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Chapter 52—DECEDENTS' ESTATES AND TRUSTS TRUE/FALSE 1. The debts of a decedent are paid prior to distribution of any balance of the estate to those entitled to receive it. ANS: T

MSC: AACSB Analytic

2. Testate distribution describes the distribution that is made when the decedent leaves an invalid will. ANS: F

MSC: AACSB Analytic

3. A beneficiary of personal property by will may be called a devisee. ANS: F

MSC: AACSB Analytic

4. Generally, the right to make a will is limited to persons 18 or older. ANS: T

MSC: AACSB Analytic

5. To make a valid will, the testator must have testamentary capacity. ANS: T

MSC: AACSB Analytic

6. Testamentary intent makes the provisions of the testator effective and binding during the testator's life. ANS: F

MSC: AACSB Analytic

7. A will is very informal and may be created in any reasonable manner. ANS: F

MSC: AACSB Analytic

8. A written will must be signed by the testator at the bottom or end of the will. ANS: T

MSC: AACSB Analytic

9. Statutes often require that the attestation of witnesses be made in the presence of the testator and in the presence of each other. ANS: T

MSC: AACSB Analytic

10. A will, to be effective, always must be dated. ANS: F

MSC: AACSB Analytic

11. A will cannot be modified by merely crossing out a clause and writing in something new. ANS: T

MSC: AACSB Analytic


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12. Once a will has been properly executed, it can be totally revoked only by a codicil; it cannot be simply modified. ANS: F

MSC: AACSB Analytic

13. If a person marries after making a will, some statutes provide that the will existing prior to the marriage has been revoked. ANS: T

MSC: AACSB Analytic

14. A Living Will that now is recognized in most states provides that if the testator becomes unable to express his or her wishes and is in irreversible, incurable medical condition, he or she does not want life-sustaining medical treatments. ANS: T

MSC: AACSB Analytic

15. The judge, not the decedent, has the privilege of naming who is to administer the estate of a person who has died with a will. ANS: F

MSC: AACSB Analytic

16. One desiring to leave the balance of an estate to a specified person or group after specific bequests are satisfied may do so by making a residuary bequest in a will. ANS: T

MSC: AACSB Analytic

17. No administration is required when the decedent did not own any property at the time of death. ANS: T

MSC: AACSB Analytic

18. Family members receive distributions from an estate before creditors are paid. ANS: F

MSC: AACSB Analytic

19. Under the Uniform Simultaneous Death Act, if survivorship cannot be established, the property of each person is disposed of as though each had survived the other. ANS: T

MSC: AACSB Analytic

20. In a trust, legal title is transferred to one party, the trustee, to benefit another party, the beneficiary. ANS: T

MSC: AACSB Analytic

21. The requirements to create a trust are uniform. ANS: F

MSC: AACSB Analytic

22. A trust is invalid if a beneficiary lacks capacity. ANS: F

MSC: AACSB Analytic

23. A failure by the settlor to name a trustee renders a trust invalid.


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ANS: F

MSC: AACSB Analytic

24. Under a trust, both legal and equitable title are given to the trustee. ANS: F

MSC: AACSB Analytic

25. In the absence of a disclaimer, a trustee's acceptance of duties under a trust is presumed. ANS: T

MSC: AACSB Analytic

26. A trustee cannot make decisions on matters that could not be foreseen by the settlor. ANS: F

MSC: AACSB Analytic

27. A trustee can delegate the performance of personal duties. ANS: F

MSC: AACSB Analytic

28. A trustee is not permitted to profit personally from the position of trustee, other than to receive the compensation allowed by contract or law. ANS: T

MSC: AACSB Analytic

29. A trustee may keep all matters associated with the trust secret. ANS: F

MSC: AACSB Analytic

30. A trust may be terminated by its own terms. ANS: T

MSC: AACSB Analytic

MULTIPLE CHOICE 1. Which of the following generally is not required for the testator to have testamentary capacity? a. Testator knows the exact value of his or her estate. b. Testator understands the writing to be a will. c. Testator has a reasonable appreciation of the identity of relatives and friends. d. Testator has a reasonable appreciation of the extent of the property that may exist at death. ANS: A

