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Wills, Trusts, & Estates

Intro
• - Estate Law revolves around the two eventualities that every human faces; death and taxes. The estate planning attorneys at 1LAW are here to walk you through the process of forming an estate plan that will ensure that your loved ones are taken care of and that your property is distributed how you wish. Before embarking on any estate planning path, it is absolutely essential that you consult with an experienced estate planning attorney in order to tailor the best plan for the needs of your estate. The inexperienced entering that attempt to enter the realm of estate law and wade through it on their own do so at their own peril. The issues surrounding estate law are widely varied and complex which makes an experienced attorney essential through every step of the process.

Definitions
• • Estate – an interest in real or personal property.
  • Will – document that directs the distribution of a person’s estate.
  • Codicil – a modification to an already completed will that requires the same formalities of a completed will.
  • Holograph – a handwritten will (this type of will is recognized in approximately 25 states).
  • Testamentary Capacity – the minimum mental state that one must be in to make a will. Typically, a person must be at least eighteen (18) years of age and of sound mind (i.e. not insane or under undue influence) in order to make a will.
  • Undue Influence – influence used by another to force him or her to make a will. The influence exerted must be such that the free will of the person making the will must vanish completely (i.e. without such influence, the will would not have been made in the first place).
  • Ademption – complete or partial loss of a gift given by will or trust.
  • Abatement – reduction of gifts in order to satisfy claims against the estate.
  • Advancement – gift given with the intent that it be deducted from any intestate share.
  • Disclaimer – abandonment of an intestate share of an estate that a descendant might be rightfully entitled to. In order to be valid for tax purposes, such an act must meet the requirements of the Internal Revenue Code.
  • Trust – estate planning principle in which the property of another is held by a person that holds duties to use and protect it for the benefit of others.
  • Testator – a person who makes a will.
  • Settelor – a person who creates a trust.
  • Trustee – a holder of property for the benefit of another.
  • Beneficiary – a person who is entitled to enforce a promise (such as in a will or trust).
  • Witness – a person required by law to sign a will or trust in order to attest to the competency of the testator/settelor.
  • Present Intent – intent shown, usually in writing, that indicates the intent to create a trust.
  • Precatory Language – language that merely expresses some type of hope or desire that the property of an estate will be used in a certain way. This term is usually used when discussing the law of trusts and cannot exist in the trust document if the trust is to be deemed valid.
  • Charitable Trust – a trust that is created for any charitable purpose. Such a trust can be perpetual in nature.
  • Cy Pres – the literal meaning is “as close as possible”. A charitable trust can be changed to meet the ends of the purposes the settelor intended as nearly as possible to the original purpose (such as when the original purposes of the trust become impracticable).
  • Discretionary Trust – a trust in which the trustee is given discretion to pay the beneficiaries.
  • Spendthrift Trust – a trust in which controls the way in which a beneficiary spends the proceeds.
  • Honorary Trust – a trust that has no human beneficiary. The trustee is “on his/her honor” to carry out the terms of the trust. Honorary trusts are most commonly set up for animals and gravesites.
  • Trust Purpose – a trust can be set up for any purpose so long as its not illegal or contrary to public policy.
  • Res – trust property. A trust cannot exist without a res.
  • Elective Share – the amount of money a surviving spouse may elect to take, regardless of how property is disposed of in an estate plan.
  • Pretermitted Child – a child left out of an estate planning document unintentionally. In such a case, the child is given an intestate share of the estate.
  • Advanced Healthcare Directive – a document that states a person’s desire regarding crucial healthcare decisions such as when to withdraw life sustaining machines or artificial nutrition procedures.
  • Homestead Allowance – statutes that exist in most states that allow for a certain amount of land that is part of the estate to be exempt from claims against the estate by creditors.

