The Estate Plan and the Purpose and Need for a Will Chapter 2

Estate Plan An arrangement of a person’s assets using the laws of various disciplines (wills, trusts, taxes, insurance, and property) to gain maximum financial benefit of all the laws for the disposition of the person’s assets during life (inter vivos) and after death

Will A legally enforceable written declaration of a person’s intended distribution of property after death

Requirements to Make a Will Capacity Legal capacity The age at which a person acquires capacity to make a valid will, usually 18 Testamentary capacity The sanity (sound mind) requirement for a person to make a valid will

Terminology of Makers of Wills Testator A male who makes and/or dies with a valid will Testatrix A female who makes and/or dies with a valid will

Requirements of a Will Written Document Witnesses Date (in most states) Signature of the Testator/Testatrix Sound Mind of the Testator/Testatrix Legal Capacity of the Testator/Testatrix Selection of Personal Representative

Formal Probate A court-supervised administration of a decedent’s estate Decedent: A person who has died

Terminology of Wills Beneficiary Devisee Legatee A person entitled to receive property under a will Devisee A person who receives a gift of real property under a will Legatee A person who receives a gift of personal property under a will

Terminology of Intestacy Intestate A person who dies without a valid will Heir A person who receives a gift of real property from an intestate Next of Kin The closest blood relatives of a decedent

Terminology of Wills Ambulatory Codicil Letter of Instructions Subject to change Codicil A written amendment to a will Letter of Instructions A document that specifies a testator’s intentions for organ donation and funeral and burial plans but does not amend or change a will

Residuary Estate The remaining assets of a decedent’s estate after all debts have been paid and all other gifts in the will have been distributed

Property Distributions Tenancy in Common Joint Tenancy

Letter of Instructions Structure of an Estate Beneficiary Testator Estate Letter of Instructions Personal Representative

Trusts Trust Testamentary Trust Inter Vivos Trust A right of property, real or personal, held by one person for the benefit of another Testamentary Trust A trust created in a will; becomes operational upon the death of its creator Inter Vivos Trust A trust that is effective during the life of its creator; becomes operational immediately after created

Structure of a Trust Settlor Trustee Inter Vivos Gifts Trust Estate Beneficiary

Title Legal Title Equitable Title The form of ownership of trust property held by the trustee, giving the trustee the right to control and manage the property for another’s benefit Equitable Title Provides the right to the benefits of a trust to the beneficiary

Trustee The person or institution named by the maker of a will or creator/settlor of a trust to administer the property for the benefit of another, according to the creator’s provisions Compare to an executor, who carries out the terms of a will, and a personal representative, who carries out the terms of a will or administers an estate when there is no will

Personal Representative A person who administers and distributes an intestate or testate decedent’s estate Compare to an executor, who carries out the terms of a will

Will Substitutes Joint Tenancy Life Insurance Inter vivos Trust Inter vivos Gift Community Property Agreement Transfer-on-Death Deed/Beneficiary Deed