CHAPTER FOURTEEN
True-False
Any element of falsity renders the statement false.
1. A fidelity bond insures against losses caused by the dishonest performance of duties by a personal
representative.
2. Statutory wills were devised to provide for complex and unusual circumstances of persons who
may otherwise die intestate.
3. Estate planning is an ongoing analysis of what a person owns or expects to own (assets), and what
he or she owes to others (liabilities).
4. One element of an estate plan is to consider whether life insurance is appropriate for the needs of
beneficiaries.
5. Joint tenancy is a form of joint property ownership allowing parties to avoid all taxes on such
owned property.
6. Estate planning has substantial potential monetary and psychological value for an elderly retired
person, but not for a young bachelor or young married couple.
7. A serious objection to making a last will is its finality and irrevocability.
8. Estate plans ideally should be customized to fit the unique circumstances and situation of the
individual or family for whom the plan is prepared.
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9. Very few adults are able to qualify to act as an executor.
10. A holographic, un-witnessed will is often as legally effective as a formal, witnessed will.
11. An inter-vivos trust may be made revocable, or revocable after a specified time, or irrevocable —
each with different objectives and potentially different tax consequences.
12. The person who creates an inter-vivo trust may not serve as the trustee of the trust.
13. Trustees normally collect money for their services through brokerage fees earned from investment
in securities for the trust.
14. A durable power of attorney authorizes one person to handle the estate of another upon the death of
the latter.
15. A trust may be used to protect a spendthrift child against his or her own folly and against possible
exploitation by others.
16. Assisted suicide includes the acts of aiding and abetting another to commit suicide.
17. State laws, which regulate how property shall be distributed when a resident of the state dies
without leaving a will, are called trust laws.
18. The person who creates a testamentary trust may not serve as the trustee of the trust.
19. A spendthrift trust is one that gives directions to the trustee to spend all money on the beneficiary as
fast as possible.
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20. In 1900, there was no federal income tax or federal estate and gift tax.
21. Estate planning is the name given the process of proving the validity of a will in court, coupled with
the related matter of administering the decedent’s estate.
22. Most modest estates are exempt from any estate or death tax but once an estate qualifies for
taxation the rate is high (i.e., 45% or above).
23. A will is often called a conditional document because although valid at creation it does not become
operational until the death of the testator.
24. A will can be used to convey documents owned by the testator as a form of personal property but
not documents filed with a court which become public property.
25. Joint tenancy as a form of joint property ownership is used to avoid probate but it is not effective to
avoid estate taxes.
26. If a child is not specifically provided for in a will either by gift or expressed exclusion it is called an
ademption.
27. The book discussed a famous Mexican case where a holographic will was created by an eccentric
woman putting her will on an engraved piñata.
Fill-ins
Complete each sentence or statement.
1. A(n) __________________ is a type of self-prepared will written, signed, and dated with a
complete date, all entirely in the handwriting of the testator.
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2. One way to change a will is through an amendment to the will. This __________________ changes
part of the will, but not all of it.
3. A(n) __________________ is created by will and which becomes effective upon the death of the
testator. The document will separate legal and equitable title.
4. The historical word for a mercy killing is __________________.
5. A private contract among the beneficiaries, in which family members agree on a plan for
distribution of the decedent’s assets among themselves, is called a(n) __________________.
6. The court process of proving the validity of a will and complying with the directions of the testator
is called __________________.
7. A trust designed for the benefit of a segment of the public or of the public in general is a(n)
__________________.
8. A trust created to provide for the maintenance of a beneficiary by preventing his or her
improvidence with the bestowed funds is a(n) __________________.
9. A(n) __________________ is the arrangement whereby property is transferred from one person,
the __________________ to be administered by a(n) __________________ for the benefit of a
third party, the __________________.
10. The person in charge of the personal affairs of the deceased is called a(n) __________________ if
named in the will and a(n) __________________ if selected by the probate court.
11. A(n) __________________ is the legal expression of a person’s wishes for the distribution of his or
her property after death.
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12. A person who creates a trust is called a(n) __________________.
13. A(n) __________________ is imposed by some states on those who receive property from a
deceased person’s estate.
14. A person dies __________________ if he or she dies without having left a valid will.
15. A failure to provide for a child can partially revoke a will. The protected child who challenges the
distribution is a(n) __________________.
16. The person subject to a guardianship is called a(n) __________________. The person in charge of
the ward’s personal and financial affairs is called the __________________.
17. State laws that regulate how property shall be distributed when a resident of the state dies without
leaving a will are called __________________ laws.
18. Those legally entitled to your estate if you leave no will are called __________________.
19. A(n) __________________ may be created to provide for a minor whose parents are dead.
20. Fred wishes to donate money to several charities through his will but in unsure how much each
should receive. So Fred donates a fixed sum of money, identifies the charities and names and
empowers his good friend Wilkins McCawber to determine the amount each charity is to receive.
Wilkins has received a(n) __________________.
