Estate Planning Documents Flashcards
1
Q
Types of Fiduciaries
A
- an executor or personal representative of an estate has a duty to act in the best interests of the beneficiaries of the estate.
- A trustee must act in the best interests of the trust beneficiaries
- Guardians are appointed to act in the best interests of the person who is their ward
- an agent under a power of attorney document is a fiduciary who must act in the best interests of the principal.
2
Q
Fiduciary Duties
A
- To act for the benefit of beneficiaries in regard to matters within the scope of the fiduciary relationship
- To refrain from delegating acts that can be performed by the fiduciary
- To make full disclosure of all facts in any transaction with the beneficiary; any transaction must be fair to the beneficiary; or it cant be set aside
- To refrain from any self-dealing at the expense of the beneficiaries and to remain loyal to beneficiaries
- To preserve property and make it productive
- to invest property prudently according to state laws that may consist of prudent-person rule; legal-list statute, or Uniform Prudent Act
- To be impartial towards beneficiaries so as not to favor income beneficiaries over remainder beneficiaries
3
Q
Power of Attorney (POA)
A
- a legal document allowing the principal (person creating the POA) to name an agent to handle their financial affairs
- under certain circumstances it is limited
- broad powers that are granted is known as a general POA
- A durable power of attorney (one that survives the incapacity of the principal) is commonly used in planning for incapacity
4
Q
Execution of a Will
A
- distributing property to charities or to persons other than heirs
- establishing a trust at death (testamentary)
- allocating particular estate assets to pay debts and estate administration expenses
- apportioning death taxes among the heirs receiving bequests
- naming guardians and custodians for minor children and assets passing to minors
- providing for presumption of survival in cases of simultaneous death of spouses
- coordinating the use of the unified tax credit and marital and charitable deductions to reduce estate taxes
5
Q
A will cannot do the following
A
- disinherit a spouse
- making excessive charitable bequests
- creating illegal conditions for inheritances
- transferring property that passes by operation of law or trying to change an irrevocable trust
6
Q
Holographic Will
A
- handwritten will that must be written by the testator in their own handwriting and signed and dated.
- not valid in all states
7
Q
Nuncupative Wills
A
- an oral will spoken by the testator in the presence of the required number of witnesses and latter reduced to writing.
- not valid in all states
8
Q
Per Stripes
A
- means by root or stock
- distribution under a will or trust means that property passes to the issue as though their immediate ancestor had divided the property equally among them.
- also called right of representation
9
Q
Modifying or Revoking a will
A
- a will can be modified by executing a codicil
- a will can be revoked by destroying it or by defacing it with the intent to revoke.
- a will can be revoked by executing a new one
10
Q
Living Wills
A
- mainly medical life-support directives and do not dispose of the owner’s property
- an individual can declare his or her wishes for medical treatment and procedures in the event he or she becomes unconscious or incompetent
11
Q
Trusts are used to achieve the following
A
- to provide professional management (by trustees) of assets for beneficiaries
- to reduce income and estate taxes
- to avoid creditors and prevent the waste of assets
- to arrange for income to be paid to one person and the remaining assets to another
- to provide assets or income to charities
- to avoid probate
12
Q
Powers of Guardians
A
-a guardian or conservator generally has all the powers over the ward’s estate that the ward would exercise, except the power to make a will.
-there is potential for abuse
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13
Q
General Nondurable Power
A
- the agent is given restricted rights, and the power ends when the principal becomes incompetent.
- since it ends at incapacity, it does not do much to help plan for this
14
Q
Durable Power of Attorney
A
- continues indefinitely, even after the principal become incompetent or incapacitated
- with a broadly drafted power of attorney, the attorney-in-fact can act to the same extent as the principal could act, including the power to make gifts, create trusts, to buy and sell property, and to elect gift splitting
- avoids the expense of guardians and the legal fees of court supervision over the principal’s estate
15
Q
Springing Power
A
-a durable power that is activated only when a person becomes incapacitated or incompetent
