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Estate Planning > Chapter 2 - Basic Estate Planning Documents > Flashcards

Chapter 2 - Basic Estate Planning Documents Flashcards

1
Q

Define Administrator

A

A person, usually a relative of the deceased, appointed by the probate court to oversee the probate process when an executor is not named in the will.

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2
Q

Define Ancillary Probate

A

A probate process conducted in a state other that the state of the decedent’s domicile.

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3
Q

Define Appointment of Executor Clause

A

A clause in will that identifies the executor and any successor executor. This clause may also define the extent of the executor’s powers and may grant specific or general powers.

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4
Q

Define Attestation Clause

A

Witness clause stating that the testator is of sound mind and that he signed the document in the witness’ presence.

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5
Q

Define Attorney in Fact

A

Agent of power holder of a power of attorney.

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6
Q

Define Bequest Clause

A

Directs the distribution of property, whether cash, tangible property, intangible property, or real property.

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7
Q

Define Codicil

A

A document that amends a will. A codicil is prepared subsequent to and separate from the will to modify, explain, or amend the will.

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8
Q

Define Contingent Legatee Clause

A

A clause in a will that names a secondary person to inherit if the original legatee is dead or disclaims the property.

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9
Q

Define Declaration Clause

A

A clause in will which states that this is the last will and testament of the testator.

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10
Q

Define Disclaimer

A

An heir or legatee’s refusal to accept a gift or bequest. The disclaimer allows assets to pass to other heirs or legatees without additional transfer tax.

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11
Q

Define Durable Feature

A

Allows a power of attorney to survive incapacity and/or disability.

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12
Q

Define Durable Power of Attorney Issued Either for Health Care of for Property

A

A written document enabling one individual, the principal, to designate another person(s) to act as his “attorney-in-fact.” A durable power of attorney services the incapacity and/or disability of the principal.

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13
Q

Define Escheat

A

The reversion of an heirless, intestate decedent’s property to the state.

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14
Q

Define Executor

A

Estate representative designated in the will by the decedent. An executor may survive without bond if the bond is waived by the decedent.

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15
Q

Define Domicile

A

Where one lives and intends to remain. The location of one’s home.

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16
Q

Define Felonious Homicide Statute

A

Statue that prevents heirs who feloniously participated in the decedent’s death from inheriting via the will or state intestacy laws.

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17
Q

Define Forced Heirship

A

A state requirement that a certain portion of the decedent’s estate be transferred to a spouse and, in some instances, children.

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18
Q

Define Guardianship Clause

A

A clause in a will which allows the testator to identify an individual(s) to raise any minor children.

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19
Q

Define Holographic Will

A

Will handwritten by the testator. It must be dated and signed by the testator. Valid in most states.

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20
Q

Define Intestacy

A

To die without a valid will or to die with a will that does not distribute all property.

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21
Q

Define Introductory Clause

A

A clause in which identifies the testator.

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22
Q

Define Joint Will

A

One will executed by two or more individuals jointly that transfers their common interest in property.

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23
Q

Define Living Will/Advance Medical Directive

A

Legal document expressing and individual’s last wishes regarding life sustaining treatment. It establishes the medical situations and circumstances in which the individual no longer desires life-sustaining treatment in the event he is no longer capable of making those decisions.

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24
Q

Define Mutual Will

A

Two or more identical wills that leave all assets to the reciprocal party. Also known as a reciprocal will.

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25
Q

Define No-Contest Clause

A

A clause in a will that discourages heirs from contesting the will by substantially decreasing or eliminating bequests to them if they file a formal legal contest to the will.

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26
Q

Define Nuncupative Will

A

Oral will consisting of dying declarations. Made before a sufficient number of witnesses. Not valid in most states.

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27
Q

Define Overqualified

A

A decedent’s taxable estate is less than the applicable estate tax credit equivalency, usually the result when too many assets pass to a surviving spouse.

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28
Q

Define Per Capita

A

Sometimes called “by the head” allows the deceased person’s heirs to move into the generational slot of the deceased heir and inherit accordingly.

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29
Q

Define Per Stirpes

A

Sometimes called “taking by representation” direct that the deceased person’s designated share of an estate is transferred to his heirs.

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30
Q

Define Power of Attorney

A

Legal document that authorizes an agent to act on a principal’s behalf.

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31
Q

Define Power of Attorney for Property

A

A special Power of Attorney designed for a specific purpose. It enables the principal to select a particular person or financial institution to act on his behalf and managed financial tasks that may arise in the event of incapacity.

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32
Q

Define Principal

A

The grantor giver of a power of attorney.

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33
Q

Define Reciprocal Will

A

Two or more individuals that leave all assets to the reciprocal party. Also known as a mutual will.

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34
Q

Define Residuary Clause

A

A clause in a will which directs the transfer of the balance of any assets not previously bequeathed or distributed.

