Wills, Trusts, and Estates Lecture Notes

Class Announcements

  • Two assignments upcoming:

    • Fourth in-class quiz on Chapter 51 - Wills, Trusts, and Mistakes from the textbook.

    • Project Three due as a hard copy on Monday. If submitting a video or PowerPoint, email it to the instructor.

  • Quiz Format:

    • Multiple Choice and Petrificial options are allowed.

    • No blank answers; indicate final answers clearly.

    • Time allotted: Entire class period for the quiz.

  • Quiz Material: Chapter 51 on Wills, Trusts, and Mistakes serves as the foundational material for both the quiz and Project Three, relevant for answering questions on estate planning for client Ernie.

  • Handout on Bankruptcy Law will be given at the time of quiz submission:

    • This will introduce the next unit which starts the following week and covers bankruptcy law and professional legal liability.

  • Next Steps:

    • Final quiz in class will occur on Wednesday, December 3 (last day of class). There will be no final exam but a Project Four due on the same day. Students may submit early if unable to attend.

  • Projects and Participation:

    • Instructions for Project Four will be distributed to assist in planning and time management as the semester concludes.

    • Engage actively to benefit from extra credit opportunities in the final weeks of the class.

Client Case Study: Ernie Entrepreneur

  • Background: Ernie has been operating a business for five years, experiencing early success before a downturn in year six, leading to client inquiries into bankruptcy options.

  • Client Concerns:

    • Bankruptcy Options: What is bankruptcy, how does it work, and its implications for Ernie personally and his business?

    • Legal Liability of Accountants: If losses relate to errors by the accounting firm (Dewey Cheatham and Howe) handling Ernie's finances, what legal recourse is available?

Discussion on Wills, Trusts, and Estates

  • Key Concepts and Definitions:

    • Testator: Person who makes a will; must be of testamentary capacity. Requirements:

    • Age: 18 years or older in Ohio.

    • Sound mind and memory; must intend to create a will.

    • Formalities: Wills generally must be in writing, signed, and witnessed by at least two disinterested witnesses.

  • **Types of Death: **

    • Testate: Dying with a will.

    • Intestate: Dying without a will (assets are distributed per state laws).

  • Intestate Distribution:

    • Probate assets distributed according to a hierarchy:

    • Spouse

    • Children (equally divided)

    • Parents (50/50 or all to surviving parent)

    • Siblings

    • Cousins, aunts, uncles (up to distant relatives)

    • If no relatives, property goes to the state.

  • Probate Assets vs. Non-Probate Assets:

    • Probate Assets: Subject to distribution by the probate court.

    • Examples: Individual property, tenants in common property.

    • Non-Probate Assets: Pass outside of probate process.

    • Examples:

      • Life insurance proceeds (to policy beneficiaries)

      • Retirement accounts (direct payment to beneficiaries)

      • Joint tenancy property (with right of survivorship)

      • Assets in irrevocable living trusts.

  • Wills Defined:

    • Ambulatory Nature: Valid until the testator’s death; can be revoked or changed at any time.

    • Formalities of Execution: Signed in front of disinterested witnesses, possibly handwritten (holographic). Verbal wills are generally not recognized.

  • Beneficiaries: Individuals or entities entitled to inherit through the will.

    • Must be distinguished from witnesses to avoid conflicts of interest.

  • Legal Representatives:

    • Executor: Appointed by a will.

    • Administrator: Appointed by the court for intestate estates.

    • Compensation for services is governed by statute.

  • Types of Gifts in Wills:

    • Real Estate: Called a devise (specific or general).

    • Personal Property: Bequest (specific or general).

    • Monetary Gifts: Legacy (specific or general).

  • Disinheriting a Beneficiary: Must explicitly state intention; simply failing to mention can lead to legal assumptions against disinheritance.

  • Trusts Discussion:

    • Intervivos Trusts: Created during the testator's lifetime.

    • May be revocable or irrevocable. Revocable allows changes during a lifetime.

    • Testamentary Trusts: Created via the will and become effective post-death.

    • Trust Structure: Legal title held by trustee, equitable title held by beneficiaries. Separation of these titles prevents automatic termination of the trust upon the same parties occupying both roles.

  • Trust Management:

    • Terms: Trustor, Grantor, or Settlor refers to the creator of the trust.

    • Trustee Responsibilities: Manage trust assets, with a legal obligation to act in beneficiaries' best interests.

  • Rule Against Perpetuities: Limits how far in the future property can be controlled by a trust.

  • Powers of Attorney and Advance Directives:

    • General Durable Power of Attorney: Grants broad power to manage affairs and remains in effect after the principal's incapacitation; can be revoked anytime.

    • Health Care Power of Attorney: Specific authority for health decisions.

    • Living Will: Outlines wishes regarding life support decisions.

Conclusion and Next Steps

  • The next class will delve into bankruptcy law, with a focus on preparing for the quiz on Monday and review of Project Three instructions.

  • Students are encouraged to engage with the material, clarify any doubts, and prepare questions for discussion.