Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 27 Wills, Intestacy, and Trusts
LESSON OVERVIEW
Chapter 27 discusses the purpose of a will and the language of wills. We understand the different types
of gifts covered by wills. The chapter elucidates the requirements of a valid will and through the use of
examples, depicts their relevance in the real life situations. The chapter also covers revisions and
revocations of wills. Students will additionally learn the concepts of intestacy and trusts, including the
major types of trusts and the role of a trustee. Finally, students’ understanding of the topic is evaluated
through objective-type questions, discussion questions, and case scenarios. Students are encouraged to
conduct their own research through the use of the Internet and other sources.
CHAPTER OUTLINE
A. THE PURPOSE OF A WILL (p. 448)
B. THE LANGUAGE OF WILLS (p. 448)
C. TYPES OF GIFTS UNDER WILLS (pp. 448-449)
D. REQUIREMENTS OF A VALID WILL (pp. 449-450)
1. Requirement of Writing (p. 449)
2. Requirement of Witnesses (pp. 449-450)
3. Testamentary Capacity (p. 450)
4. Undue Influence (p. 450)
E. REVISING AND REVOKING WILLS (pp. 450-451)
1. Revisions (p. 451)
2. Revocations (p. 451)
F. INTESTACY (pp. 451-452)
G. TRUSTS (p. 452)
1. Types of Trusts (pp. 452-453)
2. The Role of the Trustee (p. 453)
H. CHAPTER SUMMARY (pp. 453-454)
I CHAPTER ASSESSMENT (pp. 454-460)
1. Matching Legal Terms (pp. 454-455)
2. True/False Quiz (pp. 455-456)
3. Discussion Questions (p. 456)
4. Thinking Critically About the Law (p. 457)
5. Case Questions (pp. 457-458)
6. Case Analysis (pp. 458-460)
7. Legal Research (p. 460)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed
in bold in the copy. They are listed here for your quick reference.
§ decedent (p. 448)
§ will (p. 448)
§ testator (p. 448)
§ probate court (p. 448)
§ personal representative (p. 448)
§ executor (p. 448)
§ administrator (p. 448)
§ intestate (p. 448)
§ beneficiary (p. 448)
§ legacy (p. 448)
§ bequest (p. 448)
§ ademption (p. 449)
§ devise (p. 449)
§ holographic will (p. 449)
§ noncupative will (p. 449)
§ testamentary capacity (p. 450)
§ codicil (p. 451)
§ advanced directive (p. 454)
§ living will (p. 454)
§ trust (p. 452)
§ trustee (p. 452)
§ settlor (p. 453)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 27 when you begin the study of the chapter and discuss each Learning
Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 27. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Identify the purpose of a will. (p. 448, PPT slide 2)
2. Recognize the language used to describe the various people, and the court, involved with a will.
(p. 448, PPT slides 3-4)
3. Discuss the types of gifts covered by a will. (pp. 448-449, PPT slides 5-6)
4. Identify the requirements for a valid will. (pp. 449-450, PPT slides 7-15)
5. Explain how a will is revised or revoked. (pp. 450-451, PPT slides 16-18)
6. Explain the way the court distributes the estate of someone who dies intestate. (p. 451-452, PPT
slide 19)
7. Discuss trusts, including the major types of trusts and the role of a trustee. (pp. 452-453, PPT
slides 20-27)
LECTURE OUTLINE
A. THE PURPOSE OF A WILL
A will, sometimes referred to as a testament, is a person’s declaration of how he or she wishes property
to be distributed upon his or her death. The primary purpose of a will is to allow an individual to
designate what will happen to his or her property after death. This intention of the decedent is known as
testamentary intent.
B. THE LANGUAGE OF WILLS
The person who makes the will is known as the testator. The court responsible for accepting a will that
meets all statutory requirements and for supervising the operation of a will is known as the probate
court. The person responsible for settling the affairs of the decedent is known as the personal
representative. If the personal representative has been named in the will, he or she is known as the
executor. If the executor is deceased, declines to serve, or is lacking in capacity, or if the decedent dies
without making a will, the court will appoint a personal representative, known as an administrator.
