Administration of Wills, Trusts and Estates, Fourth …...Tiffany Davis, a paralegal in the law firm of Stearns & MacDonald, was discussing a client’s estate with Attorney Stearns

Administration of Wills, Trusts

and Estates, Fourth Edition

GORDON BROWN & SCOTT MYERS

A u s t r a l i a • B r a z i l • J a p a n • K o r e a • M e x i c o • S i n g a p o r e • S p a i n • U n i t e d K i n g d o m • U n i t e d S t a t e s

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Copyright 2009 Cengage Learning. All Rights Reserved.May not be copied, scanned, or duplicated, in whole or in part.

Administration of Wills, Trusts and Estates,Fourth EditionGordon Brown, Scott Myers

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n CHAPTER OUTLINE

§ 2.1 Purpose of Estate Planning

§ 2.2 The Planning Team

§ 2.3 Gathering Information

§ 2.4 Estate Planning Tools

§ 2.5 Postmortem Planning

n CHAPTER OUTCOMES

• Explain the purpose of estate planning.

• Name the members of the estate planning team.

• List the four categories of facts that must be gathered in the estate planningprocess.

• Identify the principal tools available to the estate planner.

• Describe some postmortem estate planning devices.

n JOB COMPETENCIES

• Be able to discuss with others the importance of estate planning.

• Be able to serve as a proficient member of an estate planning team.

• Be able to gather facts that are needed in the development of an estate plan.

• Be able to plan and organize an estate plan under the supervision of anattorney.

• Be able to make recommendations to an attorney regarding possiblepostmortem estate planning devices.

21

Estate Planning

C H A P T E R2

“Why fear death? Death

is only a beautiful

adventure.”

LAST WORDS OF CHARLES

FROHMAN (1860–1915)


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A DAY AT THE OFFICE . . .

Tiffany Davis, a paralegal in the law firm of Stearns & MacDonald, was discussing aclient’s estate with Attorney Stearns.

“Mrs. Bradbury is coming in at 2:00 this afternoon,” Attorney Stearns said. “She’sstill quite despondent about the death of her husband, but we need to begin theprobate work.”

“It must be hard for her. I’ll get the file out right away,” Tiffany responded. “Didn’tthey live in a lot of different states?”

“Yes. If I remember correctly, they owned property in New Mexico, Oregon, andConnecticut, among other places. Now that I think of it,” Attorney Stearns continued,“you had better check to see if any of those states are community property states.”

“Okay,” Tiffany replied, jotting down some notes.“We could have a domicile problem with this estate,” Attorney Stearns thought out

loud. “When you go through the file, look for evidence of Mr. Bradbury’s domicile.”“There might be an estate planning questionnaire in the file,” Tiffany suggested.“I don’t think so,” Attorney Stearns countered. “Mr. Bradbury found it hard to talk

about death and didn’t want to do much more than make out a will when he came in tosee us. We did a trust for him, though, and gave Mrs. Bradbury a power of appointment,among other things.”

“Oh, that’s good. Maybe now that he’s gone we can do some postmortem planningfor his estate,” Tiffany offered.

“You can bet on that,” Attorney Stearns responded. “And we’ll see what we can dofor Mrs. Bradbury before she dies, too.”

“That’s a good idea. I’ll get her file out so that you can review her will while she’shere.”

“Thanks, Tiffany,” Attorney Stearns replied. “If you’re free at 2:00, it would behelpful if you could join us.”

“Fine. I’ll plan on it.”

Queries:

1. Are New Mexico, Oregon, and Connecticut community property states?2. Why did Attorney Stearns say, “We could have a domicile problem with this

estate”?3. Why is an estate planning questionnaire important?4. When and by whom should an estate planning questionnaire be completed?5. What could Mrs. Bradbury do with a power of appointment?6. What are some possibilities with regard to postmortem planning for

Mr. Bradbury’s estate?

CHAPTER 222


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§ 2.1 PURPOSE OF ESTATE PLANNING

Estate planning is the positioning of a person’s assets to maintain and protectthe family most effectively, both during and after the person’s life. The mainpurpose of all family estate planning is to obtain the maximum benefits ofprincipal and income for the family and to pass on the family property intact(i.e., without any losses). Also important is the disposition of the propertyaccording to the client’s desires while maintaining family harmony.

The general goal of estate planning is to protect the family unit and providefinancial and psychological security. The proper positioning of a person’s assetsmay even make a larger proportion of after-tax income available for the family tosave or spend. A thoughtful insurance program can help to create a cash reserveand an estate that would otherwise not exist. Assets that might be depleted orreduced in value can be preserved by appropriate planning. Gifts, trusts, maritaldeductions, powers of appointment, pension and profit-sharing plans, and otherbusiness arrangements are additional devices used by the estate planning team toensure the family’s financial and psychological security and to maximize theassets ultimately shared by the beneficiaries (see Table 2–1). A well-developedestate plan can help do the following:

• clarify the client’s intentions regarding the transfer of assets and care ofdependents.

• make sure that the client’s assets are properly managed and distributedafter death.

• reduce transfer taxes so that wealth will be preserved for the benefit ofthe client’s family.

• spare the client’s family from complex and expensive legal proceedingsfollowing death or incapacity.

Estate planners make use of a wide variety of software programs to assistthem with estate planning. You will find many estate planning software programsby searching on the Internet and keying in the words estate planning software.

ESTATE PLANNING 23

n estate planning

Carrying out a person’s

wishes for property to be

passed on at her death and

gaining maximum legal

benefit from that property

by using the laws of wills,

trusts, insurance,

property, and taxes.

TABLE 2–1 Estate Plans Compared

No willor trust

Willonly

Living trust Estate tax trust

Can I avoid probate? No No Yes Yes, if funded during your life

Can I reduce/avoid federal estate taxes? No No No Yes

Will my estate stay private when I die? No No Yes Yes, if funded during your life

(continues)


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§ 2.2 THE PLANNING TEAM

Individuals with different training and abilities, including the paralegal, formthe estate planning team. An attorney who specializes in estate planning plays akey role, because many legal issues have to be addressed, legal advice given, andlegal documents drafted and signed. The client’s accountant can provideinformation about the client’s income taxes, details of assets and liabilities, andrealistic appraisals of those assets. A life insurance underwriter can determine theclient’s need for life insurance, suggest the type and amount required, andprepare an overall, cost-effective life insurance plan for the client.

CHAPTER 224

No willor trust

Willonly

Living trust Estate tax trust

Can I keep inheritance from my heirs until theyreach age thirty or older?

