estate planning wills wills trusts trusts insurance insurance class 8
TRANSCRIPT
Estate PlanningEstate PlanningWillsWillsTrustsTrustsInsuranceInsurance
Class 8Class 8
What is an estate?What is an estate?An individual’s “estate” is any An individual’s “estate” is any
interest the individual has in any interest the individual has in any personal or real property.personal or real property.This includes property owned solely by This includes property owned solely by
the individual or owned in common with the individual or owned in common with another.another.
Probate PropertyProbate PropertyProperty owned by the decedent at the Property owned by the decedent at the
time of deathtime of deathThis property is distributed by the courtThis property is distributed by the court
Probate property includesProbate property includesAny interest in real and personal propertyAny interest in real and personal propertyLife insurance that names the estate as Life insurance that names the estate as
beneficiarybeneficiaryPending law suits for money damagesPending law suits for money damagesDebts owed by the deceasedDebts owed by the deceasedTrusts established under a willTrusts established under a will
Nonprobate PropertyNonprobate PropertyProperty that was owned by the Property that was owned by the
decedent at the time of death that decedent at the time of death that passes directly to heirs rather than passes directly to heirs rather than going through probategoing through probateLife estateLife estateLiving (Living (inter vivosinter vivos) trusts) trustsLife insurance policies naming specific Life insurance policies naming specific
beneficiarybeneficiaryCommunity property agreementCommunity property agreementJoint tenancy with right of survivorshipJoint tenancy with right of survivorship
Why make a plan?Why make a plan?Provide for spouse or partner at deathProvide for spouse or partner at deathProvide for minor childrenProvide for minor childrenProvide for children of a prior Provide for children of a prior
relationshiprelationshipDesignate specifically who – person or Designate specifically who – person or
entity – will have benefit of one’s entity – will have benefit of one’s propertyproperty
Avoid taxesAvoid taxesAvoid probateAvoid probate
Sources of LawSources of LawPrimarily statutePrimarily statute
In Washington RCW Title 11 is the title In Washington RCW Title 11 is the title governing estate interestsgoverning estate interests
Title 26 governs community property Title 26 governs community property Title 83 governs taxes of estates and Title 83 governs taxes of estates and
giftsgiftsSome common law sourcesSome common law sources
Appellate decisionsAppellate decisionsRestatementsRestatements
What happens without a What happens without a plan?plan?
Intestate SuccessionIntestate SuccessionIf the individual does not provide for If the individual does not provide for
property distribution prior to death, the property distribution prior to death, the government will decide how to distribute government will decide how to distribute the property.the property.Decedent is called an Decedent is called an intestateintestateIncludes property in a will if there is a Includes property in a will if there is a lapsed giftlapsed giftIncludes all property if will is invalidIncludes all property if will is invalid
RCW 11.04.015RCW 11.04.015Priority of distributionPriority of distribution
Protection of Protection of FamiliesFamiliesHomestead exception: A statutory Homestead exception: A statutory
provision providing for the protection provision providing for the protection of homes – exempting them from of homes – exempting them from forced sale or execution.forced sale or execution.
Family allowance: Statutory provisions Family allowance: Statutory provisions providing for an allowance in money to providing for an allowance in money to help maintain the family during the help maintain the family during the administration of the estate.administration of the estate.In Washington, the protections for the In Washington, the protections for the
family are set out in RCW 11.54family are set out in RCW 11.54
EscheatEscheat If a person dies without a will and If a person dies without a will and
without an heir, the estate will pass without an heir, the estate will pass to the state.to the state.RCW 11.08.140RCW 11.08.140
Kinds of PlansKinds of PlansPrenuptial agreementsPrenuptial agreementsCommunity property agreementsCommunity property agreementsLife insuranceLife insuranceWillsWillsTrustsTrustsHealth care directivesHealth care directivesPowers of attorneyPowers of attorney
Prenuptial Prenuptial AgreementsAgreements
An agreement made in anticipation An agreement made in anticipation of marriage. of marriage. Provide for distribution of property upon Provide for distribution of property upon
dissolution of marriagedissolution of marriageAlso provide for agreement as to Also provide for agreement as to
distribution upon death of one spousedistribution upon death of one spouse
Community Community PropertyPropertyOne spouse’s share in community One spouse’s share in community
property may be gifted by will. property may be gifted by will. If an estate is probated all community If an estate is probated all community
property is subject to probate property is subject to probate administration.administration.
