Exam #2: Chapters 5-10, 13-17

taxable estate

property subject to death taxes, whether or not within the probate estate; in estate tax computation, the value of the gross estate reduced by estate tax deductions

probate estate

property of a decedent the distribution of which is determined by the terms of a will or the intestate succession statutes; property passing through probate administration, whether or not subject to death taxes

expenses

the required costs incurred by the administrator in carrying out the terms of an estate

nonprobate transfers

a transfer, effective at death, by a transferor domiciled in Indiana and who immediately before death had unrestricted power over the property and its use

probate delay

the extended period of time it takes to settle an estate, resulting in a significant hindrance to the distribution of assets to rightful heirs and beneficiaries

inter vivos gift

a gift made during life (inter vivos = between the living)

donor

a person transferring property

donee

a person receiving property

constructive delivery

the donor of property transfers to the donee the means of obtaining the property rather than actual property

symbolic delivery

the donor gives the donee something that represents the property rather than the actual property

deed of gift

a written instrument that evidences donative intent, names the donee, and describes the property

gift causa mortis

a gift made in contemplation of death

future interest

an ownership interest in property in which enjoyment takes effect on the occurrence of a designated event

remainder

an ownership interest in property that takes effect on the termination of a preceding estate, typically a life estate

vested remainder

a remainder interest in property giving an unconditional right to obtain possession as soon as the preceding estate terminates

contingent remainder

a remainder interest in property giving the right to obtain the possession of property only if a condition precedent is satisfied

executory interest

a future interest in property other than a remainder interest

power of appointment

the right to designate the new owner of property

general power of appointment

a power of appointment in which the donor specifies no limitations on those who may be appointees

special power of appointment

a power of appointment in which the donor specifies the individuals or groups who may be appointees, except the donee, the donee’s creditors, the donee’s estate, and creditors of the donee’s estate

joint tenancy

concurrent property ownership in which two or more persons (joint tenants) own equal undivided fractional shares of property with right of survivorship; on death, a joint tenant’s share passes to the remaining joint tenants by operation of law

survivorship

the right to succeed to property on a joint tenant’s death by operation of law

tenancy by the entirety

a form of joint tenancy between spouses

tenancy in common

concurrent property ownership in which two or more persons (cotenants) own equal or unequal undivided fractional shares of the property; on death, a cotenant’s share passes by testate or intestate succession

community property marital property system

a system in which one-half of each spouse’s income vests in the other spouse

types of multiple-party accounts

joint account, agency or convenience account, payable-on-death account, trust account

joint account

an account payable on request of one or two or more account holders

agency account

a joint account without survivorship rights

payable-on-death account

an account payable to a designated person on the death of all original depositors

trust account

an account held for a beneficiary as a revocable trust; also called Totten trust, savings account trust, and tentative trust

insurable interest

a legal interest (e.g., in the life or health of another) supporting the right to insure that interest

life insurance proceeds

no income tax on recipient of proceeds

term life insurance

insurance proceeds are paid if the insured dies during a designated term

whole life insurance

insurance proceeds are paid when the insured dies at any time

universal life insurance

whole life insurance in which the cash value receives a competitive rate of return

endowment life insurance

whole life insurance in which premiums stop at a younger age and the cash value equals the face value at that time

split dollar life insurance

life insurance in which the insured and the insured’s employer both contribute to premiums and the employer receives a share of the proceeds

payment methods

lump sum, installments, interest or deposit

second-to-die policy

life insurance on two lives payable only when the second person dies

first-to-die policy

life insurance on two lives payable when the first person dies

annuity

a contract between an annuity provider and a purchaser in which, on payment of a lump sum, the provider agrees to make periodic payments to an annuitant for life of for a fixed term

commercial annuity

an annuity purchased from a company in the business of selling annuities (e.g., an insurance company)

private annuity

an annuity purchased from a private individual (e.g., a family member)

joint life annuity

an annuity in which payments are made until the first of two annuitants dies

joint and survivorship annuity

an annuity in which payments are made until both of two annuitants die

straight annuity

an annuity in which payments are equal

variable annuity

an annuity in which the amount of each payment depends on the investment success of the annuity provider

