LAW OF SUCCESSION; ESTATE PLANNING
Estate planning is the process of anticipating and arranging for the disposal of an estate during a person's life. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes
and other expenses. However, the ultimate goal of estate plan is
determined by the specific goals of the client and may be as simple or
complex as the client's needs dictate. Guardians are often designated for minor children and beneficiaries in incapacity.
What is an "Estate"?
Your "estate" consists of all property owned by you at the time of your death, including:
•Real estate
•Bank accounts
•Stocks and other securities,
•Life insurance policies,
•Personal property such as automobiles, jewelry ,and artwork.
Your "estate" consists of all property owned by you at the time of your death, including:
•Real estate
•Bank accounts
•Stocks and other securities,
•Life insurance policies,
•Personal property such as automobiles, jewelry ,and artwork.
Devices
Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, estate planning attorneys now often advise clients to also create a living will.
Specific final arrangements, such as whether to be buried or cremated,
are also often part of the documents. More sophisticated estate plans
may even cover deferring or decreasing estate taxes or winding up a
business.
WHAT IS A TRUST?
A trust,- The right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds legal title; a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary). For a trust to be valid, it must involve specific property, reflect the settlor’s intent, and be created for a lawful purpose. (Black’s Law Dictionary 1647 (9th ed. 2009)).
B. trust is a “fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.”
A trust,- The right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds legal title; a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary). For a trust to be valid, it must involve specific property, reflect the settlor’s intent, and be created for a lawful purpose. (Black’s Law Dictionary 1647 (9th ed. 2009)).
B. trust is a “fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.”
Essential Elements of a Trust:
1. Trustee
2. Beneficiary
3. Trust Property (res)
1. Trustee
2. Beneficiary
3. Trust Property (res)
HOW TRUSTS ARE CREATED.
A. Trusts are created in several ways:
1. By Will. These trusts are known as testamentary trusts and constitute a part of the testator’s Last Will and Testament. Testamentary trusts are “dormant” until the Will is probated following the testator’s death. Therefore, a testamentary trust is not fully established until the date of the testator’s death. Probate of the Will is a required step to make a testamentary trust operational.
2. By Agreement (or Deed) of Trust. A person (the Settlor or Grantor) who desires to create a trust that will become operational during their lifetime ordinarily does so by executing a Trust Agreement or a Deed of Trust. Such trusts are often called “inter-vivos trusts” because they are made between living persons, as opposed to the testamentary trust, which is created in the Will of a decedent.
3. By Court Action. Courts of equity have powers to impose a resulting or constructive trusts.Judges ordinarily apply this legal doctrine in order to remedy an act of fraud or misappropriation of property.
IV. COMMON FEATURES OF ALL TRUSTS.
. All trusts will ordinarily contain all of the following elements:
Governing Document. The written instructions specifying the terms of the trust are contained in the Will, Trust Agreement or Court Order (in the case of a constructive trust).
Trust Assets. The property subject to the terms of the trust is often referred to as being the“trust principal,” “trust estate,” “corpus,” or “res.” All of these terms mean essentially the same thing and refer to the property that is the subject of the trust.
The Settlor. The person who, having the requisite capacity, creates
the trust. Also known as grantor, donor, or trustor.
A. Trusts are created in several ways:
1. By Will. These trusts are known as testamentary trusts and constitute a part of the testator’s Last Will and Testament. Testamentary trusts are “dormant” until the Will is probated following the testator’s death. Therefore, a testamentary trust is not fully established until the date of the testator’s death. Probate of the Will is a required step to make a testamentary trust operational.
2. By Agreement (or Deed) of Trust. A person (the Settlor or Grantor) who desires to create a trust that will become operational during their lifetime ordinarily does so by executing a Trust Agreement or a Deed of Trust. Such trusts are often called “inter-vivos trusts” because they are made between living persons, as opposed to the testamentary trust, which is created in the Will of a decedent.
3. By Court Action. Courts of equity have powers to impose a resulting or constructive trusts.Judges ordinarily apply this legal doctrine in order to remedy an act of fraud or misappropriation of property.