A community property agreement A community property agreement can change the nature of property can change the nature of property from separate to community at the from separate to community at the time of death and can transfer time of death and can transfer ownership to the surviving spouse ownership to the surviving spouse at the time of death.at the time of death.
Life InsuranceLife InsuranceWhole life – these policies are both life Whole life – these policies are both life
insurance and an investment (premiums insurance and an investment (premiums are set at the time of purchase)are set at the time of purchase)
Universal life – also are both life Universal life – also are both life insurance and an investment (premiums insurance and an investment (premiums may vary during the course of policy may vary during the course of policy ownership)ownership)
Term life – only insuranceTerm life – only insurancePurchased for a specified term (with renewal Purchased for a specified term (with renewal
option)option)
WillsWillsA will is a legal expression of an A will is a legal expression of an
individual’s wishes as to how his or individual’s wishes as to how his or her property should be distributed her property should be distributed when that person dies.when that person dies.The person making the will is the The person making the will is the
testatortestatorRCW 11.12 governs the making of RCW 11.12 governs the making of
wills in Washingtonwills in Washington
Kinds of WillsKinds of WillsFormalFormal will will
Written, signed by the testator, Written, signed by the testator, witnessed by two witnesseswitnessed by two witnesses
Holographic Holographic (or informal) will(or informal) willUsually handwritten by the testatorUsually handwritten by the testatorThese are These are NOTNOT valid in Washington valid in Washington
NuncupativeNuncupative (or oral) will (or oral) willThese are These are NOTNOT valid in Washington valid in Washington
(however there a limited exceptions)(however there a limited exceptions)
RequirementsRequirementsLegal capacityLegal capacity
Must be an adult (18 in Washington)Must be an adult (18 in Washington)Testamentary capacityTestamentary capacity (of sound mind) (of sound mind)
Knowing what property one ownsKnowing what property one ownsKnowing who his or her relations areKnowing who his or her relations areKnowing what he or she wants to do with Knowing what he or she wants to do with
the propertythe propertyVoluntarily actVoluntarily act (without undue (without undue
influence)influence)
Contents of a WillContents of a WillExordium clauseExordium clause
identifies testator, states his domicile identifies testator, states his domicile and announces that this is his willand announces that this is his will
Revocation clauseRevocation clause revokes all prior wills, codicilsrevokes all prior wills, codicils
Identification of family clauseIdentification of family clause Dispositive provisionsDispositive provisions (specific (specific
devises)devises)Minor beneficiary clausesMinor beneficiary clauses
Testamentary guardian/Trust for minorTestamentary guardian/Trust for minorSimultaneous death clauseSimultaneous death clause
Contents of a WillContents of a WillAppointment of personal Appointment of personal
representativerepresentativeStatement of powers and dutiesStatement of powers and duties
Separate writing clauseSeparate writing clauseAttestation clauseAttestation clauseSelf proof clauseSelf proof clause
Types of GiftsTypes of GiftsDeviseDevise
Gift of real property Gift of real property Bequest or legacyBequest or legacy
Gift of personal propertyGift of personal property
Separate WritingSeparate WritingA will may refer to a separate writing A will may refer to a separate writing
that directs disposition of tangible that directs disposition of tangible personal property not otherwise personal property not otherwise specifically disposed of in the willspecifically disposed of in the willWill must specifically refer to the writingWill must specifically refer to the writingThe writing is handwritten or is signed by The writing is handwritten or is signed by
the testatorthe testatorThe writing describes the property and The writing describes the property and
the recipients with reasonable certaintythe recipients with reasonable certaintyThis may be written before or after This may be written before or after
the execution of the willthe execution of the will
Provisions for MinorsProvisions for MinorsAppointment of testamentary guardian Appointment of testamentary guardian
of minor child (RCW 11.88.080)of minor child (RCW 11.88.080)Only applies where one parent is Only applies where one parent is
deceased and surviving parent is making deceased and surviving parent is making the appointment the appointment
