Chapter 52 Wills and Trusts Copyright 2017 Mc

Chapter 52 Wills and Trusts Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Overview • LO 52 -1: How does one engage in estate planning? • LO 52 -2: What legal issues relate to wills? • LO 52 -3: How are trusts used as estate planning tools? • LO 52 -4: What end-of-life decisions are important from a legal perspective? • LO 52 -5: How does international law protect wills? 52 -2

Chapter 52 Hypothetical Case 1 • The past few weeks have been very difficult for 39 -year-old Ana Marie Hunnicut. In that time frame, her father Alvaro Rodriguez, a longtime resident of Yuma, Arizona, was diagnosed with terminal cancer and died. As her father's only immediate family member (Rodriguez's wife Izarra had passed away eight years before), Hunnicut is responsible for probating her father's estate. Early this morning, while going through the important papers her father kept in an unlocked safe in his home office, Hunnicut came across a paper entitled "Last Will and Testament of Alvaro Diego Rodriguez. " The document was dated September 1, 2013, and was written entirely in what appeared to be her father's handwriting, including his signature. In it, Rodriguez revoked all previous wills and willed all of his personal and real property, including all bank deposits, to the Border Network for Human Rights, a nonprofit humanitarian group dedicated to assisting Mexican immigrants and influencing United States immigration policy. The estate is worth $175, 000. Hunnicut is both perplexed and heartbroken. Her father had always attended to her needs, and in a 2005 will (an original copy of which Hunnicut had in her possession), he had left all of his estate to his daughter. The 2005 will had been prepared by a local attorney, witnessed by two friends of the Rodriguez family, and notarized by a local notary public. • Does Rodriguez's 2013 will take precedence over his 2005 will? Does it matter that the 2005 will was executed with formalities, including the signatures of two witnesses and a notary public, and the 2013 will was not? From an ethical and/or legal standpoint, is Hunnicut obligated to honor the 2013 will, even though doing so means she will receive none of her father's estate? 52 -3

Chapter 52 Hypothetical Case 2 • Cecil Husted, a divorced father of two children, recently died of a heart attack at the age of 70. Husted was an internationally acclaimed film cinematographer and director, known for such films as 2110: A Galactic Adventure and The Glistening. The year before he died, Husted created a videotaped will in which he left all of his $7 million estate to his daughter, Sophia Collingsworth. The executor of Husted's will, his colleague Albert Fontrow, submitted the will to probate. Husted's son, Hal Husted, has challenged the will in probate court. Hal Husted seeks to invalidate the videotaped will and thereby receive a onehalf share of his father's estate through the laws of intestate distribution (the laws of intestate distribution apply by default when an individual dies without leaving a valid will; through intestate laws, children of a decedent share equally in terms of property distribution). • Will Hal Husted succeed in his legal challenge to his father's will? 52 -4

Estate Planning and the Uniform Probate Code • Estate planning: Process by which an individual decides what to do with his/her real and personal property during and after life • Uniform Probate Code: Guides states in developing laws related to estate planning 52 -5

Important Estate Planning Tools • Will: Legal document that outlines how a person wants his/her property distributed on death • Trust: Allows a person to transfer property to another person; property used for benefit a third person 52 -6

Reasons Individuals Engage in Estate Planning • To provide for their family financially after their death • To reduce taxes and preserve wealth • To promote family harmony • To allow individuals in nontraditional family relationships to gain benefits of traditional family relationships 52 -7

Intestacy Statutes • Intestacy statutes: Outline how a person's property will be distributed if he/she dies without a will 52 -8

Requirements for a Legally Valid Will • Testamentary capacity: Person must be old enough to write will, and must be of sound mind • Document in writing (usually a typed, written instrument) • Testator's signature, including initials on each page • Witnesses who attest to the will 52 -9

