Terms for Final

Question 1

Abatement

Answer 1

When there aren’t sufficient assets in the estate to satisfy the bequests made in the will. All bequests will be reduced on a pro rata basis. For intangible property, it must be appraised.

Question 2

Ademption

Answer 2

Adeemed by Extinction is when something is devised, but no longer exists when the will is being executed, the devisee can sometimes get the proceeds, but not usually. Adeemed by Satisfaction is when the property bequeathed has been given to the devisee during their lifetime and so it is no longer in the estate.

Question 3

Advancement

Answer 3

an inter vivos gift may reduce or even eliminate an heir’s intestate share when the decedent intended for the gift to serve as an advancement of that share. This requires either a contemporaneous writing made by the decedent at the time of the inter vivos gift, declaring the gift to be an advancement, or a writing made by the heir at any time, acknowledging the gift to be an advancement.

Question 4

Anatomical Gift

Answer 4

Donation of the whole body to medical or scientific research.

Question 5

Ancillary Administration

Answer 5

Administration of an estate’s asset’s in another state.

Question 6

Annual Exclusion Amount

Answer 6

$15k/year

Question 7

Antilapse Statute

Answer 7

Mere survivorship language is an insufficient indication that the testator intended to negate operation of the antilapse statute. This directs the bequest ot the issue of the devisee rather than the testator. “If he/she survives me” appears to be a conditional bequest, however, the UPC REQUIRES a statement of what happens if they don’t survive you, otherwise they are still a devisee.

Question 8

Attestation Clause

Answer 8

A provision at the end of an instrument where the witnesses certify that the instrument has been executed before them, and the manner of the execution of the same.

Question 9

Augmented Estate

Answer 9

Property owned by both a deceased person and the surviving spouse, plus any property the deceased spouse gave away shortly before death.

Question 10

Beneficiary

Answer 10

Someone named in a will or trust to receive property. In a trust, a beneficiary may either have a present or future interest.

Question 11

Class Gifts

Answer 11

Gift (in excess of $15k in a tax year requires reporting, though you have $11.4m of excess gifting in life before a gift tax is levied on the donor), Inheritance tax=State death tax, Estate tax=Federal death tax. Estate tax is assessed on the whole estate, while inheritance tax is assessed on the value received by the devisee/beneficiary. Various taxes that may all apply at once. Must file a gift return for the excess of $15k, but only has to pay the tax when the total exclusion amount is used up.

Question 12

Codicil

Answer 12

An addition or supplement that explains, modifies, or revokes a will or part of one.

Question 13

Community Property

Answer 13

Rights of a spouse - Inheritance rights separation rights. You can only bequeath your 50% of the estate. Property or assets that are owned, there is a step up in basis with the entire portfolio, not just 50% and this is a huge tax advantage

Question 14

Consanguinity

Answer 14

Being descended from the same ancestor. “the marriage was annulled on grounds of consanguinity”

Question 15

Collective Trust

Answer 15

A trust administered by a bank or trust company that combines assets for multiple investors who meet specific requirements set forth in the fund’s declaration of trust.

Question 16

Constructive Trust

Answer 16

A constructive trust is an equitable remedy resembling a trust (implied trust) imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding a legal property right which they should not possess due to unjust enrichment or interference.

Question 17

Crummy Powers

Answer 17

Typically a provision within another trust and ordinarily works as follows. The grantor makes a gift to an irrevocable living trust. The trust beneficiaries are notified by the trustee that they have the power for a specified time period to withdraw some or all of the gift to the trust.

Question 18

Cy-Pres

Answer 18

“As near as possible” to the testator’s or donor’s intentions when these cannot be precisely followed.

Question 19

Disclaimers

Answer 19

An heir may disclaim, or refuse to accept, her interest in an intestate share, in whole or in part. If disclaimed in whole, the heir is treated as predeceasing the decedent. This must be done within 9 months from the date of death and disclaimant cannot have taken effective control (or direct who shall become the beneficiary of those assets) over the inheritance prior to the disclaimer. An insolvent (bankrupt) individual cannot disclaim.

Question 20

Discretionary v. Mandatory Trusts

Answer 20

Mandatory Trusts require that income be distributed to the beneficiaries. This means the trust must file tax income returns as opposed to Discretionary Trusts.

Question 21

Dower

Answer 21

A widow’s share for life of her husband’s estate.

Question 22

Durable Power of Attorney

Answer 22

Part of planning for incapacity.

Question 23

Elements of a Trust

Answer 23

1. Capacity to create a trust
2. Manifest intent (not necessarily in writing) to create a trust
3. Res property or trust property (have something in the trust, though sometimes there are “dry” trusts)
4. Beneficiaries (for Private Express Trusts you must have definite and ascertainable beneficiaries, unlike Charitable Trusts [where you don’t have to have an ascertainable beneficiary], and are subject to the rule against perpetuities: 21 years after the death of the last person in being at the time that the trust was created). We have contingent and remainder beneficiaries in the event of the trustor’s death.
5. Trustee must have a fiduciary duty to someone other than himself. Beneficiaries have no standing to challenge a revocable trust.

Question 24

Escheat

Answer 24

The reversion of property to the state on the owner’s dying without legal heirs.

Question 25

(Federal) Estate Tax

Answer 25

IRS require estates with combined gross assets and prior taxable gifts exceeding $11.4 million to file a federal estate tax return and pay estate tax as required.

Question 26

Generation Skipping Transfer Tax

Answer 26

$11.4m

Question 27

Guardian ad Litem

Answer 27

A guardian appointed to act for a minor in court.