Person appointed must be qualified to Person appointed must be qualified to serveserve
Establishment of a trust for minor childEstablishment of a trust for minor child
Execution of the Execution of the WillWillOne of the few formalities left in lawOne of the few formalities left in law
Must be signedMust be signedMust be witnessed by two witnessesMust be witnessed by two witnesses
Witnesses must be able to say Witnesses must be able to say They know who the testator isThey know who the testator isThe testator was competentThe testator was competentThe testator was not acting under duress or undue The testator was not acting under duress or undue
influenceinfluence
Testator must ask witnesses to witness; Testator must ask witnesses to witness; they must both be present at the time the they must both be present at the time the will is signed (presence of testator and will is signed (presence of testator and presence of each other)presence of each other)
Self-Proving ClauseSelf-Proving ClauseWashington statute provides for a Washington statute provides for a
self-proving clause.self-proving clause.Affidavit signed by the witnesses under Affidavit signed by the witnesses under
oath.oath.This affidavit makes it unnecessary to This affidavit makes it unnecessary to
call the witnesses in the probate call the witnesses in the probate proceeding to prove the validity of the proceeding to prove the validity of the willwill
Letters of Instruction Letters of Instruction Information for the family and personal Information for the family and personal
representativerepresentativePreferred funeral arrangementsPreferred funeral arrangementsLocation of assetsLocation of assetsLocation of important papers (including will)Location of important papers (including will)Information about insurance policies and Information about insurance policies and
pension planspension plansList of debts, creditorsList of debts, creditorsContact information for key people (personal Contact information for key people (personal
representative, CPA, attorney, heirs)representative, CPA, attorney, heirs)
CodicilCodicilA codicil is an amendment or A codicil is an amendment or
addition to the willaddition to the willThe same formalities are required for The same formalities are required for
executing a codicilexecuting a codicil
RevocationRevocationA will can be revoked byA will can be revoked by
Writing a new willWriting a new willPhysically destroying the old willPhysically destroying the old will
TrustsTrustsA trust is an agreement under A trust is an agreement under
which money or other assets are which money or other assets are held and managed by one person held and managed by one person for the benefit of another.for the benefit of another.
Common benefits includeCommon benefits includeProviding personal and financial Providing personal and financial
safeguards for the beneficiariessafeguards for the beneficiariesPostponing or avoiding unnecessary Postponing or avoiding unnecessary
taxestaxesEstablishing a means of controlling Establishing a means of controlling
propertypropertyMeeting social or commercial goalsMeeting social or commercial goals
Essential TermsEssential TermsTrustor (grantor or settlor)Trustor (grantor or settlor) – the person – the person
who creates the trust who creates the trust TrusteeTrustee – the person or entity who holds – the person or entity who holds
legal title of the trust property for the legal title of the trust property for the benefit of anotherbenefit of another
Trust Property (principal, corpus or res)Trust Property (principal, corpus or res) – – the property placed in trust by the settlorthe property placed in trust by the settlor
BeneficiaryBeneficiary – person to benefit from trust – person to benefit from trustTrust purposeTrust purpose – reason why trust is – reason why trust is
createdcreated
RequirementsRequirementsTo be a valid trustTo be a valid trust
Settlor must manifest an intention to Settlor must manifest an intention to create itcreate it
Trust must have assets (this may include Trust must have assets (this may include future assets)future assets)
Trust must have legal purpose (not Trust must have legal purpose (not against public policy)against public policy)
Must identify beneficiaryMust identify beneficiaryMust be established by written Must be established by written
document or by operation of lawdocument or by operation of law
Categories of TrustsCategories of Trusts Inter vivos or living trustsInter vivos or living trusts – created – created
while trustor is alivewhile trustor is aliveTestamentaryTestamentary – created as part of will – created as part of willRevocable living trustsRevocable living trusts – trustor – trustor
retains right to change or terminate retains right to change or terminate the trustthe trust
