What is an insurable interest? When must an insurable interest exist—at the time the insurance policy is obtained, at the time the loss occurs, or both? What is an insurable interest? When must an insurable interest exist—at the time the insurance policy is obtained, at the time the loss occurs, or both? Is an insurance broker the agent of the insurance applicant or the agent of the insurer?  Is an insurance broker the agent of the insurance applicant or the agent of the insurer?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

What are the basic requirements for executing a will? How may a will be revoked? What are the basic requirements for executing a will? How may a will be revoked? What is the difference between a per stirpes distribution and a per capita distribution of an estate to the grandchildren of the deceased?  What is the difference between a per stirpes distribution and a per capita distribution of an estate to the grandchildren of the deceased?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

What are the four essential elements of a trust? What is the difference between an express trust and an implied trust? What are the four essential elements of a trust? What is the difference between an express trust and an implied trust? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

Insurance is a contractual arrangement for transferring and allocating risk (risk management). Insurance is a contractual arrangement for transferring and allocating risk (risk management). Risk Management: Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement. Risk Management: Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

Classification of Insurance. Insurance is classified according to the nature of the risk involved. Classification of Insurance. Insurance is classified according to the nature of the risk involved. Insurance Terminology. Insurance Terminology. – Policy (Insurance contract). – Premium is the consideration to be paid to the insurer.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

Insurance Terminology (cont’d). Insurance Terminology (cont’d). – Underwriter (usually an insurance company). – Broker v. Agent. Insurable Interest. Insurable Interest. – A person can insure anything in which he or she has an insurable interest.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

Insurable Interest (cont’d). Insurable Interest (cont’d). – A person can insure anything in which he or she has an insurable interest. – Life Insurance.  – Key-Person Life Insurance.  – Property Insurance.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

Insurable Interest (cont’d). Insurable Interest (cont’d). – Life Insurance: a person must have a reasonable expectation of benefit from the continued life of another. Insurable interest must exist at the time the policy is obtained. Interest may be financial or relational (blood or affinity).. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

Insurable Interest (cont’d). Insurable Interest (cont’d). – Property Insurance: insured derives a pecuniary benefit from preservation and continued existence of certain property. Owner must have insurance at the time of loss. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

The Insurance Contract. The Insurance Contract. – Governed by the general principles of contract law, and regulated by the state. – Application for Insurance: is an offer, which insurance company can either reject or accept. Misrepresentations can void a policy.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

The Insurance Contract (cont’d). The Insurance Contract (cont’d). – Effective Date. – Coinsurance Clauses. If owner insures her property for at least 80% of its value, owner will be able to recover up to the face value of the policy. If owner insures for less than 80%, owner will be responsible for a proportionate share of the loss. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

The Insurance Contract (cont’d). The Insurance Contract (cont’d). Incontestability Clauses. State statutes sometimes provide that once a life or health insurance policy has been in force for a specified length of time, the insurer cannot contest statements made in the application. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

The Insurance Contract (cont’d). The Insurance Contract (cont’d). – Interpreting the Insurance Contract. Courts interpret ambiguity against the insurance company. Uncertainty as to whether policy actually exists is resolved against the insurance company. Estate of Luster v. Allstate Insurance Co. CASE 45.1 Estate of Luster v. Allstate Insurance Co. (2010). © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

The Insurance Contract (cont’d). The Insurance Contract (cont’d). – Cancellation. Insured can cancel policy at any time, and the insurer can cancel according to terms of policy. Insurer must give written notice of cancellation. – Good Faith Obligations. – Bad Faith Actions. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

The Insurance Contract (cont’d). The Insurance Contract (cont’d). – Bad Faith Actions: tort action if insurer denies coverage, insured may seek damages beyond the policy, as well as punitive damages.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

The Insurance Contract (cont’d). The Insurance Contract (cont’d). – Defenses Against Payment. Insurance policy procured through fraud, misrepresentation. Insurance company lacked an insurable interest (void from beginning). Improper actions, contrary to public policy, or illegal. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

Will provides for a Testamentary disposition of property. Will provides for a Testamentary disposition of property. – A will is the final declaration of how a person desires to have his or her property disposed of after death.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

Terminology of Wills. Terminology of Wills. – Person who dies with a will, dies testate (intestate without a will). – Executor: personal representative named in a will. – Administrator: personal representative appointed by the court when person dies without a will. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

