CHAPTER 21 2 ESTATE PLANNING ESTATE PLANNING A

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-infact. • 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