No No Yes Yes

Can I arrange to have funds managed for thebenefit of an heir who is handicapped orotherwise unable to handle funds?

No No Yes Yes

Can I make sure my grandchildren will receivemy estate after my children die, excludingspouses of my children?

No No Yes Yes

Can I leave assets to children from an earliermarriage, cutting out my present spouse?

No No Depends onthe state

Depends on the state and howtrust is set up

How long should it take after my death until allassets are distributed and the estate is closed,assuming all goes well?

6 mo.–2 yr.

6 mo.–2 yr.

2–9 mo. 9 mo.–2 yr.

Can I retain control over my assets while I amalive?

Yes Yes Yes Depends on how trust is setup

Can I change or revoke the plan? N/A Yes Yes Depends on how trust is setup

Does the plan provide for someone to handlemy finances if I become disabled?

No No Yes Yes, if funded during your life

What is the cost for a simple plan? — $50–$400

$500–$5,000

$2,000–$6,000

Reproduced with permission from Armond D. Budish, Michael Gilfix, Dennis Clifford, who are all contributors toModern Maturity

TABLE 2–1 Estate Plans Compared (continued)


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If a bank is appointed as an executor or trustee, a trust officer of the bankwill also be a team member. The trust officer provides advice on how specificinvestments are to be used in an estate plan. Based on her experience withadministrative details, the officer may be able to suggest easier and moreeconomical ways to administer the trust or estate.

An important member of the estate planning team is the well-trainedparalegal, who can provide much-needed assistance to the attorney. In the U.S.Supreme Court case of Missouri v. Jenkins, 109 S. Ct. 2463, Justice Brennan noted:

It has frequently been recognized in the lower courts that paralegalsare capable of carrying out many tasks, under the supervision of anattorney, that might otherwise be performed by a lawyer and billed at ahigher rate. Such work might include, for example, factual investigation,including locating and interviewing witnesses; assistance with deposi-tions, interrogatories, and document production; compilation ofstatistical and financial data; checking legal citations; and draftingcorrespondence. Much such work lies in a gray area of tasks that mightappropriately be performed either by an attorney or a paralegal.

Paralegals can relieve the attorney of many of the routine details of the estateplanning process and thereby reduce the costs and time involved in the process.Paralegals cannot give legal advice to clients because that would be practicing lawwithout a license, which is both illegal and unethical. They can, however, withproper training, assist the attorney in many ways, including the following:

• working with clients to assure that necessary estate planning informationis gathered

• assisting with the preparation of estate planning questionnaires

• analyzing client assets and financial information

• drafting legal documents, such as deeds, wills, and trusts

• preparing summaries of provisions of wills and trust agreements

• preparing tax calculations

• monitoring state statutes to ensure that estate plans conform to state law

• reviewing and analyzing insurance policies

• preparing change-of-beneficiary forms

• recording instruments at appropriate registries

ESTATE PLANNING 25


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§ 2.3 GATHERING INFORMATION

Paralegals are frequently involved in the first, and probably most important,step of the estate planning process: gathering facts. Without these facts theprocess cannot proceed. Obtaining all the necessary data requires persistenceand is the basis for all other procedures. The needed facts can be classified intofour categories: (1) domicile, (2) property, (3) beneficiaries, and (4) theindividual’s objectives.

Domicile

The probate court in the place where the testator was domiciled at the timeof death has primary jurisdiction to administer the decedent’s estate. The statewhere the decedent is domiciled often imposes an estate tax, and this state’s lawis followed to determine the distribution of personal property. Thus, the estateplanner must establish and make clear the client’s domicile.

A person can have several residences, but only one domicile at any giventime. It is not always easy to determine whether someone has acquired a newdomicile. For a new domicile to be established, the person must reside in the newplace of residence and, at the same time, have the intent to abandon the formerdomicile and remain in the new one for an indefinite period of time. As theWinkler and Derricotte cases illustrate, a person’s intention regarding domicile isdetermined by the person’s conduct and all the surrounding circumstances.When there is a dispute over domicile, the burden of proving a change ofdomicile is on the person claiming that it has been changed. So long as areasonable doubt remains, there is a presumption that the domicile has not beenchanged.

CHAPTER 226

n domici le

A person’s permanent

home, legal home, or main

residence. The words

abode, citizenship, habitancy,

and residence sometimes

mean the same as domicile

and sometimes not.

CASE STUDY Appl icat ion of Winkler

567 N.Y.S.2d 53 (App. Div.)

FACTS: When Frederick E. Winkler died, the question arose as to the location of hisdomicile. He owned a home in Seaview, Fire Island, Suffolk County, NewYork, where he lived for seven months of the year. He spent the othermonths in his two other homes in New York County. His voting records,passport, marriage certificate, and driver’s license listed Seaview as hisresidence, and witnesses’ testimony indicated that he intended the homein Seaview to be his domicile.

LEGAL ISSUE: Is a person’s intention to be domiciled in a particular location determinedby that person’s conduct?

(continues)


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ESTATE PLANNING 27

COURT DECISION: Yes.

REASON: The intention of one’s domicile is determined by the conduct of the personand all the surrounding circumstances that can be proven by acts anddeclarations. The documentation in this case, as well as witnesses’testimony, were sufficient to show that it was the decedent’s intention thathis home in Seaview, Fire Island, was to be his domicile.

CASE STUDY Appl icat ion of Winkler (continued)

CASE STUDY In Re Estate of Derr icotte

744 A.2d 535 (DC)

FACTS: Elise Derricotte had enjoyed living in the District of Columbia for manyyears. She sold her house in the district because it was too big and had toomany steps for her to climb at her age, and moved to Maryland. She wasnever happy in her apartment in Maryland and frequently went househunting in the District. Seven months after her move to Maryland, Ms.Derricotte bought a house in the District and arranged to have her niecesmove in with her to assist her. The arrangement fell through, however,before she could move. She sold the house and gave part of the proceedsto a close friend (and licensed broker) to hold as a deposit on anotherhouse she expected to buy in the District. She continued to go on weeklyoutings to find a house in the District, where she continued to do herbanking and attend church. Ms. Derricotte died intestate, while a residentof Maryland, at the age of 94—less than four years after leaving theDistrict of Columbia.

LEGAL ISSUE: To establish a new domicile, must a person have the intent to abandon aformer domicile?


REASON: The following facts demonstrated Ms. Derricotte’s intent not to abandonher domicile in the District of Columbia: (1) her long and continuingassociation with the District of Columbia, (2) her dissatisfaction with herapartment in Maryland, (3) her action in purchasing a new residence in theDistrict, and (4) her intention to buy yet another residence there.


