Option #1: Wills (100 points)
Michael Bond lives a quiet, uncomplicated life in Goedken, California. Michael is an accounting assistant practicing in a small accounting firm. Michael has one daughter, namely Meredith, who is three years old. Michael’s spouse, and the mother of Meredith, died in an automobile accident when Meredith was 18 months old. Michael has two children from a prior marriage, and who live with their mother in a large, Eastern metropolitan community. Michael sees his two children occasionally throughout the school year, and has extended summer visitation with them. Michael Bond has modest wealth, consisting mainly of life insurance and retirement benefits. They have no significant health problems. Michael’s Last Will and Testament is set out below.
Your assignment:
Identify and discuss the use and value of wills in an estate plan (generally) and responses that explain the following provisions of the Will of Michael Bond set out below. In your descriiption, explain the provisions and the intended/expected results when Mr. Bond dies, and any contingencies. In effect, describe each provision and what will occur under Mr. Bond’s will upon his death:
Tax apportionment clause;
How and to whom the personal property is distributed
Beneficiaries of the residuary estate assets;
Who is the trustee and what are their duties and responsibilities;
Who is the Executor and what are their duties and responsibilities;
How does Michael provide for his minor children.
LAST WILL AND TESTAMENT
OF
MICHAEL JOSEPH BOND
I, MICHAEL JOSEPH BOND, of Goedken, Iowa make this my will and revoke all prior wills and codicils.
FIRST: My executor shall pay all expenses of my last illness and funeral, costs of administration including ancillary, costs of safeguarding and delivering legacies, and other proper charges against my estate (excluding debts secured by real property or life insurance). My executor shall also pay all estate and inheritance taxes assessed by reason of my death, except that the amount, if any, by which the estate and inheritance taxes shall be increased as a result of the inclusion of property in which I may have a qualifying income interest for life or over which I may have a power of appointment shall be paid by the person holding or receiving that property. Interest and penalties concerning any tax shall be paid and charged in the same manner as the tax. I waive for my estate all rights of apportionment or reimbursement for any payments made pursuant to this article.
My executor’s selection of assets to be sold to make the foregoing payments or to satisfy any pecuniary legacies, and the tax effects thereof, shall not be subject to question by any beneficiary.
My executor shall make such elections and allocations under the tax laws as my executor deems advisable, without regard to the relative interests of the beneficiaries and without liability to any person. No adjustment shall be made between principal and income or in the relative interests of the beneficiaries to compensate for the effect of elections or allocations under the tax laws made by my executor or by the trustee.
The balance of my estate which remains after the foregoing payments have been made or provided for shall be disposed of as hereinafter provided.
SECOND:I have no spouse living. I have two natural children now living from my first marriage, namely:
James Q. Bond, born 07/07/90;
Halle B. Bond, born 06/09/92
I have one natural child now living from my second marriage, namely:
Meredith Anne, born 06/27/98
I intend by this will to provide for all my natural children and any reference to “my children” shall be a reference all children of mine, including any hereinafter born or adopted.
THIRD:I give all my personal and household effects, automobiles, boats and collections not otherwise effectively disposed of by this will, and any insurance policies thereon to my children who so survive me to be divided equally among them as they agree. My executor shall sell any property as to which there is no agreement within 60 days after admission of this will to probate and shall add the proceeds to the residue of my estate.
If a child is a minor at the time of distribution, the guardian of or person in loco parentis to the child shall represent him or her in the division of the property, receipt for and hold his or her share or sell all or any part of it, and deliver the share or proceeds to the child when he or she reaches majority, or earlier if the guardian or person considers it to be for the child’s best interests.
