1. 25-1 Chapter 52 Wills, Trusts, and Estates

2. Learning Objectives  List and describe the requirements for making a valid will  Describe the different types of testamentary gifts  Identify how property is distributed under intestacy statutes if a person dies without a will  Define trust and living trust and identify the parties to a trust  Describe living wills and health care directives 2

3. Key Terms  Will: declaration of how one wants property distributed after death  Testator/testatrix: the person who makes a will  Beneficiary: a person or organization designated in the will that receives all or a portion of testator’s property at the time of the testator’s death 3

4. Will  Requirements for making a will:  Testamentary capacity: testator must have been of legal age and “sound mind” when the will was made  Writing: wills must be in writing to be valid  Testator’s signature: testator’s signature must appear at the end of the will 4

5. Will  Attestation  Action of a will being witnessed by two or three objective and competent people  Codicil  Separate document that must be executed to amend a will, with the same formalities as a will  Revocation  Termination of a will by acts of the testator 5

6. Will  Joint wills  Executed by two or more testators  Mutual wills  Two or more testators execute separate wills that make testamentary dispositions of their property to each other 6

7. Will  Uniform Simultaneous Death Act  Provides that if people who would inherit property from each other die simultaneously, each person’s property is distributed as though he or she had survived  Probate  Process of a deceased’s property being collected, debts and taxes being paid, and the remainder of the estate being distributed 7

8. Special Types of Wills  Holographic wills  Entirely handwritten and signed by the testator  Nuncupative wills  Oral wills that are made before witnesses  Also called “dying declarations” or “deathbed wills” 8

9. Testamentary Gifts  Devise: a gift of real estate by will  Bequest: a gift of personal property by will  Specific gift: a gift of a specifically named piece of property  General gift: a gift that does not identify the specific property from which the gift is to be made  Residuary gift: a gift of an estate left after the debts, taxes, and specific and general gifts have been given 9

10. Testamentary Gifts  Per stirpes distribution  Distribution of an estate in which grandchildren and great-grandchildren of the deceased inherit by representation of their parent  Per capita distribution  Distribution of an estate in which each grandchild and greatgrandchild of the deceased inherits equally with the children of the deceased 10

11. Exhibit 52.3 - Per Stirpes Distribution 11

12. Exhibit 52.4 - Per Capita Distribution 12

13. Testamentary Gifts  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  Abatement  If the property a 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 13

14. Intestate Succession SituationParties who receive deceased’s property Deceased dies with a valid will Beneficiaries named in the will. Deceased dies without a valid will Heirs set forth in the applicable state intestacy statute. If there are no heirs, the deceased’s property escheats to the state. 14

15. Irrevocable Trusts  Trust: 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  Settlor: person who creates a trust  Trustee: person or an entity that holds legal title to a trust corpus  Trust corpus: property and assets held in trust 15

16. Irrevocable Trusts  Income beneficiary of a trust: person or an entity to be paid income from a trust  Remainder beneficiary of a trust: person or an entity to receive the trust corpus upon the termination of a trust 16

17. Exhibit 52.5 - Trust 17

18. Irrevocable Trusts  Inter vivos trust  Trust that is created while the settlor is alive  Settlor transfers legal title of property to a named trustee to hold, administer, and manage for the benefit of named beneficiaries  Testamentary trust  Trust created by will  Comes into existence when the settlor dies 18

19. Special Types of Trusts  Constructive trust  Equitable trust that is implied by law to avoid fraud, unjust enrichment, and injustice  Resulting trust  Trust that is implied from the conduct of the parties  Charitable trust  Created for the benefit of a segment of society or society in general 19

20. Special Types of Trusts  Spendthrift trust  Designed to prevent a beneficiary’s personal creditors from reaching his or her trust interest  Totten trust  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 20

21. Living Trust  Method for holding property during a person’s lifetime and distributing the property upon that person’s death  Does not reduce estate taxes  Does not reduce the grantor’s income taxes  Does not avoid creditors  Subject to property division upon divorce  Does not avoid controversies upon the grantor’s death 21

22. Funding and Operation of a Living Trust  To fund a living trust, grantor transfers title to his or her property, called trust corpus, to the trust  Living trust is revocable during the grantor’s lifetime  A living trust names a trustee who is responsible for maintaining, investing, buying, or selling trust assets  Trust should name a successor trustee to replace the grantor-trustee if the grantor becomes incapacitated or too ill to manage the trust  Income and remainder beneficiaries 22

23. Undue Influence  One person takes advantage of another person’s mental, emotional, or physical weakness and unduly persuades that person to make a will  Persuasion by the wrongdoer must overcome the free will of the testator  A will may be found to be invalid if it was made as a result of undue influence on the testator 23

24. Case 52.1: Undue Influence  Case  Medlock v. Mitchell  Web 2006 Ark. App. Lexis 320 (2006)  Court of Appeals of Arkansas  Issue  Has Jerald rebutted the presumption of undue influence? 24

25. Living Will and Health Care Directive  Living will  States which life-saving measures the signor does and does not want  Health care directive  The maker names someone to be his health care agent to make all health care decisions  Right to die  Terminally ill person may make a decision to end his or her life 25

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