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