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Property

All property should be listed in detail, including automobiles, householdeffects, objects of art, stamp collections, books, and similar possessions. Theestate planner must determine the location of all real estate, the form in whichtitle is held, its cost, fair market value, and the amount of all mortgages on theproperty. All insurance must be listed, with cost, age, present value, face value,cash surrender value, type of policy, and beneficiaries noted. Balance sheets andincome statements of all businesses and partnerships must be reviewed. Stocks,bonds, and bank accounts should all be listed individually, and pension plans,profit-sharing plans, and stock option agreements should also be noted. Alljointly owned property must be listed, as well as information about gifts madeduring the client’s lifetime.

Beneficiaries

A family tree is a helpful device to visualize a family and all its members. Sucha diagram makes concrete the often complex lineal relationships discussed inChapter 4 (see Exhibit 2–1). Besides this visual aid, however, detailedinformation about all family members is essential to acknowledge or locate allheirs. Also, as beneficiaries need not be relatives, the location of nonfamilialbeneficiaries are needed.

Objectives

The individual objectives of the client are the main focus of estate planning.The client’s desires must be clarified and fulfilled in whatever way the clientdetermines. The client may wish to endow the surviving spouse primarily or tofavor one child, despite possible family resentment. The legal ramifications ofsuch decisions must be discussed, but ultimately the client’s personal preferencesare what determine the specific aspects of the estate plan.

Record of Personal and Business Affairs

Estate planners may ask clients to complete a detailed questionnaire orrecord about their personal and business affairs before the initial interview withthe attorney. Completion of the questionnaire in advance reduces the attorney’stime and legal fees. Paralegals may have access to the information in thequestionnaire or be asked to assist clients in filling out such a questionnaire. It is

CHAPTER 228


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imperative that paralegals observe proper ethical conduct by not disclosinginformation that is learned about the client’s affairs to anyone other than theattorney.

Many items in the questionnaire may not apply to a particular client;however, using so detailed a questionnaire ensures that all facts will beconsidered when formulating the best plan for the client. Appendix A illustratesa form that may be followed to record information about a client’s personal andbusiness affairs.

§ 2.4 ESTATE PLANNING TOOLS

Estate planning is sometimes called an art rather than a science. It involves aconsiderable amount of creativity. Every client’s unique situation requires acreative approach by the estate planner. The tools available to the estate plannerare limitless, but the principal ones used are wills, trusts, gifts, powers ofappointment, insurance, retirement plans, and family limited partnerships.Another important tool is the making of a family tree (see Exhibit 2–2).

Wills

A will is considered to be the single most important estate planninginstrument. Without a will, state law rather than the wishes of the decedentdetermines the disposition of the decedent’s property. A will has no effect untilthe testator(rix) dies and may be changed or revoked by the testator(rix) at anytime prior to death.

A well-organized will should be outlined before it is drafted. An outlineforces the drafter to think through the entire document before focusing onspecific details. It provides an overview of what has to be done and helps ensurethe final document includes all necessary provisions. An outline also helps weedout potential inconsistencies in the document and furnishes a fail-safe checklistto make sure that everything required has been included.

Any handwritten notes taken by the attorney and the legal assistant duringthe client interview should be dated and retained in the client’s file. These notesare useful in refreshing the attorney’s and the legal assistant’s recollection in theevent of a will contest after the client dies.

ESTATE PLANNING 29


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CHAPTER 230

EXHIBIT 2 –1 Kennedy Family Tree


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ESTATE PLANNING 31


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Trusts

Trusts are used by estate planning specialists to reduce problems created byjoint ownership, avoid the expense and publicity of probate, and reduce deathtaxes. Trusts are also used to pass assets on to future generations, provide incomefor people during their lives, and prevent family assets from being mismanagedor spent unwisely.

As discussed in Chapter 8, trusts may be created so that they come into effectwhen one is alive, or they may be created in the body of a will so that they comeinto effect after one passes away. Living trusts may be revocable or irrevocable.Trusts may be funded by life insurance. Spray, or sprinkling, trusts allow the trustprincipal and income to be distributed in a manner determined by a trusteerather than by the person who created the trust. Spendthrift trusts can be createdto protect the interests of beneficiaries who might spend trust funds unwisely.Charitable trusts, credit-shelter trusts, and QTIP trusts are often used to reducedeath taxes. So-called dynasty trusts are specially drafted irrevocable trusts withfeatures that enable the trust to continue for many generations. They aredesigned to shelter assets from transfer taxes and, at the same time, allowgenerations of family members to receive income from those sheltered assets.

CHAPTER 232

EXHIBIT 2 –2 Bush Family Tree


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Gifts

The use of gifts during one’s lifetime is an important estate planning devicethat offers tax-saving advantages, as well as providing to the donor the enjoymentof giving while alive. Death taxes can be reduced by giving property away whileone is alive, but the gift must be completed. There are three requirements for aninter vivos gift (a gift between the living) to be completed: (1) the donor (the onegiving the gift) must intend to make the gift, (2) the gift must be delivered to thedonee (the one receiving it) and placed beyond the dominion and control of thedonor, and (3) the donee must accept the gift. “Dominion and control” meansthe retention by the donor of power to direct the disposition or manner ofenjoyment of the property that was given away. A person claiming an inter vivosgift has the burden of showing that a gift was intended by clear and convincingevidence.

A problem arises when a check is given as a gift, and the donor dies beforethe check is cashed. The Bolton case points out that for the gift to be completed, thecheck must be honored by the donor’s bank before the donor’s death.

For tax-saving purposes, gifts made to minors should follow the rulesestablished by the Uniform Transfers to Minors Act. These rules are explained inChapter 10.

ESTATE PLANNING 33

n inter vivos gift

An ordinary gift, as

opposed to a gift made

shortly before dying.

n donor

A person making a gift to

another or giving another

person power to do

something.

n donee

A person to whom a gift is

made or to whom a

power is given.

CASE STUDY Matter of Estate of Bolton

444 N.W.2d 482 (IA)

FACTS: Arthur Bolton wrote a check for $20,000 to his daughter, Joyce, intendingto make a gift. The check was drawn on the State Bank of Wapello andwas mailed to Joyce in Maryland, where she was living. Joyce received thecheck, endorsed it, and mailed it to her bank in Baltimore with instructionsto use it to establish a certificate of deposit in joint tenancy with her father.Bolton died before the check reached the bank on which it was drawn, andthat bank refused to honor it.

LEGAL ISSUE: To be effective, must a gift in the form of a bank check be accepted andhonored by the drawee bank prior to the death of the donor?


