Miller_BLTC12E_PPT_ch43.pptx

BUSINESS LAW TodaySTANDARD EDITION TEXT & SUMMARIZED CASES, 12e

Roger LeRoy Miller

Miller, Business Law Today, Comprehensive Edition: Text & Cases, 12th Edition. Â© 2020 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Insurance, Wills, and Trusts

Chapter 43

Chapter Outline

43-1 Insurance

43-2 Wills

43-3 Trusts

Learning Objectives

What is an insurable interest? When must an insurable interest exist?

What are the basic requirements for executing a will?

What is the difference between a per stirpes distribution and a per capita distribution of an estate to the grandchildren of the deceased?

What are the four essential elements of a trust?

43-1 Insurance

43-1a Classifications of Insurance

43-1b Insurance Terminology

Policy: An insurance contract

Premium: In insurance law, the price paid by the insured for insurance protection for a specified period of time.

Underwriter: In insurance law, the insurer, or the one assuming a risk in return for the payment of a premium.

43-1c Insurable Interest

Insurable interest: An interest that exists when a person benefits from preservation of health or life of insured or property to be insured.

Life Insurance

Property Insurance

Spotlight Case Example 43.1 Zurich American Insurance Co. v. ABM Industries, Inc. (2005)

Case 43.1

Breeden v. Buchanan (2015)

Why is an insurable interest required for the enforcement of an insurance contract?

43-1d The Insurance Contract (slide 1 of 3)

Application

Effective Date

Binder: A written, temporary insurance policy

Coinsurance Clauses

Incontestability Clauses: A clause in a policy for life or health insurance stating that after the policy has been in force for a specified length of time the insurer cannot contest statements made in the policyholderâ€™s application.

43-1d The Insurance Contract (slide 2 of 3)

Interpreting the Insurance Contract

Case Example 43.3 Valero v. Florida Insurance Guaranty Association, Inc. (2011)

Cancellation

Automobile insurance can be canceled for nonpayment of premiums or suspension of the insuredâ€™s driverâ€™s license.

Property insurance can be canceled for nonpayment of premiums or for other reasons, including the insuredâ€™s fraud or misrepresentation, gross negligence, or conviction for a crime that increases the risk assumed by the insurer.

Life and health policies can be canceled because of false statements made by the insured in the application, but the cancellation must take place before the effective date of an incontestability clause.

43-1d The Insurance Contract (slide 3 of 3)

Duties and Obligations of the Parties

Duties of the Insured

Duties of the Insurer

Spotlight Case Example 43.4 Woo v. Firemanâ€™s Fund Insurance Co. (2007)

Bad-Faith Actions

Defenses against Payment

Fraud or misrepresentation

Lack of an insurable interest

Illegal actions of the insured

43-2 Wills (slide 1 of 5)

Will: The final declaration of how a person desires to have her or his property disposed of after death.

Testate: Having left a will at death.

43-2a Terminology of Wills

Testator: One who makes and executes a will.

Executor: A person appointed by a testator in a will to administer her or his estate.

Intestate: The state of having died without a will.

43-2 Wills (slide 2 of 5)

43-2b Types of Gifts

Specific and General Devises

A specific devise or bequest (legacy) describes particular property that can be distinguished from all the rest of the testatorâ€™s property.

Residuary Clause

Abatement

43-2 Wills (slide 3 of 5)

43-2c Requirements for a Valid Will

Testamentary Capacity and Intent

Know the nature of the act (of making a will).

Comprehend and remember the people to whom the testator would naturally leave his or her estate.

Know the nature and extent of her or his property.

Understand the distribution of assets called for by the will.

Undue Influence

Case Example 43.7 In re Estate of Laura Copeland Farmer (2017)

Disinheritance

Case Example 43.8 In re Estate of Melton (2012)

43-2 Wills (slide 4 of 5)

43-2c Requirements for a Valid Will

Writing Requirements

Generally, a will must be in writing and the writing itself can be informal as long as it substantially complies with the statutory requirements.

Signature Requirements

The testatorâ€™s signature must appear on the will, generally at the end.

Witness Requirements

43-2 Wills (slide 5 of 5)

43-2d Revocation of Wills

Revocation by a Physical Act

A testator can revoke a will by intentionally destroying it.

Revocation by a Subsequent Writing

A will may be wholly or partially revoked by a codicil (a written supplement or modification to a will).

Revocation by Operation of Law

Marriage and Divorce

Children

43-2e Probate Procedures and Estate Planning

Probate: The process of proving and validating a will and settling all matters pertaining to an estate.

Informal Probate

Formal Probate

Property Transfers outside the Probate Process

Will Substitutes: Various instruments, such as life insurance plans, that may be used to avoid the formal probate process.

43-2f Intestacy Laws

Surviving Spouse and Children

A surviving spouse and children usually receive the remaining assets after the decedentâ€™s debts have been settled.

When There Is No Surviving Spouse or Child

Stepchildren, Adopted Children, and Illegitimate Children

Grandchildren

Per Stirpes Distribution

Per Capita Distribution

Exhibit 43-4 Per Stirpes Distribution

Exhibit 43-5 Per Capita Distribution

43-3 Trusts

Trust: An arrangement in which title to property is held by one person (a trustee) for the benefit of another (a beneficiary).

Designated beneficiary

Designated trustee

Fund sufficiently identified to enable title to pass to trustee

Actual delivery by grantor to trustee

43-3a Express Trusts (slide 1 of 2)

Living Trusts

Living (inter vivos) trust: A trust created by the grantor (settlor) and effective during his or her lifetime.

Revocable Living Trusts

Irrevocable Living Trusts

Testamentary Trusts

Testamentary Trust: A trust that is created by will and therefore does not take effect until the death of the testator.

Exhibit 43â€“6 A Revocable Living Trust Arrangement

Miller, Business Law Today, Standard Edition: Text & Summarized Cases, 12th Edition. Â© 2020 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

43-3a Express Trusts (slide 2 of 2)

Charitable Trusts: A trust in which property held by trustee must be used for charitable purpose, such as advancement of health, education, or religion.

Spendthrift Trusts: A trust created to protect the beneficiary from spending all the funds to which she or he is entitled.

Totten Trusts: A trust created when a person deposits funds in his or her own name for a specific beneficiary, who will receive the funds on the depositorâ€™s death.

43-3b Implied Trusts

Constructive Trusts

Constructive trust: An equitable trust that is imposed in the interests of fairness and justice when someone wrongfully holds legal title to property.

Case Example 43.12 Garrigus v. Viarengo (2009)

Resulting Trusts

Resulting trust: An implied trust that arises when one party holds the legal title to anotherâ€™s property only for that otherâ€™s benefit.

43-3c The Trustee

Trusteeâ€™s Duties

Maintain clear and accurate accounts of the trustâ€™s administration.

Furnish complete and correct information to the beneficiary.

Keep trust assets separate from her or his own assets.

Pay to an income beneficiary the net income of the trust assets at reasonable intervals.

Limit the risk of loss from investments by reasonable diversification and dispose of assets that do not represent prudent investments.

Miller_BLTC12E_PPT_ch43.pptx

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