qualified plan

an employee benefit plan that meets federal requirements for favorable tax treatment

savings statute

a statute that validates a will not meeting the requirements of state law

emancipated minor

a minor legally freed from parental control and treated as an adult

animus testandi

an intent that an instrument serves as the testator’s will; testamentary intent

extrinsic evidence

evidence outside a document itself

holographic will

a will handwritten by the testator

noncupative will

an oral will

attested will

a will signed by witnesses

animus signandi

a present intent to authenticate a document by signing it

signature per alium

a signature by another; a proxy signature

animus attestandi

the intent of witnesses to give a document testamentary validity

publishing a will

a statement by the testator to witnesses that the document is his or her will

interested witness

a witness who will benefit if the testator’s will is valid

purging statute

a statute providing that a gift to an interested witness is void

attestation clause

a clause in a will reciting that the testator duly executed the will

self-proving affidavit

a statement by a testator and witnesses affirming under oath that the requirements for valid execution of the will have been satisfied

natural objects of bounty

spouse, children, parents, grandchildren, siblings

non-holographic material

• Intent approach

• Surplusage approach

• Materials provision approach

proxy signature

• Signed in the testator’s presence

• Signed at the testator’s direction

testamentary capacity

• Testator comprehends action being taken and effect

• Testator knows nature and extent of his or her property

• Testator recognizes natural objects of his or her bounty

• Testator has elements in mind long enough to make reasoned judgement

ademption by extinction

the failure of specific gift because the property is not in the testator’s estate at death

ademption by satisfication

the failure of a specific gift because the property has been transferred to the beneficiary before death

ademption pro tanto

a partial ademption where part of the gift is not in the testator’s estate

appreciation

an increase in value

bequest

a testamentary gift of personal property

charitable gift

a gift to a qualifying entity for social benefit

demonstrative gift

a general testamentary gift to be paid from a designated source

depreciation

a decrease in value

devise

a testamentary gift of real property

ejusdem generis

the rule of construction that a general term following a list of specific items is to be interpreted to include only items of the same kind or class as the listed items; “of the same class”

encumbrance

a charge or claim against property

exoneration

payment of debts against a specific testamentary gift so that the beneficiary takes the gift free and clear of any encumbrances

general gift

a testamentary gift not described in sufficient detail to be a specific gift

identity theory of ademption

a gift is adeemed if the exact item is not in the testator’s estate

intent theory of ademption

a gift may be saved from ademption by tracing or other circumstances

legacy

a gift of money in a will; a type of bequest

order of abatement

1. Intestate property

2. Residuary gifts

3. General gifts

4. Demonstrative gifts

5. Specific gifts

private gift

a gift to an individual for personal enjoyment

residuary gift

a testamentary gift of property remaining after specific, general, and demonstrative gifts are satisfied

specific gift

a testamentary gift described in sufficient detail to identify the exact asset intended

tax apportionment

death taxes apportioned to individual gifts rather than charged against a residuary gift

testamentary gifts

a gift that is derived from, founded on, or appointed by a testament or will

antenuptial agreement

an agreement between spouses signed before marriage

anti-lapse statute

a statute that provides for substitute beneficiaries to prevent a lapsed gift

cy pres

a doctrine of equitable approximation authorizing a court to substitute a charitable beneficiary or purpose for a testamentary charitable gift that is impossible or impractical to fulfill

elective share

a surviving spouse’s statutory right to a portion of the deceased spouse’s estate in lieu of the benefits, if any, provided in the will; also called forced share

forced share

a surviving spouse’s statutory right to a portion of the deceased spouse’s estate in lieu of the benefits, if any, provided in the will; also called elective share

lapsed gift

an intended gift that does not take effect because the beneficiary has predeceased the testator or is treated as having done so

postnuptial agreement

an agreement between spouses signed during marriage

pretermitted child

a child unintentionally omitted from a will

quasi-community property

property acquired in a non-community property state that would have been community property if acquired in a community property state

survival statute

a statute specifying a minimum period by which a beneficiary must outlive the testator to take a testamentary gift

ambulatory instrument

an instrument that is not legally effective until death (ambulatory = walking around)