When a person dies without a will, he or she is said to have died intestate. The term heir is a broad
term that refers to a person who inherits property either under a will or from someone who dies
intestate. A beneficiary is an individual who receives gifts of personal or real property pursuant to a
will.
C. TYPES OF GIFTS UNDER WILLS
To be precise, a gift of money under a will is known as a legacy, while a gift of personal property is
known as a bequest. A legacy or bequest is specific when it identifies the personal property given, or
general when it does not identify such property. Finally, a legacy or bequest can be residuary when it
provides for the disposition of the balance of the estate. A gift of real property is known as a devise.
D. REQUIREMENTS OF A VALID WILL
A will must comply with legal requirements that are intended to ensure that the wishes of the testator
are met and that there are no obstacles to the smooth transfer of the property.
1. Requirement of Writing
In most cases, a will must be in writing, dated, and signed to be effective. The writing
need not be formal, as long as it meets the legal requirements. A holographic will is one
that is completely handwritten. A noncupative will, the term used for an oral will, might
be valid in only the most unusual circumstances. A tape recording of a decedent’s voice,
offered as a noncupative will, would be invalid.
2. Requirement of Witnesses
A formal, printed will must be signed by the testator and witnessed. Minors may witness
a will as long as they have an adequate understanding of what they are signing and could
testify regarding the facts related to the execution of the will if such becomes necessary.
It is necessary that the witnesses see the testator sign the document, because they may be
called upon later to attest that they actually saw the testator sign. Witnesses are expected
to be satisfied that the testator is of sound mind at the time of signing.
3. Testamentary Capacity
Just as contracts require competent parties, the law relating to wills requires
testamentary capacity; that is, a testator must be of sound mind and legal age. It is
essential that the testator be of sound mind when the will is made, even though, as often
happens, mental capacity may deteriorate with the passing years. If it can be established
that the testator lacked testamentary capacity, the will is void.
4. Undue Influence
The expression undue influence describes the pressure that might be applied to a testator
to change his or her true wishes for the disposition of property. Undue influence can take
many forms, from threats of harm to more subtle suggestions.
E. REVISING AND REVOKING WILLS
During the lifetime of the testator, there are a number of circumstances that may prompt the testator to
revise or revoke his or her will.
1. Revisions
To make legal changes in a will, a separate document, called a codicil, is prepared to
revoke, alter, or revise the will. The execution of a codicil has formal requirements and
is very much like writing a new will. It must be witnessed and dated. There is no limit
on the number of codicils that can be made.
2. Revocations
Revocations by operation of law can include those that result from marriage or
remarriage of the testator, divorce or annulment of a marriage, and the birth or adoption
of children after the will was made, all of which can change the disposition of gifts.
F. INTESTACY
When a person dies without a will, or had a will that failed to meet the requirements of the law, he or
she is said to have died intestate. In such a case, the law of the state in which the deceased person was
domiciled governs the disposition of his or her property, even though the death may have occurred
elsewhere. These laws vary by state.
G. TRUSTS
A trust is a device or mechanism that permits personal or real property to be held by one party, the
trustee, for the benefit of another, the beneficiary.
1. Types of Trusts
There are two main types of trusts. A testamentary trust is created by a will. It only
becomes effective upon the death of the testator. The names of the parties—beneficiaries
and trustee—are specified in the will. A living trust is established while the person,
known as the settlor, who wishes to set up the trust is still alive.