Intestacy
• - When a person dies without any estate planning documents (will, trust etc.), that person is said to have died intestate. What this means is that his or her property will pass through intestate succession laws. These are also known as the laws of descent and distribution. At 1LAW, we are of the mindset that it is better to avoid this type of scenario through proper estate planning. However, there will be times when intestacy does apply. Please do not try to wade through this arena on your own. Estate planning attorneys go through years of education and training in order to practice in this realm, and the inexperienced enter at their own peril. The following is a general guideline for those facing intestacy issues:
  • Surviving Spouse Elective share
    - Anytime a person meets his or her demise without any estate planning documents (will, trust etc) the surviving spouse of that person, by law, can elect a pre determined share of the estate of the deceased. This principal also applies even if there is an estate planning document that applies to the estate. The share that the surviving spouse can elect to take varies by state, but by and large, the percentage is around 33%. If there are no surviving descendants of the deceased (natural and adopted children), some jurisdictions turn all of the estate over to the surviving spouse.
  • Share of Surviving Descendants
    - If there are descendants that survive the deceased, most states provide that the survivors are provided for per capita. When things are distributed per capita, heads are counted and percentages are assigned (i.e. if there are three children, each one gets a third of the estate). It is important to remember here that adopted children are treated the same as natural children, although foster and step children have no inheritance rights as a general matter.
  • Death at the Hands of an heir
    - As a general matter, if someone causes another’s demise, that person cannot collect anything from the estate of the deceased. This principal also applies to any beneficiaries to an estate planning document. In other words, if a person decides to kill a relative so that he or she can collect from the estate, the person committing such an act will forfeit his or her share of the estate.
  • Advancement of Share of the Estate
    - An advance in the realm of estate law means just what it sounds like. It is a gift, taken from the estate, given with the specific intent that the amount of the gift be counted against the total estate. For example, grandma may decide to give her grandson money for college on the condition that he or she collects less from the estate.
  • When an Heir/Beneficiary Does not want his Share
    - No person is obligated to take a share of any estate of which he or she may be entitled if he or she does not wish. This principal is mainly used when taxes become an issue. In order to effectively disclaim a share of the estate under the Uniform Tax Code such a disclaimer must be in writing, be irrevocable, and filed within nine months of the decedant’s death or the 21st birthday of the beneficiary.

Requirements for a will to be official
• In order for a will to be valid, the following are required:
  1. Capacity – anybody who wants to make a will must be at least 18 years of age and of sound mind. The sound mind requirement varies by state, however, if a person is capable of entering into a contract, it is safe to assume that he or she is capable of making a will.
  2. Signature – the testator must sign the will or have somebody else sign for him or her at the direction of the testator.
  3. Witnesses – the signing of the will must be witnessed by at least two people. The witnesses must be in the presence of the testator. The witnesses must also sign the will in each other’s presence.
• At 1LAW, we like to make the signing of the will a ceremony like event in which all of the required parties are present, and all of i’s are dotted and the t’s are crossed. With this method, we give you the peace of mind that comes with a properly executed document that will distribute the property of your estate as you wish.
• Will Revocation
• As mentioned above, a will can be revoked at any time. There are several methods that can be used to accomplish this task including:
  • Legal Revocation
    In certain circumstances, a will can be automatically revoked under applicable statute. For example, when a couple obtains a divorce, any and all provisions that provided anything for the former spouse are revoked. In some states a subsequent marriage can also affect will beneficiaries (i.e. the estate will shrink so that the subsequent spouse can take an intestate share). This does not prevent the validity of provisions in subsequent wills that apply to second spouses however.
  • Subsequent Children
    In some situations, children are born or adopted after the will is created. When another will is not created that provides for these children, the law refers to them as “Pretermitted Children” (which simply means that they were born/adopted subsequent to the creation of the will and that another will was not created to provide for them). In this case, the child not provided for gets an intestate share of the estate which lessens the share of the other beneficiaries.
  • Written Revocation
    A will can be revoked in writing by any subsequent instrument. If the will does not expressly revoke the prior will, both wills can generally be read together with only inconsistent provisions being revoked. It is common practice however to revoke any prior wills in writing somewhere in the content of the subsequent will. This can be done by the following methods:
    1. Other Acts by the Testator- Certain physical actions by the testator can revoke a will in whole or in part. In every state, a statute exists that provides that actions such as burning and tearing can revoke a will, but such actions must be made with such intent. Such revocation can be partial in nature (such as crossing provisions out with a pen). Also, wills that are lost or destroyed can be probated if a person can prove valid creation, the contents of the will, and proof that the testator did not intend to revoke the will.
    2. Revoked Will Revival- If the testator decides that he or she did not want to revoke the will after all, the testator must recreate the will.
    3. Dependent Relative Revocation- When a person revokes his or her will under a mistaken belief that some disposition method would be effective, and he or she would not have revoked the will if the mistake was not made, then such revocation will be deemed invalid and the original will, will be considered valid.
    4. Revoked Will Revival- If the testator decides that he or she did not want to revoke the will after all, the testator must recreate the will.
    5. Dependent Relative Revocation- When a person revokes his or her will under a mistaken belief that some disposition method would be effective, and he or she would not have revoked the will if the mistake was not made, then such revocation will be deemed invalid and the original will, will be considered valid.

