Chapter 1 The Estate Plan and the Purpose and Need for a Will

Introduction o Wills have been written on backs of envelopes, restaurant place mats, prescription blanks, hospital charts, tractor fenders, and jailhouse walls o Not a right, but a privilege permitted by law o Each state has its own laws and requirements o Ambulatory in nature — subject to change during life 2

Risks in Writing Your Own Will o Risky for lay people o Laws are technical and differ widely in each state o Drafting errors are common o True meaning may be an issue 3

The Estate Plan o An arrangement of a person’s estate 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 a person’s assets. o During life (inter vivos) and after death 4

Will o The legally enforceable written declaration of a person’s intended distribution of property after death o Usually written 5

When There is No Will o Dying without a will means that person’s property passes to heirs according to a statutory scheme adopted by the state legislature o Intestate succession o Not always according to wishes of decedent o Cannot name a beneficiary o Cannot name a guardian for children o No named personal representative o No testamentary trust 6

No Will o If you die without a will, state scheme of intestate succession will dictate who, what, where, and how an estate is distributed o May not always be the intent of decedent 7

Requirements for a Will o Capacity o Legal Capacity- o Age at which a person acquires capacity to a valid will, usually 18 o Testamentary capacity o Sanity required for a person to make a will o Sound mind 8

Terminology o Testator o Male who makes or dies with a valid will o Testatrix o Female who makes or dies with a valid will o Beneficiary o A person entitled to receive property under a will o Devisee o A person who receives a gift of real property under a will o Legatee o A person who receives a gift of personal property under a will 9

Terminology o Intestate o A person dies without a valid will or a will o Heir o A person who receives a gift of real property from an intestate o Next of Kin o Closest blood relative of the decedent o Ambulatory o Subject to change o Codicil o A written amendment to a will o Letter of Instruction o A document that specifies the testator’s intentions but does not formally amend or change the will 10

Requirements for a Will o Writing o Witnesses o Signed by Testator/trix o Sound mind o Capacity 11

Intent o Language in a will becomes significant when a court attempts to interpret the meaning and intention of a will o Interpretation comes from the document 12

Probate o A court-supervised administration of a decedent’s estate o Decedent- the person who has died 13

Residuary Estate o The remaining assets of the decedent’s estate after all debts have been paid and all other gifts in the will distributed 14

Property Distributions o Tenancy in Common o Undivided interest of real or personal property o No right of survivorship o Joint Tenancy o Right of survivorship 15

Trusts o A third party instrument made during life which is effective either at death or during life o Testamentary Trust o A trust that is effective after death o Inter vivos (Living) trust- a trust that is effective during life 16

Title o Legal Title o Right to ownership by name o Equitable Title o Right to control the asset and manage the property for the benefit of another 17

Trustee o Person or office that infers a person of trust o Named by the testator to carry out their wishes in a trust o Compare to Executor/personal representative who carries out wishes in will 18

Personal Representative o Person who administers and distributes decedent’s estate either intestate or testate o Compare to Executor/trix who carries out the provisions of the will o Administrator/trix – person appointed to carry out and distribute the decedent’s estate when they die without a will 19

Will Substitutes o Joint Tenancy o Life Insurance o Inter vivos trust o Inter vivos gift o Community Property agreement o Pay on Death instruments – deeds or bank accounts 20