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Estate Planning. Intestate Succession Wills Trusts Class 9. What is an estate?. An individual’s “estate” is any interest the individual has in any personal or real property. This includes property owned solely by the individual or owned in common with another. Probate Property.

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estate planning

Estate Planning

Intestate Succession

Wills

Trusts

Class 9

what is an estate
What is an estate?
  • An individual’s “estate” is any interest the individual has in any personal or real property.
    • This includes property owned solely by the individual or owned in common with another.
probate property
Probate Property
  • Property owned by the decedent at the time of death
    • This property is distributed by the court
nonprobate property
Nonprobate Property
  • Property that was owned by the decedent at the time of death that passes directly to heirs (or someone else) rather than going through probate
why make a plan
Why make a plan?
  • Provide for spouse or partner at death
  • Provide for minor children
  • Provide for children of a prior relationship
  • Designate specifically who – person or entity – will have benefit of one’s property
  • Avoid taxes
  • Avoid probate
sources of law
Sources of Law
  • Primarily statute
    • In Washington RCW Title 11 is the title governing estate interests
    • Title 26 governs community property and property of domestic partners
    • Title 83 governs taxes of estates and gifts
  • Some common law sources
    • Appellate decisions
    • Restatements
what happens without a plan
What happens without a plan?
  • Intestate Succession
    • If the individual does not provide for property distribution prior to death, the government will decide how to distribute the property.
      • Decedent is called an intestate
      • Includes property in a will if there is a lapsed gift
      • Includes all property if will is invalid
  • RCW 11.04.015
    • Priority of distribution
per stirpes distribution
Per Stirpes Distribution

