequest
Specific Gift
Residuary Gift
General Gift
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

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.

15. Example of Per Stripes Distribution
1st DEGREE
Bart
(1/3)
2nd DEGREE
Anne
Beth
Carla
( 0 )
(1/3)
(deceased)
3rd DEGREE
Clayton
(1/6)
Bruce
Deborah
1/12
(deceased)
Cathy
Dominic
1/12
(deceased)
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

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.

17. Example of Per Capita Distribution
1st DEGREE
Bart
(1/6)
2nd DEGREE
Anne
Beth
Carla
(1/6)
(1/6)
(deceased)
Clayton
3rd DEGREE
(1/6)
Bruce
Deborah
(1/6)
(deceased)
Cathy
Dominic
(1/6)
(deceased)
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

18. Ademption and Abatement
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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

19. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

20. Trust
A legal arrangement established when one person transfers title of property to another person to be held and used for the benefit of a third person.
Trust Corpus – the property held in trust.

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.

22. Example of Parties to a Trust
Legal title to the trust corpus
Settlor
Trustee
Manages the trust for the benefit of the beneficiary or beneficiaries
Equitable title to the trust corpus
Beneficiary or Beneficiaries
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

23. Express Trusts 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: the trust comes into existence when the settlor dies.

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. (Minor who receives settlement/law suit.)
Resulting Trust – a trust that is created by the conduct of the parties.

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.

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.
i.e. Education Funds
Christmas Club

27. Termination of a Trust
A trust is irrevocable unless the settlor reserves the right to revoke it.
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.

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.

29. Living Trusts (continued)
Trustee-Person named in a living will to administer the trust assets. This is usually the grantor.
Used to avoid probate.

30. Funding and Operation Grantor transfers title of property to trust.
Trust revocable during grantor’s lifetime.
Names trustee, normally grantor.
Should also name successor trustee.

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. (Churches / Colleges)

32. Pour-Over Will
A will that distributes the grantor’s property that is not in the living will upon the grantors death.