21. A trust created and operational during the lifetime of the settler is called a(n)
________________trust and if it can be dissolved is called ____________ and if it cannot be it is
called ________________ .
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22. Cecil was working on his tractor, he mistakenly put it in reverse and was pinned by the tractor.
Fearful that he might not live through this experience, he used his jack knife (pocket knife) to etch
in the fender of the tractor this message. “In case I die in this mess, I leave all to the wife. If Cecil
dies his wife through a ______________proceeding will try to prove the tractor fender is a
___________________________.
Multiple Choice
Select the one best answer.
1. Which of the following is to be eliminated in the year 2010?
a. probate
b. federal estate taxes
c. state inheritance taxes
d. state income taxes
2. An effective estate plan should include
a. a formal statement of the planner’s philosophy of life
b. a list of the planner’s favorite books, plays, and restaurants
c. a will and a letter of last instructions
d. an outline of the planner’s unrealized, but potentially still attainable, lifetime goals
3. Legal duties of an executor include all of the following except
a. extending sympathy and comforting the bereaved initially and throughout the traumatic
experience of probate.
b. notifying heirs and designated beneficiaries of the death and of the contents of the will.
c. paying debts of the decedent and of the estate, and receiving and safekeeping any income of the
estate.
d. preparing a final accounting report of the administration of the estate for court review and
approval before discharge.
4. Among the advantages of writing a will is
a. all death taxes may be avoided without sacrifice to customary beneficiaries.
b. property may be distributed in accordance with the wishes of the testator.
c. the services of a personal representative may be dispensed with, and his or her fee saved.
d. probate may be avoided.
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5. When an elderly person is senile and/or physically unable to handle his/her own finances and other
affairs, a close relative, such as a son or daughter, may petition a court to
a. create an inter-vivos trust with the elderly person as beneficiary.
b. declare a conservatorship with the elderly person as conservatee.
c. declare the elderly person legally insane, and then creates a living will
d. make an assignment of all assets to the closest relatives in exchange for their agreement to care
for the elderly person until death.
6. If you create a will,
a. probate is avoided.
b. the will is irrevocable once created.
c. the will reduces or eliminates estate taxes.
d. none of the above
7. Mary Banks died without leaving a will. Surviving her were her parents Carl and Sheila, her
husband Willie, and her minor children, Tabatha and Kaillie. Regarding the distribution of her
estate,
a. any property she owned, separate from her husband, will be forfeited to the state in which she
lived at the time of her death.
b. because she did not leave a will, property that would otherwise go to her husband goes to her
children if her state has a pretermitted heir statute.
c. her property will be distributed according to the law of intestate succession in her state.
d. because she did not leave a will, her estate is spared probate costs.
8. The person who creates a trust is called a(n)
a. beneficiary.
b. settlor or trustor.
c. trustee.
d. executor or administrator.
9. A living will is sometimes called a(n)
a. directive to physicians.
b. A and B trust.
c. trust.
d. durable power of attorney.
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10. Probate has some advantages over procedures that avoid probate. Which of the following is an
advantage of probate?
a. Probate provides an effective method of settling outstanding claims against the deceased
person’s estate
b. Probate is generally the fastest and cheapest way to transfer property to heirs.
c. Probate allows an effective means of allowing the decedent’s wishes for burial and donation of
internal organs.
d. Probate is an effective way to reduce fees and taxes.
11. To celebrate their 25th wedding anniversary, Juan and Maria Fuentes created a trust transferring
more than $250,000 worth of real property to Capitol Trust Company for the benefit of the River
City University scholarship program. They did not retain any right to a return of the property. They
created a(n)
a. irrevocable testamentary trust.
b. revocable living trust.
c. marital life estate trust.
d. irrevocable inter-vivos trust.
12. Usual costs of a testamentary trust include
a. will preparation fees.
b. future trustee’s fees.
c. future probate fees.
d. all of the above
13. A holographic will
a. does not require witnesses.
b. can be created in all states.
c. must be signed on all pages.
d. all of the above
14. The typical joint marital trust
a. will eliminate or reduce estate or inheritance taxes.
b. will eliminate or reduce probate fees.
c. violates the rule against perpetuities.
d. is also called a nuncupative trust.
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15. A durable power of attorney
a. is another term for a living will.
b. empowers another to make significant health care decisions on behalf of the creator of the
document under specified circumstances.
c. must be drafted and executed with the assistance of an attorney.
d. all of the above
16. A trust, the purpose of which is to stop creditors of the beneficiaries from reaching the income or
principal while it is in the hands of the trustee, is called a
a. living trust.
b. spendthrift trust.
c. living will.
d. testamentary trust.