IV. COMMON FEATURES OF ALL TRUSTS.
. All trusts will ordinarily contain all of the following elements:
Governing Document. The written instructions specifying the terms of the trust are contained in the Will, Trust Agreement or Court Order (in the case of a constructive trust).
Trust Assets. The property subject to the terms of the trust is often referred to as being the“trust principal,” “trust estate,” “corpus,” or “res.” All of these terms mean essentially the same thing and refer to the property that is the subject of the trust.
The Settlor. The person who, having the requisite capacity, creates
the trust. Also known as grantor, donor, or trustor.
The Beneficiary. All trusts have one or more beneficiaries, who are the persons who are named or otherwise designated to enjoy the income and principal of the trust property. The Beneficiary is considered to be the equitable owner of the trust property.
Trustee(s). All trusts will have one or more Trustees, who are the legal owners of the trust property. As the legal owners the Trustees are vested with powers to manage, invest and dispose of the trust property, subject to the terms of the governing document. A trust will ordinarily continue after the death or resignation of its Trustee and another substitute or successor Trustee will be appointed to carry on the duties of the Trustee.
Time Period of Trust. Most trusts will have a definite beginning and ending point, ordinarily beginning at the death of the testator/settlor who created the trust and ending upon the beneficiary of the trust reaching a specified age of financial maturity. The Rule Against Perpetuities is a common law legal doctrine that limits the term of trusts to the lifetimes of beneficiaries or certain other described persons who were living when the trust was established, plus an additional period of twenty-one (21) years. The rule ordinarily limits the term of all private trusts, i.e. trusts created for the benefit of individuals. However, charitable and governmental trusts are exempt from the limits of the Rule Against Perpetuities. Delaware and some other states have repealed the common law doctrine known as the Rule Against Perpetuities, so that private trusts established in those jurisdictions may continue indefinitely.
Trustee(s). All trusts will have one or more Trustees, who are the legal owners of the trust property. As the legal owners the Trustees are vested with powers to manage, invest and dispose of the trust property, subject to the terms of the governing document. A trust will ordinarily continue after the death or resignation of its Trustee and another substitute or successor Trustee will be appointed to carry on the duties of the Trustee.
Time Period of Trust. Most trusts will have a definite beginning and ending point, ordinarily beginning at the death of the testator/settlor who created the trust and ending upon the beneficiary of the trust reaching a specified age of financial maturity. The Rule Against Perpetuities is a common law legal doctrine that limits the term of trusts to the lifetimes of beneficiaries or certain other described persons who were living when the trust was established, plus an additional period of twenty-one (21) years. The rule ordinarily limits the term of all private trusts, i.e. trusts created for the benefit of individuals. However, charitable and governmental trusts are exempt from the limits of the Rule Against Perpetuities. Delaware and some other states have repealed the common law doctrine known as the Rule Against Perpetuities, so that private trusts established in those jurisdictions may continue indefinitely.
Wills
• What does a will do?
o A will is a written testament which provides for the distribution of property owned by you at the time of your death. You have very broad discretion to designate how you want your property to be divided and distributed, although state statutes may place certain limitations on your discretion. For example, most states have specific laws that prevent you from absolutely disinheriting your
spouse.
o Aside from providing for the intended disposition of your property to your spouse, children, close friends, etc., there are a number of other objectives that may be accomplished in your will:
You may designate a guardian for your minor children if you have survived the other parent and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.
You may designate an executor of your estate and eliminate the need for a bond.
You may choose to acknowledge or provide for a child (e.g., stepchild, godchild, etc.), an elderly parent, or other vulnerable individual.
If you are acting as custodian for the assets of a child or grandchild, you may designate your successor custodian and avoid the expense of a court appointment.
• What does a will do?
o A will is a written testament which provides for the distribution of property owned by you at the time of your death. You have very broad discretion to designate how you want your property to be divided and distributed, although state statutes may place certain limitations on your discretion. For example, most states have specific laws that prevent you from absolutely disinheriting your
spouse.
o Aside from providing for the intended disposition of your property to your spouse, children, close friends, etc., there are a number of other objectives that may be accomplished in your will:
You may designate a guardian for your minor children if you have survived the other parent and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.
