The Estate Plan and the Purpose and Need for a Will

Estate Plan

• An arrangement of a person’s assets using the laws of various disciplines (wills, trusts, taxes, insurance, and property) to gain maximum financial benefit of all the laws for the disposition of the person’s assets during life (inter vivos) and after death

Will

• A legally enforceable written declaration of a person’s intended distribution of property after death

Requirements to Make a Will

• Capacity– Legal capacity

• The age at which a person acquires capacity to make a valid will, usually 18

– Testamentary capacity• The sanity (sound mind) requirement for a

person to make a valid will

Terminology of Makers of Wills• Testator

– A male who makes and/or dies with a valid will

• Testatrix– A female who makes and/or dies with a

valid will

Requirements of a Will

• Written Document• Witnesses• Date (in most states)• Signature of the Testator/Testatrix• Sound Mind of the Testator/Testatrix• Legal Capacity of the Testator/Testatrix• Selection of Personal Representative

Formal Probate

• A court-supervised administration of a decedent’s estate– Decedent: A person who has died

Terminology of Wills

• Beneficiary– A person entitled to receive property under

a will• Devisee

– A person who receives a gift of real property under a will

• Legatee– A person who receives a gift of personal

property under a will

Terminology of Intestacy

• Intestate– A person who dies without a valid will

• Heir– A person who receives a gift of real property

from an intestate• Next of Kin

– The closest blood relatives of a decedent

Terminology of Wills

• Ambulatory– Subject to change

• Codicil– A written amendment to a will

• Letter of Instructions– A document that specifies a testator’s

intentions for organ donation and funeral and burial plans but does not amend or change a will

Residuary Estate

• The remaining assets of a decedent’s estate after all debts have been paid and all other gifts in the will have been distributed

Property Distributions

• Tenancy in Common• Joint Tenancy

Structure of an Estate

• BeneficiaryTestator

PersonalRepresentative

Estate

Letter of Instructions

Trusts

• Trust– A right of property, real or personal, held by

one person for the benefit of another• Testamentary Trust

– A trust created in a will; becomes operational upon the death of its creator

• Inter Vivos Trust– A trust that is effective during the life of its

creator; becomes operational immediately after created

Structure of a Trust

• Settlor

Trust Estate

Trustee

Beneficiary

Inter Vivos Gifts

Title

• Legal Title– The form of ownership of trust property held

by the trustee, giving the trustee the right to control and manage the property for another’s benefit

• Equitable Title– Provides the right to the benefits of a trust to

the beneficiary

Trustee

• The person or institution named by the maker of a will or creator/settlor of a trust to administer the property for the benefit of another, according to the creator’s provisions– Compare to an executor, who carries out

the terms of a will, and a personal representative, who carries out the terms of a will or administers an estate when there is no will

Personal Representative

• A person who administers and distributes an intestate or testate decedent’s estate– Compare to an executor, who carries out

the terms of a will

Will Substitutes

• Joint Tenancy• Life Insurance• Inter vivos Trust• Inter vivos Gift• Community Property Agreement• Transfer-on-Death Deed/Beneficiary Deed