Eastern Illinois University

FIN 4300

Retirement and Estate Planning

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Chapter 3: Estate Planning Documents

1) Arnold Abufakuseh, age 49, is the insured under a $500,000 term life insurance policy issued by Beverly Mutual. Arnold’s wife, Alice, is the beneficiary and his niece, Bernice Bleke, is the contingent beneficiary if Alice predeceases Arnold. The policy premiums are fixed at $5,000 per year for the next 10 years.

a) While watching the weather on the 10 o’clock news one night, Arnold decides he is in love with Fern Fox, the channel 10 meteorologist. Can Arnold replace Alice with Ms. Fox as the beneficiary? Explain why or why not.

b) Alice opens an envelope from Beverly Mutual and discovers Arnold has requested a Change in Beneficiary form. On her way out of the kitchen to question Arnold about the form, Alice trips and her frying pan accidentally flies out of her hand and strikes a fatal blow to Arnold, seated in his easy chair in the living room. Will the $500,000 life insurance proceeds be included in Arnold’s probate estate?

2) Edith Estes is a participant in the 401(k) plan of Gurtler Gutters. Edith has a son, Egbert, and an ex-husband, Eddy. Edith’s aunt Helen Hanlon is her primary beneficiary to receive any benefits payable from this plan after death and Edith’s cousin Herbert Holt is the contingent beneficiary. If Helen and Herbert predecease Edith and there is a $763,000 balance in Edith’s 401(k) account at the time of her death, who will receive the $763,000 in the 401(k) account?

3) Korky Koch, age 61 and a brain surgeon at the Taylorville Trauma Center, is addicted to Diet Coke. In his will executed today he leaves $500,000 to Coca-Cola, $43 to his only child Kleon, his mold-covered fruitcake to his ex-wife Smokey and the residue of his estate to the Society for the Protection of Aliens. Explain whether or not Korky has testamentary capacity.

4) Klaudette Kurak, age 83, decides she is in love with Ralph Reed, the channel 2 traffic reporter, while watching the morning news. After receiving an autographed picture from Mr. Reed in the mail, Ms. Kurak immediately wrote on a napkin covered with ketchup “I revoke all prior wills and I leave the GE toaster oven to my only son, Korny, $15 to my husband Klyde, and the residue of my estate to Ralph Reed, channel 2 traffic reporter and if any person contests this will, I revoke and interest given this person and said interest shall be disposed of as though said person predeceased me without leaving issue.” Then she signed her name at the bottom of the napkin.

a) Explain whether or not this is a valid will.

b) If Korny unsuccessfully contests the terms of the will, who will receive the GE toaster oven?

5) John F. Kennedy Jr. and his wife Carolyn Bessette-Kennedy were killed in a plane crash in July 1999. The couple had no children. John F. Kennedy, Jr.’s will is available online at

http://www.willsforamerica.com/kennedyjrwill.htm

a) Who received the tangible property of John F. Kennedy, Jr.?

b) Who received the scrimshaw set owned by John F. Kennedy? Is this considered a specific bequest?

c) Who will receive the cooperative apartment at 20-26 Moore Street?

d) Who would have been guardian of their children if they had children at the time of his death?

e) Who received the residue of the estate?

f) Is the executor of the estate required to post a fiduciary bond?

6) In general, where should copies of your will be kept?

7) The will of Jerry Garica is available online at:

http://www.doyourownwill.com/garcia.asp

a) If Sunshine Schutte successfully proves Jerry Garcia was her father, how much will she receive under the terms of this will?

b) What subparagraph of the will insures the testamentary trust complies with the rule against perpetuities clause?

c) Who will be the guardian of Keelin Garica if her mother, Manasha Matheson, predeceases Jerry Garcia?

d) Under the terms of the testamentary trust, when does the trust for the benefit of Theresa Adams Garcia terminate?

e) Under the terms of Jerry Garcia’s will, if Clifford Garcia predeceases Jerry Garcia does the family of Clifford Garcia receive any of the residue of Jerry Garcia’s estate?

8) Loretta Lombard was killed when a meteor landed on her while she was shopping at Rural Queen. Upon hearing the news of the death of his charming wife, Leroy Lombard died 47 minutes later of a heart attack. The couple had no children and neither had a will. In general, who will receive the assets owned by Loretta that are subject to probate?

9) Mabel Murokh establishes a trust funded with $500,000 and naming the Last National Bank of Watseka as the trustee. Pierre Petrouski is the income beneficiary and Ralphetta Raines is the principal beneficiary. Discuss whether Raines would prefer the trust to invest its assets primarily in equities or bonds.

10) Discuss the three similarities and differences between living trusts and a will.

11) Based on the living trust on page 101, if John C. Jones transfers the ownership of his 1971 AMC Gremlin to his Revocable Living Trust, does the title of the vehicle need to be changed to reflect ownership by the trust if the car is one of the items of property included in Schedule One?

12) Based on the living trust on page 101, if John C. Jones transfers the ownership of his Next to Last National Bank of Rochelle bank account to his Revocable Living Trust, does the title of the checking account need to be changed to reflect ownership by the trust if the checking account is one of the items of property included in Schedule One?

13) Describe the concept of a spendthrift clause.

Chapter 4: Transfer of Wealth

1) Which of the following is subject to probate administration?

a) Farm land owned as tenants in common

b) Life insurance proceeds

c) Property held by a living trust

d) Distributions from a retirement account

e) Apartments owned jointly with the right of survivorship

2) Sam Scianna died testate. His wife predeceased him in death. He had three sons, Fred, Ned, and Ted and one adopted daughter, Cloudburst. Fred, age 44, has three children, Mack, Jack and Tack. His second son, Ned, died 12 years before Sam, but his two children, Pam and Paul, have survived. Ted, age 41, has no children. His adopted daughter died three years ago and left one daughter, Blizzard and a son, Cold Front. How will Mr. Scianna’s property be distributed to his descendants if his will says to my issue by:

a) per capita distribution

b) traditional per stirpes

c) per capita at each generation per stirpes

3) Wanda Weaver dies intestate in Illinois. She leaves an estate of $600,000. She has two children, Willy and Walt, from her current marriage to her husband Wally, who survives. Wanda’s parents are deceased. She has one child from a prior marriage, Wilbur and he has a son, William. How much will the following individuals receive from Wanda’s estate?

a) Wally

b) Willy

c) Walt

d) Wilbur

e) William

4) Ulysses Uphoff executed a will in 1989 leaving 10% of his property to his wife Ursula and 90% of his property to his mother-in-law, Cruella. In 2004, Ulysses divorced Ursula and married Zsa Zsa. Two days later, just prior to signing the first revision of his will since 1989, Ulysses was accidentally smashed when his charming ex-wife Ursula drove a bulldozer through his living room. How much will the following individuals receive from Ulysses’ estate which had a value of $1,000,000?

a) Ursula

b) Cruella

c) Zsa Zsa

5) Under California law, what would be the statutory probate fee for the probate attorney of Ulysses’ estate?

6) Under California law, what would be the statutory probate fee for the executor of Ulysses’ estate?

7) What are the requirements for a valid premarital agreement waiving elective share rights?

8) Zelda Zauner, age 94, recently married Biff Biceps, age 23. On the night of their honeymoon after 10 hours of playing Gin Rummy, Zelda changed her will leaving $15 to her only surviving son, Ziegfried, and the remainder of her $4,500,000 estate to Biff. Can Ziegfried elect to “take against the will” his intestate share of his mother’s estate?

9) What are the four procedures in formal probate proceedings?

10) In general, how long do creditors have to file a creditor’s claim form?