Chapter 21.2: Estate Planning - PowerPoint Presentation

Slide1

Chapter 21.2: Estate PlanningSlide2

Estate Planning

A process of assuring that a person’s assets remain intact to protect the family before and after death.

Estate planning includes contributing to one’s

retirement income

as well as using certain legal instruments such as

wills and trusts.

Estate Plan Vs. Will Vs. TrustSlide3

Wills

A will is a document that is signed during your lifetime that provides for the distribution of your property upon death.

Each state has its own requirements for making Wills

Testate

means to die with a will

A

testator

is a male who dies with a will

A

testatrix

is a female who dies with a willSlide4

Wills

A gift of

personal

property made by a will is called a

bequest

or

legacy

.

A gift of

real property

made by a will is called a

devise

in most states.Slide5

Who can make a will?

Anyone who has reached the age of 18 and has both

testamentary intent

and

testamentary capacity

Testamentary intent

Intention that the documents is meant to be a last will and testament

Testamentary Capacity

The mental ability to create a willSlide6

Testamentary Capacity

Sound Mind is defined as the following:

Understand the nature and extent of your property

Know who would be the natural persons to inherit your property, even though you may leave your property to anyone you choose

Know that you are making a will

Be free delusions that might influence the dispensation of your propertySlide7

Requirements of A Will

Will must conform exactly to requirements of the state where it is made.

To be valid, a will must be

Published-

written and must reflect the true intentions of the parties writing the will

Oral wills of personal property are acceptable for soldiers and mariners

Attested-

Must be witnessed by the number of people required by state, usually 2 people

And signed-

If someone cannot write, someone else can sign it for them in their presence and with their consent.Slide8

Revoking or Changing a Will

A will can be revoked in the following ways:

Burning, tearing, canceling, or obliterating it with intent to revoke it

Making a new will

Marrying after the will was created.

Divorce usually revokes gifts made under a will to a former spouse.

Codicil-

A formal documents used to supplement or change an existing will. It must be signed and witnessed to be valid.Slide9

Family and Spouse Protections

Children who can prove they were

mistakenly

left out of the will also have certain rights of protection in most states.

Forgotten children may receive the same amount they would have received if their parents would have died without a will.

Adopted children are also treated as naturally born children

If a will specifically states that a child has been

intentionally omitted

from a parent’s will, then the will must be followed.Slide10

Intestate Succession

To be without a will

Can have serious consequences

The people you want to inherit your estate may not be able to do so…Slide11

Intestate- Without a WillSlide12

Intestate Succession

Distribution of property is done according to relationship to the deceased.

A

surviving spouse

is usually entitled to one-third or one-half of the estate.

The

balance is divided equally among children

.

If a child has died since the will has been written, then his or her children share that portion. Slide13

Probate and

Estate Settlement

Probate

Process of validating and executing a will.

Probate court supervises the process

Its first job is to validate the will, if no one opposes – the settlement is simple

This is where people can contest the will if they were left out or disagree

When you make a will you can put a clause in contesting certain people from inheriting anything.Slide14

Probate and Estate Settlement

Executor

Male designated in the will to carry out its terms

Executrix

Female designated in the will to carry out its terms

If no one is named, or the person named refuses to take that role, the court will appoint an executor to carry out the will

That person is called an

administrator

or

administratrix

.

Role: inventory assets, pay any debts and taxes, and distribute remaining assets as stated in will or by state lawSlide15

Power of Attorney

A power of attorney grants power to a representative to legally

act on your behalf

.

The person

giving

power or attorney is the grantor or principle.

The person receiving the power of attorney is the attorney-in-fact.

Powers of Attorney can make decisions on your half.

Powers of AttorneySlide16

Medical Directives

A special power of attorney that deals solely with

medical care

They allow the attorney-in-fact to make decisions on behalf of the person instead of the court making that decision.Slide17

Living Will

D

ocuments that directs whether

your life should be prolonged by artificial means

if you become incapacitated with no reasonable expectation of recovery.

Because technology allows people to stay alive for a long time, living wills give their representative the authority to make health care decisions according to the directives in the living will.Slide18

Trust

A legal device by which property is

held by one person for the benefit of another.

A trustee is a person who holds title to the property for another’s benefit.

The beneficiary is the person for whose benefit the property is held in the trust.

A trust allows to provide for your children

Wills Vs. TrustsSlide19

Types of Trusts

Private Trusts

- involves individual settlers and beneficiaries. Most common!

Testamentary Trust-

Created by a will. Only comes into existence upon death.

A living Trust-

Comes into existence while the settler is alive. Can be revocable or irrevocable

Spendthrift Trust-

Protects assets from being spent recklessly.

Charitable Trust-

Fund a charity upon deathSlide20

Rights and Duties of Parties

Trustees are obligated by law to use a high degree of care in investing the trust funds.

They cannot take extraordinary risk