Estate Planning Documents Flashcards
1
Q
What are some frequently used documents for estate planning?
A
- Wills
- DNR orders
- Advanced medical directives (living will)
- Power of attorney for property
- General power of attorney for healthcare
- Side letters of instruction
2
Q
What is a will?
A
- A legal document that the creator creates (the testator) while alive to control the distribution of their property at death.
- A will can be amended, changed, or revoked at any time PRIOR to death
- Although, the testator must be competent when doing any of those
3
Q
How can a will help with estate planning?
A
- It can help avoid distribution of property under the state’s intestacy laws (dying without a will)
- It helps distribute property that is a part of the probate estate to the correct bene’s
4
Q
How can a testator be considered “competent”
A
- Must be mentally compotent and attained age 18
- Must understand the significance of writing the will
- Must understand the type and amount of property being distributed by the will
- Must recognized friends and relatives who may claims to assets
- Must be of legal age according to state of domicile
5
Q
What conditions may lead to intestacy?
A
- These conditions can lead to dying without a will:
- The will not prepared or created according to the laws and standards of the state
- The decedent died in another state other than the state of where the will was created (although there can be exceptions here)
- The decedent was not considered competent when making the will
6
Q
Who is responsible when a person dies intestate?
A
- The court will appoint a administrator
- Usually will be spouse or the next of kin if there is no spouse
7
Q
Advantages of having a will
A
- Testator can change the will as personal, financial, and property related interest change over time
- The will can allocate sources of payment of estate taxes and bequests from the decednet’s estate
- The will can have an executor and a contingent exector for their personal rep, instead of court appointed
- Wills direct the transfer of property:
- A will can decide who or who does not receive a share of the estate
- A spouse CANNOT be disinherited
- A child CAN be disinherited if not named in the will except in Lousisana
- A will can decide who or who does not receive a share of the estate
- A will can help in the estate planning process by minimzing estate tax burden at spouse’s death by maximizing the marital deduction
- Designated estate assets passing to charity could reduce the taxable estate
- A will can designate primary and contingent guardians for minor children
8
Q
Disadvantages and constraints of having a will
A
- Bene’s can contest the will, which can lead to substantial admin and legal expenses and can be time-consuming
- Assets that transfer automatically to designated bene’s by law cannot be changed by the will
- A poorly written will can be rejected and decedent could be considered intestate
- Property will pass trhough probate, which is more costly and time-consuming
- Property passing to grandchildren by will can be subject to GST tax
- Property bequested to an ex-spouse by an OUTDATED will can be subject to intestacy by some states
9
Q
Explain holographic wills
A
- These are written wills that must be signed and dated by testator
- No witness is usually required
- Must meet material requirements of a will
10
Q
Explain Noncupative wills
A
- These are oral wills that are usually executed just prior to the death of a decedent (last wishes)
- There usually needs to be a witness
- Some states do not accept these
- Personal assets can be transffered by this will, but REAL ASSETS CANNOT
11
Q
Explain Statutory Wills
A
- These are prepared and written by attorney so they meet all legal requirements in the state of domicile
- Requires signatures from testator and from witnesses
12
Q
Sweetheart wills/Reciprocal wills
A
- These are I LOVE YOU wills
- Basically have two identical wills between spouses and leave everything to one another
- Can be a mutual will
13
Q
Explain Joint Wills
A
- Executed by two or more parties
- Upon death of first party, the will requires the surviving party to dispose of the assets based on instructions by the will
- Spouses often use these types of wills together to decide what bene’s get the property
- Could be used for someone who had a previous marriage to try and protect their children
- Some states do not allow these wills
14
Q
Mutual wills
A
- Executed when individuals own property together and agree to bequeth the property to one another
15
Q
Pour-over wills
A
- Designate a testator’s recovable trust to receive remainder of a decedent’s property
- Goes to probate, but avoids intestacy
16
Q
Who are heirs?
A
- A person’s relatives by BLOOD
17
Q
Who are legatees?
A
- The people who inherit the person’s property
18
Q
Who are devisees?
