WILLS, ESTATES, AND TRUSTS

HOT DEBATE !!

Tom Blackwell was in a motorcycle accident and suffered extensive brain injuries. Life support monitors detected no brain function. Tom had $7000 in assets and no heath insurance. Soon his assets were, by court order, liquidated to pay for his care. The cost to keep him alive per year would be more than $200,000 in state funds. These funds could be put to use for patients who had more promise of recovery. Tom had no relatives and never expressed an opinion about life support. When the state brought in a court order to remove the equipment, several religious groups intervened.

• LIST REASONS FOR KEEPING TOM ALIVE.• LIST REASONS SUPPORTING THE STATE.

VOCAB

• Decedent• Intestate• Administrator/Administratix• Estate• Testate• Will• Testator/Testatrix• Executor/Executrix• Living will• Testamentary intent• Testamentary capacity• Codicil• Holographic will• Nuncupative will• Escheats

What’s YOUR Verdict?

Dennis, a bachelor living in Maine, often thought he should make a will but repeatedly put off doing so. In the meantime, he collected a considerable amount of property. One day, without warning, Dennis died of a heart attack.

How will his property be distributed?

Death and the Law

• When a person dies, the law looks for his or her instructions to help resolve basic legal issues (how debts are paid and what is to be done with property).

• These instructions are found either in a will, in statutes or both.

• Decedent: a name for the person who dies

Death WITHOUT a will

• If you die without a valid will, you are said to have died intestate.

1. A special court (probate court) settles the decedent's affairs

2. Court appoints a rep known as an administrator (male) or administratrix (female) to take charge of the property.

3. This rep uses the property, called the estate, to pay all debts left by deceased.

4. Remainder of property will be distributed according to state intestacy laws

• Dying without a valid will can cause the beneficiaries to pay all these costs.

• Generally, they call for the surviving spouse to receive 1/3 to ½ of the estate with the remainder divided equally among children.

• If there are no surviving children, those shares may go to the deceased parents or siblings.

Death WITH a will

• It is to everyone’s advantage if the decedent dies testate (leaving a valid will)

• A will is a legal expression, in writing, by which a person directs how his/her property is to be distributed after death.

• Maker of the will (YOU) is/are called the testator (male) or testatrix (female)

• A will also allows its maker to name a personal representative called an executor (male) or executrix (female) to carry out the directions in the will.

• A will may also be used to name a guardian for minor children of the testator/testatrix.

• Living will is a term used for a document directed to physicians regarding a person’s choices about the use of life-support in treatment for terminal illness or vegetative state.

Creation and Execution of a Valid Will

• To prevent the possibility of forgery, the law has strict requirements regarding the preparation and execution of wills.

• To be valid, a will must conform to state laws1. The testator/trix must have testamentary intent –the

clear intention to make a will. A person cannot be pressured into signing it.

2. The testator/trix, when the will is executed, must have testamentary capacity to make the will (must know the people who stand to benefit and the property involved)

3. Will must be in writing and signed to prevent unauthorized add-ons. Signing must be witnessed.

Amendment of a Valid Will

• A will takes effect only upon the death of the maker. Therefore, it can be changed or cancelled at any time during the maker’s life.

• It is important the maker keep the will current and up to date (marriages, kids)

• In states requiring a formal will, changes must be made using a codicil –a formal, written and witnessed amendment.

Special Types of Wills

• Many states recognize a holographic will –one that was written entirely by the decedent’s own hand and signed by him/her. Changes must be done in the handwriting of the maker.

• A nuncupative will (an oral will) is recognized in some states. However, the will must be witnessed and it limited to controlling the distribution of the property

Revocation of a Will

• A will is subject to full or partial change at the desire of the testator.

• As long as the testator has testamentary intent and testamentary capacity, the will can be amended.

• A will can also be revoked because of destroying it or defacing it.

• Divorce does not produce an automatic revocation, but a marriage or birth does.

• A will may be revoked by a written revocation in a later will. “I hereby revoke all prior wills.”

