2 Estate planning documents

Question 1

Estate planning documents (3)

Answer 1

1. Will
2. Prenuptial agreement
3. Side letter

Question 2

Advantages of a will (7)

Answer 2

1. Can name executor
2. Can transfer property to anyone
3. Can use estate tax marital deduction
4. Can specify how to apportion estate debts and taxes
5. Can designate guardians for minors
6. Can contain provisions for establishing trusts
7. Can name charitable beneficiaries

Question 3

Possible advserse consequences of intestacy (7)

Answer 3

1. In some states, child’s share equals spouse’s share
2. Some states provide spouse’s share is life estate with remainder passing to children
3. When no children, surviving spouse might share with parents or siblings
4. Children may be treated equally, not equitably
5. May require surety bond, incresing cost
6. Court selects administrator
7. No assets left to charity

Question 4

General rules for making a valid will (4)

Answer 4

1. 18 years old, unless emancipated minor
2. Of sound mind. (Not as strict as for entering a contract)
3. Absence of undue influence
4. Absence of fraud

Question 5

Types of wills (3)

Answer 5

1. Holographic (handwritten)
   
   1. Not recognized in all states
   2. Material provisions in testator’s handwriting
   3. Signed and dated
   4. No need for witnesses
2. Noncupative (oral)
   
   1. Not recognized in all states
   2. In some states personal property only, not real property
   3. Use is fairly restrictive
3. Statutory (formal)
   
   1. Should be drawn by attorney
   2. Must comply with domicile state
   3. Witnessed by required #witnesses
   4. Probate court determines whether valid

Question 6

General provisions of a will (15)

Answer 6

1. Intro to id testator
2. Establishment of domicile
3. Declare is last will and testament
4. Revocation of all prior wills and codicils
5. ID exector/executrix and successor
6. Payment of debts clause
7. Payment of taxes clause
8. Disposition of tangible personal property
9. Disposition of real estate clause (residence)
10. Specific beqests of intangibles and cash
11. Residuary clause, for all assets not specified (may risk intestate assets if not included)
12. Appointment and powers clause that names executors and guardians
13. Testator’s signature clause
14. Attestation clause (witnesses)
15. Self-proving wills meet state rules to obviate need for witnesses to testify before probate court

Question 7

Other clauses in a will (6)

Answer 7

1. Simultaneous death clause - if occurs, specifies presumed order of deaths
2. Survivorship clause - heir must survive a specified period to receive bequest
   
   1. Avoids prop from being in two estates in rapid succession
   2. To qualify for marital deduction, cannot require spouse survives more than six months
3. Spendthrift clause - specifies interest is beyond claims of heir’s creditors. Not usually effective in a will
4. Disclaimer clause - typically unnecessary
5. No contest (in terrorem) clause - Discourages heirs from contesting the will by substantially decreasing or eliminating their bequest if they file a will contest
6. Codicil - separate document that amends a will

Question 8

Ways property can be distributed in a will

Answer 8

1. Per stripes. Preferred by courts
2. Per capita (should define “who,” lest you risk disinheriting some). Preferred by insurers and mutual fund cos.

Question 9

Possible planning mistakes involving wills

Answer 9

1. Invalid, poorly drafted, out of date
   
   1. Does not meet statutory requirements
   2. Does not contemplate change in tax laws
   3. Decedent has moved to a different state
   4. Lacks specificities or has no residuary clause
2. Sweetheart wills