FOURTH:All the residue of my estate, wherever situated, including lapsed legacies, but expressly excluding any property over which I may have power of appointment at my death, I give to JOHN BOND of Laz, California, as trustee, to be held and disposed of as provided for below:
SECTION 1:Until the time hereinafter fixed for distribution, the trustee may pay so much or all of the income and principal of the trust estate to any one or more of my children and the descendants of a deceased child of mine from time to time living, in equal or unequal proportions and at such times as the trustee deems best, considering the needs, other income and means of support, and best interests of my children and those descendants, individually and as a group, and any other circumstances and factors which the trustee deems pertinent, adding to principal any income not so paid. No payment of income or principal to a child or other descendant of mine shall be charged against the share hereinafter provided for the child or descendant or hi
SECTION 2:If upon or whenever after my death there is no living child of mine under the age of 24 years, the trustee shall distribute the trust estate in equal shares to such of my children as shall then be living, except that the then living descendants of a deceased child of mine shall take per stirpes the share which the child would have received if living, subject to postponement of possession of provided below.
SECTION 4:Each share of the trust estate which is distributable to a beneficiary who has not reached the age of 21 years shall immediately vest in the beneficiary, but the trustee shall (a) establish with the share a custodianship for the beneficiary under a Uniform Transfers or Gifts to Minors Act, or (b) retain possession of the share as a separate trust, paying to or for the benefit of the beneficiary so much or all of the income and principal of the share as the trustee deems necessary or advisable from time to time for his or her health, maintenance in reasonable comfort, education (including postgraduate) and best interests, adding to principal any income not so paid, and distributing the share to the beneficiary when he or she reaches the age of 21 years or to the estate of the beneficiary if he or she dies before receiving the share in full.
SECTION 5: My trustee shall have all the rights, powers and responsibilities as set out the applicable Iowa Probate Code provisions as they may apply to trustees. In addition to those powers, and without limiting the powers, my trustee shall have the following powers:
The trustee shall hold, manage, care for and protect the trust property and shall have the following powers and, except to the extent inconsistent herewith, those now or hereafter conferred by law:
a) To retain any property (including stock of any corporate trustee hereunder or a parent or affiliate company) originally constituting the trust or subsequently added thereto, and to invest and reinvest the trust property in bonds, stocks, mortgages, notes, bank deposits, options, futures, limited partnership interests, shares of registered investment companies and real estate investment trusts, or other property of any kind, real or personal, domestic or foreign; the trustee may retain or make any investment without liability, even though it is not of a type, quality, marketability or diversification considered proper for trust investments;
b) To cause any property, real or personal, belonging to the trust to be held or registered in the trustee’s name or in the name of a nominee or in such other form as the trustee deems best without disclosing the trust relationship;
c) To vote in person or by general or limited proxy, or refrain from voting, any corporate securities for any purpose, except that any security as to which the trustee’s possession of voting discretion would subject the issuing company or the trustee to any law, rule or regulation adversely affecting either the company or the trustee’s ability to retain or vote company securities, shall be voted as directed by the beneficiaries then entitled to receive or have the benefit of the income from the trust; to exercise or sell any subscriiption or conversion rights; to consent to and join in or oppose any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations and in connection therewith to deposit securities and accept and hold other property received therefor;
d) To lease trust property for any period of time though commencing in the future or extending beyond the term of the trust;
e) To borrow money from any lender, extend or renew any existing indebtedness and mortgage or pledge any property in the trust;
f) To sell at public or private sale, contract to sell, convey, exchange, transfer and otherwise deal with the trust property and any reinvestments thereof, and to sell covered call options, from time to time for such price and upon such terms as the trustee sees fit;
g) To employ agents, attorneys and proxies and to delegate to them such powers as the trustee considers desirable;
h) To compromise, contest, prosecute or abandon claims in favor of or against the trust;