REASON: Mere delivery of the check to the donee does not place the gift beyond thedonor’s power of revocation prior to payment or acceptance. Moreover,the death of the drawer effects a revocation of the alleged gift of a checknot presented for payment until after such death.


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Tax Consequences of Gifts

A donor can give up to $12,000 a year (to be adjusted for inflation) to eachof any number of donees without any tax consequences. Under the split-giftprovision of the Internal Revenue Code, spouses may consent to treat gifts of onespouse as if made one-half by each spouse, and double the amount that may begiven away tax free each year. For example, one parent of three children can giveas much as $36,000 annually to the children ($12,000 to each) without filing agift tax return, and both parents, by consenting, could increase the amount to$72,000.

Under the present tax law, a person can make lifetime gifts of up to$2,000,000 in 2007 and 2008, $3,500,000 in 2009, an unlimited exclusion in 2010and reverting to $1,000,000 in 2011 under the sunset provision of the current taxlaw, in addition to the $12,000-per-donee-per-year exclusion, without being subjectto a gift tax. Furthermore, gifts to the donor’s spouse and to charitable institutionsare exempt from the tax, as are gifts for tuition and medical care. For reportingpurposes, gifts over $12,000 in any one year per donee, other than to a spouse,must be reported to the Internal Revenue Service (IRS) on either Form 709 orForm 709A. Federal estate and gift taxes are explained further in Chapter 13.

CHAPTER 234

n spl it-gi ft provision

Provision in the Internal

Revenue Code under

which spouses may

consent to treat gifts of

one spouse as if made

one-half by each spouse,

thereby doubling the

amount that may be given

away tax free each year.

A MODEL ESTATE PLAN

Strategies used in the will of Jacqueline Kennedy Onassis can be

applied to estates worth far less than her many millions. Her

36-page will, reproduced in Appendix B, provides valuable

examples of effective estate planning techniques. Here is an

analysis of some of the strategies used in writing her will:

Objective Strategy Used by Onassis Value of Strategy

Make personalrequests

Jacqueline gave her personal papers andletters to her children and requested thather privacy be maintained: “I request, butdo not direct, my children to respect mywish for privacy ... and consistent withthat wish, to take whatever action iswarranted to prevent the display, pub-lication or distribution, in whole or inpart, of these papers, letters, andwritings.”

A will provides the opportu-nity to make wishes known,while allowing beneficiariessome flexibility.

(continues)

JACQUELINE KENNEDY ONASSIS


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Powers of Appointment

When making a will or a trust, people sometimes do not know who theirbeneficiaries should be. They cannot predict which family members will be mostneedy at the time of the testator’s death. A power of appointment in a will ortrust allows flexibility in determining who will inherit from a decedent’s estate. Itallows someone besides the decedent to decide, after the decedent’s death, whowill be the beneficiaries and to what extent.

A power of appointment is a right created in a will, trust, or other instrumentthat allows the holder (the donee) to direct the disposition of property. Thetestator(rix) or other person who creates the power is known as the donor.The person to whom the power is given—that is, the power holder, the one whohas the right to exercise the power—is called the donee. The person for whosebenefit the appointment is made is known as the appointee. The act of executingthe power is called the appointment. The property that is subject to the power isknown as the appointive property.

ESTATE PLANNING 35

Give materialpossessions

Items of value or sentimental importancewere given to specific individuals (e.g., acopy of John Kennedy’s inaugural addresssigned by the poet Robert Frost given toher lawyer, Alexander Forger).

Specific bequests preventarguments among heirs andindecision over the decedent’sintentions.

Give cash Taxes on cash gifts to friends, maids, andthe butler are directed to be paid fromthe remainder of the estate.

Unless the will indicates thattaxes be paid from the estate,the value of a gift can bedrastically reduced.

Give realproperty

Each of her real properties was clearlydevised to a specific heir.

Homes often involve emo-tional attachment and shouldbe designated for a specificperson rather than lumpedinto the total assets.

Create trusts After all bequests were made, a chari-table trust was established from theremainder of her estate.

For 24 years, the trust willgive a specified percentage tocharities, then will be dividedamong her grandchildren.

When heirs do not need income immediately, a charitable trust can be used to reduce

estate taxes through donations to charities.

A MODEL ESTATE PLAN (continued)

n power of

appointment

The power to decide who

gets certain money or

property or how it will be

used. This power is usually

given to a specific person

in a deed or will.

n appointee

The person who is to

receive the benefit under a

power of appointment.

n appointment

The act of putting into

effect a power of

appointment.

n appointive

property

Property that is an estate

asset that will be given out

by power of appointment.


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Powers of appointment may be either general or special. A general power ofappointment gives the donee the right to appoint the property to any appointeeshe desires, including the donee or the donee’s estate. In contrast, a specialpower of appointment limits the appointment of the property to a specified classof persons named by the donor. The following is an example of a special powerof appointment in the body of a trust:

On the death of the donor’s wife, the remaining trust property shallbe paid over as the donor’s wife may in her last will and by expressreference to this instrument appoint to any of the donor’s issue. Insofaras the donor’s wife fails to exercise this power of appointment, theremaining trust property shall be distributed to the donor’s then livingissue by right of representation.

In view of the language used in this sample power of appointment, thedonor’s wife must select the appointees from among the donor’s issue. Thefollowing is an example of a provision that could be used in the wife’s will toexercise the power:

I am the donee of a power of appointment under a declaration oftrust dated _____ , 2___ , wherein the settlor is my late husband. I herebyexpressly exercise such power by appointing the appointive propertythereunder as follows: 50% to my husband’s daughter Karen; 25% to myhusband’s daughter Cynthia; and 25% to my husband’s son Charles.

Insurance

Insurance performs many roles in a family estate plan. Most important is itsability to furnish liquidity to an estate. As part of an integrated business plan,insurance may be used to finance the sale of a business interest, therebyguaranteeing sufficient cash to prevent a forced liquidation and the accompany-ing losses. Insurance may also create an estate that would otherwise benonexistent. Broadly speaking, life insurance is divided into three generalclasses: (1) term, (2) whole life, and (3) endowment.

Term life insurance is issued for a particular time period, such as one, five, or10 years. It offers protection only, with no cash surrender or loan value. The costof term insurance increases with each new term because the insured is older andat a higher risk of death. Term insurance is the least expensive kind of lifeinsurance, providing maximum protection for the period of coverage atminimum cost. However, it offers no protection after the expiration of the term.

