After reading this chapter, you will be able to answer the following questions: How does one engage in estate planning? What legal issues relate to wills? How are trusts used as estate planning tools? What end-of-life decisions are important from a legal perspective? How does international law protect wills?
Chapter 52 Wills and Trusts Copyright © 2015 McGrawHill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education Estate Planning (Definition): Process by which an individual decides what to do with his/her real and personal property during and after life 522 The Uniform Probate Code Guides states in developing laws related to estate planning 523 Important Estate Planning Tools 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 524 Reasons Individuals Engage In Estate Planning To provide for their family financially after their death To reduce taxes and preserve wealth To promote family “harmony” To allow individuals in nontraditional family relationships to gain benefits of traditional family relationships 525 Intestacy Statutes (Definition): Outline how a person’s property will be distributed if he/she dies without a will 526 Requirements For A Legally Valid Will Testamentary 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) 527 Exhibit 522: Special Kinds Of Wills Oral Will: Will that testator declares verbally during his/her last illness, in front of witnesses, who later document testator’s wishes Holographic 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/forgery Mutual 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 testators 528 Legal Issues Related To Wills Grounds for contesting will: Will fails to meet legal requirements Testator 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 will Testator must satisfy same procedures to make a valid codicil as those followed in making original will Revoking will: Most common method is destruction of will Settlement of estate: By way of a personal representative (executor/executrix), through process known as probate 529 Creation of A Trust Person 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 documents Common trust components: Trust Corpus: Property held in trust Income Corpus: Trust income generated through interest and/or appreciation 5210 Types of Trusts Express: Living Trust: Created when settlor is alive Testamentary Trust: Created through a will Implied: Created by court 5211 Termination of Trust Through provision in trust which either indicates date on which trust will terminate, or specifies an event that will terminate trust 5212 EndOfLife 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 lifethreatening illness Health Care Proxies/Durable Powers of Attorney: Allow individuals to make medical decisions for others 5213 The 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” 5214 The 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 format 5215 ... 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 ... Holographic 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/forgery... Person 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 documents