© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. Twomey & Jennings BUSINESS LAW Chapter 51 Decedents’ Estates and Trusts Chapter 51 Decedents’ Estates and Trusts

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 2 DefinitionsDefinitions A will is a writing that provides for disposition of property to take effect upon death. A man who makes a will is called a testator; a woman, a testatrix. The person to whom property is left by will is a beneficiary. A legacy is a gift of personal property by will; a gift of real property by will is a devise. A will is a writing that provides for disposition of property to take effect upon death. A man who makes a will is called a testator; a woman, a testatrix. The person to whom property is left by will is a beneficiary. A legacy is a gift of personal property by will; a gift of real property by will is a devise.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 3 Requirements for a Valid Will A testator must have testamentary capacity to make a will and must manifest some intention that the will is to be effective only upon death. Bracewell v Bracewell (2000) The Will of The Walking Wounded: When Does Illness Equal Incapacity?

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 4 Requirements for a Valid Will The will must be signed by the testator and be witnessed. In special circumstances, a will may be unwitnessed if it is completely handwritten and signed by the testator. A will may be modified by a codicil or revoked either by the act of the testator or by operation of law. The will must be signed by the testator and be witnessed. In special circumstances, a will may be unwitnessed if it is completely handwritten and signed by the testator. A will may be modified by a codicil or revoked either by the act of the testator or by operation of law.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 5 Will Terminology TESTATOR/TESTATRIX— maker of the will LEGATEE — person to whom personal property is left DEVISEE— person to whom real property is left WILL — Document used to transfer property at death CODICIL —Addition to will HOLOGRAPHIC WILL — Handwritten will LIVING WILL — Document that covers wishes regarding life-sustaining medical treatment

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 6 Special Kinds of Wills A holographic will is an unwitnessed will written entirely in the handwriting of the testator. A self-proved will may be admitted to probate without the testimony of subscribing witnesses. A living will allows a person to make wishes known regarding life-sustaining medical treatment. A holographic will is an unwitnessed will written entirely in the handwriting of the testator. A self-proved will may be admitted to probate without the testimony of subscribing witnesses. A living will allows a person to make wishes known regarding life-sustaining medical treatment.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 7 Living Will INSTRUCTIONS: This is an important legal document. It sets forth your directions regarding medical treatment. You have the right to refuse treatment you do not want. You may make changes in any of these directions, or add to them, to conform them to your personal wishes. I, John Jones, being of sound mind, make this statement as a directive to be followed if I become permanently unable to participate in decisions regarding my medical care. These instructions reflect my firm and settled commitment to decline medical treatment under the circumstances indicated below: I direct my attending physician to withhold or withdraw treatment that serves only to prolong the process of my dying, if I should be in an incurable or irreversible mental or physical condition with no reasonable expectation of recovery. These instructions apply if I am a) in a terminal condition; b) permanently unconscious or c) if I am conscious but have irreversible brain damage and will never regain the ability to make decisions and express my wishes. I direct that treatment be limited to measures to keep me comfortable and to relieve pain, including any pain that might occur by withholding or withdrawing treatment.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 8 Living Will While I understand that I am not legally required to be specific about future treatments, if I am in the condition(s) described above I feel especially strongly about the following forms of treatment: I do not want cardiac resuscitation. I do not want mechanical respiration. I do not want tube feeding. I do not want antibiotics. I do want maximum pain relief. Other directions (insert personal instructions): NONE. These directions express my legal right to refuse treatment, under the law of [name of state]. I intend my instructions to be carried out, unless I have rescinded them in a new writing or by clearly indicating that I have changed my mind. Signed: John Jones. Witness: Earl Hummel. Address: 7852 Bailey Avenue. Buffalo, New York. Witness: Ramona Valey. Address: 8921 Clinton Street. Buffalo, New York. Sign and date here in the presence of two adult witnesses, who should also sign. Keep the signed original with your personal papers at home. Give copies of signed original to your doctor, family, lawyer and others who might be involved in your care.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 9 Administration of Estates Probate is the process by which a proper court official accepts a will. –Probate may be refused or set aside if the will is not the free expression of the testator. Will Contests: Undue Influence. Probate is the process by which a proper court official accepts a will. –Probate may be refused or set aside if the will is not the free expression of the testator. Will Contests: Undue Influence. Ramsey v Taylor (2000) There’s a Melody in the Heirs.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 10 Administration of Estates The estate of the testator will be administered by the person appointed in the will (the executor) or, if there is no will, by a person appointed by the court (an administrator). Creditors who have claims against the estate are required to give notice of their claims. The estate of the testator will be administered by the person appointed in the will (the executor) or, if there is no will, by a person appointed by the court (an administrator). Creditors who have claims against the estate are required to give notice of their claims.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 11 Estate Terminology EXECUTOR/EXECUTRIX —Person named in a will to administer estate ADMINISTRATOR/ADMINISTRATIX —Person administering an intestate estate PERSONAL REPRESENTATIVE —Name for party administering any estate under the UPC PROBATE —Act of a court in declaring a will valid WILL CONTEST —Challenge to validity of a will

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 12 Distribution of Property In estates with a valid will, the last phase of administration of the estate is the distribution of property after payment of debts and taxes. General legacies are bequests of money, whereas specific legacies or specific devises are gifts of identified personal or real property. Residuary legacies are when the will states something like “everything else goes to Joe.” In estates with a valid will, the last phase of administration of the estate is the distribution of property after payment of debts and taxes. General legacies are bequests of money, whereas specific legacies or specific devises are gifts of identified personal or real property. Residuary legacies are when the will states something like “everything else goes to Joe.”

