Bài giảng Business Law (13th edition) - Chapter 26: Estates and Trusts

Learning Objectives Nature and terminology of wills Planning for disability through advance directives Intestacy (no will) Estate administration Nature and terminology of trusts

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PropertyPersonal Property and BailmentsReal PropertyLandlord and TenantEstates and TrustsInsurance Law5McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Estates and TrustsPAETRHC26“When you have told anyone that you have left him a legacy, the only decent thing is to die at once.” Samuel ButlerLearning ObjectivesNature and terminology of willsPlanning for disability through advance directivesIntestacy (no will)Estate administrationNature and terminology of trusts26 - *A person’s estate is all property owned by that person and estate planning refers to the process of planning for the transfer of a person’s estate in later life and at deathA will is a document executed with specific legal formalities by a testator (person making will) that bears instructions about the way the person’s property will transfer at deathOverview26 - *A bequest or legacy is a gift of money or other personal propertyA devise is a gift of real propertyThe residuary is the estate balance after specific devises and bequestsDistribution is per capita (named people share equally) or per stirpes (surviving descendants divide share his/her deceased parent would have received)Will Terminology26 - *A valid will requires testamentary capacity (sound mind, legal age) and legal execution: A writing signed by the testator or someone at testator’s direction with signature witnessedA nuncupative will is an oral will A holographic will is handwritten and signed in the testator’s handwritingA codicil is an amendment of a willWill Making26 - *A person who takes property by will takes it subject to all claims against the propertyExample: mortgage or lienMost states grant statutory rights in testator’s property to surviving spouseLimitations on Disposition by Will26 - *A will is revocable until the moment of the testator’s deathThus confers no present interest in propertyWills may be revoked in many ways: Physical destruction, crossing out the will or creating a writing that expressly cancels the will, or executing a later valid will that expressly revokes the earlier willRevocation of a Will26 - *Advance directive directs others how to make health care decisions in event of incapacityLiving will: person states intention to forgo or obtain life-prolonging medical proceduresDurable power of attorney gives another person legal authority to act on one’s behalf in case of mental or physical incapacityDurable power of attorney for health care is power of attorney limited to health careAdvance Directives26 - *When a person dies, the administration process or probate process collects property (probate estate), settles debts, and distributes remaining property of decedent to those who inherit by will or intestacy (no will)Process supervised by a probate courtTaxable estate different from probate estateEstate Administration26 - *Determine whether the decedent left a will to direct property distributionSelect a personal representative (executor) to administer estateExecutor undertakes various duties of the estate administration Probate court closes estate and discharges personal representativeProbate Process26 - *A trust is a legal relationship in which person with legal title to property (trustee) has duty to hold it for use or benefit of a beneficiaryA settlor or trustor creates the trust by:Owner declaring s/he holds property in trustOperation of lawExpress document transferring title to trusteeTrusts26 - *Inter vivos trust: established and effective during settlor’s lifetime Testamentary trust: established in a person’s will and takes effect only at settlor’s deathTypes of trusts: private (benefits named person), charitable (benefits society), Totten (money in a financial institution in name of depositor as trustee for beneficiary)Trusts26 - *Trustee generally has broad management powers over property and must use reasonable degree of skill, judgment, and care in exercise of duties Trustee owes duty of loyalty (fiduciary duty) to beneficiariesA trustee who breaches any of the duties may incur personal liabilityDuties of the Trustee26 - *Test Your KnowledgeTrue=A, False = BA bequest is a gift of personal property or money.A residuary is a gift of real property. The phrase “per capita” in a will means that each member of a specified group must share equally in the propertyA holographic will is an oral will.26 - *Test Your KnowledgeTrue=A, False = BOnce written, a will is irrevocable. A Totten trust directs how real property is to be managed for the beneficiary.A trust is less private than a will since a trust is filed as a public record to be valid.An inter vivos trust is established and effective during the settlor’s lifetime.26 - *Test Your KnowledgeMultiple ChoiceIn Amy’s living will, she stated in advance: (a) who shall receive property from her estate(b) which charity shall benefit from her estate (c) her intention to forgo or obtain certain life-prolonging medical procedures (d) both A and B (e) none of the above26 - *Test Your KnowledgeMultiple ChoiceWhat steps occur in the probate process? (a) select an executor(b) determine whether the decedent left a will and follow the directions in the will(c) close the estate and discharge the personal representative(d) all of the above(e) all of the above plus administer the estate26 - *Thought QuestionsWhat would you write in your last will and testament? 26 - *
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