17. Which of the following is a commonly used way to avoid probate?
a. ownership of property by tenancy in common
b. use of inter-vivos trusts
c. use of testamentary trusts
d. durable power of attorney
18. Amanda Silver-Lockett, married to David Lockett and mother of one child (female) named Bree,
made a dated document, entirely in her own handwriting, and signed it. In the document she stated
in the event of her death she wanted to leave $50,000 to River City University, $200,000 to her
child Bree, and the reminder of any assets she owned to go to her loving husband David.
a. This is an invalid will, because there are no witnesses.
b. This is an invalid will, because it is not notarized.
c. This appears to be a valid holographic will.
d. This appears to be a valid power of attorney.
19. Twenty-nine year old Kitty McBills lapsed into a permanent coma after a skiing accident. She
existed for several years in a “vegetative state” after her accident. Assuming she would not have
wished to continue to live in this condition, what legal document could she have prepared before
the accident to give guidance for her care?
a. an advanced medical directive
b. a holographic will
c. a living trust
d. a conservatorship
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20. Which of the following is not an objective of estate planning?
a. to prolong the life of the planner through a medically approved regimen of proper diet,
exercise, and rest
b. to better provide for the economic needs of the planner while alive
c. to avoid or minimize the costs, delays, and publicity of probate
d. to avoid income and estate taxes in so far as practicable
21. If you create a will,
a. an executor can be named.
b. the will reduces income taxes.
c. the will eliminates potential conflicts between heirs.
d. it will be probated in federal court.
22. In the textbook Case of Estate of Southworth v North Shore Animal League
a. The North Shore Animal League sought a court order for an early distribution of trust assets.
b. The court found the gift to the North Shore Animal league did not violate the rule against
perpetuities and was thus valid.
c. The court found against the North Shore Animal League’s contention that a holographic will
existed.
d. The court found the gift to Ms. Southworth’s pet Doberman was valid.
23. Hiro Nakamura and Niki Sanders own a house in joint tenancy. Sanders dies, leaving a will that
attempted to give her interest in the house to her mother, Jessica Larter.
a. The will as the last expression of the Sander’s intent is operational and interest in the house
goes to. Jessica Larter.
b. As Nakamura’s interest is perfected at the moment of Sanders’s death, there is no interest left to
convey by will.
c. The courts when faced with two contrary documents refuse to honor either. The interest in the
house will pass intestate to lineal decedents.
d. Joint tenancy agreements unless between related persons are determined by the courts to be
void. The property goes to Jessica Larter.
24. Which of the following is not necessary to create an express trust?
a. valid trust purpose.
b. trust property.
c. beneficiary
d. successor trustee.
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25. Did you read the textbook case of McConnell v. Beverly Enterprises-Connecticut Inc? if so then
selecting which of the below is accurate is easy.
a. Ms. McConnell was determined by her doctors to be in a persistent vegetative state.
b. The property in Ms. McConnell’s will was distributed in accordance with her wishes.
c. The circumstances relating to the creation of her will created a conclusive presumption of
undue influence.
d. The naming of the corporate trustee was determined to be appropriate over the wishes of her
beneficiary, the University.
26. Petrelli creates an ordinary power of attorney granting the power to Mohinder to make financial
decisions on his behalf. Petrelli is injured in an accident and falls into a coma. The doctors are
unsure if Petrelli will recover
a. the ordinary power of attorney is terminated as a matter of law by Petrelli’s incapacity.
b. the ordinary power of attorney is operational and it is a good thing that Petrelli thought to create
it.
c. an ordinary power of attorney gives Mohinder the right to make health care decisions on
Petrelli’s behalf.
d. Petrelli should have created a living will to give Mohinder the power to make business and
financial decisions while he is incapacitated.
27. A person who dies without a will, dies
a. intestate.
b. in probate.
c. adempted.
d. perpetachewed.
Short Answer Essays
1. Herbert executed a proper, formal will. In the will, Herbert left all of his property to River City
University. A copy of the will was mailed to the Alumni Association of River City. Thirty days
before his death, Herbert tore up the will and wrote a second one in which he left all of his property
to his friend Dawn. On Herbert’s death, Dawn renounced her right to receive his property. Who will
get Herbert’s property?
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2. What are the advantages and disadvantages of owning property in joint tenancy? Is it an appropriate
form of ownership for two unrelated persons? Explain?
3. What are the usual requirements for a valid will?
4. Explain the purpose of a living will and a durable power of attorney. How are they different?
5. Please answer the following questions about probate:
a. What is probate?
b. Discuss the positive and negative attributes of probate.
c. What are common probate costs?
d. Discuss two methods of avoiding probate.
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6. Please answer the following questions about trusts:
a. What are the different methods of creating trusts?
b. What parties are indispensable to a trust?
c. What is the purpose of the rule against perpetuities?
d. Identify three reasons why someone might wish to create a trust. How would they accomplish
their purposes?
7. What legal documents can a person use to address problems of health care and property in case the
person was become incapacitated at a later time?
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8. Respond to this statement, “If you wish to make a donation of your body parts for transplant
surgery it is important to include this instruction in your will.”
9. What is the advantage of a durable power of attorney over a ordinary power of attorney?
10. What is the importance of residuary clause in a will?