Bài giảng Business Law - Chapter 26: Estates and Trusts

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin5Personal Property and BailmentsReal PropertyLandlord and TenantEstates and TrustsInsurance LawPropertyPARTEstates and TrustsPAETRHC26When you have told anyone that you have left him a legacy, the only decent thing is to die at once. Samuel ButlerLearning ObjectivesList and explain requirements for a valid will, changes, and revocationIdentify tools for future disabilityExplain intestacy (no will)Describe estate administrationDetail formation & administration of trusts, including revocationEach state has statutes and case law that regulates the distribution of property upon a person’s deathUniform Probate Code, a comprehensive model law, enacted in 16 statesA 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 deathOverviewA 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 deathA will can direct only property owned by the testator at the time of the testator’s deathThe WillA bequest (also called legacy) is a gift of personal property or money Ademption: a specific bequest of property that is ineffective since the testator disposed of the property before deathA devise is a gift of real propertyThe residuary is balance of the estate left after specific devises and bequests have been madeWill TerminologyTestamentary capacity (sound mind, legal age)Standard for mental capacity is fairly lowExecution with formalities of state lawA writing Signed by the testator or someone else at the testator’s directionSignature witnessed, generally by two or three disinterested witnessesRequirements of Will MakingA nuncupative will is an oral will Recognized as valid in some states under limited circumstancesHolographic wills are written and signed in the testator’s handwritingInformal WillsA person who takes property by will takes it subject to all claims against the propertyExample: mortgage or lienMost states grant statutory rights to the surviving spouse of the testator in property owned solely by the testator Specifics of the statutory right varies from state to stateLimitations on Disposition by WillA 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 WillAn advance directive is a written document directing others how to make future health care decisions in the event that the person becomes incapacitatedLiving wills and power of attorneyIn a living will, a person states in advance his/her intention to forgo or obtain certain life-prolonging medical proceduresSee page 696 of textAdvance DirectivesDurable 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 gives the attorney in fact specific authority to make certain health care decisions for the person if the person becomes incompetentExample: consent to or withholding surgery, nursing home care, or withdrawing or prolonging life supportAdvance DirectivesA person who dies without making a will, or if the will is declared invalid, is said to have died intestateProperty will be distributed to intestate’s heirs in accordance with state intestacy or intestate succession statutesEstate of McDaniel v. McDaniel: due to divorce proceedings, wife not “surviving spouse” under intestate lawIntestacyWhen a person dies, the administration process or probate process provides the method to collect the property (probate estate), settle debts, and distribute remaining property of the decedent to those who will inherit by will or intestate successionProcess supervised by a probate courtEstate AdministrationA trust is a legal relationship in which a person with legal title to property (trustee) has the duty to hold it for the use or benefit of another person (beneficiary)Beneficiary has equitable title to the property since it is maintained for his/her benefitTrustsA settlor or trustor creates the trust by one of several methods:Owner of property may declare that s/he is holding certain property in trustBy operation of law Example: constructive trustExpress instrument in which owner of property transfers title to a trustee to hold for a beneficiaryTrustsAn inter vivos trust is established and effective during the settlor’s lifetime A testamentary trust is established in a person’s will takes effect only at the death of the settlorReasons for creating trusts include greater privacy (avoids probate process), more control over property management, and income and estate tax advantagesTrustsTrustee generally has broad management powers over propertyTrustee must use reasonable degree of skill, judgment, and care in the exercise of duties May be held to higher standard if expected to have a greater degree of skill (e.g., lawyer)Trustee owes a duty of loyalty (fiduciary duty) to the beneficiariesDuties of the TrusteeA trustee who breaches any of the duties of a trustee or whose conduct falls below the standard of care applicable to trustees may incur personal liabilityBreach of TrustThought QuestionWhat would you write in your last will and testament?