A
- The people who receive REAL property based on the will
19
Q
Will Clauses - Intro Clause (Exordium)
A
- Has the testator’s basic info such as full name, address and state of domicile
20
Q
Will Clauses - Declaration Clause
A
- Identifies the will as the most current will and REVOKES all PREVIOUS wills
- Used to avoid any future controversary that may arise out of changes from previous wills
21
Q
Will Clauses - Bequest Clauses
A
- Instructions of distributions of assets to the legatees
- One bequest is created for EACH legatee
- Bequests can be:
- Specific
- General OR
- Residual
22
Q
Will Clauses - Bequest Clause - Contingency Clause
A
- Identifies the bene who should receive the property in the event the legatee die or disown the bequest
23
Q
Will Clauses - Bequest Clause - Ademption Statute
A
- Addresses tangible personal property that is bequeathed by will but DOES NOT EXIST at the testator’s death
24
Q
Will Clauses - Bequest Clause - Per Capita Method
A
- Contingent bene’s can receive assets based on their generational closeness to the decedent
- Each bene who is alive at time of testator’s death will inherit EQUALLY
25
Q
Will Clauses - Bequest Clause - Per Stirpes Method
A
- Transfers assets to heirs in an UNEQUAL manner when one or more decendants have predeceased the testator
- If son dies before testator, that son’s children will receive equal shares of their father’s property interests under the will
26
Q
Will Clauses - Residuary clause
A
- Transfers the remaining undistributed property to an indivdiual, trust, or charity
- In absence of this clause, the remaining property acquired after a will was executed becomes part of the intestate property
27
Q
Will Clauses - Guardianship clause
A
- Designates indiviudals who will take care of minor or legal dependents upon death of testator
- Serves as custodian for a child and as “guardian of the estate”
28
Q
Will Clauses - Tax appointment clause
A
- Directs the assets that will be spent to pay for reamining debt and estate taxes of the testator
29
Q
Will Clauses - Attestation clause
A
- Signed by a witness and certifies that the will was signed by the testator in a compotent state of mind without facing any durress or coercion
- Legatees CANNOT serve as witness to the will
30
Q
Will Clauses - Self-proving clause
A
- Signed by the notary confirming that the will was signed by the named testator in front of the named witnesses
31
Q
Will Clauses - Simultaneous death clause
A
- Named the person who will be assumed to have DIED FIRST should both spouses die simulatneously OR WITHIN 1-5 days of the other spouse’s death
- Prevents assets from being included successively in both spouses’ estates
32
Q
Will Clauses - Survivorship clause
A
- identifies spouse who is presumed to survive
- Prevents assets from being included successively in both spouses’ estates
33
Q
Will Clauses - Disclaimer clause
A
- Instructs bene’s that they can refuse to accept a bequest under the following conditions:
- Bene disclaiming bequest cannot benefit from it
- Disclaiming bene cannot designate another recipient to receive it
- Property has to be discalimed WITHIN NINE MONTHS of testator’s death
- Has to be in WRITING
34
Q
Will Clauses - No contest clause
A
- Discourages heirs from contesting a will
- The disputing heirs are REMOVED from the list of bene’s
35
Q
Will Clauses - Codicil
A
- Becomes part of the will and is used for modifying, amending, or explaining a will
36
Q
Will Clauses - Side instructions letter
A
- Usuually for funeral/burial wishes and may include additional info about assets being left as bequests or transfers
- SEPARATE from will
37
Q
What is power of attorney?
A
- A legal document with which a person can delegate or authorize another person to make financial, banking investment, and business decisions on their behalf
- Principal - the person who grants power
- Agent - the person who receives the power
38
Q
General power of attorney
A
- Authorizes agent to act as the principal in ALL legal, finanical, and business matters
- Principal can take away power by serving notice with revocation form
- If agent dies BEFORE grantor, part of the estate may be included in the agent’s estate
- Power does end on death of grantor or revocation of power (durable power of attorney)
- Does NOT end when grantor becomes incapacitated or mentally disabled
39
Q
Limited power of attorney
A
- Agent has authority to act on SPECIFIC task or in a LIMITED capacity
- Nondurable power of attorney
- Ends when grantor dies or becomes incapacitated/mentally incompetent
- Does have power to manage and appoint assets as directed by the principal in the power of attorney document
40
Q
Power of attorney - side instructions letters
A
- NOT LEGALLY BINDING
41
Q
How to revoke a will
A
- Create a new will OR
- Add to the old will by adding a codicil
42
Q
Forced heirship
A
- Some states REQUIRE that a portion of the decedent’s estate pass to the children
43
Q
Durable power of attorney for property
A
- Grants an agent the ability to maek property-related decisions on the principal’s behalf
- Can be an individual or a financial institution, such as a bank
- Advantage is that it saves on time and costs (because if the court had to appoint a guardian in the event of principal mental incompotence)
- May NOT be accepted by all banks if it is not current enough of meet bank’s requirements
44
Q
Funded standby trust
A
- A trustee’s authoirty is recognized by banks no matter how long ago the trust was establsihed
- So this is good for incapacity planning purposes for managing an incapacitated person’s financial and property interests
45
Q
Springing power of attorney
A
- Power of attorney is triggered when certain conditions are met or when certain events happen, such as prinicpal becoming mentally disabled or incapacitated
- Authority may end if principal recovers from disability
- Remains in effect until death or if principal is legally competent to revoke the power
46
Q
Durable power of attorney for healthcare (healthcare proxy)
A
- A legal document that appoints an agent to make healthcare-related decisions when the principal in unable to communicate or make these decisions
- Agent may confer with medical professionals to determine extent of treatment and best treatment options
- Agent may have limited scope of authory made by prinicpal
- MOST STATES do NOT allow agent the right to make a decision on ending a life-sustaining treatment
- Is a SPRINING power of attorney and becomes effective when principal cannot make these decisions on their own due to disablity or incapacity
47
Q
Advance medical directive (living will)
A
- Legal document that contains an individiual’s last wishes regarding sustainment of life under specific circumstances
- Also appoints an agent to make life-sustaining decisions for the incapacitated person
- Gives someone power to die on their own terms and most likely save a shitload of money in paying for life support
- Not all states recgonzied living wills
48
Q
DNR orders
A
- Legal document that contains a terminally ill’s principal’s wish to NOT have CPR performed or to contiue with other life-sustaining treatments once it is medically evident the person cannot survive
49
Q
Guardianship
A
- An arrangement that provides for an incompetent person’s care and the management of his/her own property
- DOES NOT hold legal title to property
- This is when a person takes custody of the child and provides for his/her personal care, property, and financial affairs