i)To distribute income and principal in cash or in kind, or partly in each, and to allocate or distribute undivided interests or different assets or disproportionate interests in assets, and no adjustment shall be made to compensate for a disproportionate allocation of unrealized gain for federal income tax purposes; to value the trust property and to sell any part or all thereof in order to make allocation or distribution; no action taken by the trustee pursuant to this paragraph shall be subject to question by any beneficiary;
j)To deal with, purchase assets from, or make loans to, the fiduciary of any trust made by me or a trust or estate in which any beneficiary under this will has an interest, though a trustee hereunder is the fiduciary, and to retain any assets or loans so acquired, although not of a type, quality, marketability or diversification considered proper for trust investments; to deal with a corporate trustee hereunder individually or a parent or affiliate company;
k) To determine in cases not covered by statute the allocation of receipts and disbursements between income and principal, except that (i) if the trust is beneficiary or owner of an individual account on any employee benefit plan or individual retirement plan, income earned after death in the account shall be income of the trust, and if the trustee is required to pay all trust income to a beneficiary, the trustee shall collect and pay the income of the account to the beneficiary at least quarterly (and to the extent that all income cannot be collected from the account, the deficiency shall be paid from the principal of the trust), and (ii) reserves for depreciation shall be established out of income only to the extent that the trustee determines that readily marketable assets in the principal of the trust will be insufficient for any renovation, major repair, improvement or replacement of trust property which the trustee deems advisable;
l)To elect, pursuant to the terms of any employee benefit plan, individual retirement plan or insurance contract, the mode of distribution of the proceeds thereof, and no adjustment shall be made in the interests of the beneficiaries to compensate for the effect of the election;
m)To take such action in collecting the proceeds of any life insurance policy payable to the trustee (after deducting all charges by way of advances, loans or otherwise, for which the trustee shall not seek reimbursement) as the trustee deems best, paying the expense thereof from the trust property, but the trustee need not enter into or maintain litigation to enforce payment on a policy until indemnified to its satisfaction against all expenses and liabilities which might result therefrom; the insurance company shall not take notice of the provisions of this will or see to the application of the proceeds, and the trustee’s receipt to the insurance company shall be a complete release for any payment made;
n) To inspect and monitor businesses and real property (whether held directly or through a partnership, corporation, trust or other entity) for environmental conditions or possible violations of environmental laws; to remediate environmentally-damaged property or to take steps to prevent environmental damage in the future, even if no action by public or private parties is currently pending or threatened; to abandon or refuse to accept property which may have environmental damage; the trustee may expend trust property to do the foregoing, and no action or failure to act by the trustee pursuant to this paragraph shall be subject to question by any beneficiary; and
o) To perform other acts necessary or appropriate for the proper administration of the trust, execute and deliver necessary instruments and give full receipts and discharges.
FIFTH:I appoint my brother, WILSON A. BOND, as executor of this will to serve without bond. If for any reason Wilson A. Bond is unwilling or unable to act as executor, I appoint my sister, Leslie Bond and Reding Bank and Trust, as co-executors of this will without bond.
In addition to the powers granted to executors under the Iowa Probate Code, and by way of addition and not limitation, I give my executor the same powers as to the administration and investment of my estate which I have granted the trustee with respect to the trust property, to be exercised without authorization by any court and, as to property subject to administration outside the state of my domicile, only with the approval of my domiciliary executor. No bond or security shall be required of any executor wherever acting. If permitted by law and if not inconsistent with the best interests of the beneficiaries as determined by my executor, the administration of my estate shall be independent of the supervision of any court.
SIXTH: I acknowledge that, as of the date of this Last Will and Testament, my two children from my first marriage are currently in the primary physical care of their mother pursuant to Court order. In the event their mother does not survive me or dies after my death without providing for the custody of a minor child of mine, I nominate Leslie Bond to serve as guardian and conservator of the person of that child.
Also, I am currently the primary physical care parent of Meredith Anne Bond. In the event I die while she is a minor, I nominate Leslie Bond to serve as guardian and conservator of Meredith Anne Bond.
I request that the guardian of my children make every possible effort to raise my children in a family unit in the same home, and I authorize and empower the guardian to incur such reasonable expenses on behalf of my child or children as may be necessary to accomplish this purpose.