What’s YOUR Verdict?

Benson owed Cane $1,750. Can did not learn of Benson’s death until 8 months after it occurred. By that time, the period for presenting claims against the estate had elapsed.

Can Cane still legally collect the $1,750 from the estate?

Procedure for Estate Resolution

• Whether a person dies with or without a valid will, a probate court will supervise the handling of the decedent’s estate.

• First item of business is to offer proof of death to the court. (death certificate or testimony)

• If a person vanishes, after several years he/she can be declared dead under Enoch Arden Laws. 5-7 years missing.

• After proof of death is established, these are the rep’s duties:

1. Assembling, inventorying and appraising the assets of the estate and collecting the debts owed to it

2. Giving public notice of the estate and the importance of filing claims within the stated period (usually within 6 months)

3. Paying valid claims against the estate4. Distributing the remaining property according

to the will or statute

Distributions with a will

• There may be certain conditions allowing certain relatives to override the will’s terms and receive more of the estate than the will provided.

• The testator may suggest the relatives split the property equally among children or grandchildren (per capita distribution)

• Or he/she may suggest that the relatives split equally what the deceased parent would have received, but receive nothing if the parent still lives. (per stirpes distribution)

• If there are no inheritors, the property of the deceased escheats –goes to the state.

REVIEW…

1. Those who die without a valid will are legally termed to have died intestate. T / F

2. A will written entirely by the decedent and signed by him/her is legally called _________________.

3. The fact that a testator crossed out all the provisions of the current will may be sufficient evidence that it has been revoked. T / F

4. If there is no one to inherit an estate, the property __________ to the state.

5. What is the term for an oral will?6. The insertion of a codicil on a will does not have to be witnessed.

T / F7. The personal reps of the estate can be held personally liable for

failure to properly carry out the duties of the will. T / F

Sid went to his lawyer’s office and described in detail how he wanted his estate distributed upon his death. The lawyer made a lot of notes and prepared a 12-page will. He called Sid and read it to him over the phone. Sid made a few minor changes. The lawyer then prepared a final copy. On his way to the lawyer’s office to sign the final document, Sid died of a heart attack.

WAS THE FINAL COPY A VALID WILL? WHY OR WHY NOT?

Tia was ill. She did not think she could afford an attorney, so she sat down and wrote on notebook paper what she wanted done with all her property upon death. She signed and dated the document in front of 4 neighbors—in fact, one of them signed as well.

WILL TIA’S ESTATE BE DISTRIBUTEDACCORDING TO HER WISHES?

Hilda executed a will on January 1. On the first day of June in the same year, she executed a second will, which contained many changes that conflicted with the first will. She died on December 1 of that year.

WHICH WILL GOVERNS (TAKES CHARGE OF) THE DISTRIBUTION OF HER ESTATE?

Eric executed a valid will dividing his property among his wife and 3 children. The will was not altered for 22 years. Then, Eric separated from his wife but did not divorce her. He wrote a 2nd will, which left all the property to his children. After Eric’s death, his wife sued to receive her fair share of his estate. Will she succeed? Why or why not?

ACTIVITY

With a partner, you will write out a sample will. You will assume the identity of Whitney Houston. Find out who his (your) survivors would include and who you would distribute what to. You will have to find out what his main assets are (property, items of value, money, etc.) to make a valid will. You may need to research on the Internet how to properly construct a will.

VOCAB

TrustTrusteeSettlorBeneficiaryInter vivos trustTestamentary trustCharitable trustPrivate trustSpendthrift trustExpress trustsResulting trustConstructive trust

Creation of Trusts

• People may want to transfer the control of some or all of their property to someone else along with instructions on how they should manage it in the future.

• When the person who receives the property is a separate entity under the law, a trust is created.

• A trust is the transfer of control of that property from one person to another.

• A trust is an arrangement where property (tangible/intangible) is managed by one person for the benefit of another.

• The creator of the trust is known as the settlor –who entrusts the property to people of his/her choice.