35
Q

Define Self Proving Clause

A

A clause in which a will involves the notary signing a notorized declaration that he/she is the witnessed the testator and the witnesses sign the will.

36
Q

Define Side Instruction Letter

A

Also known as a personal instruction letter, details the tester’s whites regarding the disposition of tangible possessions (household goods), the disposition of the decedent’s body, and funeral arrangements. It is not legally binding, but generally followed.

37
Q

Define Simultaneous Death Clause

A

A clause in a will that establishes a presumption of which person died first in simultaneous death situations.

38
Q

Define Situs

A

The place, generally referring to the state, where property is located.

39
Q

Define Sound Mind

A

A person’s mental capacity.

40
Q

Define Springing Power

A

The agent’s power “springs” into existence upon some defined event or determination.

41
Q

Define Statutory Will

A

A will meeting state statutes that is generally:

  • drawn up by an attorney
  • signed in the presence of witnesses
  • must be typed or in writing
  • be signed by the testator
42
Q

Define Survivorship Clause

A

A clause in a will requiring that the legatee survive for a specific period in order to inherit under the will. The bequest will qualify for the martial deduction if the property transfers to the surviving period and the time period of the clause is six months or less.

43
Q

Define Sweetheart Will

A

Two wills executed by spouses that leave all assets to the other spouse.

44
Q

Define Tax-Appointment Clause

A

A clause in a will directing which assets will bear the payment of any debts and estate taxes.

45
Q

Define Tesate

A

When a decedent dies with a valid will.

46
Q

Define Testator

A

Writer of a will.

47
Q

Define Will

A

A legal document that provides the testator, or will maker, the opportunity to control the distribution of property, appoint an executor and avoid the state’s intestacy law distribution scheme.

48
Q

What are six primary documents used in estate planning?

A
  • Wills
  • Side letters of instruction
  • Powers of attorney for property
  • Durable powers of attorney for health care
  • Living wills or advanced medical directives, and
  • DNR orders.
49
Q

What assets will become part of a decedent’s probate estate?

A

Any that do not automatically transfer upon the testator’s death under state contracts, state property titling law, or state trust law (retirement benefits, jointly owned property, and life insurance policies).

50
Q

When might a will be invalid under state law? 3

A

-If the decedent did not comply with the testamentary requirements of the domiciliary state at the time of the execution of the will,
if the decedent moved to another state of domicile and failed to update his will to meet the new state law requirements, or
-the decedent did not satisfy the necessary requirements (such as testamentary competence) to execute the will.

51
Q

Under what law is personal property distributed? Real property?

A
  • Personal property is distributed according the the will of the laws of intestacy in the state of domicile of the decedent.
  • Real property, is distributed based on the laws of the state in which the property is actually located (the situs).
52
Q

In most states, who usually is entitled to be appointed an administrator?

A

The individual with the largest share in the estate.

53
Q

What are the main benefits to the testator of an effective will? 8

A
  • Select an executor as the decedent’s personal representative to administer the estate
  • Transfer assets that do not automatically transfer at death via contract or operation of law.
  • Designate a guardian for minor children and/or dependents
  • Transfer assets to a designated charity
  • Maximize the utilization of the marital deductions
  • Direct that certain people do not receive any inheritance.
  • Implement provisions to minimize the estate tax burden, and
  • Direct the payment of the estate’s share of the estate tax burden as well as the designation of the source of funds to pay such estate taxes.
54
Q

What are four limitations of wills?

A
  • The potential for a will contest.
  • Courts may invalidate certain restrictions and/or sections in a will that put impermissible conditions on the recipient of assets are that have too many constraints on the transfer of assets.
  • Assets that pass automatically by contract or by law supersede the transfers provided for under the will.
  • A poorly drafted will that contains conflicting transfers, reference to deceased heirs, or nonexistent property may become invalid or the testator’s wishes may not be understood.
55
Q

Generally, what are the only two requirements needed to execute a valid will?

A
  • The will must be in writing

- The will must be signed at its logical end by the testator.

56
Q

What are the three basic forms of wills?

A
  • Statutory
  • Holographic
  • Nuncupative
57
Q

What is the intent of a joint will?

A

For two or more individuals, to agree who will receive the property and contractually bind the survivor to the agreement. Used commonly to protect children from a previous marriage.

58
Q

Why are joint wills generally not recommended? 2

A

It binds the surviving spouse to dispose of property without considering future events (including future tax law changes) and
there are other devices that will more appropriately achieve the desired objective.

59
Q

When does a testator have legal capacity to execute a valid will? 2

A
  • When the will maker is the age of majority in his domiciliary state or is an emancipated minor, and
  • When the will maker has legal testamentary capacity
60
Q

What three things are evidence of a testator’s legal testamentary capacity?