D

A

B

1/3

C

E

1/9

F

1/9

G

1/9

H

1/3

per capita distribution
Per Capita Distribution

D

A

B

1/3

C

E

1/6

F

1/6

G

1/6

H

1/6

protection of families
Protection of Families
  • Homestead exception
  • Family allowance
    • In Washington, the protections for the family are set out in RCW 11.54
escheat
Escheat
  • If a person dies without a will and without an heir, the estate will pass to the state.
    • RCW 11.08.140
what kinds of plans are there
What kinds of plans are there?
  • Prenuptial agreements
  • Community property agreements
  • Life insurance
  • Wills
  • Trusts
  • Health care directives
  • Powers of attorney
prenuptial agreements
Prenuptial Agreements
  • An agreement made in anticipation of marriage.
    • Provide for distribution of property upon dissolution of marriage
    • Also provide for agreement as to distribution upon death of one spouse
community property
Community Property
  • One spouse’s share in community property (i.e., one-half) may be gifted by will.
    • If an estate is probated, all community property is subject to probate administration.
life insurance
Life Insurance
  • Whole life – these policies are both life insurance and an investment (premiums are set at the time of purchase)
  • Universal life – also are both life insurance and an investment (premiums may vary during the course of policy ownership)
  • Term life – only insurance
    • Purchased for a specified term (with renewal option)
wills
Wills
  • A will is a legal expression of an individual’s wishes as to how his or her property should be distributed when that person dies.
    • The person making the will is the testator
  • RCW 11.12 governs the making of wills in Washington
kinds of wills
Kinds of Wills
  • Formal will
    • Written, signed by the testator, witnessed by two witnesses
  • Holographic (or informal) will
    • Usually handwritten by the testator
    • These are NOT valid in Washington
  • Nuncupative (or oral) will
    • These are NOT valid in Washington (however there a limited exceptions)
requirements of a valid will
Requirements of a Valid Will
  • Legal capacity
    • Must be an adult (18 in Washington)
  • Testamentary capacity (of sound mind)
    • Knowing what property one owns
    • Knowing who his or her relations are
    • Knowing what he/she wants to do with the property
  • Voluntarily act (without undue influence)
contents of a will
Contents of a Will
  • Exordium clause
    • identifies testator, states his domicile and announces that this is his will
  • Revocation clause
    • revokes all prior wills, codicils
  • Identification of family clause
  • Dispositive provisions (specific devises)
  • Minor beneficiary clauses
    • Testamentary guardian/Trust for minor
  • Simultaneous death clause
contents of a will1
Contents of a Will
  • Appointment of personal representative
    • Statement of powers and duties
  • Separate writing clause
  • Attestation clause
  • Self proof clause
self proving clause
Self-Proving Clause
  • Washington statute provides for a self-proving clause.
    • Affidavit signed by the witnesses under oath.
    • This affidavit makes it unnecessary to call the witnesses in the probate proceeding to prove the validity of the will
execution of the will
Execution of the Will
  • One of the few formalities left in law
    • Must be signed
    • Must be witnessed by two witnesses
      • Witnesses must be able to say
        • They know who the testator is
        • The testator was competent
        • The testator was not acting under duress or undue influence
    • Testator must ask witnesses to witness; they must both be present at the time the will is signed (presence of testator and presence of each other)
letters of instruction
Letters of Instruction
  • Information for the family and personal representative
    • Preferred funeral arrangements
    • Location of assets
    • Location of important papers (including will)
    • Information about insurance policies and pension plans
    • List of debts, creditors
    • Contact information for key people (personal representative, CPA, attorney, heirs)
codicil
Codicil
  • A codicil is an amendment or addition to the will
    • The same formalities are required for executing a codicil
revocation
Revocation
  • A will can be revoked by
    • Writing a new will
    • Physically destroying the old will
trusts
Trusts
  • A trust is an agreement under which money or other assets are held and managed by one person for the benefit of another.
  • Common benefits include
    • Providing personal and financial safeguards for the beneficiaries
    • Postponing or avoiding unnecessary taxes
    • Establishing a means of controlling property
    • Meeting social or commercial goals
trust terms
Trust Terms
  • Trustor (grantor or settlor) – the person who creates the trust
  • Trustee – the person or entity who holds legal title of the trust property for the benefit of another
  • Trust Property (principal, corpus or res) – the property placed in trust by the settlor
  • Beneficiary – person to benefit from trust
  • Trust purpose – reason why trust is created
requirements
Requirements
  • To be a valid trust
    • Settlor must manifest an intention to create it
    • Trust must have assets (this may include future assets)
    • Trust must have legal purpose (not against public policy)
    • Must identify beneficiary
    • Must be established by written document or by operation of law
categories of trusts
Categories of Trusts
  • Inter vivos or living trusts – created while trustor is alive
  • Testamentary – created as part of will
  • Revocable living trusts – trustor retains right to change or terminate the trust
  • Irrevocable living trusts – trustor gives up right to revoke after creation
  • Express trusts – intentionally created
  • Implied trusts – created by operation of law
rule against perpetuities
Rule Against Perpetuities
  • All interests in property must vest within 21 years of the life of someone who is alive at that time of the creation of the interest.
    • Insures that someone will own the property within a reasonable time
    • RCW 11.98.130
termination of trusts
Termination of Trusts
  • Trusts terminate when:
    • Express terms of trust instrument require termination at a specific time or upon the happening of a specific condition (child reaches age of majority)
    • Fulfillment of trust purpose
    • The same person owns both legal and equitable or beneficial title of trust property
    • Settlor revokes the trust
probate
Probate
  • Probate is a legal procedure for settling the affairs of a person who has died and overseeing the distribution of the decedent’s property to the rightful beneficiaries.
  • The process
    • Collects and protects decedent’s property
    • Identifies beneficiaries and creditors
    • Pays all debts, expenses, taxes
    • Distributes the property of the estate properly
probate1
Probate
  • Jurisdiction of the court is triggered by
    • Filing Petition to Probate a Will (person died testate) or
    • Petition for Letters of Administration (intestate)
  • Personal Representative or Administrator is appointed
  • Court’s continued involvement is to resolve disputes or interpret documents
duties of personal representative
Duties of Personal Representative
  • Notify heirs and creditors
  • Take possession of and inventory estate
  • Determine fair market value of estate assets
  • Determine names, locations of heirs
  • Collect debts owed to the decedent
  • Represent the estate in any challenges to the will
  • Complete any pending lawsuits in which the decedent has an interest
duties of personal representative1
Duties of Personal Representative
  • Prepare tax returns and pay all estate and income tax
  • Pay the valid claims of creditors
  • Sell property – when necessary – to pay debts and taxes
  • Transfer title to real property and certain personal property
  • Distribute the remaining assets to the designated heirs
  • File a Declaration of Completion of Probate
estate taxes
Estate Taxes
  • One reason for making estate plans is to avoid estate taxes
health care directive
Health Care Directive
  • A document that expresses the individual’s desires regarding the withholding or withdrawal of life support measures
  • A helpful website discussing the issues that should be considered is
    • www.agingwithdignity.org
    • www.atg.wa.gov/DealingWithDeath/default.aspx
    • www.doh.wa.gov/livingwill/healthcaredirective.htm
power of attorney
Power of Attorney
  • Three forms
    • Durable Power of Attorney
    • Power of Attorney for Health Care Decisions
    • Power of Attorney