• The person who is said to receive the property in the trust is known as the trustee. Someone who holds money/property on behalf of another.

• The trustees hold legal title to the trust property or account. The trustees have a legal duty to the beneficiaries—who are the owners of the trust property.

• Beneficiary: The person the trust is managed for; recipient of any money from insurance

• Also, trustees have the right to be paid for their services. The court decides the amount. However, the settlor may have say in the matter.

What are reasons for creating a trust?

• To pass on benefits to surviving spouse, children or grandchildren

• To establish supervision of your assets in case you become unable to personally

• To transfer your assets more easily to your beneficiaries in the event of death

• To provide for minors who might lack the requirements needed to obtain assets

What’s YOUR Verdict?

Oliver formed a charitable trust to raise money to install air conditioning at the local high school. He transferred to the trust several items of property that were to be sold for the cause. Unfortunately, the school building burned before that purpose could be fulfilled.

WHAT IS TO BE DONE WITH THE PROPERTY OWNED BY THE TRUST?

Types of Trusts

• Express trusts (next 5)– created by a written or oral statement in which the

terms are specifically stated by the settlor– These are trusts created by the free and deliberate

act of the parties involved (usually in written documentation)

• A trust may be created during the lifetime of the settlor (inter vivos trust)

• A trust created after death of a settlor with directions for it included in his/her will is called a testamentary trust.

• A trust created to fulfill a selfless purpose or to help others is known as a charitable trust.

• A trust created for a private purpose is known as a private trust.

• One type of private trust is called a spendthrift trust – created for the benefit of a person (often because he or she is unable to control spending) that gives an trustee full authority to make decisions as to how the trust funds may be spent. Creditors of the beneficiary generally cannot reach the funds in the trust, and the funds are not actually under the control of the beneficiary.

• There are two types of implied trusts:1. Resulting trust –where property gets

transferred to one who pays nothing for it; and he/she holds the property for another person. The trust property is said to "result" back to the transferor (implied settlor).

2. Constructive trust –created to require a person holding property to transfer it to another. EX: property obtained through fraud, force, etc. is said to have been held by the wrongdoer.

REVIEW…

1. A trust terminates at the death of the settlor. T / F

2. A trust terminates with the death of the trustee. T / F

3. A resulting trust may be created due to the death of the trust’s beneficiary. T / F

4. A trust created by the will of the deceased settlor is known as _______?

5. Is a resulting trust an express trust? YES / NO

6. In a spendthrift trust, the beneficiary’s creditors can utilize the trust’s property to settle the debts owed to them by the beneficiary. T / F

7. The 2 types of implied trusts are the private trust and the spendthrift trust. T / F

Think about it…

Terry was named in his parents’ will as the trustee of the family farm. He does not want the position as he has little or no interest in farming. His brother, Harold, has worked the farm for the past 5 years and would be a far better trustee. His parents chose Terry, however, because he was older.

WHAT CAN TERRY DO?

If Terry does take the position, he will lose time that could be spent working on his new insulation business. Worse, the will does not mention the possibility of any pay for Terry.

WHAT CAN HE DO TO HELP THE SITUATION?

Terry decides to repair the farmhouse. He asks for bids from different contractors and chooses the lowest bidder. However, when it comes to the contract to insulate the farmhouse, he has his firm do it and sends the estate a bill that is $1000 more than the cost the other firms bid the job. When his brother realizes what he has done, Terry just says the extra charge was to pay him for his time as the trustee.

HAS TERRY ACTED LEGALLY? WHY/NOT?

Dr. Anders teaches law in a midwestern university. At the end of one of his classes, a student brought up a brand new laptop that was left behind by an unknown student from that dept. Dr. Anders accepted the computer for “safekeeping.”

What sort of responsibilities does he have?

What kind of trust might be imposed on him if he sells the laptop?

• Your Legal Vocabulary (pg 368) write definition and word

• Complete assigned worksheets for chapter concepts review