Question 28

Holographic Wills

Answer 28

Handwritten and signed by the testator, with no witnesses attesting. Not all jurisdictions accept holographic wills. If they aren’t subscribed, there can be doubt of the testamentary intent of the document.

Question 29

Hotchpot

Answer 29

A lifetime gift would be brought back into the estate, and then the total estate is divided among the heirs.

Question 30

(State) Inheritance Tax

Answer 30

Beneficiary is responsible for paying the tax, not the estate.

Question 31

Illusory Transfer

Answer 31

A principle by which an inter vivos gift is disregarded by law if the donor retains so much control that there is no good-faith intent to relinquish the transferred property during the conveyor’s lifetime. This doctrine is usually applied to inter vivos trusts in which the settlor retains an excessive control or an interest.

Question 32

Joint Tenancy

Answer 32

Does not go through probate.

Question 33

Lapsed Bequest

Answer 33

Failure of a bequest due to death of beneficiary.

Question 34

Legatee/Devisee

Answer 34

A person or entity inherits under a will but who may not be related to the decedent.

Question 35

Letters of Administration

Answer 35

Authority to administer an intestate estate.

Question 36

Living Will

Answer 36

Is an advance directive, in case they become unable to communicate their decisions. It has no power after death.

Question 37

Marital Deduction

Answer 37

A non-citizen spouse doesn’t get the full marital deduction.

Question 38

Non-Probate Assets

Answer 38

Trust, Payable on Death accounts, Joint Property (real or not), Life Insurance.

Question 39

Per Capita

Answer 39

Uniform Probate Code the estate is divided per capita with representation at each generational level starting at first surviving level.

Question 40

Per Stirpes

Answer 40

English per stirpes the estate is divided at the immediate generation. Modern/American per stirpes the estate is divided at the first generation in which there is surviving issue (living descendants).

Question 41

Power of Appointment (general and non-general)

Answer 41

· General power of appointment – right of the donee to assign power to: the donee, creditors, the estate, or the creditors of the estate. · Non-general power of appointment – right of the donee to assign power to appoint the power to anyone other than the donee, creditors of the donee, the estate of the donee, or the creditors of the donee’s estate.

Question 42

Precatory Language

Answer 42

Words of entreaty, request, wish or recommendation addressed to a donee under a will.

Question 43

Pretermitted Heir (Child, Spouse)

Answer 43

Some statutes permit the claim of an intestate share while others limit the amount comparable to a devisee.

Question 44

Probate

Answer 44

The disposition of an estate or review of a will to determine whether it is valid and authentic.

Question 45

Probate Property

Answer 45

Wills govern probate assets according to Uniform Probate Code, Property titled and owned solely it is subject to probate.

Question 46

Qualified Terminable Interest Property Trust

Answer 46

allows a spouse to give a life estate in property to his or her spouse without incurring the federal gift tax. The donee (recipient) spouse has an income interest in the trust and does not have a power of appointment over the principal.

Question 47

Revocable Trust

Answer 47

Beneficiaries have no standing to challenge a revocable trust.

Question 48

Rule Against Perpetuities

Answer 48

For a future interest to be good it must vest after its creation, within a life in being or lives in being plus 20 years plus the period of gestation of any beneficiary conceived but not yet born.

Question 49

Spendthrift Trusts

Answer 49

Ones including a provsion that says creditors cannot get to the assets in the trust (with the exception of child support and spousal support).

Question 50

Testamentary Capacity

Answer 50

Must be at least 18, be capable and understanding of the nature and extent property that they wish to dispose of in the will, can determine the “natural objects of your bounty,” must be capable of understanding the way that property is being disposed of.

Question 51

Trust

Answer 51

A legal arrangement where a person (settlor/grantor) transfers property it to another person (trustee) to hold in a fiduciary capacity for the benefit of another individual. In this arrangement, Beneficiaries hold equitable title while trustee holds legal title to the property, beneficiaries have equitable title and can hold trustee accountable for a breach of their fiduciary responsibility. Trustee holds the duty of utmost loyalty to the trust.

Question 52

Trust

Answer 52

A legal arrangement where a person (settlor/grantor) transfers property it to another person (trustee) to hold in a fiduciary capacity for the benefit of another individual. In this arrangement, Beneficiaries hold equitable title while trustee holds legal title to the property, beneficiaries have equitable title and can hold trustee accountable for a breach of their fiduciary responsibility. Trustee holds the duty of utmost loyalty to the trust.

Question 53

Testamentary Trust

Answer 53

Created by will and must satisfy the Wills Act. These aren’t funded until testator dies.

Question 54

Threshold Amount/Applicable Exclusion Amount

Answer 54

$11.4m

Question 55

Intervivos Trust

Answer 55

Trustor has the right to amend or revoke the trust at any time. This is a revocable trust. Testamentary trust (created by will and must satisfy the Wills Act). These aren’t funded until testator dies. An inter vivos irrevocable trust gets the assets out of the taxable estate

Question 56

Undue Influence

Answer 56

If the wrongdoer exerted such influence over the donor such that it overcame the donors free will and caused the donor to make a donative transfer that the donor would not otherwise have made. VERY DIFFICULT TO PROVE. Caveator has the burden of showing that testator disposed of estate due to undue influence. However, Trier of fact (judge) may infer from circumstantial evidence:
Whether testator was susceptible to undue influence;
Whether alleged wrongdoer had opportunity as well as the disposition to exert undue influence, and
Whether the result or consequence of the will apparently the result of such undue influence.

Question 57

Unlimited Marital Deduction

Answer 57

Provision in federal law that permits the unlimited transfer of assets at any time free from tax.

Question 58

Unitrust

Answer 58

A trust from which a fixed percentage of the net fair market value of the trusts assets valued annually, is paid each year to a beneficiary.