You may designate an executor of your estate and eliminate the need for a bond.
You may choose to acknowledge or provide for a child (e.g., stepchild, godchild, etc.), an elderly parent, or other vulnerable individual.
If you are acting as custodian for the assets of a child or grandchild, you may designate your successor custodian and avoid the expense of a court appointment.
Power of Attorney
• What is a power of attorney?
o A power of attorney is a document that gives another person or entity the power to act on your behalf. The person or entity which has been granted a power of attorney is often called an “agent” or “attorney-in-fact.” With a valid power of attorney, your agent can take any action permitted in the power of attorney document; however, your agent may be required to present the actual document to invoke such power.
o You may limit the power you give to your agent to relate only to a particular activity (e.g., closing the sale of your home), or you may make your agent’s powers broad, allowing your agent to act on your behalf in a variety of situations. You can also specify whether your agent’s power will take effect immediately or upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself), often referred to as a “springing” power of attorney. You can also specify whether the power you have given your agent is temporary or permanent.
• What is a power of attorney?
o A power of attorney is a document that gives another person or entity the power to act on your behalf. The person or entity which has been granted a power of attorney is often called an “agent” or “attorney-in-fact.” With a valid power of attorney, your agent can take any action permitted in the power of attorney document; however, your agent may be required to present the actual document to invoke such power.
o You may limit the power you give to your agent to relate only to a particular activity (e.g., closing the sale of your home), or you may make your agent’s powers broad, allowing your agent to act on your behalf in a variety of situations. You can also specify whether your agent’s power will take effect immediately or upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself), often referred to as a “springing” power of attorney. You can also specify whether the power you have given your agent is temporary or permanent.
beneficiary designations
Most retirement plans, annuities and life insurance policies let you
decide what should become of your assets in the event of your demise
through the designation of beneficiaries. The primary beneficiary or
beneficiaries inherit first. If they are dead or they die with you,
your assets go to any secondary beneficiaries you have named. You will need to name names. And you will need to determine what percentage of your assets go to each beneficiary.
Beneficiaries can include those who leap to mind -- spouses, children
and other relatives. Or they can include friends, trusts, charities and
institutions.
Beneficiary designations generally kick in immediately after death
and override a will. That means your assets will not have to go through
probate, a legal proceeding that can be expensive. But it also means
that you need to ensure that your beneficiary designations reflect your
most recent wishes because your will cannot override them.
Considerations in Designating Beneficiaries
Spouses can generally inherit assets from one another without
generating estate taxes or, in the case of retirement accounts, being
forced into taking mandatory taxable payouts. (Unless the inheriting
spouse has turned 70 1/2, in which case normal distribution rules
apply.)
Other heirs, though, may face some consequences.
How Can an Estate Plan Help?
Regardless of your age,or the size and complexity of your estate,an estate plan can accomplish the following:
•Identify the family members and other loved ones that you wish to receive your property after your death.
•Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as
possible.
•Minimize the amount of taxes that will need to be paid in order for your property to pass to others after your death.
•Avoid the time and costs associated with the probate process by utilizing estate planning devices like living trusts
and "payable on death" bank accounts.
•Dictate the kinds of life-prolonging medical care you wish to receive should you be unable to make your wishes
known when the time comes.
•Set for the kind of funeral arrangements you would like, and how related expenses are to be paid
Regardless of your age,or the size and complexity of your estate,an estate plan can accomplish the following:
•Identify the family members and other loved ones that you wish to receive your property after your death.
•Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as
possible.
•Minimize the amount of taxes that will need to be paid in order for your property to pass to others after your death.
•Avoid the time and costs associated with the probate process by utilizing estate planning devices like living trusts
and "payable on death" bank accounts.
•Dictate the kinds of life-prolonging medical care you wish to receive should you be unable to make your wishes
known when the time comes.
•Set for the kind of funeral arrangements you would like, and how related expenses are to be paid
thanks learned bro
ReplyDelete