2. The Role of the Trustee
The responsibility of the trustee is that of a fiduciary and, as suggested by the name, is
one of great trust. He or she must manage the property according to the wishes of the
settlor, who may be deceased. Appointment as a trustee should not be accepted unless
one has the temperament, knowledge, and skills necessary to minimize the risks inherent
in the position of trustee. Like all other fiduciaries, a trustee has a duty of loyalty and a
duty of care.
a) Trustee’s Powers
The trustee has certain, nondelegable powers granted by law or by the trust
instrument itself. Powers usually granted by law include the authority and
responsibility to invest trust property; to sell, exchange, or rent property; to
contract with others in matters relating to the trust; to borrow funds using trust
property as security; and to distribute income to beneficiaries.
b) Trustee’s Duties
The trustee has the duty to maintain appropriate records and to provide a full
accounting of the trust property; to pay taxes; and to use good judgment in
managing the property, including making good investment decisions. The trustee
may purchase securities that are of very low risk and that appear on a document
referred to as a legal list.
c) Trustee’s Accountability
A trustee whose performance of duty in managing the trust property is called into
question can be held liable unless a court rules that the trustee exercised sound
judgment.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 27. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Identify the purpose of a will.
The purpose of a will is to recognize the concept of private property and give a person the right to
dispose of his or her property as he or she wishes. A will is also important toward protecting the family
of the deceased person.
Text Pages: 448
PowerPoint: Slide 2
Discussion Questions: 26
LO2. Recognize the language used to describe the various people, and the court, involved with a
will.
The person who makes the will is known as the testator. The court responsible for accepting a
will that meets all statutory requirements and for supervising the operation of a will is known as the
probate court. The person responsible for settling the affairs of the decedent is known as the personal
representative. If the personal representative has been named in the will, he or she is known as the
executor. If the executor is deceased, declines to serve, or is lacking in capacity, or if the decedent dies
without making a will, the court will appoint a personal representative, known as an administrator.
When a person dies without a will, he or she is said to have died intestate. An heir is a person who
inherits property either under a will or from someone who dies intestate. A beneficiary is an individual
who receives gifts of personal or real property pursuant to a will.
Text Pages: 448
PowerPoint: Slides 3-4
Case Analysis: 40-41
LO3. Discuss the types of gifts covered by a will.
A gift of money is known as a legacy and a gift of personal property is known as a bequest, although
both terms are often used synonymously. A bequest can be specific, general, or residuary.
Text Pages: 448-449
PowerPoint: Slides 5-6
Discussion Questions: 27
LO4. Identify the requirements for a valid will.
The requirements for a valid will vary by state but often include that the will be written, dated, signed,
and witnessed. The testator also must have testamentary capacity and be free from undue influence.
The requirements for testamentary capacity are that the testator be of legal age and of sound mind when
the will is created.
Text Pages: 449-450
PowerPoint: Slides 7-15
Discussion Questions: 28-30
Thinking Critically About the Law: 34
Case Questions: 37-38
Case Analysis: 43
LO5. Explain how a will is revised or revoked.
A codicil is prepared to revoke, alter, or revise a will. The most recent will, if valid, automatically
revokes all prior wills made by the testator.
Text Pages: 450-451
PowerPoint: Slides 16-18
LO6. Explain the way the court distributes the estate of someone who dies intestate.
When a person dies intestate, the law of the state in which the deceased was domiciled governs the
disposition of his or her property. Usually, a surviving spouse and children receive the entire estate. If
there is no surviving spouse or children, other relatives (including parents, grandchildren, and siblings)
are then included in the distribution.
Text Pages: 453-454
PowerPoint: Slides 15-16
Discussion Questions: 31
Thinking Critically About the Law: 32
LO7. Discuss trusts, including the major types of trusts and the role of a trustee.
The purpose of a trust is to allow a person to control the disposition of his or her property after death by
having it held by one party, the trustee, for the benefit of another, the beneficiary. The two kinds of
trusts are a testamentary trust, which is created by a will, and a living trust, which is established while
the settlor is still alive. A trustee has a fiduciary duty to manage property according to the wishes of the
settlor. Powers usually include the ability to sell, exchange, or rent property; borrow funds; contract
with others in matters pertaining to the trust; and distribute income to beneficiaries. Duties include
maintaining records of the property, providing a full accounting of trust property, and using good
judgment.
Text Pages: 452-453
PowerPoint: Slides 20-27
Thinking Critically About the Law: 35
Case Questions: 39
Case Analysis: 42