Copyright © 2004 by Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5 th Edition by Henry R. Cheeseman Slides developed by Les Wiletzky Wiletzky and Associates, Puyallup, WA Chapter 52 Wills, Trusts, and Estates Chapter 52 Wills, Trusts, and Estates

52- 2Copyright © 2004 by Prentice-Hall. All rights reserved. Will A declaration of how a person wants his or her property distributed after death.

52- 3Copyright © 2004 by Prentice-Hall. All rights reserved. Key Terms Testator – the person who makes a will. Testator – the person who makes a will. Beneficiary – a person or organization designated in the will that receives all or a portion of the testators property at the time of the testators death. Beneficiary – a person or organization designated in the will that receives all or a portion of the testators property at the time of the testators death.

52- 4Copyright © 2004 by Prentice-Hall. All rights reserved. Requirements for Making a Will Statute of Wills – a state statute that establishes the requirements for making a valid will. Statute of Wills – a state statute that establishes the requirements for making a valid will. Testamentary Capacity Testamentary Capacity Writing Writing Testators Signature Testators Signature

52- 5Copyright © 2004 by Prentice-Hall. All rights reserved. Attestation by Witnesses Wills must be attested to by mentally competent witnesses. Wills must be attested to by mentally competent witnesses. Most states require two or three witnesses. Most states require two or three witnesses. Most jurisdictions stipulate that interested parties cannot be witnesses. Most jurisdictions stipulate that interested parties cannot be witnesses.

52- 6Copyright © 2004 by Prentice-Hall. All rights reserved. Changing a Will Codicil – a separate document that must be executed to amend a will. Codicil – a separate document that must be executed to amend a will. It must be executed with the same formalities as a will. It must be executed with the same formalities as a will. The codicil must incorporate by reference the will it is amending. The codicil must incorporate by reference the will it is amending.

52- 7Copyright © 2004 by Prentice-Hall. All rights reserved. Revoking a Will A will may be revoked by acts of the testator. 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 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 testators intention to do so. A properly executed subsequent will revokes a prior will if it specifically states that it is the testators intention to do so.

52- 8Copyright © 2004 by Prentice-Hall. All rights reserved. Special Types of Wills Holographic Will Holographic Will Will that is entirely handwritten and signed by the testator. Will that is entirely handwritten and signed by the testator. Noncupative Will Noncupative Will Oral will that is made before a witness during the testators last illness. Oral will that is made before a witness during the testators last illness.

52- 9Copyright © 2004 by Prentice-Hall. All rights reserved. Types of Testamentary Gifts Bequest Specific Gift General Gift Residuary Gift Devise

52- 10Copyright © 2004 by Prentice-Hall. All rights reserved. Ademption and Abatement Ademption 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. 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.Ademption 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. 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.Abatement

52- 11Copyright © 2004 by Prentice-Hall. All rights reserved. Per Stripes Distribution A distribution of the estate that makes grandchildren and great-grandchildren of the deceased inherit by representation of their parent. A distribution of the estate that makes grandchildren and great-grandchildren of the deceased inherit by representation of their parent. i.e., they split what their deceased parent would have received. i.e., they split what their deceased parent would have received. If their parent is not deceased, they receive nothing. If their parent is not deceased, they receive nothing.

52- 12Copyright © 2004 by Prentice-Hall. All rights reserved. Example of a Per Stripes Distribution AnneBeth 1 st DEGREE Bart Bruce (deceased) (deceased) 2 nd DEGREE 3 rd DEGREE Carla Clayton Cathy Deborah Dominic ( 1/3 ) ( 1/6 ) ( 0 ) () () (deceased) 1/12 1/12

52- 13Copyright © 2004 by Prentice-Hall. All rights reserved. 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. A distribution of the estate that makes each grandchild and great-grandchild of the deceased inherit equally with the children of the deceased.

52- 14Copyright © 2004 by Prentice-Hall. All rights reserved. Example of a Per Capita Distribution AnneBeth 1 st DEGREE Bart Bruce (deceased) (deceased) 2 nd DEGREE 3 rd DEGREE Carla Clayton Cathy Deborah Dominic ( 1/6 ) (deceased)

52- 15Copyright © 2004 by Prentice-Hall. All rights reserved. Special Issues Concerning Wills: Simultaneous Deaths Uniform Simultaneous Death Act Uniform Simultaneous Death Act An act that provides that if people who would inherit property from each other die simultaneously, each persons property is distributed as though he or she survived.