Whole life insurance, also called ordinary life insurance and straight lifeinsurance, provides lifetime protection and builds up a cash surrender value, butpayments continue for life. If the policy is cancelled, the policyholder can receivethe cash surrender value of the policy, making the insurance a form of savings.Limited-payment life insurance requires a greater annual premium, but need

CHAPTER 236

n term life insurance

Life insurance that ends at

the end of a certain time

period.

n whole l i fe

insurance

Life insurance with

continuing premium

payments (which stop if

the policy becomes fully

paid), a sum paid at death,

and, usually, a cash

surrender value.

n l i m i t e d - p a ym e n t

l i fe insurance

Insurance for which

premiums are paid only

for the limited period

required by the policy,

such as 10, 20, or

30 years. After that period,

the policy is paid up.


21764_03_ch02_p021-047.3d 5/6/2008 8:53 page 37

only be paid for the limited period required by the policy, such as 10, 20, or30 years. After that period, the policy is paid up. Like ordinary life insurance,limited-payment life insurance has a cash surrender value.

Universal (adjustable-premium whole) life insurance, is a flexible type ofinsurance coverage that allows policy-holders to change the terms of the policy astheir needs change. Coverage can be increased or decreased, and cash can bewithdrawn without cancelling the policy.

Endowment insurance provides protection for a stated time, generally 20 to30 years. The face value of the policy is paid to the insured at the end of thestated period, or, if the insured dies before then, the face value is paid tothe beneficiary at the time of death. Thus, endowment insurance functions asboth a life insurance plan and a way to guarantee funds to the insured if she livesbeyond the time during which the insurance is in effect. Basically, an endowmentpolicy is a savings plan guaranteed by life insurance. The cost of endowmentinsurance is higher than whole life insurance because the policy builds up itscash value more rapidly.

An annuity is not really life insurance. Rather, it is a guaranteed retirementincome providing period payments over a specified term or for the life of theinsured. If the annuity is for a fixed number of years, the beneficiary will receivewhatever is left if the insured dies before that time. In contrast, if the annuity isfor the life of the insured, any amount remaining after the insured’s death is lost.Annuities are purchased either by paying a lump sum or by making periodicpayments to the insurer.

Long-term care insurance provides money to pay for nursing home and/orcustodial care when an insured becomes chronically debilitated. Many peopleerroneously believe that either private health insurance or government-basedbenefits like Medicaid will pay for these needs. Nothing could be further fromthe truth. Virtually no private health insurance policies pay anything towardscustodial care; likewise, Medicaid provides only for acute care benefits. Evenbenefits for indigent individuals provided through Medicare only pay for nursinghome care for a few months, and, of course, Medicare requires that an individualdeplete her assets before it can be used. The fear of saving for a lifetime, thenseeing all those assets spent on long-term care has spurred an aging Americanpopulation to consider long-term care insurance as protection.

Some seven million long-term care insurance policies have been sold in theUnited States in the last 30 years. Policies may vary widely, making comparisonshopping difficult, but most good policies can provide peace of mind that care inone’s later years will be available and affordable for the insured. Part of thatcomfort comes from protecting the depletion of assets from expensive long-termcare costs, making these policies useful in estate planning. Policies can cover notonly nursing home care but should cover care in assisted living facilities, or evenhome care assistance. The more care options one includes in the policy,however, the more expensive the policy becomes.

ESTATE PLANNING 37

n universal

(adjustable-premium

whole) l i fe insurance

Type of whole life

insurance that allows the

policyholder flexibility in

choosing and changing

terms of the policy.

n endowment

insurance

An insurance policy that

pays a set amount at a set

time or, if the person

insured dies, pays the

money to a beneficiary.

n annuity

1. A fixed sum of money,

usually paid to a person at

fixed times for a fixed time

period or for life. 2. A

retirement annuity is a

right to receive payments

starting at some future

date, usually retirement,

but sometimes a fixed

date. 3. An account with

an investment or

insurance company that is

tax free until retirement.

n long-term care

insurance

An insurance policy

designed to provide

money to pay for nursing

home and custodial care

when an insured becomes

chronically ill.


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The trigger for most policies comes either when the insured cannot performat least two essential daily activities such as bathing, eating, or dressing, or whenthe insured is cognitively impaired by any dementia such as Alzheimer’s disease.When triggered, the policy pays an amount, based on a daily schedule, for thelevel of care that the policy covers. The policy will pay the daily rate over the termof years that the policy covers. Obviously, the longer the term that the insured’spolicy covers, the more expensive the policy.

Long-term care insurance is more affordable the younger you are when it ispurchased. The American Association of Long-Term Care Insurance, at itsWeb site (<http://www.aaltci.org>) provides an estimator for costs of thisinsurance. For example, a healthy 40-year-old would pay an estimated $641annually for a four-year term comprehensive policy with inflation protection, a20-day waiting period, and a $100-per-day benefit. The same policy would cost a50-year-old an estimated $849 per year. If this policy was purchased by a 65-year-old, the estimated cost would be $1,726 per year.

There is no age at which a healthy person cannot qualify for a long-term carepolicy. However, as an individual ages and her health deteriorates, she may reacha point at which health problems prevent qualification. Also, since the annualcosts rise as the starting age rises, the costs can become either out of reach or atleast become not cost-effective. For example, at age 75, the previously mentionedpolicy would cost over $10,000 per year.

Retirement Plans

Retirement plans are an important part of estate planning. Government-sponsored retirement plans include railroad pensions, civil service pensions,military pensions, and Social Security. People who have paid into social securityfor at least 40 calendar quarters (10 years) are eligible to collect retirementbenefits. Retirees may begin collecting reduced Social Security benefits at age 62.They will collect full benefits, however, if they wait until they reach age 65 beforestarting the process. The latter age increases to 66 and 2 months for peopleborn after 1954, and to 67 for people born after 1960 (see Table 2–2). Whencollected at 62, Social Security reductions range from about 20 percent forindividuals born in 1937 or earlier, to about 30 percent for individuals born in1960 and later.

In addition to government-sponsored plans, there are a number of differentkinds of private retirement plans. Traditional IRAs (individual retirementaccounts) are individually owned personal pension plans for people (and theirnonworking spouses) who are under 70½ years of age and have earnedincome. The amount that may be contributed to a traditional IRA is $4,000 in2007, increasing to $5,000 in 2008, for people 49 and younger. An additional$1,000 may be contributed by individuals 50 and older. Contributions are taxdeductible if one’s income is below a prescribed amount, and interest on the

CHAPTER 238

n tradit ional IRAs

Bank or investment

accounts into which some

persons may set aside a

certain amount of their

earnings each year and

have the interest taxed

only later when

withdrawn.