Wills created in other states
• If one creates a will in a different state than the state in which that person resides at the time of death, the following principles need to be remembered:If any real property is given in the will, the laws of the state in which the real property is located will apply.If any personal property is given in the will, the law of where the deceased was residing will apply.

Will Principles
• The length and complexity of any given will is dependent on the size of one’s estate, however, there are principles that can be applied to any will and they included (but are not limited to):
  1. Integration – when the will is created, anything that is attached physically to the will and is consistent with the terms is presumed to be part of the will.
  2. Codicil – a codicil is a modification of the original will document. In order to be valid, a codicil must be created using the same formalities required for a will.
  3. Incorporation – other documents can be incorporated into the will document by referring to such a document. The will must describe such documents in such a manner that there can be no confusion that the testator intended to incorporate the document into the will.
  4. Pour Over Provisions – this is a common principle when a trust is a part of the estate plan. A provision of a will (or the entire will) can put money or other property into a trust. Essentially, these types of provisions “pour” property over to the trust.Estate/Beneficiary Changes after Will Creation
  5. Lapse – when a beneficiary of a will meets his or her demise before the testator, that person’s gift is said to lapse and is put back into the estate. In some states, once a person becomes a beneficiary in a will, that gift becomes part of the beneficiary’s estate and passes to his or her heirs. This type of statute is what is called the “Anti Lapse” principle and can be found in nearly all states. However, it is important to remember that any gift in a will given to a person that is deceased is void from the start.
  6. Ademption – when thinking of estate property, a good analogy is to think of muscle atrophy; it is possible for muscles to shrink and completely disappear. The same principle applies to estate property. If property exists at the time of the creation of the will, that does not mean that the property will exist as part of the estate at the time of probate. Any part of the estate can shrink or disappear, leaving the beneficiary with less, or even nothing, of what the will stated that the beneficiary would receive. Ademption does not apply to gifts of a specific amount of money however (such gifts will usually be satisfied by selling other property of the estate.
  7. Increases in Estate Property – Property can increase as well as decrease. For example, any improvements made on real property go to the specific beneficiary (although it is important to remember that income made on any real property goes into the general estate). This also means that any increases to the property made after death belong to the specific beneficiary. Also, keep in mind that this also applies to any increases in stock.

Estate Law Restrictions
• It is generally true that a person can dispose his or her property as he or she sees fit, however, what needs to be kept in mind is the fact that there are restrictions in regard to the law of estates that are meant to protect the family of the deceased. The following is a sampling of such restrictions

Elective Share
• A spouse cannot be disinherited completely. The law in most states provides that each surviving spouse is entitled to what is called an elective share from the estate of the deceased spouse. This means that there is a certain percentage that a spouse can take. If a spouse is provided for in an estate planning document, he or she can decide to take whatever share the state provides rather that what is provided in the will. For example, if the surviving spouse is given a house and boat in the will and nothing else, the surviving spouse can elect to take a percentage of the total estate (if the value of the elective share is more than the house and boat). The percentage that the elective share provides varies by state, but is generally around 1/3. Also, any property that is given in order to defeat the principle of elective share is subject to elective share.

Pretermitted Children
• While children can be intentionally disinherited, there are statutes that exist that protect children that were disinherited unintentionally. For example, children that are born/adopted after a will is made can be provided a share of the estate that he or she would have been entitled to if the will had not been made.