Irrevocable living trustsIrrevocable living trusts – trustor gives – trustor gives up right to revoke after creation up right to revoke after creation
Express trustsExpress trusts – intentionally created – intentionally created Implied trustsImplied trusts – created by operation – created by operation
of lawof law
Rule Against Rule Against PerpetuitiesPerpetuities
All interests in property must vest All interests in property must vest within 21 years of the life of within 21 years of the life of someone who is alive at that time of someone who is alive at that time of the creation of the interest.the creation of the interest.Insures that someone will own the Insures that someone will own the
property within a reasonable timeproperty within a reasonable timeRCW 11.98.130RCW 11.98.130
Termination of Termination of TrustsTrusts
Trusts terminate when:Trusts terminate when:Express terms of trust instrument require Express terms of trust instrument require
termination at a specific time or upon the termination at a specific time or upon the happening of a specific condition (child happening of a specific condition (child reaches age of majority)reaches age of majority)
Fulfillment of trust purpose Fulfillment of trust purpose The same person owns both legal and The same person owns both legal and
equitable or beneficial title of trust equitable or beneficial title of trust propertyproperty
Settlor revokes the trustSettlor revokes the trust
ProbateProbateProbate is a legal procedure for settling Probate is a legal procedure for settling
the affairs of a person who has died the affairs of a person who has died and overseeing the distribution of the and overseeing the distribution of the decedent’s property to the rightful decedent’s property to the rightful beneficiaries.beneficiaries.
The processThe processCollects and protects decedent’s propertyCollects and protects decedent’s propertyIdentifies beneficiaries and creditorsIdentifies beneficiaries and creditorsPays all debts, expenses, taxesPays all debts, expenses, taxesDistributes the property of the estate Distributes the property of the estate
properlyproperly
ProbateProbate Jurisdiction of the court is triggered by Jurisdiction of the court is triggered by
Filing Petition to Probate a Will (person Filing Petition to Probate a Will (person died testate) ordied testate) or
Petition for Letters of Administration Petition for Letters of Administration (intestate)(intestate)
Personal Representative or Personal Representative or Administrator is appointedAdministrator is appointed
Court’s continued involvement is to Court’s continued involvement is to resolve disputes or interpret documentsresolve disputes or interpret documents
Duties of Personal Duties of Personal Rep.Rep.
Notify heirs and creditorsNotify heirs and creditorsTake possession of and inventory estateTake possession of and inventory estateDetermine fair market value of estate Determine fair market value of estate
assetsassetsDetermine names, locations of heirsDetermine names, locations of heirsCollect debts owed to the decedentCollect debts owed to the decedentRepresent the estate in any challenges Represent the estate in any challenges
to the will to the will Complete any pending lawsuits in which Complete any pending lawsuits in which
the decedent has an interest the decedent has an interest
Duties of PRDuties of PRPrepare tax returns and pay all estate Prepare tax returns and pay all estate
and income taxand income taxPay the valid claims of creditorsPay the valid claims of creditorsSell property – when necessary – to pay Sell property – when necessary – to pay
debts and taxesdebts and taxesTransfer title to real property and Transfer title to real property and
certain personal property certain personal property Distribute the remaining assets to the Distribute the remaining assets to the
designated heirs designated heirs File a Declaration of Completion of File a Declaration of Completion of
ProbateProbate
Estate TaxesEstate TaxesOne reason for making estate plans One reason for making estate plans
is to avoid estate taxesis to avoid estate taxes
Health Care Health Care DirectiveDirective
A document that expresses the A document that expresses the individual’s desires regarding the individual’s desires regarding the withholding or withdrawal of life withholding or withdrawal of life support measuressupport measures
A helpful website discussing the A helpful website discussing the issues that should be considered isissues that should be considered is
www.agingwithdignity.orgwww.agingwithdignity.org
Power of AttorneyPower of AttorneyThree formsThree forms
Durable Power of AttorneyDurable Power of AttorneyPower of Attorney for Health Care Power of Attorney for Health Care
DecisionsDecisionsPower of AttorneyPower of Attorney