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earning is tax deferred until the money is withdrawn. Distributions (withdrawals)made before the age of 59½ are subject to a 10 percent penalty with theexception of an amount for certain home purchases and higher education costs.Distributions from traditional IRAs must begin the year after the contributorreaches the age of 70½.

Roth IRAs are similar to traditional IRAs except that distributions are notrequired during the owner’s lifetime and, when taken after age 59½, are tax freeif the account has been in existence for five years. In addition, the amount thatpasses to the owner’s beneficiary at death is not subject to federal income taxes.It is, however, subject to federal estate taxes if the estate is large enough to betaxable. A traditional IRA may be converted to a Roth IRA when the owner’sannual adjusted gross income is below $100,000. However, the conversion istaxable on the entire amount of the owner’s original deductible contribution aswell as on its earnings. Contributions for a Roth IRA are the same as those for atraditional IRA.

In addition to the IRAs mentioned, education IRAs (also called CoverdellEducation Savings Accounts) can be established for children under the age of 18by anyone who wishes to put money aside for a child’s elementary throughpostsecondary education. Up to $2,000, through 2010, may be contributedannually for each child. A bank must be the custodian or trustee of the funds in

ESTATE PLANNING 39

TABLE 2–2 Retirement Age to Receive Social Security Benefits

People Born in Receive Full Benefits at Age

1938 65 and 2 months





1943–54 66






1960 or later 67

n roth IRAs

Retirement accounts that

are similar to traditional

IRAs except that

distributions are not

required and are tax free

when taken after age 59½

if the account has been in

existence for 5 years or

longer.

n education IRAs

Accounts that can be

established for children

under the age of 18 for a

child’s elementary through

postsecondary education.


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the account. The earnings on an education IRA accumulate tax free, making it adesirable investment for many people. Although contributions are not taxdeductible, they are not considered gifts and therefore do not reduce theamount of gifts that can be made tax free by the donor under federal estate andgift tax law. If the particular child does not use the funds for a postsecondaryeducation, the beneficiary can be changed to another child in the family.

All states now have college savings plans, known as 529 plans, for theircitizens. Income that is earned on 529 plans is not taxable under federal law,allowing savings to grow at a faster rate. For more information about state collegesavings plans go to <http://www.collegesavings.org>.

A 401(k) plan is a company-sponsored retirement plan in which an employeeagrees either to take a salary reduction or to forgo a bonus to provide money forretirement. Many employers make matching contributions to the plan based on apercentage of the employee’s contribution; however, the law places limits on theamount that can be contributed annually to a 401(k) plan. The money thatis invested in the plan and the interest accruing from it are tax free until it iswithdrawn at retirement. Withdrawals from a 401(k) pension plan made beforethe age of 59½ are subject to a 10 percent penalty with the exception of death,disability, termination of employment, or financial hardship.

A simplified employee pension plan (SEP) is a pension plan in which anemployer withholds money from the employee’s salary and deposits it directlyinto the employee’s IRA. Contributions are not currently taxed, and accumu-lated earnings are tax deferred. There are limits (which are indexed forinflation) to the amount that may be contributed to SEP accounts. Like otherprivate pension plans, withdrawals made before the age of 59½ are subject to a10 percent penalty (see Table 2–3).

A Keogh plan is an optional retirement plan for self-employed people (soleproprietorships and partnerships) and their employees. When a self-employedperson elects to adopt a Keogh plan, all employees who have been employed formore than three years and work 1,000 hours or more a year must be included inthe plan. Each year, self-employed people may deposit up to 25 percent of theirincome, or a maximum of $30,000, into the retirement plan account. Whateverpercentage contribution employers made to their own account must also bemade to their employees’ accounts. Contributions to Keogh plans are taxdeductible, and the interest they earn is tax deferred until the money iswithdrawn. Withdrawals made before the age of 59½ are subject to a 10 percentpenalty.

Family Limited Partnership

Estate planners will sometimes recommend placing family-owned businessesinto the form of a family limited partnership. A family limited partnership is apartnership of family members in which one or more family members (typically

CHAPTER 240

n 401(k) plan

A company-sponsored

retirement plan in which

an employee agrees either

to take a salary reduction

or to forgo a bonus to

provide money for

retirement.

n simpli f ied

employee pension

plan (SEP)

An employer’s

contribution to an

employee’s IRA that meets

certain federal

requirements. Self-

employed persons often

use a SEP.

n Keogh plan

A tax-free retirement

account for persons with

self-employment income.

n family l imited

partnership

A partnership of family

members in which one or

more family members are

general partners and one

or more family members

are limited partners.


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the parents) are general partners and one or more family members (typically thechildren) are limited partners. General partners manage the partnership andhave unlimited liability. Limited partners have no voice in managing thepartnership and have no liability beyond their investment in the partnership.Under this form of ownership, parents can retain control of a business, continueto receive income from it, and make annual gifts of limited-partnership interestto their children at reduced gift-tax rates. The tax rates are reduced because theInternal Revenue Code allows a discount on the value of gifts of limited-partnership shares. The shares are not worth as much because limited partnershave restricted rights to the management and sale of the business. Thus, aparent’s gift to a child of a $10,000-valued limited-partnership share would betreated as a $7,000 to $7,500 gift rather than as a gift of $10,000.

§ 2.5 POSTMORTEM PLANNING

As unusual as it may seem, estate planning does not end when someone dies;rather, it continues until all possible benefits are identified, explained to heirs,and claimed if possible. Estate planning after a person dies is known aspostmortem planning and can sometimes be advantageous, especially in savingtaxes. An instrument such as a will or a trust cannot be changed or discardedafter the death of a decedent; however, decisions can be made and actions takenthat can produce tax-saving benefits.

Death taxes can sometimes be reduced when property passes to a familymember other than the one who is named in the will to receive it. The gift isrenounced or disclaimed and passes by intestacy to other family members in away that results in a tax savings to the family as a whole.

ESTATE PLANNING 41

TABLE 2–3 IRA Contribution Limits Increase Gradually

Roth and Traditional IRAs 401(k), 403(b), SEP

Tax Year Under Age 50 Age 50 and over Under Age 50 Age 50 and over

2007 $4,000 $5,000 $15,000* $20,000+

2008 $5,000 $6,000 $15,000* $20,000+

2009 $5,000 $6,000 $15,000* $20,000+

* Amounts are adjusted for inflation in $500 increments in these and subsequent years.