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 13 Other Issues If a beneficiary named in the will has died before the testator and no alternate provision has been made for such beneficiary, antilapse statutes provide that the gift will go to the children or heirs of the beneficiary. If specifically bequeathed property is sold, destroyed or given away before the testator’s death, the beneficiary gets nothing in the place of the property. If a beneficiary named in the will has died before the testator and no alternate provision has been made for such beneficiary, antilapse statutes provide that the gift will go to the children or heirs of the beneficiary. If specifically bequeathed property is sold, destroyed or given away before the testator’s death, the beneficiary gets nothing in the place of the property.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 14 Intestate Distribution If the decedent does not dispose of all property by will or does not have a will, the property will be distributed according to state intestacy statutes. A surviving spouse may generally elect to take the statutory allocation instead of that provided in the will. If the decedent does not dispose of all property by will or does not have a will, the property will be distributed according to state intestacy statutes. A surviving spouse may generally elect to take the statutory allocation instead of that provided in the will.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 15 Intestate Distribution Other lineals: grandchildren, other direct descendants Parents Spouse and children (equal shares) Collateral heirs: siblings, cousins, other descendants from a common ancestor (subject to exclusion of remote heirs in some states) The state When a person dies without a valid will, the estate goes to: If there are none, then:

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 16 Per Capita vs. Per Stirpes There are two methods of determining percentages of an estate that an heir will receive: –Per Capita: each heir receives an equal share, no matter the relationship. –Per Stirpes: each family line receives an equal share and the members of each family line split that share evenly. There are two methods of determining percentages of an estate that an heir will receive: –Per Capita: each heir receives an equal share, no matter the relationship. –Per Stirpes: each family line receives an equal share and the members of each family line split that share evenly.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 17 Distribution Per Capita D’s surviving children take equal shares C’s surviving children take equal parts of C’s share Decedent (D) ABC 1/3 of estate Decedent (D) AB C 1/4of estate X YZ Per Capita: divided evenly among eligible recipients Surviving heir Heir; predeceased Decedent D Non- heir

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 18 Distribution Per Stirpes C’s surviving children take equal parts of C’s share; C’s total share is equal to A’s and B’s. Decedent (D) AB C 1/3 of estate X YZ 1/6 of estate Per Stirpes: divided evenly among each family line of the nearest generation Surviving heir Heir; predeceased Decedent D Non- heir

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 19 TrustsTrusts A trust is a legal device by which property is held by one person for the benefit of another. The settlor creates the trust, and the person for whose benefit the trustee holds the property is the beneficiary. Property held in trust is the trust fund, trust corpus, trust estate, or trust res. A trust is a legal device by which property is held by one person for the benefit of another. The settlor creates the trust, and the person for whose benefit the trustee holds the property is the beneficiary. Property held in trust is the trust fund, trust corpus, trust estate, or trust res.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 20 Creation of a Trust A trust is usually created by a writing called a trust agreement or deed of trust. No particular form or language is required. A trust is not created unless an active duty is placed on the trustee to manage the property in some manner. A trust comes to an end when its terms so provide or when it becomes impossible to attain the object of the trust. A trust is usually created by a writing called a trust agreement or deed of trust. No particular form or language is required. A trust is not created unless an active duty is placed on the trustee to manage the property in some manner. A trust comes to an end when its terms so provide or when it becomes impossible to attain the object of the trust.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 21 Title and Interest in Trusts Legal title to trust property is given to the trustee, but equitable title is held by the beneficiary. A beneficiary may transfer an interest in the trust except in the case of a spendthrift trust. Legal title to trust property is given to the trustee, but equitable title is held by the beneficiary. A beneficiary may transfer an interest in the trust except in the case of a spendthrift trust.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 22 Trust Principal/Income Allocation PrincipalPayable From Principal Original Trust PropertyLoans (Principal) Proceeds and Gains from SaleLitigation Expenses Insurance PaymentsPermanent Improvements New Property Purchased with PrincipalCosts of Purchase Stock Dividends Stock Splits Income Payable From Income RentLoans (Interest) InterestTaxes Cash DividendsInsurance Premiums RoyaltiesRepairs

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 23 Trustee Duties The trustee can exercise only those powers that are given by law or the trust instrument. The trustee must administer the trust and carry out the trust in a proper manner. A trustee’s acceptance of duties is presumed. The trustee can exercise only those powers that are given by law or the trust instrument. The trustee must administer the trust and carry out the trust in a proper manner. A trustee’s acceptance of duties is presumed.