Wills Trust Estate Flashcards
form 709
IRS form used to report taxable gifts and it also allocates the lifetime use of a tax payer’s generation-skipping transfer tax exemption (over $14k in gifts not to spouse)
form 1040
individual income tax return
form 706
used by an executor of a decedent’s estate calculate estate tax owed
form 1041
income tax return for estates and trusts; required if the estate generates more than $600 in annual gross
joint tenants with rights to surviorship
the interest of a deceased owner automatically get transferred to the remaining survivor owners
tenants by the entirety
real property held by husband and wife whereby each owns the undivided whole of the property, coupled with the rights of survivorship
beneficiary deed
a type of real estate transfer deed that takes effect upon the death of the property owner; must be recorded in the county where the property is located
TOD
a non-retirement account designating a beneficiary that establishes a transfer on death; such as brokerage or investment account/stocks
POD
a payable on death account by one person who has named another person (the beneficiary) to receive any money left in the account when the owner dies; such as bank accounts
totton trust
beneficiary designation
application/form; simply just stating a beneficiary; such as IRA, 401k, retirement
heritable estate
intestacy; who gets whats left
before heritable estate can begin, these must be taken out:
- dowery/curtesy
- homestead rights
- statutory allowances (things needed to keep the homestead going)
- taxes
- administration of estate
per capita distribution
when it goes to the same category of people (related in equal degree), all will inherit in equal shares
post humous heirs
conceived before death, but born there after death
brokerage house
an institution, not a bank; when you buy a stock or bond, they will hold all your shares in a brokerage account - they communicate with the banks that issues dividends
mutual funds
a professionally managed investment fund that pools money from many investors to purchase security (such as stocks and bonds)
list parts of a will
- exordium clause = opening
- apportionments clause = debts
- dispostivie provision = giving/distributive
- attestation clause = 2 witness signature
- testimonian clause = testator signature
owned in severalty
a form of property ownership; owned solely by one person or an individual company
joint ownership
when 2 or more persons owns property concurrently
tenants in common
one owns an undivided interest in property between 2 or more people; however, interest does NOT pass on to the other owners by law (the deceased interest can go into probate w/out the traditional documents)
community property
form of ownership by husband and wife; property acquired DURING MARRIAGE
fee simple estate
aka fee simple absolute; the biggest estate a person can hold; entitled to all rights and privileges
life estate
the right of the “life tenant” to use the property until his death ONLY
reversion interest
after the life tenant, it comes back to the grantor
remainder
after the life tenant goes, it goes to a future owner
a will must have what to be valid…
intent & testamentary capacity
testamentary capacity
2 factors: age and sound mind; must be age of majority 18 yrs (or married/emancipated/in armed service)
holographic will
completely hand written; do not require a signature of witnesses but must follow statutory requirements (intent & testamentary)
nuncupative will
oral will; only dispose of personal property; often called soldiers and sailors wills
rules in regards to witness of a will (4)
must have 2 witness; they need not be informed of the wills contents; must sign in the testator’s presence; a beneficiary should NOT be allowed to witness a will
codicils
a method to change terms of a will; an addition or supplement to a will that modifies certain sections
methods of revocation of will (3)
- physical act
- operation of law
- by subsequent writing - write an new will expressly revoking the prior will
dependent relative revocation
aka ineffective revocation; is a doctrine making a revocation of a former will ineffective if the testator made the revocation through execution of a new will, and that newly executed will is determined invalid
in torrem clauses
aka “no contest clause”; a provision in a will which threatens that if anyone challenges the legality of the will or any part of it, then that person will be cut off or given only a dollar, instead of getting the full gift provided in the will.
when there is no will, one will petition for this..
letters of administration for an administrator
when there is a will, one will petition for this…
testamentary letters for an executor
administrator with will annexed
when a testator’s choice of personal rep. predeceased or fails to qualify, this person will step in
administrator pendente lite
Latin for “administrator pending litigation.” The person appointed by a court to begin probate proceedings during a lawsuit that challenges the will
small estate
under $100k; informal administration; normally takes a few weeks to a couple of months to complete
ancillary administration
required when a decedent was domiciled in 1 jurisdiction but has real property in another at the time of death - when this occurs, a probate proceeding of the decedents real property located in the other jurisdiction is required - court located in the decedent’s place of domicile is prohibited from making distribution decisions about real property not within its jurisdictional limits
trust
the trustor/settlor/grantor transfers property to a trustee; the trustee holds property in the trust for the benefit of the beneficiaries
2 kinds of trust
testamentary trust and those created as a stand alone
testamentary turst
those created in a will
2 types of stand alone trust and their definition
- revocable = aka inter-vivos or living trust; they can be altered or amended
- irrevocable = one put into effect,they cannot be altered or amended
implied trust
involuntary trust; those that are created by operation of law; it is imposed by law to situations either by presuming an intention of the participants to create a trust, or simply because of the facts at hand. Two types of implied trusts are constructive and resulting trusts.
constructive trust
not an actual trust by the traditional definition; it is a legal fiction that is used as a remedy for unjust enrichment, meaning there is no trustee, but the constructive trust orders the person who would otherwise be unjustly enriched to transfer the property to the intended party.
resulting trust
an equitable reversion that arises by operation of law (as determined by the court) whenever a person has created an express intentional trust, but the trust fails or does not completely dispose of the trust property
how to get things into a trust:
- deed of house?
- stock accounts?
