Wills, Trusts & Estates Overview
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Questions and Answers

What happens to the property if the decedent has no heirs?

  • It is given to the state (correct)
  • It is donated to charity
  • It is divided among the children
  • It goes to the spouse

    • Collaterals can inherit if they are more than 5 degrees kinship removed from an intestate.

    False

    What is the survivorship requirement established by the Simultaneous Death Act?

    120 hours

    If not all of the estate is properly disposed of in the will, the part not disposed shall be distributed as __________ property.

    <p>intestate</p> Signup and view all the answers

    Match the following sections with their descriptions:

    <p>§ 29-6 = Lineal succession unlimited § 29-7 = Collateral succession limited § 29-14 = Share of surviving spouse § 29-9 = Inheritance by unborn infant</p> Signup and view all the answers

    Which of the following statements is true regarding advancements in intestate succession?

    <p>Advancements are counted toward the advancee's intestate share.</p> Signup and view all the answers

    Who can inherit from an intestate if they are born within 10 months after the death of the intestate?

    <p>Lineal descendants and other relatives</p> Signup and view all the answers

    Being an alien prohibits a person from intestate succession.

    <p>False</p> Signup and view all the answers

    What happens to a homestead if the owner dies without minor children?

    <p>The surviving spouse is exempt from debts and benefits from the homestead.</p> Signup and view all the answers

    A child can be intentionally omitted from a will without any consequences.

    <p>False</p> Signup and view all the answers

    What are posthumous children required to do in order to inherit?

    <p>Be born within 10 months of the parent's death.</p> Signup and view all the answers

    A trust in which property is held by a trustee for beneficiaries is called a ______.

    <p>trust</p> Signup and view all the answers

    Match the following types of trusts with their definitions:

    <p>Testamentary Trust = Created by a will and is automatically irrevocable Inter-vivos Trust = Created during a person's life, can be revocable or irrevocable Totten Trust = Type of POD account Passive Trust = Trust without active duties appointed by the court</p> Signup and view all the answers

    Which of the following is NOT a requirement for creating a trust?

    <p>A specified tax bracket</p> Signup and view all the answers

    A trustee must always be a person capable of fulfilling active duties.

    <p>False</p> Signup and view all the answers

    What is the purpose of the settlor in a trust?

    <p>To convey property to the trustee for the benefit of the beneficiaries.</p> Signup and view all the answers

    What happens to a specific devise if the testator no longer owns the property at the time of death?

    <p>The devise fails</p> Signup and view all the answers

    Under the Intent Theory, if a specific item is not in the testator's estate, the beneficiary is entitled to its cash value regardless of intent.

    <p>False</p> Signup and view all the answers

    What is 'Ademption by Satisfaction'?

    <p>It occurs when a testator gives a gift to the donee during their lifetime.</p> Signup and view all the answers

    The beneficiary of a property should receive it free of ___ unless the will states otherwise.

    <p>debt</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Ademption by Extinction = The devise fails if the specific item is not owned at death. Exoneration of Liens = Beneficiary receives the property free of debt. Abatement = Assets are insufficient to pay debts and devisees. Stock Splits = Stock is given to a beneficiary even if it splits after the will is made.</p> Signup and view all the answers

    In which order do devises abate when there are insufficient assets?

    <p>Residuary, General, Specific</p> Signup and view all the answers

    All stock left to a person will be given to that person even if there are stock splits, provided there is no specific bequest.

    <p>True</p> Signup and view all the answers

    What presumption exists about debts secured by mortgages on specifically devised property?

    <p>It is presumed that the testator wanted the debt to be paid from the residuary estate.</p> Signup and view all the answers

    What is a key duty of a trustee regarding trust property?

    <p>To keep trust property separate from their own</p> Signup and view all the answers

    A spendthrift trust allows creditors to attach a beneficiary's interest in the trust.

    <p>False</p> Signup and view all the answers

    What is the primary function of a discretionary trust?

    <p>To give the trustee the authority to decide on distributions to beneficiaries.</p> Signup and view all the answers

    A ________ trust allows the trustee to make distributions necessary for a beneficiary's education or support.

    <p>support</p> Signup and view all the answers

    Match the types of trusts to their definitions:

    <p>Spendthrift Trust = Protects beneficiary's interest from creditors Discretionary Trust = Trustee decides when and how to distribute Pure Discretionary Trust = Trustee has absolute discretion over distributions Support Trust = Distributions for education or basic support needs</p> Signup and view all the answers

    What documentation is a trustee required to maintain?

    <p>Detailed records of all administrative actions</p> Signup and view all the answers

    Self-Settled Asset Protection Trusts are recognized in North Carolina.

    <p>False</p> Signup and view all the answers

    What happens to a protective trust when a beneficiary's creditors attach their interest?

    <p>It automatically converts to a discretionary interest.</p> Signup and view all the answers

    What is required for a trust to shield from state support?

    <p>It must be irrevocable</p> Signup and view all the answers

    A pet trust terminates when the last animal, that is a beneficiary of the trust, passes away.

    <p>True</p> Signup and view all the answers

    What term is used when a charitable trust's specific purpose becomes illegal or impossible?

    <p>Cy Pres</p> Signup and view all the answers

    A trust cannot compel ________ distribution to the beneficiaries.

    <p>mandatory</p> Signup and view all the answers

    Which of the following is NOT a purpose for charitable trusts?