52- 16Copyright © 2004 by Prentice-Hall. All rights reserved. Special Issues Concerning Wills: Joint and Mutual Wills Joint Will A will that is executed by two or more testators. A will that is executed by two or more testators. Joint Will A will that is executed by two or more testators. 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. 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. 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. 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.

52- 17Copyright © 2004 by Prentice-Hall. All rights reserved. Special Issues Concerning Wills: Undue Influence Occurs where one person takes advantage of another persons mental, emotional, or physical weakness and unduly persuades that person to make a will. Occurs where one person takes advantage of another persons 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. The persuasion by the wrongdoer must overcome the free will of the testator.

52- 18Copyright © 2004 by Prentice-Hall. All rights reserved. Intestate Succession Situation Parties Who Receive Deceaseds 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 deceaseds property escheats (goes) to the state.

52- 19Copyright © 2004 by Prentice-Hall. All rights reserved. Settlement of the Estate (Probate) The process of a deceaseds property being collected, debts and taxes being paid, and the remainder of the estate being distributed. The process of a deceaseds property being collected, debts and taxes being paid, and the remainder of the estate being distributed. Probate Court Probate Court A specialized state court that supervises the administration and settlement of an estate. A specialized state court that supervises the administration and settlement of an estate.

52- 20Copyright © 2004 by Prentice-Hall. All rights reserved. The Uniform Probate Code (UPC) Model law promulgated to establish uniform rules for the: Model law promulgated to establish uniform rules for the: Creation of wills Creation of wills Administration of estates Administration of estates Resolution of conflicts in settling estates Resolution of conflicts in settling estates About one-third of the states have adopted all or part of the UPC. About one-third of the states have adopted all or part of the UPC.

52- 21Copyright © 2004 by Prentice-Hall. All rights reserved. Trust A legal arrangement established when one person transfers title to property to another person to be held and used for the benefit of a third person. A legal arrangement established when one person transfers title to property to another person to be held and used for the benefit of a third person. Trust Corpus – the property held in trust. Trust Corpus – the property held in trust.

52- 22Copyright © 2004 by Prentice-Hall. All rights reserved. Parties to a Trust Settlor or Trustor – person who creates 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. 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. Beneficiary – person for whose benefit a trust is created.

52- 23Copyright © 2004 by Prentice-Hall. All rights reserved. Example of Parties to a Trust Equitable title to the trust corpus Legal title to the trust corpus Manages the trust for the benefit of the beneficiary or beneficiaries Settlor Trustee Beneficiary or Beneficiaries

52- 24Copyright © 2004 by Prentice-Hall. All rights reserved. Express Trusts A trust created voluntarily by the settlor. A trust created voluntarily by the settlor. Inter Vivos Trust (Living Trust) – a trust that is created while the settlor is alive. 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. Testamentary Trust – a trust created by will: the trust comes into existence when the settlor dies.

52- 25Copyright © 2004 by Prentice-Hall. All rights reserved. Implied Trusts A trust that is implied by law or from the conduct of the parties. 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. Constructive Trust – an equitable trust that is imposed by law to avoid fraud, unjust enrichment, and injustice. Resulting Trust – a trust that is created by the conduct of the parties. Resulting Trust – a trust that is created by the conduct of the parties.

52- 26Copyright © 2004 by Prentice-Hall. All rights reserved. Special Types of Trusts (1 of 2) Charitable Trusts – created for the benefit of a segment of society or society in general. Charitable Trusts – created for the benefit of a segment of society or society in general. Spendthrift Trusts – designed to prevent a beneficiarys personal creditors from reaching his or her trust interest. Spendthrift Trusts – designed to prevent a beneficiarys personal creditors from reaching his or her trust interest. All control over the trust is removed from the beneficiary. All control over the trust is removed from the beneficiary.

52- 27Copyright © 2004 by Prentice-Hall. All rights reserved. Special Types of Trusts (2 of 2) 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. 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.

52- 28Copyright © 2004 by Prentice-Hall. All rights reserved. Termination of a Trust A trust is irrevocable unless the settlor reserves the right to revoke it. A trust is irrevocable unless the settlor reserves the right to revoke it. A trust either: A trust either: Contains a specific termination date, or Contains a specific termination date, or Provides that it will terminate upon the happening of an event Provides that it will terminate upon the happening of an event Upon termination, the trust corpus is distributed as provided in the trust agreement. Upon termination, the trust corpus is distributed as provided in the trust agreement.