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LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING
Chapter 24Chapter 24 Slide Slide 11
Wills, Estates, and Trusts
24-124-1 Legal Consequences of Death
24-224-2 Trusts
CHAPTER 24
Lessons
LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING
Chapter 24Chapter 24 Slide Slide 22
Legal Consequences of Death
Explain why an orderly distribution of a decedent’s estate is necessary
Discuss the benefits of making a willDescribe how a valid will is made
LESSON 24-1
GOALS
Chapter 24Chapter 24 Slide Slide 33
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DEATH AND THE LAW
Death without a willDeath with a will
Creation and execution of a valid willAmendment of a valid willSpecial types of willsRevocation of a will
Chapter 24Chapter 24 Slide Slide 44
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Someone dies -- ?
Decedent – person who is deceasedWhat does the law do?
Looks for instructionsHow are debts to be paid?Remaining property?
Will – written document which state wishes of the deceased (how property is to be divided)
Chapter 24Chapter 24 Slide Slide 55
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No Will
Intestate – dying without a willProbate Court – settles the affairs
appoints a personal representativeADMINISTRATOR (male)ADMINISTRATIX (female)
Estate – property of the deceased
No Will = large administrative expenses and large estate taxes
Chapter 24Chapter 24 Slide Slide 66
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Chapter 24Chapter 24 Slide Slide 77
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No Will
Intestacy Statutes – dictates how property will be dispersed
1/3 or ½ to spouseremainder among children
No surviving children/grandchildren – decedent’s parents
Parents deceased – decedent’s sisters & brothers and their children
Chapter 24Chapter 24 Slide Slide 88
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With a Will
Testate – dying with a valid WillTestator – maker of the Will (male)Testatrix – maker of the Will (female)Allows the deceased to decide how
property will be divided instead of intestacy statutes.
Chapter 24Chapter 24 Slide Slide 99
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With a Will
Executor (male) Executrix (female)personal representative of deceased
Can be exempt from posting bond (paying the court $ to ensure the duties are properly performed)
Appoint guardian for minor children guardian can also be exempt from posting bond
Chapter 24Chapter 24 Slide Slide 1010
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Living Wills
Directions to physicians on choices regarding life-support treatment for
terminally ill vegetative state
Durable Power of Attorney – confers the power to an individual to make health care decisions on your behalf
Chapter 24Chapter 24 Slide Slide 1111
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Rules on creation and execution of a valid Will
There are strict state laws that govern: how wills are created how wills are executed
1) Testatrix/Testator must have Testamentary Intent (clear intention to create a will)
no deception present
2) Testamentary Capacity – understand clearly what you are giving and to whom
Chapter 24Chapter 24 Slide Slide 1212
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3) Writing –
signature witnessed by 2-3 adults
witnesses not in will
witnesses aware the document is a
will
Must be at least 18 years of age.
Chapter 24Chapter 24 Slide Slide 1313
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Amendment
Wills become effective when the person dies.
Can be changed at any time before the person dies.
Codicil – formal, written, and witnessed amendment.
Chapter 24Chapter 24 Slide Slide 1414
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Special Types of Wills
Holographic Will – written by decedent’s own hand and signed
Nuncupative Will – oral will / during maker’s last illness or by service personnel on active duty.
Chapter 24Chapter 24 Slide Slide 1515
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Lee was fatally injured in a car accident. As she was dying – she told 3 witnesses
she was making a will.She wanted her paintings collection to go
to her good friend, Anne.In a State that allows nuncupative wills, if
the witnesses’ testimonies were properly and promptly reduced to writing, Lee’s dying wish as to the disposition of her property would be carried out.
Chapter 24Chapter 24 Slide Slide 1616
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Revocation of a Will
As long as the Testator/trix has testamentary intent and capacity, the will can be amended.
Revoke a Will – destroy / deface marriage / adoption (not divorce; but divorce
settlement can alter a will)
Chapter 24Chapter 24 Slide Slide 1717
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Revocation of a Will
Written revocation – in new will, write:
“I hereby revoke all prior wills, . . .”
Chapter 24Chapter 24 Slide Slide 1818
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Procedures for Estate Resolution
After decedant dies –
-- Administrator must bring proof of death to the appropriate court (probate/surrogate)
death certificate
official notice from armed services
disaster recovery testimony
Chapter 24Chapter 24 Slide Slide 1919
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Procedures for Estate Resolution
If a person just vanished –State can declare dead under “Enoch
Arden laws” (after 5 – 7 years)
-- Organizing all assets and debts
-- Give public notice of the estate and necessity for filing claims against it within the statutory period (six months)
Chapter 24Chapter 24 Slide Slide 2020
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Procedures for Estate Resolution
-- Paying valid claims against the estate
-- Distributing the remaining property according to the will or statute
Administrator is personally liable for failure to reasonably carry out the duties.
