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Flashcards in Estate Planning Documents Deck (16):

Types of Fiduciaries

-an executor or personal representative of an estate has a duty to act in the best interests of the beneficiaries of the estate.
-A trustee must act in the best interests of the trust beneficiaries
-Guardians are appointed to act in the best interests of the person who is their ward
-an agent under a power of attorney document is a fiduciary who must act in the best interests of the principal.


Fiduciary Duties

-To act for the benefit of beneficiaries in regard to matters within the scope of the fiduciary relationship
-To refrain from delegating acts that can be performed by the fiduciary
-To make full disclosure of all facts in any transaction with the beneficiary; any transaction must be fair to the beneficiary; or it cant be set aside
-To refrain from any self-dealing at the expense of the beneficiaries and to remain loyal to beneficiaries
-To preserve property and make it productive
-to invest property prudently according to state laws that may consist of prudent-person rule; legal-list statute, or Uniform Prudent Act
-To be impartial towards beneficiaries so as not to favor income beneficiaries over remainder beneficiaries


Power of Attorney (POA)

-a legal document allowing the principal (person creating the POA) to name an agent to handle their financial affairs
-under certain circumstances it is limited
-broad powers that are granted is known as a general POA
-A durable power of attorney (one that survives the incapacity of the principal) is commonly used in planning for incapacity


Execution of a Will

-distributing property to charities or to persons other than heirs
-establishing a trust at death (testamentary)
-allocating particular estate assets to pay debts and estate administration expenses
-apportioning death taxes among the heirs receiving bequests
-naming guardians and custodians for minor children and assets passing to minors
-providing for presumption of survival in cases of simultaneous death of spouses
-coordinating the use of the unified tax credit and marital and charitable deductions to reduce estate taxes


A will cannot do the following

-disinherit a spouse
-making excessive charitable bequests
-creating illegal conditions for inheritances
-transferring property that passes by operation of law or trying to change an irrevocable trust


Holographic Will

-handwritten will that must be written by the testator in their own handwriting and signed and dated.
-not valid in all states


Nuncupative Wills

-an oral will spoken by the testator in the presence of the required number of witnesses and latter reduced to writing.
-not valid in all states


Per Stripes

-means by root or stock
-distribution under a will or trust means that property passes to the issue as though their immediate ancestor had divided the property equally among them.
-also called right of representation


Modifying or Revoking a will

-a will can be modified by executing a codicil
-a will can be revoked by destroying it or by defacing it with the intent to revoke.
-a will can be revoked by executing a new one


Living Wills

-mainly medical life-support directives and do not dispose of the owner's property
-an individual can declare his or her wishes for medical treatment and procedures in the event he or she becomes unconscious or incompetent


Trusts are used to achieve the following

-to provide professional management (by trustees) of assets for beneficiaries
-to reduce income and estate taxes
-to avoid creditors and prevent the waste of assets
-to arrange for income to be paid to one person and the remaining assets to another
-to provide assets or income to charities
-to avoid probate


Powers of Guardians

-a guardian or conservator generally has all the powers over the ward's estate that the ward would exercise, except the power to make a will.
-there is potential for abuse


General Nondurable Power

-the agent is given restricted rights, and the power ends when the principal becomes incompetent.
-since it ends at incapacity, it does not do much to help plan for this


Durable Power of Attorney

-continues indefinitely, even after the principal become incompetent or incapacitated
-with a broadly drafted power of attorney, the attorney-in-fact can act to the same extent as the principal could act, including the power to make gifts, create trusts, to buy and sell property, and to elect gift splitting
-avoids the expense of guardians and the legal fees of court supervision over the principal's estate


Springing Power

-a durable power that is activated only when a person becomes incapacitated or incompetent


Medicaid Trust

-an irrevocable trust that pays income only to the grantor and may also provide for additional invasion of the principal for special needs.
-the purpose is to remove assets from the control of the grantor so that they will be eligible for medicaid assistance without expending their assets to the poverty level.

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