Chapter 52. Wills, Trusts, and Estates

Chapter Objectives:
List and describe the requirements for making a valid will.
Describe how a will can be revoked.
Describe a holographic will.
Define ademption and abatement.
Describe how property is distributed if a husband and wife die simultaneously.
Describe the effect of entering into a mutual will.
Identify how property is distributed under intestacy statutes if a person dies without a will.
Describe the process of probate.
Describe a living will.
Define a trust and identify the parties to a trust.

Requirements for making a valid will
Every state has a statute of wills that establishes the requirements for making a valid will in that state. These requirements are:

• Testamentary capacity—the testator must have been of legal age and sound mind when the will was made.
• Writing—most wills must be in writing to be valid.
• Testator's signature—wills must be signed.

How a will can be revoked

• A will may be revoked by acts of the testator such as burning, tearing, obliterating, or otherwise destroying the will.
• Wills can also be revoked by operation of law.

Holographic wills

• A holographic will is a will that is entirely written and signed by the testator. Many states recognize the validity of such wills.
• A noncupative will is an oral will that is made before a witness during the testator's last illness.

Ademption and abatement

• Ademption is a principle that says if a testator leaves a specific devise of property to a beneficiary, but the property is no longer in the estate when the testator dies, the beneficiary receives nothing.
• Abatement is a principle that says if the property the testator leaves is not sufficient to satisfy all the beneficiaries named in a will and there are both general and residuary bequests, the residuary bequest is abated first (i.e. paid last).

Per stirpes and per capita

• Per stirpes distribution of an estate makes grandchildren and great—grandchildren of the deceased inherit by representation of their parent.
• Per capita distribution of an estate makes each grandchild of the deceased inherit equally with the children of the deceased.

How property is distributed if a husband and wife die simultaneously
In the case of simultaneous death, each person's property is distributed as though he or she survived.

Mutual wills
Mutual wills occur where two or more testators execute separate wills that leave their property to each other on the condition that the survivor leave the remaining property on his or her death as agreed by the testators.

Intestacy statutes
All states have intestacy statutes that specify how a deceased property will be distributed if he or she dies without a will or if the last will is declared void and there is no prior will.

Probate
When a person dies, his or her property must be collected, debts and taxes paid, and the remainder of the estate distributed to the beneficiaries of the will or the heirs under the state intestacy statute. This process is called settlement of the estate or probate.

Living wills
In a living will, a people who do not want their lives prolonged indefinitely by artificial means may stipulate their wishes before a catastrophe strikes and they become unable to express it themselves because of an illness or an accident.

Trusts and parties to a trust

• A trust is a legal arrangement established when one person transfers title to property to another person to be held and used for the benefit of a third person.
• A settlor or trustor is a person who creates the trust.
• A trustee is a person who holds legal title to the trust corpus and manages the trust for the benefit of the beneficiary or beneficiaries.
• A beneficiary is the person for whose benefit a trust is created.
• The trust corpus is the property held in trust.

Types of trusts

• Express trusts—created voluntarily by the settlor.
• Inter vivos trusts or living trusts—trusts created while the settlor is alive.
• Testamentary trusts—trusts created by will; such trusts come into existence when the settlor dies.
• Implied trusts—implied by law or from the conduct of the parties.
• Constructive trusts—equitable trusts imposed by law to avoid fraud, unjust enrichment, and injustice.
• Resulting trusts—created by the conduct of the parties.
• Special trusts
• Charitable trusts—created for the benefit of a segment of society or society in general.
• Spendthrift trusts—designed to prevent a beneficiary's personal creditors from reaching his or her trust income.
• Totten trusts—created when a person deposits money in a bank account in his or her own name and holds it as a trustee for the benefit of another person.

A trust is irrevocable unless the settlor reserves the right to revoke it.

Terms

• abatement—If the property the testator leaves is not sufficient to satisfy all the beneficiaries named in a will and there are both general and residuary bequests, the residuary bequest is abated first (i.e., paid last).
• ademption—A principle that says if a testator leaves a specific devise of property to a beneficiary, but the property is no longer in the estate when the testator dies, the beneficiary receives nothing.
• attestation—The action of a will being witnessed by two or three objective and competent people.
• beneficiary—A person or organization designated in the will that receives all or a portion of the testator's property at the time of the testator's death.
• beneficiary—Person for whose benefit a trust is created.
• bequest—A gift of personal property by will. Also known as a legacy.
• codicil—A separate document that must be executed to amend a will. It must be executed with the same formalities as a will.
• constructive trust—An equitable trust that is imposed by law to avoid fraud, unjust enrichment, and injustice.
• devise—A gift of real estate by will.
• express trust—A trust created voluntarily by the settlor.
• general gift—Gift that does not identify the specific property from which the gift is to be made.
• holographic will—Will that is entirely handwritten and signed by the testator.
• implied trust—A trust that is implied by law or from the conduct of the parties.
• inter vivos trust—A trust that is created while the settlor is alive.
• joint will—A will that is executed by two or more testators.
• lineal descendants—Children, grandchildren, great—grandchildren, and so on of the testator.
• mutual wills—Occur where two or more testators execute separate wills that leave their property to each other on the condition that the survivor leave the remaining property on his or her death as agreed by the testators.
• nuncupative will—Oral will that is made before a witness during the testator's last illness.
• per capita—A distribution of the estate that makes each grandchild and great—grandchild of the deceased inherit equally with the children of the deceased.
• per stirpes—A distribution of the estate that makes grandchildren and great—grandchildren of the deceased inherit by representation of their parent.
• probate court—A specialized state court that supervises the administration and settlement of an estate.
• residuary gift—Gift of the estate left after the debts, taxes, and specific and general gifts have been paid.
• resulting trust—A trust that is created by the conduct of the parties.
• revocation—Termination of a will.
• settlement of the estate—The process of a deceased's property being collected, debts and taxes being paid, and the remainder of the estate being distributed.
• settler or trustor—Person who creates a trust.
• specific gift—Gift of a specifically named piece of property.
• Statute of Wills—A state statute that establishes the requirements for making a valid will.
• testamentary trust—A trust created by will: the trust comes into existence when the settlor dies.
• testator—The person who makes a will.
• trust corpus—The property held in trust.
• trust—A legal arrangement established when one person transfers title to property to another person to be held and used for the benefit of a third person.
• trustee—Person who hold legal title to the trust corpus and manages the trust for the benefit of the beneficiary or beneficiaries.
• undue influence—Occurs where one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to make a will; the persuasion by the wrongdoer must overcome the free will of the testator.
• Uniform Probate Code (UPC)—A model law promulgated to establish uniform rules for the creation of wills, the administration of estates, and the resolution of conflicts in settling estates.
• Uniform Simultaneous Death Act—An act that provides that if people who would inherit property from each other die simultaneously, each person's property is distributed as though he or she survived.
• will—A declaration of how a person wants his or her property distributed upon death.

Internet Links
Nolo Press:
Legal Information Institute: http://www.law.cornell.edu/topics/estates_trusts.html
Trusts and Estates (magazine): http://www.trustsandestates.com/