+The contribution amount and the catch-up amount (both of which are combined to equal the limit shown)

are separately adjusted for inflation in $500 increments in these and subsequent years.

n general partners

Members of a partnership

who run the business and

have liability for all

partnership debts.

n l imited partners

Members of a partnership

who partly or fully finance

a business, take no part in

running it, and have no

liability for partnership

debts beyond the money

they put in or promise to

put in.

n postmortem

planning

Estate planning done after

a person dies.


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For example, suppose a son dies intestate, survived by an elderly mother anda sister. Under many state laws, the elderly mother inherits and the estate issubject to estate taxes. Soon thereafter, the mother passes away, leavingeverything to her daughter. Like her son’s estate, the mother’s estate is subjectto estate taxes, even though some of it was just taxed. This double taxation couldhave been avoided if the elderly mother had disclaimed the inheritance from herson and allowed the property to pass to her daughter initially. A disclaimer is aformal renunciation of a gift under a will, a trust, or the law of intestatesuccession. Under federal tax law, a qualified disclaimer (illustrated by theHolden case) is defined as an irrevocable and unqualified refusal by a person toaccept an interest in property, but only if it is: (1) in writing, (2) received within aspecified time, (3) received prior to the acceptance of any benefits, and (4)legally effective to pass the disclosed interest to another person without directionfrom the person making the disclaimer.

Other devices used in postmortem planning are the release of a power ofappointment and the selection of optional provisions in life insurance policies.Also considered are the selection of the tax year for income tax purposes andwhether to file a joint return on the decedent’s final return. Other strategiesinclude delaying the administration of the decedent’s estate and distributingestate assets over a period of time to beneficiaries rather than giving them out allat one time.

CHAPTER 242

n disclaimer

The refusal, rejection, or

renunciation of a claim, a

power, or property.

n quali f ied

disclaimer

Under federal tax law, an

irrevocable and

unqualified refusal by a

person to accept an

interest in property. It is

effective only if it is in

writing, received within a

specified time, received

prior to the acceptance of

any benefits, and legally

effective to pass the

disclaimed interest to

another person without

direction from the person

making the disclaimer.

CASE STUDY Renunciat ion of Legacy

20A AMJUR LF WI 266:1093

It is the wish of the undersigned, ______ , that the other members of the family of

_____ , deceased, who may be entitled to receive property of the estate under the law may

receive it. I therefore decline to accept anything under the will of ______, deceased, and

renounce the same in toto, so far as any interest coming to me is concerned, and leave it to

descend under law to the parties entitled, free from any encumbrance on account of the

provision naming me in the will.

Dated:

Sometimes taxes can be saved if a spouse exercises elective rights (discussed in

Chapter 7). For example, suppose a wife died with a will that left everything to her son. To

reduce the estate tax liability on his wife’s death, her husband elected to take his intestate

share, which qualified for the estate tax marital deduction. The husband’s actions resulted

in a considerable estate tax savings. The husband then made a gift of his elective share

directly to his son’s children, reducing the estate taxes ultimately payable upon his son’s

subsequent death.


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SUMMARY

The primary purpose of all family estate planning is to arrange the affairs ofthe family unit to obtain the maximum benefits of principal and income for thefamily and, to the fullest extent possible, to pass on the family property withoutany loss. The overall goal is to protect the family unit and achieve financial andpsychological security to the maximum extent possible.

The first step in planning an estate is to gather the facts, which fall into fourcategories: (1) domicile, (2) property, (3) beneficiaries, and (4) the individual’sobjectives. A questionnaire should be completed by the client and returned tothe lawyer before any discussion of specific family estate planning proposals. Theindividual objectives of the client cannot be overlooked in planning an estate.

An attorney who specializes in estate planning, an accountant, and a lifeinsurance underwriter are members of the estate planning team. If a bank is afiduciary, a trust officer is also included. An important member of the estateplanning team is the well-trained legal assistant.

The principal tools used by an estate planner are wills, trusts, gifts, powers ofappointment, insurance, retirement plans, and family limited partnerships. A willis considered to be the single most important estate planning instrument. Trustsare used by estate planners to pass assets on to a future generation, provideincome for people during their lives, and prevent family assets from beingmismanaged or spent unwisely. Trusts also help to reduce problems created byjoint ownership, avoid the expense and publicity of probate, and reduce taxes.Gifts are important to reduce death taxes. Powers of appointment allow flexibility

ESTATE PLANNING 43

CASE STUDY In Re Estate of Holden

539 S.E.2d 703 (SC)

FACTS: William Holden, Sr., died intestate survived by his wife, two sons, and twograndchildren (one of whom was in gestation when the decedent died).Wishing the entire estate to pass to his mother, each son signed adisclaimer stating, “I hereby disclaim and renounce any interest in theestate and relinquish any claim I may have to it.” The sons did not realizethat their inheritance, if disclaimed, would pass under intestate law to theirchildren—the lineal descendants of their father—rather than to theirmother (see Chapter 4). Learning the legal effect of their disclaimers, thesons filed court documents attempting to revoke their disclaimers.

LEGAL ISSUE: Can a disclaimer of an inheritance be revoked?

COURT DECISION: No.

REASON: A qualified disclaimer is irrevocable under South Carolina statutes, whichfollow the federal tax law on the subject.


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in determining who will inherit from a decedent’s estate. Insurance can create anestate where otherwise there would be none. It can also furnish liquidity, thuspreventing a forced sale of estate property.

Estate planning does not end when a person dies. Postmortem planning canoften save estate taxes. Devices such as disclaiming inheritances and exercising aspousal election can sometimes reap tax-saving benefits for beneficiaries.

CHAPTER 244

n REVIEW QUESTIONS

1. Why are paralegals not allowed to give legal advice to clients?

2. What is the primary purpose of all estate planning?

3. Name six members of an estate planning team.

4. What is the first step in estate planning? List the four categories into which the needed facts can beclassified.

5. What is required for a new domicile to be established, and why is the determination of domicileimportant?

6. What are the principal tools used by estate planners?

7. Why are trusts used by estate planners?

8. How can the use of gifts as an estate planning device reduce death taxes?

9. Why might someone use a power of appointment in a will or trust?

10. Describe two postmortem estate planning devices.

n CASES TO DISCUSS

1. Lenora Conger assisted in caring for her uncle, William Westleigh, during his declining years.Westleigh gave Conger $34,000 to keep in her safe deposit box, saying he did not want others toknow that he had that amount of money. He also told Conger she could use the money to take careof her parents’ medical needs. Conger believed that the money should be retained to coverWestleigh’s medical needs and that it would always be available to him if needed. When Westleighdied, approximately $27,000 of the funds remained. Conger claims that the money was a gift to her.Do you agree? Why or why not? Westleigh v. Conger, 755 A.2d 518 (ME).

