CHAPTER 21.2: ESTATE
PLANNING
ESTATE PLANNING
• A process of assuring that a person’s assets
remain intact to protect the family before
and after death.
• Estate planning includes contributing to
one’s retirement income as well as using
certain legal instruments such as wills and
trusts.
• Estate Plan Vs. Will Vs. Trust
WILLS
• A will is a document that is signed during
your lifetime that provides for the distribution
of your property upon death.
• Each state has its own requirements for making
Wills
• Testate means to die with a will
• A testator is a male who dies with a will
• A testatrix is a female who dies with a will
WILLS
• A gift of personal property made
by a will is called a bequest or
legacy.
• A gift of real property made by a
will is called a devise in most
states.
WHO CAN MAKE A WILL?
• Anyone who has reached the age of 18
and has both testamentary intent and
testamentary capacity
• Testamentary intent
• Intention that the documents is meant to be a last
will and testament
• Testamentary Capacity
• The mental ability to create a will
TESTAMENTARY CAPACITY
• Sound Mind is defined as the following:
• Understand the nature and extent of your
property
• Know who would be the natural persons to
inherit your property, even though you
may leave your property to anyone you
choose
• Know that you are making a will
• Be free delusions that might influence the
dispensation of your property
REQUIREMENTS OF A WILL
• Will must conform exactly to requirements of the
state where it is made.
• To be valid, a will must be
• Published- written and must reflect the true intentions of the
parties writing the will
• Oral wills of personal property are acceptable for soldiers and
mariners
• Attested- Must be witnessed by the number of people
required by state, usually 2 people
• And signed- If someone cannot write, someone else can
sign it for them in their presence and with their consent.
REVOKING OR CHANGING A WILL
• A will can be revoked in the following ways:
• Burning, tearing, canceling, or obliterating it with intent to
revoke it
• Making a new will
• Marrying after the will was created.
• Divorce usually revokes gifts made under a will to a former spouse.
• Codicil- A formal documents used to supplement or
change an existing will. It must be signed and witnessed
to be valid.
FAMILY AND SPOUSE PROTECTIONS
• Children who can prove they were mistakenly left out of
the will also have certain rights of protection in most
states.
• Forgotten children may receive the same amount they
would have received if their parents would have died
without a will.
• Adopted children are also treated as naturally born
children
• If a will specifically states that a child has been
intentionally omitted from a parent’s will, then the will
must be followed.
INTESTATE SUCCESSION
• To be without a will
• Prince Dies Without A Will
• Can have serious consequences
• The people you want to inherit your
estate may not be able to do so…
INTESTATE- WITHOUT A WILL
INTESTATE SUCCESSION
• Distribution of property is done according to
relationship to the deceased.
• A surviving spouse is usually entitled to one-third or
one-half of the estate.
• The balance is divided equally among children.
• If a child has died since the will has been written,
then his or her children share that portion.
PROBATE AND ESTATE SETTLEMENT
• Probate
• Process of validating and executing a will.
• Probate court supervises the process
• Its first job is to validate the will, if no one opposes – the
settlement is simple
• This is where people can contest the will if they were left out
or disagree
• When you make a will you can put a clause in
contesting certain people from inheriting anything.
PROBATE AND ESTATE SETTLEMENT
• Executor
• Male designated in the will to carry out its terms
• Executrix
• Female designated in the will to carry out its terms
• If no one is named, or the person named refuses to
take that role, the court will appoint an executor to
carry out the will
• That person is called an administrator or administratrix.
• Role: inventory assets, pay any debts and taxes, and distribute
remaining assets as stated in will or by state law
POWER OF ATTORNEY
• A power of attorney grants power to a representative to
legally act on your behalf.
• The person giving power or attorney is the grantor or
principle.
• The person receiving the power of attorney is the
attorney-in-fact.
• Powers of Attorney can make decisions on your half.
Powers of Attorney
MEDICAL DIRECTIVES
• A special power of attorney that deals
solely with medical care
• They allow the attorney-in-fact to
make decisions on behalf of the
person instead of the court making
that decision.
LIVING WILL
• Documents that directs whether your life should be
prolonged by artificial means if you become
incapacitated with no reasonable expectation of
recovery.
• Because technology allows people to stay alive for
a long time, living wills give their representative the
authority to make health care decisions according
to the directives in the living will.
TRUST
• A legal device by which property is held by one person
for the benefit of another.
• A trustee is a person who holds title to the property for
another’s benefit.
• The beneficiary is the person for whose benefit the property is
held in the trust.
• A trust allows to provide for your children
• Wills Vs. Trusts
TYPES OF TRUSTS
• Private Trusts- involves individual settlers and
beneficiaries. Most common!
• Testamentary Trust- Created by a will. Only comes into
existence upon death.
• A living Trust- Comes into existence while the settler is
alive. Can be revocable or irrevocable
• Spendthrift Trust- Protects assets from being spent
recklessly.
• Charitable Trust- Fund a charity upon death
RIGHTS AND DUTIES OF PARTIES
• Trustees are obligated by law to
use a high degree of care in
investing the trust funds.
• They cannot take extraordinary
risk