- bank accounts?
- life insurance?
- tangible personal property?
- warranty deed (any real property)
- title it in the name of the trust
- should be in the name of the trust
- must name the trust as a beneficiary
- do a “bill of sale”
spend thrift trust
a trust that is created for the benefit of a person (often unable to control his spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary; also includes a provision that protects the trust principle and unpaid income from creditors
sprinkling and spray trust
allows the trustee the discretion to “sprinkle and spray” the income from the trust as the trustee sees fit among a group of beneficiaries
marital deduction trust
a deduction permitted by the IRS; only available to legally married couples; provides for the exclusion of estate death taxes at the time of the first spouse’s death
martial and family trust A/B
whereby trust assets are split into 2 portion: the surviving spouse is the beneficiary of both, with children as beneficiaries of the remaining interest
QTIP trust
a tax provision that allows a trustor to create a trust giving a life interest to all the income of the trust to a surviving spouse with the remainder of the trust property passing to someone other than the surviving spouse upon that spouse’s death
ex. wife dies - husband is beneficiary - husband dies - wife’s children from her first marriage becomes beneficiary
A-B trust
a joint trust created by a married couple for the purpose of minimizing estate taxes; the trust divides into 2 upon the death of the first spouse
credit shelter trust
a type of trust fund that allows married couple to reduce estate taxes by taking advantage of the state and federal estate tax exemption - generally only applicable in mulitmillion dollar estate
charitable remainder trust
a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity
charitable lead trust
an irrevocable trust designed to provide financial support to one or more charities for a period of time, with the remaining assets eventually going to family members or other beneficiaries.
Cy press doctrin
meaning “as near as possible” allows a court to find a charity with either the same or a similar purpose to give charitable income and principal (when a charity no longer exists or merges with another charity)
special needs trust
aka supplemental needs trusts; may be established to insure that the disable person, often a child, may received funds in the trust and not lose government benefits and assistance
gifts for estate planning purposes
gifts are made to friends and family so that the monetary value of certain property is removed from the donor’s estate at the time of death (avoiding taxes); however there are limits as to the amount a person can receive or give before taxes will apply
living will
a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive
do not resuscitate directive
A DNR order allows you to choose whether or not you want CPR in an emergency. It is specific about CPR. It does not have instructions for other treatments, such as pain medicine, other medicines, or nutrition.
advance directive
a written statement of a person’s wishes regarding medical treatment, often including a living will, made to ensure those wishes are carried out should the person be unable to communicate them to a doctor
statutory will
a simple type of will legally recognized by only a handful of states; a “fill-in-the-blank” and “check the boxes” Will form that is easy to fill out, inexpensive to prepare, but very limited in use
what should be included in the administrative provision of a trust..
Specified powers of the trustee, expressly to be exercisable without the need for prior court approval; any special limitations or conditions on the trustee’s power; and recitation of any powers that the trustee is expressly prohibited from exercising
per diem
Latin for “per day” or “for each day” or daily allowance is a specific amount of money an organization gives an individual, often an employee, per day to cover living expenses when traveling for work
qualified sub-chapter shareholders trust QSST
the trust may provide that upon the death of the income beneficiary, the principal will pass to other beneficiaries; it is one of several types of trusts that are eligible to hold stock in an S corporation. Its two primary requirements are (1) there can be only one beneficiary of the trust and (2) all income must be distributed at least annually
Gross estate
This is the total value of everything you own at the time of your death. You’ll then subtract certain transactions from that gross total to arrive at the value of your net estate for estate tax purposes.
*** ALL property is included in a gross estate
non-durable power of attorney (POA)
usually established to achieve a specific financial or legal goal
*** If you should become incapacitated or incompetent before the specific transaction is to occur a Non-Durable Power Of Attorney will expire, and the agent will not be able to act on your behalf. For this reason, many legal professionals encourage naming a Durable Power Of Attorney instead.
Durable power of attorney
If a power of attorney is durable, it remains valid and in effect even if you become incapacitated and unable to make decisions for yourself. If a power of attorney document does not explicitly say that the power is durable, it ends if you become incapacitated.
The basic elements of a trust (3):
Corpus or res (trust property)
Trustee, and
Beneficiary
The deadline to file form 706 to report estate or GST tax is due…
9 month after the dates of the defendants death
GST tax
a comprehensive indirect tax imposed on manufacture, sale and consumption of goods as well as services at the national level
Trustee deed
Used to convey real property to a purchaser at a sale following a default under a deed of trust
Laws against perpetuities
Under the Common Law, the principle that no interest in property is valid unless it vests not later than 21 years, plus the period of gestation, after some life or lives in being which exist at the time of the creation of the interest - prevents people from using legal instruments to exert control over the ownership of property for a time long beyond the lives of people living at the time the instrument was written
Termination by operation of law (3 ways)
i) termination by death or insanity of either party;
(ii) termination by a supervening illegality; and
(iii) termination by destruction
What taxes is generally required to be paid by the recipient of the transfer, rather than the transferor…
What taxes is paid by the transferor…
State inheritance tax is paid by the recipient
Paid by the Transferor:
Federal gift Tax
Federal estate Tax
State gift Tax
Crummy Trust
to enable a person to gift into a trust and receive the annual gift tax exclusion
A/B estate plan
will avoid wasting the federal estate tax credit the second spouse to die may incur if all of the property of the deceased spouse went to the surviving spouse outright or in a martial trust