IN WITNESS WHEREOF I have signed this will, this ______________day of _____________________, 2002.
________________________________
Testator
We certify that the above instrument was on the date thereof signed and declared by MICHAEL JOSEPH BOND as her Will in our presence and that we, at her request and in her presence and in the presence of each other, have signed our names as witnesses thereto, believing MICHAEL JOSEPH BOND to be of sound mind and memory at the time of signing.
___________________________Residing at ___________________________
___________________________Residing at___________________________
OPTION #2: Trusts (100 points)
Charles and Katherine Brennan were married over 60 years ago in Danner, Iowa. Charles began as a common laborer in the local factory, and through hard work and dedication, worked his way to the top of the corporate ladder, as CEO and President of Sullivan Manufacturing. Katherine gave up her career to raise the Brennan’s six children, three boys and three girls, namely:
Harriet, born February 7, 1942;
Marvin, born April 10, 1944;
Donald, born August 18, 1945
Mary, born October 11, 1947
Catherine, born November 4, 1949
Richard, born June 27, 1953
The Brennans have 12 grandchildren, and 6 great grandchildren. Charles has amassed millions through his business dealings, shrewd investing and good old fashioned hard work. Truly an American success story, the Brennans have grown in number and complexity. Their family tree is set out in below.
[Charles] ——————————————- [Katherine]
CHILDREN OF CHARLES AND KATHERINE (WITH SPOUSES IN PARENTHESIS)
Harriet(Rob)—Marvin(Adel)—-Donald(Ann)—Mary–Catherine(Andy)–[Richard](June)
GRANDCHILDREN OF CHARLES AND KATHERINE (WITH SPOUSES NOTED)
Steve/Laurie/Kent Bill/Matt/Allie Brooken/c [Rick]/Kim/Megan Annie/Zoie
GREAT GRANDCHILDREN OF CHARLES AND KATHERINE
(Lori) (Nate) (Kim) (Gail) (Jon)(Steph) (Tom)(Mark)
GREAT GREAT GRANDCHILDREN OF CHARLES AND KATHERINE
Brad/Ed n/cn/c Maddy Telef Michael n/c Charles
Note:
Each level immediately below the names are the children/issue of the individuals directly above them.
Names in ( ) are spouses
“n/c” means no children
Like most families, the Brennans have endured their share of triumph and adversity, and the goals of the members of the Brennan family are varied. Charles has cancer, and Katherine has been fighting diabetes. They have lost a child to drug addiction, namely Richard. Both Harriet and Marvin have fought serious illnesses, and Donald’s daughter is mentally challenged. Catherine has been married three times, and is in the process of her third divorce. Richard’s daughter, Zoie, has a rare blood disease. Charles and Katherine believe success is a product of hard work and dedication, and quick financial rewards are an illusion.Kim, however, believes that times have changed radically since “Grandpa Chick” began at Sullivan Manufacturing, and the good life involves fast cash, fast cars and fast friends. In addition to divergent attitudes on how to gain success, the Brennans have endured their share of challenges. Specifically, their grandchild, Steve, has been arrested and convicted of drug-related offenses, and their grandchild Bill can’t seem to hold a job. Oh, the challenges presented by the Brennans.
Charles wants to make sure his fortune goes to his spouse and children, but wants to make sure it is not squandered and remains in trust until each child reaches 40 years old.
Your assignment: Prepare an outline and narrative of the trust terms that would be appropriate for the Charles Brennan. You do not need to draft or create the specific paragraphs for the trust; however, you must list and explain the appropriate trust provisions that would address the facts and concerns of Charles Brennan. Name the individual(s) or entities you would have serve in a role if and when appropriate. Make sure you:
List and identify for 5-7 trust provisions that would be appropriate;
Describe the purpose and/or goal of these provisions–why would you use these provisions given the goals and objectives of Charles and Katherine; and
Include the applicable law or legal analysis on the provisions included in the trust–what is the effect of the provisions when the trust terms become effective.
