Chapter 16

List five reasons why having a will is important.

1. If you don't have a will, the court will choose a relative as the guardian of your children under the age of 18 and their property. You might not want this relative, so it's important to specify in your wiill who you want the guardian to be. 2. A will is the most appropriate way to provide for someone who has special needs. 3. Property that isn't co-owned or included in a trust is transferred according to your wishes as expressed in your will. 4. You can make special gifts or requests through your will. 5. If you don't have a will, the court will appoint an administrator to distribute your assets. This might conflict with your desires and will cost a lot more than making an actual will.

List four strategies for transferring property that will avoid probate.

1. joint ownership 2. gifts 3. trusts 4, make accounts payable on death

​________ is a type of ownership that exists only between married couples.

Tenancy by the entirety

You and your roommate have decided to purchase a house together. If you want your share of the asset to pass on to your relatives named in your​ will, what type of ownership should you establish for the​ house?

Tenancy in common

​________ is a type of ownership where two or more individuals share asset​ ownership, but the asset is passed to the deceased​ owner's estate and is distributed according to his or her will.

Tenancy in common

John Kennedy Jr. and his wife Caroline both perished in the same plane crash. Which of the following clauses would identify who is assumed to have perished​ first?

Common disaster clause

What is probate and why is it often prudent to take steps to avoid​ probate?

It's a court supervised process for adinistering and distributing a person's estate after their death. You want to avoid it becaues it takes a long time and it costs a lot.

You and your brother have decided to invest in the stock market together. You will put in​ $5,000 each and open a single account at a brokerage. How should the ownership of this account be established if both of you wish the other to keep all the money in the event that the other should​ die?

Joint tenancy with the right of survivorship

Which of the following does not have to be paid out of your estate before distribution to your​ heirs?

Legal fees Estate and inheritance taxes Funeral expenses Outstanding debt

The introductory statement of a will identifies whose will it is and revokes any prior wills.

True

What​ is/are advantage(s) to establishing a​ trust?

Trusts bypass probate. Trusts can be used to shelter assets from estate taxes. Trusts can ensure that children from a previous marriage will receive some inheritance. A trust does not become a matter of public​ record, so it offers confidentiality.

Madonna is a famous​ singer; as​ such, she may select to settle her estate through a trust because of which​ reason(s)?

Trusts provide confidentiality. Trusts are harder to challenge. Trusts allow for professional management. Trusts reduce estate taxes.

What is the first step in​ probate?

Validation of the will

Ingrid is single with no dependents. She has been in the hospital with a coma for the last 2 weeks. Her bills are piling up and her rent on her apartment is due. Who is legally empowered to take care of her banking and bill paying while she is​ incapacitated?

Whoever is named in her durable power of attorney

Which of the following is a requirement of a valid​ will?

You must be mentally competent when the will is written. Your will must conform to the laws of the state. You​ can't be under undue influence of another person.

Which of the following estate planning documents​ - will,​ codicil, letter of last​ instructions, living will​ - do the following​ individuals/families need? Explain your rationale. a. ​ Kayla, a recent college graduate with only a few personal​ assets, all jointly owned with her parents. b. Justin and​ Edee, a couple in their 30s with two young children. They already have a will that they made when they were first married 10 years ago​ - before they had their second child. c. ​ Mac, a widowed man living with a close personal friend to whom he would like to leave his personal assets upon death.

a) a letter of last​ instructions, giving information and directions with respect to the execution of the will. b) a living​ will, stating their wishes regarding medical treatment in the event of a terminal illness or injury a​ codicil, in order to include the second child. a letter of last​ instructions, to giving the surviving spouse information and directions with respect to the execution of the will. c) a​ will, to specify who receives his assets.

Someone who receives assets or money from a person after death is called the​ deceased's

beneficiary

Alfred has appointed an executor in his will. This person will be responsible for

carrying out​ Alfred's wishes. managing​ Alfred's property until the estate is passed on to the heirs.

An attachment to a will that alters or amends a portion of the will is called a

codicil

In some​ states, property that is acquired during a marriage is referred to as​ ________ and upon the death of either​ spouse, his/her half is distributed according to the​ will, or if​ intestate, according to state law.

community property

A durable power of attorney means that the attorney who wrote the will for you is your legal guardian in case you become incapacitated and​ can't make decisions yourself.

false

A will created by an attorney cannot be contested.

false

If you have children from a previous marriage and you get remarried and own property jointly with your new​ spouse, then tenancy by the entirety should be sufficient for you if you wish your children to inherit your property.

false

Individuals to whom you have willed your property are known as executors.

false

The individual you name who will care for your minor aged children is known as their

guardian

Under​ ________, ownership passes directly on to the surviving owner or​ owners, bypassing the will. With​ ________, when one spouse dies assets become part of the​ deceased's estate and are distributed through the will.

joint tenancy with the right of​ survivorship; tenancy in common

You were almost killed in a recent mountain bike accident and have decided to write a will. You also plan to construct​ a(n) ________, which will give information and directions with respect to the execution of your will.

letter of last instructions

A​ ________ provides a directive to a physician that allows you to state your wishes regarding medical treatment in the event of a terminal illness or injury that renders you unable to make decisions regarding life support or other medical treatments.

living will

Only about​ ________ Americans have created a trust as part of an estate plan.

one out of five

For someone who dies​ intestate, or without a valid​ will, ________ and the applicable state laws allow for the orderly distribution of the estate.

probate

If you were to create a trust by your​ will, which becomes active only after you​ die, then you have created​ a(n)

testamentary trust

A durable health care power of attorney allows you to designate another person to make life support decisions if you are unable to.

true

A living will allows you to state your wishes regarding medical treatment in the event of an illness or injury that renders you unable to make decisions regarding your health care.

true

A living will is a directive to a physician that allows you to state your wishes regarding medical treatment in the event you are unable to make decisions for yourself.

true

A qualified terminable interest property trust gives the individual establishing the trust the ability to direct income from the trust to his or her spouse over the​ spouse's life, and​ then, at the​ spouse's death, to choose to whom the assets go.

true

A will can be amended by a codicil for relatively minor changes.

true

For most married​ couples, tenancy by the entirety is the best way to establish ownership.

true

Giving assets away as a gift reduces the value of your estate and allows you to help your heirs while​ you're still alive.

true

If you die without​ one, your state will​ "write one for​ you" based on intestacy laws.

true

The executor is the individual who is responsible for carrying out the provisions of your will.

true

The first step in estate planning is to determine the value of your estate.

true

Through joint tenancy in​ common, George was able to transfer his share of his assets in a company he owns with his best friend to his son instead of to his best friend.

true

Trusts are much more difficult to challenge in court than are wills which is what makes them more attractive.

true