MSC: AACSB Analytic

2. An individual who desires to make provisions that will be effective only on his or her death is said to have: a. probationary intent. b. a prejudicial interest. c. testamentary intent. d. attestation intent. ANS: C

MSC: AACSB Analytic

3. Unless statutory requirements are met, a will is invalid and the testator:


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a. b. c. d.

is considered to have died testate. is considered to have died intestate. is subject to federal law. has provided guidelines of distribution.

ANS: B

MSC: AACSB Analytic

4. Which of the following is not a correct statement concerning wills? a. Attestation is the act of witnessing the execution of a will. b. Most states require two witnesses to the execution of the will. c. A will must be dated. d. Publication is the act of the testator informing attesting witnesses that they are witnessing his or her will. ANS: C

MSC: AACSB Analytic

5. A codicil: a. must be executed with the same formalities as a will. b. is treated the same as a will. c. does not invalidate the entire will. d. all of the above. ANS: D

MSC: AACSB Analytic

6. Where a testatrix executes a will and later has a child: a. the child is prohibited by law from receiving anything from the estate. b. many states hold that the will of the testatrix is partially revoked by operation of law to provide a share to the afterborn child. c. a new will must be executed because the birth voids the original will. d. the afterborn child takes a share by escheat. ANS: B

MSC: AACSB Analytic

7. Probate is the act by which: a. the court declares an instrument is a valid will. b. a qualified person may contest the will. c. the witnesses sign an attestation clause. d. publication of the will takes place. ANS: A

MSC: AACSB Analytic

8. A will may be contested on grounds of: a. lack of mental capacity of the testator. b. undue influence, duress, or mistake. c. forgery. d. all of the above. ANS: D

MSC: AACSB Analytic

9. Letters testamentary: a. are given to an administrator. b. are given to an executor. c. require a bond to be filed by the person to whom they are given if the will exempts the requirement.


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d. none of the above. ANS: B

MSC: AACSB Analytic

10. When a testator provides for a bequest of his gold watch to his nephew, but the gold watch is not owned by the testator at the time of death: a. the nephew is entitled to an equivalent amount of cash. b. the executor must purchase a similar gold watch for the nephew if funds are available. c. the bequest to the nephew fails by ademption. d. all legacies in the estate abate to provide funds to purchase a gold watch for the nephew. ANS: C

MSC: AACSB Analytic

11. A bequest of a pearl necklace is a: a. general legacy. b. specific legacy. c. specific devise. d. residuary legacy. ANS: B

MSC: AACSB Analytic

12. The relatives of an individual who dies without a valid will may acquire title to the decedent's property through: a. intestate succession. b. the right of replevin. c. intestate decree succession. d. the right of acquisition. ANS: A

MSC: AACSB Analytic

13. State intestacy statutes commonly provide for distribution in the following order: a. spouse, parents, lineals, collateral heirs. b. spouse, lineals, collateral heirs, parents. c. spouse and children, other lineals, parents, collateral heirs. d. spouse and lineals equally, parents, collateral heirs. ANS: C

MSC: AACSB Analytic

14. When all the distributees stand in different degrees of relationship: a. distribution is made per stirpes. b. distribution is made per capita. c. a distribution cannot be made without the consent of the state. d. none of the above. ANS: A

MSC: AACSB Analytic

15. In order for a trust to be created, who must be able to hold legal title? a. the beneficiary only b. the trustee only c. either the beneficiary or the trustee d. both the beneficiary and the trustee ANS: B

MSC: AACSB Analytic


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16. A decedent's transfer of $10,000 to a trustee, to be held in trust for A, failed to create a valid trust because: a. it was not supported by consideration. b. it did not place an active duty on the trustee to manage the property in some manner. c. there was no intention on the part of the decedent to create a trust. d. the trustee had no opportunity to renounce the trust. ANS: B

