Financial Planning- Chapter 11

Question 1

What is a will?

Answer 1

A legal document that gives someone the power to act as your financial representative after your death. Details on how your assets should be distrubuted

Question 2

Executor/Executrix

Answer 2

The person in your will who is given the authority to act as your agent

Question 3

Tesator/Testatrix

Answer 3

The person whom the will is made for (the deceased)

Question 4

What are the three legal requirements to make a will?

Answer 4

1. Must have reached age of maturity. 2. Must be of sound mind 3. Must be free from undue influence

Question 5

When can a will be contested?

Answer 5

When they are proven to be of unsound mind, or be under coercion at time of signing. & when they disinherited someone who was financially dependent on the deceased.

Question 6

What is the common disaster clause?

Answer 6

What should happen if the deceased and their main beneficiary die at the same time

Question 7

What are the rules to witnessing a will?

Answer 7

Two witnesses are required, and all three must sign in one anothers presence.

Question 8

Why should a witness not be a beneficiary?

Answer 8

They could be the one’s doing the coercion

Question 9

How can a will be voided?

Answer 9

Marriage, Destroy It, Write a new will stating that all previous wills are revoke, express written revocation(not preparing a new will, but stating all previous wills are revoked)

Question 10

Codicil

Answer 10

Additions made to an existing will that is separate, and allows changes to be made in the will without drawing up an entirely new one. Must be signed, dated, and witnessed

Question 11

Memorandum

Answer 11

A list of specific bequests that can be attached to the will. As is not part of the will, can be altered without having to draw up a new will

Question 12

Holograph

Answer 12

Entirely in the handwriting of the testator, dated and signed but not witnesses, (Farmer example)

Question 13

Probate

Answer 13

The process of proving the will

Question 14

Grant of Letters Probate

Answer 14

Approval letter that establishes the will is the last will and testament of the deceased

Question 15

What are the two tax returns required for the estate?

Answer 15

Taxes resulting from income received from income during the past year or part thereof, of the deceased. Taxes from any income generated by the estate while held in trust

Question 16

What happens when there is no executor?

Answer 16

Someone with a financial interest in the estate must apply to the court of Letters of Administration. With this, the surrogate court appoints an administrator to carry out the executors duties.

Question 17

Intestate

Answer 17

When there is no will, you are said to have died intestate

Question 18

What is the law in NB on how an intestate estate is settled?

Answer 18

Spouse recieves all the joint. Residue- 1/3 to the spouse, 2/3 to children. Nothing to stepchildren.

Question 19

Consanguinity

Answer 19

Blood relationships

Question 20

Representation

Answer 20

If the deceased leaves grandchildren, but no living children, the estate goes to the grandchildren through a process call representation because they recieve their parents share

Question 21

What are the two types of assets not distrubuted by the will?

Answer 21

Assets transfered by contract (Life Insurance, annuities, RRSP, RRIF) Assets Transferred by Law (Assets held in joint tenancy like house, joint bank accounts, cars ,ect)

Question 22

Tenants in Common

Answer 22

In the even that a partnership is ended due to death, the partner only owns their half and would have to buy the other half to retain full ownership

Question 23

Why would someone want to reduce the size of the probatable estate?

Answer 23

The fees that are attached to execute this process can be large and the deceased may not want to pay them. The best way to avoid any issues and fees is to make sure you bequest as much of your estate as possible

Question 24

Testamentary Trust

Answer 24

A trust established in the will that makes provisions that assets will be held in trust for someone, usually until a certain age. (EX, Trust fund for babies)

Question 25

Living Trust

Answer 25

Operating during the lifetime of the person who established the trust

Question 26

Donor

Answer 26

Person putting the money in the trust

Question 27

Trustee

Answer 27

Handler who directs the funds

Question 28

Beneficiary

Answer 28

Person who ultimately gets the money

Question 29

Fiduciary Duty

Answer 29

One person has more information and knowledge and therefor puts them in a position of higher power, and responsibility over another.

Question 30

Power of Attorney

Answer 30

A legal document that names someone to handle your finances under certain circumstances.

Question 31

What are the two types of Power of Attorney?

Answer 31

Regular- if you are physically incapacitated

Enduring- physically and mentally incapacitated

Question 32

Power of Attorney for Personal Care

Answer 32

Limited to making decisions about the cost and level of physical care to be given to an incapacitated person (ex: pulling the plug)