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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
19 - 13© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
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.
19 - 15© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Example of Per Stripes Distribution
AnneAnne BethBeth
11stst DEGREE DEGREE
BartBart
BruceBruce
(deceased)(deceased)
(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.
19 - 17© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Example of Per Capita Distribution
AnneAnne BethBeth
11stst DEGREE DEGREE
BartBart
BruceBruce
(deceased)(deceased)
(deceased)(deceased)
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))
19 - 18© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
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.
19 - 19© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
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.
19 - 22© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
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.
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