Estate PlanningIntestate SuccessionWillsTrusts

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 PropertyProperty owned by the decedent at

the time of deathThis property is distributed by the court

Nonprobate PropertyProperty 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?Provide for spouse or partner at

deathProvide for minor childrenProvide for children of a prior

relationshipDesignate specifically who – person

or entity – will have benefit of one’s property

Avoid taxesAvoid probate

Sources of LawPrimarily 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 sourcesAppellate decisionsRestatements

What happens without a plan?

Intestate SuccessionIf the individual does not provide for

property distribution prior to death, the government will decide how to distribute the property.Decedent is called an intestateIncludes property in a will if there is a lapsed

giftIncludes all property if will is invalid

RCW 11.04.015Priority of distribution

Per Stirpes Distribution

D

A

B 1/3 C

E1/9

F1/9

G1/9

H1/3

Per Capita Distribution

D A B

1/3 C

E1/6

F1/6

G1/6

H1/6

Protection of FamiliesHomestead exception

Family allowance

In Washington, the protections for the family are set out in RCW 11.54

EscheatIf 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?

Prenuptial agreementsCommunity property agreementsLife insuranceWillsTrustsHealth care directivesPowers of attorney

Prenuptial Agreements

An agreement made in anticipation of marriage. Provide for distribution of property upon

dissolution of marriageAlso provide for agreement as to

distribution upon death of one spouse

Community PropertyOne 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 InsuranceWhole 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 insurancePurchased for a specified term (with

renewal option)

WillsA 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

testatorRCW 11.12 governs the making of

wills in Washington

Kinds of WillsFormal will

Written, signed by the testator, witnessed by two witnesses

Holographic (or informal) willUsually handwritten by the testatorThese are NOT valid in Washington

Nuncupative (or oral) willThese are NOT valid in Washington

(however there a limited exceptions)

Requirements of a Valid WillLegal capacity

Must be an adult (18 in Washington)Testamentary capacity (of sound

mind)Knowing what property one ownsKnowing who his or her relations areKnowing what he/she wants to do with

the propertyVoluntarily act (without undue

influence)

Contents of a WillExordium 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 minorSimultaneous death clause

Contents of a WillAppointment of personal

representativeStatement of powers and duties

Separate writing clauseAttestation clauseSelf proof clause

Self-Proving ClauseWashington 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 WillOne of the few formalities left in law

Must be signedMust be witnessed by two witnesses

Witnesses must be able to say They know who the testator isThe testator was competentThe 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 Information for the family and

personal representativePreferred funeral arrangementsLocation of assetsLocation of important papers (including

will)Information about insurance policies and

pension plansList of debts, creditorsContact information for key people

(personal representative, CPA, attorney, heirs)

CodicilA codicil is an amendment or

addition to the willThe same formalities are required for

executing a codicil

RevocationA will can be revoked by

Writing a new willPhysically destroying the old will

TrustsA trust is an agreement under which

money or other assets are held and managed by one person for the benefit of another.

Common benefits includeProviding personal and financial

safeguards for the beneficiariesPostponing or avoiding unnecessary

taxesEstablishing a means of controlling

propertyMeeting social or commercial goals

Trust TermsTrustor (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

RequirementsTo 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 beneficiaryMust be established by written

document or by operation of law

Categories of TrustsInter vivos or living trusts – created

while trustor is aliveTestamentary – created as part of willRevocable 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 createdImplied trusts – created by operation

of law

Rule Against PerpetuitiesAll 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 timeRCW 11.98.130

Termination of TrustsTrusts 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

ProbateProbate 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 processCollects and protects decedent’s propertyIdentifies beneficiaries and creditorsPays all debts, expenses, taxesDistributes the property of the estate

properly

ProbateJurisdiction of the court is triggered

by Filing Petition to Probate a Will (person

died testate) orPetition for Letters of Administration

(intestate)Personal Representative or

Administrator is appointedCourt’s continued involvement is to

resolve disputes or interpret documents

Duties of Personal Representative

Notify heirs and creditorsTake possession of and inventory

estateDetermine fair market value of estate

assetsDetermine names, locations of heirsCollect debts owed to the decedentRepresent the estate in any challenges

to the will Complete any pending lawsuits in

which the decedent has an interest

Duties of Personal Representative

Prepare tax returns and pay all estate and income tax

Pay the valid claims of creditorsSell property – when necessary – to pay

debts and taxesTransfer title to real property and

certain personal property Distribute the remaining assets to the

designated heirs File a Declaration of Completion of

Probate

Estate TaxesOne reason for making estate plans

is to avoid estate taxes

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 iswww.agingwithdignity.org www.atg.wa.gov/DealingWithDeath/defa

ult.aspx

www.doh.wa.gov/livingwill/healthcaredirective.htm

Power of AttorneyThree forms

Durable Power of AttorneyPower of Attorney for Health Care

DecisionsPower of Attorney