Special Kinds of Wills • Oral will: Will that testator declares verbally during his/her last illness, in front of witnesses, who later document testator's wishes • Holographic will: Will that testator writes and signs in his/her own handwriting; usually states do not require witnesses, because when entire will is in handwriting, reduced chance of fraud/forgery • Mutual will: Will that two/more testators execute in which they leave property to each other, provided the survivor agrees that when he/she dies, remaining property will be distributed consistent with plan created by all testators 5210

Legal Issues Related to Wills • Grounds for contesting will • Will fails to meet legal requirements • Testator a victim of fraud/undue influence • Changing will: By writing a will codicil (wills are ambulatory, meaning testators can change them) • A codicil is a separate document with new provisions that outline changes to will • Testator must satisfy same procedures to make a valid codicil as those followed in making original will • Revoking will: Most common method is destruction of will • Settlement of estate: By way of a personal representative (executor/executrix), through process known as probate 5211

Creation of a Trust • Person who creates trust (settlor) delivers and transfers legal title to property to another person (trustee), who holds the property and uses it for benefit of third person (beneficiary) • Trusts are usually created through formal, written documents • Common trust components: • Trust corpus: Property held in trust • Income corpus: Trust income generated through interest and/or appreciation 5212

Types of Trusts • Express • Living trust: Created when settlor is alive • Testamentary trust: Created through a will • Implied: Created by court 5213

Termination of Trusts • Termination of trust: Through provision in trust which either indicates date on which trust will terminate, or specifies an event that will terminate trust 5214

End-of-Life Decisions: Advance Directives • Types of advance directives (through which person can express his/her wishes about efforts to prolong life and the right to die) include: • Living wills: Allow individuals to express their wishes regarding extent of medical treatment desired if they are in an accident or suffer from a life-threatening illness • Health care proxies/durable powers of attorney: Allow individuals to make medical decisions for others 5215

Uniform Anatomical Gifts Act (UAGA) • Provides that any individual 18 years old/older may give all/any part of his/her body to donee on death • Such donations are called anatomical gifts 5216

Providing for a Uniform Law on the Form of an International Will (1973) • Sponsored by International Institute for Unification of Private Law (UNIDROIT) • Protects wills written in other countries, provided the wills follow a particular format 5217

Chapter 52 Hypothetical Case 3 • Known as the "Queen of Mean, " hotelier and real estate developer Leona Helmsley gained notoriety in the 1980 s for the purported quote, "Only the little people pay taxes. " (She was convicted of federal tax evasion and sentenced to a short prison stay as a result of her crime. ) Helmsley died in 2007, leaving behind a will that devised $12 million for the care of her eightyear-old dog, a Maltese named Trouble. She completely disinherited two grandchildren; the will offered no explanation for their disinheritance other than "reasons which are known to them. " Donald Trump was quoted as saying, "The dog is the only thing that loved her and deserves every single penny of it. " • Should a probate court rewrite such a will, reducing the amount of money for the care of the dog and allocating a reasonable portion of the funds to the two grandchildren who received nothing from the will? Is it ethical for a testator to completely disinherit close relatives, especially when such a snub favors a dog? 5218

Chapter 52 Hypothetical Case 4 • Seven years ago, 83 -year-old Sara Muldowney signed a durable power of attorney agreement that stipulated that her son, Robert Muldowney, could make medical decisions for her if she became incapacitated. Her daughter, Sylvia Cantor, was not named in the document nor any other document relating to Muldowney's affairs or estate. Yesterday, Sara Muldowney suffered a severe stroke. She has been placed on life support, and doctors have advised her son and daughter that Muldowney could persist for years in that state. Without the life support, they have told her children, she will certainly die, and if she does at some point regain consciousness (an unlikely event), she will be paralyzed, will require a ventilator to breathe, and will be unable to speak or care for herself. Robert Muldowney decides to withdraw life support from his mother and let her die peacefully. Cantor is outraged and wants her mother to survive by any means necessary. • Is Robert Muldowney able to override his sister's wishes and allow his mother to be removed from life support? Does Cantor have legal grounds to fight her brother's decision? 5219