WILLS: TERMINOLOGY

n Will: An instrument prepared by or at the direction of a testator directing what is to be done with her property upon her death.

n The testator may revoke any part or all of her will, and/or amend it by a codicil, during her lifetime.

n No interest in the testator’s property passes under the will prior to the testator’s death.

n Executor: A person appointed by the testator in her will to see that the will is administered and the testator’s property is disposed of as the testator wished.

n Administrator: A person appointed by a (probate) court to handle the disposition of an intestate’s property or to handle the disposition of a testator’s property if the executor named by the testator cannot serve.

n Types of Gifts

n Devise: A gift of real property by will to a devisee.

n Legacy: A gift of personal property by will to a legatee.

WILLS: REQUISITES FOR VALIDITY

n Testamentary Capacity: The testator must be of legal age and sound mind at the time the will is made. Generally, a testator who is of legal age must:

(1) intend the document to be his or her last will,

(2) comprehend the kind and character of the property being distributed by the will, and

(3) comprehend and remember the “natural objects of his [or her] bounty” (i.e., the intended beneficiaries).

n Writing Requirement: Generally, a will must be in writing.

n Holographic Will: A will that is completely handwritten.

n Nuncupative Will: An oral will made and declared before witnesses (e.g., a “deathbed will”).

n Other Formalities: The testator’s signature must appear on the face of the will, and, in the case of non-holographic wills, must be declared before and signed by witnesses.

WILLS: REVOCATION

n A testator may revoke his or her will at any time prior to his or her death. Revocation may be accomplished:

(1) By Physical Act – intentionally burning, tearing, canceling, obliterating, or otherwise destroying the will or directing another to do so in the testator’s presence;

(2) By Subsequent Writing – intentionally making a new will or amending or revoking any or all of a will by means of a codicil; or

(3) By Operation of Law – due to marriage, divorce, or annulment, or the birth of one or more child(-ren) after the will was executed.

INTESTACY

n Intestacy: When a person dies without leaving a valid will, he or she is said to have died intestate. In such cases, the deceased’s property passes according to law, rather than according to the deceased’s wishes.

n Generally speaking, an intestate’s property passes first to any surviving spouse and children.

n When the intestate has no surviving spouse or children, the general order of inheritance is:

(i) surviving grandchildren, if any; if none then

(ii) surviving siblings of the intestate, if any; if none then

(iii) surviving parents, if any; if none then

(iv) collateral heirs – surviving nieces, nephews, aunts, and uncles of the intestate.

n Stepchildren are not entitled to inherit unless they are adopted by the intestate prior to his or her death.

n Illegitimate children inherit only from their mother.

TRUSTS

n Trust: Any arrangement by which title to property (real and/or personal) owned by one person (the grantor or settlor) is held by another person (the trustee) for the benefit of a third person (the beneficiary). In addition to a designated beneficiary and a designated trustee, a valid trust requires:

(1) funds or other property sufficiently identified to enable title to pass to the trustee, and

(2) actual delivery by the grantor to the trustee with the intent that title pass to the trustee.

n Trustee: The person (designated by will or otherwise) holding title to, and responsible for dealing with, the property of a trust.

n Inter Vivos Trust: A trust created by the grantor and effective during the grantor’s lifetime.

n Testamentary Trust: A trust created by will and, therefore, not effective until the grantor’s death.

TRUSTS: SPECIAL TYPES

n Charitable Trust: A trust in which the property held by a trustee must be used for a charitable purpose, such as the advancement of health, education, or religion.

n Spendthrift Trust: A trust created to protect a beneficiary from spending all the money to which he or she is entitled, by parceling out the trust proceeds over time.

n Totten Trust: A trust created by the deposit of a person’s own money in his or her own name as trustee for another.

n A Totten trust is revocable at will until the grantor dies or completes the gift by some unequivocal act or declaration.

n Constructive Trust: An equitable trust imposed by a court in the interest of fairness and justice when someone wrongfully holds legal title to property.

n Resulting Trust: An implied trust arising from the conduct of the parties, where one party holds legal title to another’s property, but only for the other’s benefit.

TRUSTEES’ DUTIES

n Standard of Care: A trustee must administer the trust with (i) honesty, (ii) good faith, and (iii) prudence. A trustee’s performance of her duties is judged against the degree of care a reasonably prudent person would exercise in her personal affairs.

n Duty of Loyalty: A trustee must act in the exclusive interest of the trust beneficiary(-ies).

n A trustee’s specific duties include:

n keeping clear and accurate accounts of the trust’s administration;

n furnishing a complete and correct accounting to the beneficiary(-ies);

n keeping the trust’s assets separate from her own;

n distributing, at reasonable intervals, the net income of trust assets to any income beneficiary(-ies);

n diversifying the trust’s assets; and

n disposing of unreasonably risky assets.

TRUSTEES’ POWERS

n The trust document may prescribe the trustee’s powers and direct the trustee in the performance of her duties. A trust containing such terms “trumps” state law, unless the terms of the trust are contrary to law or public policy.

n In the absence of specific terms in the trust, a trustee is generally required to:

n confine investments of the trust’s principal to conservative debt securities, such as government bonds and first mortgages on realty;

n balance the needs of income beneficiaries for a reliable stream of income against the importance of maintaining the principal of the trust for the sake of the principal beneficiaries (the “remaindermen”); and

n allocate the expenses of maintaining trust assets between income and principal beneficiaries in accordance with applicable state law.

ESTATE ADMINISTRATION

n Personal Representative: A person designated by the decedent’s will (executor or executrix) or by a court (administrator(-trix)), if there is no valid will or if the will fails to name a viable executor(-trix), to administer a decedent’s estate.

n Duties of the Personal Representative include:

n collecting and inventorying the decedent’s assets, and having them appraised, as necessary;

n managing the estate’s assets and prevent them from being wasted or unnecessarily depleted;

n receiving and paying valid claims of the decedent’s creditors;

n paying or arranging for payment of income, estate, and inheritance taxes due;

n distributing the remaining assets of the estate to the decedent’s beneficiaries; and

n preparing a final accounting of the estate.

DISABILITY PLANNING

n Durable Power of Attorney: A written – and, where necessary, notarized – document authorizing a party to act on behalf of the person granting the power of attorney when the grantor becomes incapacitated.

n Health Care Power of Attorney: A written – and, where necessary, notarized – document designating a party to have the power to choose what type of and how much medical treatment the grantor will receive when the grantor is incapable of making those decisions for himself.

n Living Will: A form of health care power of attorney that informs those reading it whether the maker wants certain lifesaving or life-sustaining procedures to be undertaken in situations where the treatment will not likely improve the maker’s quality of life.

n While state laws regarding living wills often require that precise language be used and other formalities be observed, once a valid living will is created, those same laws generally require physicians to abide by the terms of the living will, notwithstanding their best medical judgment.