Chapter 24Chapter 24 Slide Slide 2121
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Distributions Without a Will
Hawaii as an example:Person dies intestate (one or more
children, no spouse) – children inherit equal shares
Person dies (spouse + children) – spouse gets ½ and rest divided equally among children
Chapter 24Chapter 24 Slide Slide 2222
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Person dies (spouse, no children) – spouse gets ½ and parents of the deceased receive the remainder. If parents are deceased brothers and sisters
Chapter 24Chapter 24 Slide Slide 2323
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Distributions with a Will
Terms of the Will are followed.There may be statutory provisions
allowing certain relatives to override the will’s terms and receive more of the estate than the will provided.
i.e. some states – surviving spouse may elect to receive ½-1/3 instead of the will’s provision.
Chapter 24Chapter 24 Slide Slide 2424
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DIVISION OF $1,800,000 ESTATE
John(testator—deceased)
Robin
Marie (deceased)
Grant (deceased)
John’s ChildrenJohn’s ChildrenHarold
Maynard
Scott
Alicia (deceased)
Guy
Damon
Oliva
GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren
Molly
Morris
Alex
Chapter 24Chapter 24 Slide Slide 2525
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DIVISION OF $1,800,000 ESTATE PER STIRPES
Robin
John(testator—deceased)
Marie (deceased)
Grant (deceased)
Molly
Morris
Alex
Harold
Maynard
Scott
Alicia (deceased)
Guy
Damon
Oliva
John’s ChildrenJohn’s Children GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren($0)
($0)
($300,000)
($200,000)
($200,000)
($200,000)
($600,000)
($150,000)
($150,000)
($0)
Chapter 24Chapter 24 Slide Slide 2626
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DIVISION OF $1,800,000 ESTATE PER CAPITA
Robin
John(testator—deceased)
Marie (deceased)
Grant (deceased)
Molly
Morris
Alex
Harold
Maynard
Scott
Alicia (deceased)
Guy
Damon
Oliva
John’s ChildrenJohn’s Children GrandchildrenGrandchildren Great-GrandchildrenGreat-Grandchildren($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
($180,000)
Chapter 24Chapter 24 Slide Slide 2727
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No Inheritors
Property of the deceased “escheats” or reverts to the state.
LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING
Chapter 24Chapter 24 Slide Slide 2828
Trusts
Explain the usefulness of trustsName and describe the various types of trustsDistinguish between express and implied trusts
LESSON 24-2
GOALS
Chapter 24Chapter 24 Slide Slide 2929
LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING
DISTRIBUTION OF A DECEDENT’S ESTATE
Procedure for estate resolution
Chapter 24Chapter 24 Slide Slide 3030
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What’s your verdict
Pedro buys a vacation home as a way to “keep the family together”.
Didn’t want the property to be split up and sold when he dies.
Pedro wants the vacation home to remain as a “family gathering place.”
What can he do?
Chapter 24Chapter 24 Slide Slide 3131
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CREATION OF TRUSTS
A trust is a legal device used to transfer the immediate control of property to another party.
A separate legal entity.
Chapter 24Chapter 24 Slide Slide 3232
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Creation of Trusts
Trustee – legal entity that has title to property.
Settlor – person who creates the trust
Beneficiary – person for whom the trust has been set up
Chapter 24Chapter 24 Slide Slide 3333
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Creation of Trusts
Trustees have the right to be paid for managing the trust.
NJ – 5%-7%
Chapter 24Chapter 24 Slide Slide 3434
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TYPES OF TRUSTS
Express TrustInter vivos trustTestamentary trustCharitable trustPrivate trust
Spendthrift trust
Implied TrustResulting trustConstructive trust
Chapter 24Chapter 24 Slide Slide 3535
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Inter vivos trust
A trust created during the lifetime of the settlor.
Chapter 24Chapter 24 Slide Slide 3636
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Testamentary trust
A trust created after the death of the settlor in accordance with his/her wishes.
Chapter 24Chapter 24 Slide Slide 3737
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Charitable trust
A trust created for altruistic purposes.Raise money to help build shelter for
homeless.
Chapter 24Chapter 24 Slide Slide 3838
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Private trust
A trust created for a private purpose.One type Spendthrift Trust -
protects the beneficiary’s interest in the property from potential creditors.
Beneficiary cannot have any control over the trust.
Chapter 24Chapter 24 Slide Slide 3939
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Express Trusts
Written or oral statements made by the settlor where terms are explicitly stated by the settlor.
Chapter 24Chapter 24 Slide Slide 4040
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Implied Trusts
Resulting Trust
-- Entity intended to receive the benefit of an express trust cannot do so.
Resulting Trust formed to hold the property for its original owner.
What’s your verdict – Oliver formed charitable trust to install air conditioning in local high school.
Transferred property to be sold for for the cause.
School building burned down.
Chapter 24Chapter 24 Slide Slide 4141
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Implied Trusts
Constructive Trust
-- Created to require a person holding property to transfer it to another b/c retention of the property would be a wrongful and unjust enrichment of the holder.
Property obtained via fraud, duress, etc.