Estate Planning Documents

Question 1

Types of Fiduciaries

Answer 1

• 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.

Question 2

Fiduciary Duties

Answer 2

• 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

Question 3

Power of Attorney (POA)

Answer 3

• 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

Question 4

Execution of a Will

Answer 4

• 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

Question 5

A will cannot do the following

Answer 5

• 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

Question 6

Holographic Will

Answer 6

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

Question 7

Nuncupative Wills

Answer 7

• 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

Question 8

Per Stripes

Answer 8

• 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

Question 9

Modifying or Revoking a will

Answer 9

• 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

Question 10

Living Wills

Answer 10

• 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

Question 11

Trusts are used to achieve the following

Answer 11

• 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

Question 12

Powers of Guardians

Answer 12

-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
-

Question 13

General Nondurable Power

Answer 13

• 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

Question 14

Durable Power of Attorney

Answer 14

• 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

Question 15

Springing Power

Answer 15

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

Question 16

Medicaid Trust

Answer 16

• 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.