Terminology of Wills (cont’d). Terminology of Wills (cont’d). – Devise: gift of real property. – Bequest (legacy): gift of personal property. Recipient is a devisee or legatee. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

Types of Gifts: specific, general, or residuary. Types of Gifts: specific, general, or residuary. – Specific: describes particular property in the estate. – General Devise: uses less restrictive terminology. – General Bequest: specific sum of money. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

Types of Gifts (cont’d). Types of Gifts (cont’d). – Abatement: when assets of the estate are insufficient to pay all general bequests. – Residuary: what is left in the estate after all debts and gifts have been made. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

Requirements for a Valid Will. Requirements for a Valid Will. – Testamentary Capacity and Intent: requires a “sound-mind” and intent. – Writing Requirements: can be handwritten, or holographic will (but nuncupative (oral) will is possible). Signature Requirements: at least two witnesses, so will is ‘self-proving.’  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23

Requirements for a Valid Will (cont’d). Requirements for a Valid Will (cont’d). – Publication Requirements: not required under the UPC. Revocation of Wills: executed will is revocable by the maker anytime before death.  Revocation of Wills: executed will is revocable by the maker anytime before death.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24

Revocation of Wills (cont’d). Revocation of Wills (cont’d). – Revocation by Physical Act. Peterson v. Harrell CASE 45.2 Peterson v. Harrell (2010). Can a provision be canceled without revoking the entire will? – Revocation by Subsequent Writing: called a codicil. – Revocation by Operation of Law. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25

Probate Procedures. Probate Procedures. – Informal Probate Proceedings: Family Settlement Agreements, and Small Estates. – Formal Probate: larger estates, guardianship appointment, and trusts for minors or incompetent persons. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26

Probate Procedures (cont’d). Probate Procedures (cont’d). – Property Transfers outside the Probate Process. Living Trusts. Joint Ownership of Property. Gifts Intervivos (while one is alive). Life Insurance Policies. Individual Retirement Accounts (IRA). © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 27

Intestacy Laws. Intestacy Laws. – Statutes of descent and distribution which attempt to carry out the likely intent and wished of the decedent who died without a will. – Surviving Spouse and Children: surviving spouse usually receives ½ of the estate if there is a surviving child.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28

Intestacy Laws (cont’d). Intestacy Laws (cont’d). – Surviving Spouse and Children (cont’d). Surviving spouse usually receives only ½ of the estate, 1/3 if two or more children, 1/2 if one surviving child, or entire estate if no children or grandchildren. If no surviving spouse or child the order of inheritance is: lineal descendants, and then collateral heirs (if no lineal descendants). © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 29

Intestacy Laws (cont’d). Intestacy Laws (cont’d). – Stepchildren, Adopted Children, and Illegitimate Children. Stepchildren -- not considered children of deceased. Adopted children -- considered children of deceased. Illegitimate -- must prove paternity. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 30

Intestacy Laws (cont’d). Intestacy Laws (cont’d). – Distribution to Grandchildren. Per stirpes distribution: heirs take the share their deceased parent would have taken had that parent lived.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 31

Intestacy Laws (cont’d). Intestacy Laws (cont’d). – Distribution to Grandchildren. Per capita distribution: each person takes an equal share of the estate. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 32

A trust is any arrangement whereby property (real or personal) is held by one party for the benefit of another. A trust is any arrangement whereby property (real or personal) is held by one party for the benefit of another. – Essential Elements: designated beneficiary, designated trustee, funds sufficiently identified to enable title to pass to the trustee, actual delivery to the trustee with the intention of passing title. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 33

Express Trusts. Express Trusts. – Living Trusts: revocable living trusts, irrevocable living trusts. – Testamentary Trusts. – Charitable Trusts. – Spendthrift Trusts. – Totten Trusts. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 34

Implied Trusts. Implied Trusts. – Constructive Trusts: arises by operation of the law in the interest of equity and fairness. Garrigus v. Viarengo – CASE 45.3 Garrigus v. Viarengo (2009). What circumstances prompted the court to create a constructive trust? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 35

The Trustee: person holding trust property. The Trustee: person holding trust property. – Trustee’s Duties: honesty, good faith, and prudence in administering the trust and high degree of loyalty to beneficiaries.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 36

The Trustee (cont’d). The Trustee (cont’d). – Trustee’s Powers: state law governs in the absence of specific language in will or instrument. – Allocations Between Principal and Income. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 37