    <p>Personal Gain</p> Signup and view all the answers

    Match the following concepts with their definitions:

    <p>Irrevocable Trust = Cannot be modified or terminated easily Beneficiary = Receives benefits from the trust Pet Trust = Created for the care of animals Charitable Trust = Established for public good</p> Signup and view all the answers

    A trust can be modified if only one beneficiary agrees to the change.

    <p>False</p> Signup and view all the answers

    The __________ allows beneficiaries to compel the modification of a noncharitable irrevocable trust without court approval.

    <p>§ 36C-4-411</p> Signup and view all the answers

    Under which section can a trust be modified or terminated due to unanticipated circumstances?

    <p>§ 36C-4-412</p> Signup and view all the answers

    A trustee can never deviate from the trust's terms under any circumstances.

    <p>False</p> Signup and view all the answers

    What is the primary purpose of decanting power in a trust?

    <p>To distribute property from the first trust to one or more second trusts, or to modify the terms of the first trust.</p> Signup and view all the answers

    A trustee may be removed if there is a serious __________ of trust.

    <p>breach</p> Signup and view all the answers

    Match the following powers or actions with their definitions:

    <p>Deviation = Trustee can deviate from terms if compliance would defeat settlor's accomplishment Decanting Power = Ability to distribute property from one trust to another Trustee Removal = Circumstances under which a trustee can be removed Powers of Appointment = Authority to distribute trust property by a nonfiduciary</p> Signup and view all the answers

    Which of the following is NOT a reason for trustee removal?

    <p>Cooperation among co-trustees</p> Signup and view all the answers

    The holder of a power of appointment is known as the grantor.

    <p>False</p> Signup and view all the answers

    List one factor that must be satisfied to exercise a power of appointment.

    <p>Intent</p> Signup and view all the answers

    Study Notes

    Wills, Trusts & Estates - Background

    • Freedom of Disposition is the organizing principle of the American Law of Donative Transfers. Property owners have the unrestricted right to dispose of their property as they please.
    • Exceptions to this include protection of a surviving spouse, intentional or unintentional omission of a child, transfer taxation, and creditor protection.
    • North Carolina law requires that valid notice be sent to creditors within 75 days of the probate court granting letters of administration.

    Mechanics of Succession

    • Personal property is governed by the domicile at death.
    • Real property is governed by the state where the property is located.
    • Property can pass to an executor (named in the will), or by way of other will substitutes such as living trusts, POD/TOD accounts, life insurance policies where ownership passes on death; and joint tenancies.
    • If a person dies without a will, the estate is distributed according to intestacy laws.

    Intestacy

    • If a person dies without a will, the estate is divided based on a hierarchy of relatives. Spouses are prioritised followed by descendants (children/grandchildren),parents, and collateral relatives (aunts, uncles, cousins).
    • Property is distributed either per capita (equal shares) or per stirpes (each grandchild receives the share of their deceased parent).
    • If there are no heirs, the property escheats to the state.
    • North Carolina has specific statutes regarding succession, including lineal succession (unrestricted) and collateral succession (limited to 5 degrees of kinship).

    Shares of Persons Taking Upon Intestacy

    • The Simultaneous Death Act states that if two people die within 120 hours of each other, it is treated as though the other predeceased them.
    • Spouses have variable shares depending on whether children or other relatives exist; these shares are determined using specific rules regarding the relative's existence and their combined assets under different situations, dividing property either as per capita or per stirpes.

    Bars to Succession

    • In North Carolina, if a person is a “slayer” they are disallowed any inheritance or benefit from the decedent.
    • If there is a credible claim of murder, the property will be governed by other rules regarding inheritance.

    Wills

    • A will is a written instrument detailing how a testator wants their property distributed after death.
    • Essential components include a valid will's execution and the testator's capacity to make the will.
    • Types of wills include attested wills, holographic wills, and nuncupative wills.
    • Revocation of a will can occur through specific wording in a new will or by physical destruction.

    Capacity and Contests

    • To make a valid will, the testator must have sound mind.
    • Testators must be 18 years or older.
    • Capacity concerns such as undue influence, duress, and fraud can invalidate wills.
    • Court cases can determine whether the will was made under mental capacity or under influence.

    Construction of a Will

    • Issues of ambiguity or mistakes in a will can be addressed in court; these issues may need to be resolved with reference to the context, or intent of the will during the will's creation.
    • A court can intervene when a will is disputed or contains defects.

    Will Substitutes

    • Revocable trusts are a common will substitute in which a settlor transfers assets to a trustee who manages them until the settlor dies, and then distributes them according to the terms of the trust.
    • Other examples of will substitutes are life insurance policies, POD and TOD accounts that pass assets directly to named beneficiaries, and payable on death accounts.

    Planning for Incapacity

    • Conservatorship is the procedure used when it is determined an individual is incapacitated.
    • Power of Attorney designates an agent to make decisions relating to financial matters.
    • Advance directive documents provide guidance on healthcare decisions if the individual is incapacitated.

    Spouse and Child Rights

    • Surviving spouses are entitled to an 'elective share' of the deceased spouse's estate, usually one-third of the estate.
    • There are special rules addressing the division of assets between spouses if the couple lived less than five years at the time of a death.
    • Intestate laws vary for children and grandchildren based on the extent of their relationship to the deceased individual and whether the individuals have other surviving partners or family members.

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    Wills, Trusts & Estates PDF

    Description

    Explore the fundamental principles of Wills, Trusts, and Estates, focusing on the Freedom of Disposition and the mechanics of succession. Understand how personal and real property is distributed, the significance of valid notice, and the implications of dying intestate. This quiz covers essential North Carolina laws and general estate planning concepts.

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