Financial Planning- Chapter 11 Flashcards
What is a will?
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
Executor/Executrix
The person in your will who is given the authority to act as your agent
Tesator/Testatrix
The person whom the will is made for (the deceased)
What are the three legal requirements to make a will?
- Must have reached age of maturity. 2. Must be of sound mind 3. Must be free from undue influence
When can a will be contested?
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.
What is the common disaster clause?
What should happen if the deceased and their main beneficiary die at the same time
What are the rules to witnessing a will?
Two witnesses are required, and all three must sign in one anothers presence.
Why should a witness not be a beneficiary?
They could be the one’s doing the coercion
How can a will be voided?
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)
Codicil
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
Memorandum
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
Holograph
Entirely in the handwriting of the testator, dated and signed but not witnesses, (Farmer example)
Probate
The process of proving the will
Grant of Letters Probate
Approval letter that establishes the will is the last will and testament of the deceased
What are the two tax returns required for the estate?
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
What happens when there is no executor?
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.
Intestate
When there is no will, you are said to have died intestate
What is the law in NB on how an intestate estate is settled?
Spouse recieves all the joint. Residue- 1/3 to the spouse, 2/3 to children. Nothing to stepchildren.
Consanguinity
Blood relationships
Representation
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
What are the two types of assets not distrubuted by the will?
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)
Tenants in Common
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
Why would someone want to reduce the size of the probatable estate?
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
Testamentary Trust
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)