Contesting a will
• - There are times when a will, in spite of fulfilling all of the procedural requirements, can be deemed invalid. Typically, any party that wants to contest a will must do so within six months after the will is admitted to probate. The following is a brief overview of what issues typically arise when the validity of a will is contested.
  • a. Capacity- Any person that wishes to make a will must be at least 18 years of age and have sufficient mental capacity. In order to show sufficient mental capacity, it must be proven that the person who made the will was able to understand the consequences of his or her actions, the nature of his or her property, know the people he or she is giving the property to, and understand the effect of the will. Capacity is determined in the past tense (i.e. did the person have sufficient capacity at the time the will was made). Physical illness or addiction are not by themselves enough to show that a person lacked capacity to make a will, although people that were insane at the time the will was made have been determined to lack capacity to make a will (the delusion must have caused the person to make the will and the person must believe in facts that do not exist in order for this principle to apply).
  • b. Undue Influence- A will can be deemed invalid if it can be shown that the will was made under undue influence. In order to show undue influence, the alleged influence must be shown to have eliminated the free will of the person making the will and that the will would not have been made but for the exertion of such influence. That being said, it is very important to remember that things such as nagging, begging, or even threatening are not enough to prove undue influence; the free will of the person making the will must be eliminated.
  • c. Fraud- When a party is deceived into making, or not making, a will, the maker of the will must have been deceived as to the nature of the instrument, facts that would induce the making of a will (or not making a will), or facts given as to the nature of the gift.
  • d. No-Contest Clause- If a will contains a no contest clause, it is generally enforceable unless there is probable cause for contesting the will (i.e. undue influence). Some states give no contest clauses full effect regardless of probable cause.

Trusts
• Much like the law of wills, the law of trusts is varied and complex. A trust can be defined, essentially, as an estate planning tool in which one or more persons (trustee) keeps and distributes property to another person. An experienced estate planning attorney is necessary to help you find your way through the process of the creation of your trust. The following is a very short overview of the law of trusts.

Creation
• The following are the necessities for creating a valid trust:
  1. Settlor – the term “settlor” is how the law refers to a person who creates a trust. The settlor must have the same level of capacity required of a person that creates a will.
  2. Intent – there must be intent to create the trust on the part of the settlor. Remember that a trust can contain no precatory language (i.e. the trust cannot say “I wish” or “I hope”, the intent to create a trust must be stated with certainty).
  3. Trustee – this is the guardian of the trust property so to speak. The trustee must have duties that are enforceable against him or her during the course of administering the trust.
  4. Res – res is a legal term for property. A trust must have a valid res in order to exist. If not, the trust will fail.
  5. Beneficiaries – beneficiaries are the folks who enforce the terms of the trust. A trust cannot exist without someone to give the property to. Please note that a person cannot be both the trustee and the sole beneficiary.
  6. Valid Purpose – a trust must have a valid purpose that is not illegal or against public policy.

General Trust Principals
• • Intent
    - In order to create a valid trust, the intent to do so must be present at the time of creation. The intent to create is usually stated clearly within the trust document.
  • Precatory Language
    - When speaking of intent, the topic of precatory language inevitably arises. Precatory language implies suggestion rather than command. Language such as “I wish” or “I suggest” cannot exist in order for the trust to be valid.
  • Trust Res
    - Any valid trust must contain res (property). Such property must exist at the time of the creation of the trust. This is very important, so it is worth repeating: there can be no trust without trust property
  • Trust Purpose
    - A trust must have a valid purpose. A trust cannot exist to help people conduct illegal activity or acts that are against public policy.
  • Cy Pres
    - This is a principle that is applied to charitable trusts when the purposes of the trust have become obsolete (i.e. when a cure is found for a disease). For example, at one time a person may have set up a trust to benefit research for a cure for tuberculosis, but since a cure has been found since the creation of that trust, a court will give the trust a new charitable purpose as near as possible to the alternative (such as benefitting research for a cure for ALS).

Powers and Duties of the Trustee
• - It is the duty of the trustee to administer the trust in such a way as to fulfill the terms of the trust instrument (such duties and powers can be spelled out expressly or they can be implied by law).
• Power sources
  - The trustee must have the authority to act, otherwise, the trust is invalid. Where the trustee’s power to act comes from varies. More often than not, the settelor will spell out the powers and duties of the trustee very clearly and specifically in the trust instrument itself. However, there are times when such powers and duties can be implied by law as well. As a general matter, the trustee has the power to collect and hold trust property, to instigate and defend lawsuits on behalf of the trust, and prudently invest trust assets. Again, these powers and duties should be clearly spelled out in the trust instrument and a trustee should consult with an attorney if any questions arise.
• Trustee’s Duties
  - A trustee has certain duties that must be followed, the breach of which can leave the trustee open to personal liability. Generally, the trustee holds the following duties (this is not an exhaustive list): to administer the trust prudently and in good faith, to administer the trust with absolute loyalty (i.e. no buying and selling of trust property, no borrowing of trust funds, avoiding personal gain through position as trustee), no self dealing, and duty to invest prudently.