BUS251 CH 49 WILLS, TRUSTS, AND ESATES

DEFINE: Decedent

An individual who has died

DEFINE: Testator

A decedent who left a will

DEFINE: Having Died Intestate

A decedent who did not leave a will

DEFINE: Estate

The real and personal property the decedent owns or has interest in. Transferred at death by will or intestate law.

DEFINE: Will

A legal document in which the testator expresses how their estate is distributed at death

Who manages the estate until final distribution?

An executor

Is the law of wills uniform across all states?

No, each state’s laws vary

What are the 4 unconditional requirements for will formation?

1. Executed with testamentary intent

2. Testator had testamentary capacity

3. Will was executed free of fraud, duress, undue influence, or mistake

4. Will was legally and properly executed and signed by the required number of witnesses

Can a testator change their will at any time?

Yes

DEFINE: Cocidil

A testamentary document that amends an existing will

DEFINE: Executor

The person named by the testator in the will to carry out the instructions of the will. They can sue or be sued, are the estate’s representative, and they hold the legal title to the estate, but may not use it for personal gain unless stated in the will.

DEFINE: Intestacy

When the decedent dies without leaving a will or disposing of their property in their lifetime

DEFINE: Freedom Of Disposition

The fundamental common law principle that says testators should be free to dispose of their property at death in any way they want

What is the main justification for the freedom of disposition?

It incentivizes productivity

What are the 2 competing ideologies concerning fairness in disposition?

1. Since freedom of disposition is a legally created and artificial right, it should have limitations

2. It’s actually a natural right and shouldn’t be interfered with

DEFINE: Probate

A fail-safe system, the process that manages, settles, and distributes a decedent’s property

What is a will contest?

When the conflicts among heirs are approached

What property is not subject to probate?

Marital property and joint tenancy

What is a trust?

A will substitute

DEFINE: Trustor

The settler, grantor, or creator of a trust.

DEFINE: Trustee

The person or company that holds the legal title to assets in a trust and is responsible for managing and distrubting these assets according to the terms of the trust

DEFINE: Beneficiary

An individual or entity entitled to all or parts of the property in a trust, either now or in the future.

DEFINE: Trust

A 3-party fiduciary relationship. The 1st party (trustor) transfers the property to the 2nd party (trustee), for the benefit of the 3rd party (beneficiary)

DEFINE: Revocable Trust

A living trust, created during the trustor’s lifetime, generally can be changed or revoked at any point in the trustor’s life. Trustor serves as the trustee, but when they die, the trust becomes irrevocable. It is also taxed.

DEFINE: Irrevocable Trust

Created during the trustor’s lifetime or upon their death under another will or trust. Cannot be changed or revoked. Created for the benefit of individuals or charitable organizations. Also taxed but less than revocable trusts.

Why are trusts used in place of wills?

To minimize or eliminate estate taxes, and because assets can be transferred outside of a probate system. This saves time and money.

FILL IN THE BLANK: Trusts are ________ transfers of assets

“Private”

What 2 things do trusts provide that make them more desirable over wills?

1. Control

2. Protection against spendthrifts

What are negative aspects of trusts?

1. Up-front legal fees

2. Lack of safeguards

3. Administration fees

4. Higher cost compared to probate

What are estate taxes?

A tax on the transfer of the estate of a decedent. A.k.a. the death tax

DEFINE: Tax Cuts and Job Act of 2017

Up to $11.58 million exempt from taxes, married couples can cluster their exemption

Tax begins at 18% and increases to 40% once the exemption amount is exceeded by $1 million

After 2025, the exemption amount drops to $5.49 million

What is the difference between estate tax and inheritance tax?

Estate tax= decedent pays

Inheritence tax= beneficiary pays

DEFINE: Uniform Probate Code (UPC)

A comprehensive model act drafted by the NCCUSL that governs inheritance and decedent estates.

Meant to streamline the probate process and standardize/modernize will, trust, and intestacy law.

TRUE OR FALSE: All states have adopted the UPC

FALSE- Many states actually have a variation of the UPC

DEFINE: Uniform Trust Code (UTC)

governs trusts and is a comprehensive model act drafted by the NCCUSL. It is not binding but used by many states as a model.