2. John L. Lauricella, Jr., died while living in a house that was owned by his son and located in St.Tammany Parish, Louisiana. Three months before he died, in a codicil to his will, Lauricelladeclared himself to be a resident of St. Tammany Parish. He also had a checking account there.However, in his last will and testament, executed seven years earlier, Lauricella had declaredhimself to be a domiciliary of Jefferson Parish. In at least three real estate transactions conducted amonth before he died, and in a trust agreement executed 10 days before his death, Lauricellaidentified himself as a resident or domiciliary of Jefferson Parish. He was a registered voter inJefferson Parish, and his driver’s license, income tax records, and death certificate all identifiedhim as a Jefferson Parish resident. His son stated that his father lived in the St. Tammany Parish


21764_03_ch02_p021-047.3d 5/6/2008 8:53 page 45

ESTATE PLANNING 45

house for insurance purposes. Who has the burden of proving a change of domicile?Was Lauricella domiciled in St. Tammany Parish or in Jefferson Parish? Explain. Successionof Lauricella, 571 So. 2d 885 (LA).

3. Mr. Macklem made a donation to the Church of the Adamic Communion, a religious enterprisefounded by Mr. Macklem. Mr. Macklem was the sole member of the church, which was located athis residence. No regular worship services were conducted by or at the church. The churchoperated to disseminate Mr. Macklem’s personal religious views and to proselytize others to hisviews. Was the gift to the church a completed gift? Why or why not? Macklem v. United States, 757 F.Supp. 6 (D. CT).

n RESEARCH ON THE WEB

1. For an overview of estate planning, see <http://www.law.cornell.edu> and follow the Topics linkand then the Estate Planning link.

2. Go to <http://www.lawcrawler.com>. Under the topic Research, click Summaries of Law. Then,scroll down to Trusts & Estates and click Estate Planning. Select a topic of interest and write areport on your findings.

3. To learn more about saving for college, key in <http://www.Google.com>. Then, in the spaceprovided, type “Coverdell Education Savings Accounts.”

n SHARPENING YOUR PROFESS IONAL SKILLS

1. Refer to the will of Theodore Roosevelt (reproduced in Appendix B).

a. What paragraph contains a power of appointment?

b. What is the appointive property?

c. Who is the donee of the power?

d. Who is the appointee?

2. Draw a diagram of your family (a family tree).

3. Refer to Item XI in the will of Elvis Presley (reproduced in Appendix B). Assume that Elvis’s fatherwishes to exercise the power of appointment, in his own will, by naming John Burns as successortrustee to Elvis’s will. Draft a clause that could be used in Elvis’s father’s will to accomplish this.

4. For what reason do you think paragraph FIRST (D) and (E) and paragraph THIRD (B) and (D) ofthe will of Jacqueline K. Onassis (reproduced in Appendix B) authorize her children to renounceand disclaim interests in real and personal property?

5. In your own words, explain the meaning of paragraph FOURTH of the will of Jacqueline K. Onassis(reproduced in Appendix B).


21764_03_ch02_p021-047.3d 5/6/2008 8:53 page 46

CHAPTER 246

n SHARPENING YOUR LEGAL VOCABULARY

On a separate sheet of paper, fill in the numbered blank lines in the following anecdote with legalterms from this list:

401(k) plan

appointees

appointive property

appointments

disclaimer

donee

donor

education IRA

endowment

estate planning

family limited partnership

general partners

general power of appointment

group term life insurance

inter vivos gift

Keogh plan

limited partners

limited payment life insurance

long-term care insurance

ordinary life insurance

postmortem planning

power of appointment

qualified disclaimer

Roth IRA

simplified employee pension (SEP) plan

special power of appointment

split gift provision

straight life insurance

term insurance

traditional IRA

whole life insurance


21764_03_ch02_p021-047.3d 5/6/2008 8:53 page 47

ESTATE PLANNING 47

When Stanley died, his wife, Ruby, realized that Stanley had done some (1), that is, he had arranged hisproperty and estate in the manner best calculated to maintain and protect his family, both duringhis lifetime and after his death. He was also well insured. He was covered by (2), which furnishes maximumprotection for the period covered at minimum cost. In addition, he was covered by (3), also known as (4) or(5), which gives lifetime protection and builds up a cash surrender value but has to be paid for throughouthis life. Stanley had decided against buying (6), for which premiums are paid only for the limited periodrequired by the policy and which also has a cash surrender value. He did not have a(n) (7) policy, whichwould have made a fund available during his lifetime. He did, however, have (8) that provided protectionunder a master policy, through his employment. The policy was not a(n) (9) policy, under which he wouldpay only the annual increase in the cash surrender value and the annual premium of the policy. Stanley waseligible to collect retirement benefits from (10) because he had paid into it for more that 40 calendarquarters. He also had two retirement plans: a(n) (11), which is similar to a traditional IRA except thatdistributions are not required during the owner’s lifetime and are tax-free after the age of 59½ and a(n)(12), which is a company-sponsored retirement plan in which an employee agrees either to take a salaryreduction or to forgo a bonus to provide money for retirement. When Ruby read Stanley’s will, shediscovered that Stanley had given her a(n) (13), that is, the right to direct the disposition of Stanley’sproperty. Stanley was called the (14), and Ruby was called the (15). The right was a(n) (16) because it waslimited to making (17) to Stanley’s children or grandchildren. The people Ruby selects to receive Stanley’sproperty will be called (18). In doing some (19), that is, estate planning after Stanley’s death, Ruby decidedagainst making a(n) (20), which is a formal renunciation of her inheritance.

n KEY TERMS

401(k) plan

annuity

appointee

appointive property

appointment

disclaimer

domiciled

donee

donor

education IRAs

endowment insurance

estate planning

family limited partnership

general partners

inter vivos gift

Keogh plan

limited partners

limited-payment life insurance

long-term care insurance

postmortem planning

power of appointment

qualified disclaimer

roth IRAs

simplified employee pension plan

(SEP)

split-gift provision

term life insurance

traditional IRAs

universal (adjustable-premium

whole) life insurance

whole life insurance

Online CompanionTM

For additional resources, please go to

http://www.paralegal.delmar.cengage.com.

Student CD-ROMFor additional materials, please go to the

CD in this book.


Documents

Administration of Wills, Trusts and Estates, Fourth …...Tiffany Davis, a paralegal in the law firm of Stearns & MacDonald, was discussing a client’s estate with Attorney Stearns