A

If they have sufficient mental capacity to:

  • Understand the consequences of writing a will
  • Understand the nature and the extent of property being disposed of by the will, and
  • Recognize the natural objects of his or her bounty (those friends and relatives who have any claim to the testator’s assets)
61
Q

What are the common clauses found in a will? 9 What are the more sophisticated ones? 5

A
  • Introductory clause
  • Declaration clause
  • Bequest clause
  • Residuary clause
  • Appointment of executor clause
  • Guardianship clause
  • Tax-Appointment clause
  • Attestation clause
  • Self-Proving clause

More sophisticated clauses include:

  • Simultaneous death clause
  • Survivorship clause
  • Disclaimer clause
  • Contingent Legatee clause
  • No-Contest clause
62
Q

What are three benefits of having a simultaneous death clause?

A
  • Establishes guidelines for the disposition of assets
  • Eliminates the expense of two probate proceedings including identical assets, and
  • Ensures fulfillment of each individual’s transfer desires.
63
Q

Why might some attorneys advics against a survivorship clause?

A

It can delay probating the will.

64
Q

What four requirements are in needed for a party to be able to disclaim an inheritance?

A
  • The disclaiming party cannot benefit from the property (with the exception, in certain circumstances, of the surviving spouse)
  • The disclaiming party must not direct who receives further interest in the property
  • The disclaiming party must disclaim the property within nine months of the decedent’s death, and
  • The disclaimer must be in writing.
65
Q

When are disclaimers used?

A

To reallocate interests so that the property passes without gift tax consequence and to ensure that a decedent’s estate is not overqualified.

66
Q

When would a no-contest clause not apply?

A

If, when contested, the heir is able to successfully have the will invalidated.

67
Q

Who may not be deterred by a no-contest clause?

A

Disinherited parties or those who have little to lose.

68
Q

How can a will be revoked?

A

By destroying the will (shredding or burning) or replacing the will with a new will revoking all previous wills. Sometimes writing cancel across the will is acceptable. Other states provide that any defacing, such as crossing out a provision, constitutes revocation of the will.

69
Q

What are two common uses of a codicil?

A
  • To include additional children born after the drafting of the original will
  • When additional property is acquired after the drafting of the will.
70
Q

What is the marital share statute?

A

It requires the decedent to provide for his surviving spouse under certain conditions.

71
Q

What are divorce statutes?

A

They invalidate any provisions in a will that leave assets to a former spouse.

72
Q

What are anti-lapse statutes?

A

Ones that provide that if the legatee has predeceased the testator that assets go to the legatees residuary estate if they would have gone to distant relatives or friends instead.

73
Q

Besides no-contest clauses, what are some possible ways the testator can avoid will contests?

A

Lifetime gifts
Trust options
Property titling

74
Q

What is Power of Appointment?

A

The power to appoint the assets of one person to another and may be general or limited. Its is often included with a Power of Attorney.

75
Q

What are the characteristics of a Power of Attorney? 5

A
  • A stand alone document that allows an agent to act for the principal and may include the power to appoint assets.
  • Power to act
  • Ends at the death of the principal
  • May be general or limited
  • May be revoked at any time by the principal
76
Q

What are the characteristics of a Power of Appointment?

A
  • A power, usually included in a trust or power of attorney, allowing the power holder to direct assets to another.
  • Power to transfer assets
  • May survive the death of the grantor
  • May be general or limited
  • May be revoked by the principal during life or at death (via last will and testament)
77
Q

When would the assets controlled by a power of appointment be included in the power holder’s estate?

A

If the power holder dies before the principal and holds a general power of appointment, the assets get included. They do not get included if they hold a limited power of appointment.

78
Q

When are powers of appointment considered limited?

A

If the extend the holders dye to exercise and not to exercise the power is reasonably measurable in terms of his needs for health, education, maintenance, or support (or any combination of them).

79
Q

What are three disadvantages of a Power of Attorney?

A
  • The agent can abuse the powers granted to him.
  • Generally, a person possessing a limited/special power of attorney is not permitted to make gifts to himself or other family members.
  • In the case of a general power of attorney, if the agent dies before the principal and is hollering a general power of appointment over the principal’s assets, such power will cause the inclusion in the agent’s gross estate of the value of the principals’s assets over which the agent had a power.
80
Q

What are the other names a durable power of attorney for health care goes by? 2

A
  • Medical Power of Attorney

- Health Care Proxy

81
Q

How is a health care proxy different from a regular POA?

A
  • The power is specific to health care decisions
  • Entitles the power holder to do exactly what may be needed if the principal is incapacitated or disabled to the extent that the principal cannot make his own health care decisions.
82
Q

When, in most places, is a living will disregarded?

A

If the patient is pregnant.

83
Q

Why is a living will prepared in advance of an illness? 2

A
  • To explicitly state the client’s wishes

- Avoid the necessity for heirs to seek court approval for life-sustaining or termination decisions.

Estate Planning (13 decks)

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