MSC: AACSB Analytic

17. Which of the following is an incorrect statement concerning trusts? a. The trustee has legal title to the corpus. b. The beneficiary has equitable title or beneficial interest. c. Generally, a beneficiary may not transfer his or her interest in the trust. d. All trusts must have executors. ANS: C

MSC: AACSB Analytic

18. Which of the following is not a duty of a trustee? a. to use reasonable skill b. to defend the trust in court c. to invest trust assets d. to deliver possession of trust assets to the settlor for the trust period ANS: D

MSC: AACSB Analytic

19. If the trustee breaches the trust, which of the following remedies might be available? a. money judgment b. injunction c. criminal prosecution d. all of the above ANS: D

MSC: AACSB Analytic

20. A trust may be terminated: a. in accordance with its terms. b. by merger of all interests in the same person. c. via revocation by the settlor if allowed by the terms of the trust. d. all of the above. ANS: D

MSC: AACSB Analytic

CASE 1. Fred and Mary were married. Fred had executed a will prior to the marriage that left all of his property, both real and personal, to his mother. Fred later died without changing his will. Mary feels that she should be entitled to some of Fred's estate. While waiting for Fred's estate to be finalized, Mary remarries. Mary's second husband executes a will providing for Mary. Later, after Mary and her husband adopt two children, her second husband dies. Mary feels that her children should be entitled to receive something from her second husband's estate. Is Mary and, later, are her adopted children entitled to receive something under the wills? ANS:


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Yes. Under certain circumstances statutes provide that a change in circumstances has the effect of a revocation or a partial revocation of a will. When a person marries after a will already has been executed, that person often is entitled to a share of the estate. The amount of the share varies from state to state. It also is commonly provided that the adoption of a child or children after the execution of a will works a partial or full revocation as to those children. Again, the amount of the estate to which the children are entitled varies from state to state. MSC: AACSB Reflective Thinking | AACSB Analytic 2. Tuttle died at age 96, leaving a will that she made at age 40 that provided that her three children would share her estate equally. At the time of her death, only one child, Anna, was living. Tuttle's two deceased children, Bill and Caroline, each had two children who were living at the time of Tuttle's death. Anna is claiming that she is entitled to the entire estate because the bequests to Bill and Caroline lapsed upon their deaths prior to Tuttle's death. How will the estate be settled? ANS: The bequests to Bill and Caroline will not lapse. There are antilapse statutes that commonly provide that gifts to deceased beneficiaries, instead of lapsing, will be given to the children of such beneficiaries. Thus, the beneficiaries under Tuttle's will are Anna, Bill's two children, and Caroline's two children. Because the five beneficiaries are of different generations, distribution will be per stirpes. Anna will be entitled to one-third of the estate, Bill's two children will split one-third, and Caroline's two children will split the remaining one-third. MSC: AACSB Reflective Thinking | AACSB Analytic 3. Margo had only one son, and her husband had predeceased her. The son was reckless and extravagant, but Margo loved him dearly. She left all her property to a trustee in trust for her son and provided that the trust was a spendthrift trust. Margo further provided that the income from the trust was to be paid to her son quarterly until he reached the age of 30 at which time the full trust corpus was to be paid over to him. After Margo's death and before the son had reached the age of 30, the son signed a contract that purported to transfer the entire trust corpus to a finance company. The son was paid for this. The son had also run up many unpaid bills on which he was sued and judgments entered against him. The finance company and the other judgment creditors are seeking to compel the trustee to turn over the trust corpus to them. Decide. ANS: Where the settlor provides that the trust is a spendthrift trust, the beneficiary cannot transfer his or her interest to anyone. Likewise, creditors cannot reach the interest in such a trust. The name "spendthrift" provides a clue regarding the nature of this type of trust that is designed to protect spendthrifts from defeating the wishes of the settlor. MSC: AACSB Reflective Thinking | AACSB Analytic


Test bank andersons business law and the legal environment comprehensive edition 20th edition twomey