19 - 1 Wills, Trusts, and Living Wills Business Law.

19 - 1

Wills, Trusts, and Living Wills

Wills, Trusts, and Living Wills

Business Law

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WillWill

A declaration of how a person A declaration of how a person

wants his or her property wants his or her property

distributed after death.distributed after death.

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Key Terms• Will – declaration of how

one wants property distributed after their death.

• Testator – the person who makes a will.

• Beneficiary – a person or organization designated in the will that receives all or a portion of the testator’s property at the time of the testator’s death.

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Requirements for Making a Will

• Statute of Wills – a state statute that establishes the requirements for making a valid will.– Testamentary Capacity– Writing– Testator’s (mark) Signature– Witnesses (Calif.)

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Attestation by Witnesses• Wills must be attested to

by mentally competent witnesses.

• Most states require two or three witnesses.

• Most jurisdictions stipulate that interested parties (beneficiaries) cannot be witnesses.

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Codicil• A separate document that

must be executed to amend a will.

• It must be executed with the same formalities as a will.

• The codicil must incorporate by reference the will it is amending.

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Revoking a Will• 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 properly executed subsequent will revokes a prior will if it specifically states that it is the testator’s intention to do so.

19 - 8© 2007 Prentice Hall, Business Law, sixth edition, Henry R.

Cheeseman

Joint and Mutual WillsJoint Will

• A will that is executed by two or more testators.

Joint Will• 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.

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.

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Special Types of Wills

• Holographic Will– Will that is entirely handwritten

and signed by the testator.

• Noncupative Will– Oral will that is made before a

witness during the testator’s last illness.

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Simultaneous Deaths• 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 survived.

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Undue Influence• Occurs where one person

takes advantage of another person’s 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.

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Probate

• The process of a deceased’s property being collected, debts and taxes being paid, and the remainder of the estate being distributed.

• Probate Court supervises the administration and settlement of an estate.– State (Superior) court

• Appoints personal representative to administer estate– Executor named in will– Administrator appointed if died

intestate


Cheeseman

Types of Testamentary Gifts

Bequest

Specific Gift

General GiftResiduary Gift

Devise

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Per Stripes Distribution• A distribution of the estate

that makes grandchildren and great-grandchildren of the deceased inherit by representation of their parent.– They split what their deceased

parent would have received.

• If their parent is not deceased, they receive nothing.


Cheeseman

Example of Per Stripes Distribution

AnneAnne BethBeth

11stst DEGREE DEGREE

BartBart

BruceBruce

(deceased)(deceased)


22ndnd DEGREE DEGREE

33rdrd DEGREE DEGREE

CarlaCarla

ClaytonClayton

CathyCathy

DeborahDeborah

1/121/12

DominicDominic

1/121/12

((1/31/3))

((1/31/3))

((1/61/6))

( 0 )( 0 )(deceased)(deceased)

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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.


Cheeseman

Example of Per Capita Distribution

AnneAnne BethBeth

11stst DEGREE DEGREE

BartBart

BruceBruce



22ndnd DEGREE DEGREE

33rdrd DEGREE DEGREE

CarlaCarla

ClaytonClayton

CathyCathy

DeborahDeborah

DominicDominic

((1/61/6))

(deceased)(deceased)((1/61/6))((1/61/6))

((1/61/6))

((1/61/6))

((1/61/6))


Cheeseman

Ademption and AbatementAdemption

• 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• 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 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• 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.


Cheeseman

Intestate SuccessionSituation Parties 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 intestacy statute.

If there are no heirs, the deceased’s property escheats (goes) to the state.

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Trust• A legal arrangement

established when one person transfers title of property to another person to be held and used for the benefit of a third person.

• Trust Corpus – the property held in trust.

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Parties to 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.

• Beneficiary – person for whose benefit a trust is created.


Cheeseman

Example of Parties to a Trust

Equitable title to the trust corpusEquitable title to the trust corpus

Legal title to the trust Legal title to the trust corpuscorpus

Manages the trust Manages the trust for the benefit of the for the benefit of the beneficiary or beneficiary or beneficiariesbeneficiaries

SettlorSettlor TrusteeTrustee

Beneficiary Beneficiary or or

BeneficiariesBeneficiaries

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Express Trusts• A trust created voluntarily by

the settlor.– 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.

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Implied Trusts• 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. (Minor who receives settlement/law suit.)

– Resulting Trust – a trust that is created by the conduct of the parties.

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Special Types of Trusts• Charitable Trusts – created

for the benefit of a segment of society or society in general.

• Spendthrift Trusts – designed to prevent a beneficiary’s personal creditors from reaching his or her trust interest.– All control over the trust is

removed from the beneficiary.

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Special Types of Trusts (continued)

• 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.

• i.e. Education Funds• Christmas Club

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Termination of a Trust• A trust is irrevocable unless the

settlor reserves the right to revoke it.

• A trust either:– Contains a specific termination

date , or– Provides that it will terminate upon

the happening of an event

• Upon termination, the trust corpus is distributed as provided in the trust agreement.

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Living Trusts• A method for holding

property during a person’s lifetime and distributing the property upon that person’s death. – Also called a grantor’s trust

and revocable trust.

• The grantor is the person who creates a living trust. – Also called a trustor.

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Living Trusts (continued)

• Trustee-Person named in a living will to administer the trust assets. This is usually the grantor.

• Used to avoid probate.

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Funding and Operation • Grantor transfers title of

property to trust.• Trust revocable during

grantor’s lifetime.• Names trustee, normally

grantor.– Should also name successor

trustee.

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Beneficiaries• Income Beneficiary: Person

who receives the income from the living trust during his or her life. – Usually the grantor.

• Remainder Beneficiary: Person who receives the assets of the living trust upon the death of the grantor.(Churches / Colleges)

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Pour-Over Will• A will that distributes the

grantor’s property that is not in the living will upon the grantors death.

19 - 1 Wills, Trusts, and Living Wills Business Law.

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