Deck 29: Insurance, Wills, and Trusts

Question 1

Social Media Estate Planning
People are generally quite careful about choosing the personal representatives who will deal with their real estate, bank accounts, and investments after they are gone. Today, the same care should be taken in choosing an online executor to deal with a deceased's online identity, particularly in social media.
What an Online Executor Should Do
An online executor is responsible for dealing with a decedent's e-mail addresses, social media profiles, and blogs. E-mail accounts should be closed, but some people do not want their social media profiles to be erased after they die. They want the profiles to be maintained, at least for some specified time after death, so that family and friends can visit them. Some people ask that the online executor place a memorial profile in their social media accounts.
Why Social Media Estate Planning Is Important
Online estate planning is essential because the deceased can still be a victim of identity theft. Unscrupulous fraudsters often use dead people's online identities to defraud private companies, individuals, and federal and state governments. If all of a person's e-mail addresses and social media accounts are closed, it is harder for online fraudsters to use them for identity theft.
In addition, closing an e-mail account not only protects family members from being harassed with continuing spam after the person's death but also prevents spammers from hijacking the account. Spammers can use a dead person's e-mail account as the sender of billions of unwanted bulk e-mails.
Why might an online executor need a copy of the deceased's death certificate?

Answer 1

People should be careful in choosing their representatives that will deal with their bank accounts, investments and estate when they are gone.
Online Executor:
Online executor is a person who deals with the social media profiles, blogs and e-mail addresses of a decedent person. He is a representative of the deceased person.
Online estate planning is important as it helps to close the social media profiles and other related things of the deceased person.
The online executor needs a copy of the death certificate of the deceased person to actually close deceased's profiles from social media and other sites. It is presented as a proof that the person is actually dead.

Question 2

Bad Faith Actions. Leo and Mary Deters owned Deters Tower Service, Inc., in Iowa. Deters Tower serviced television and radio towers and antennas in a multistate area. The firm obtained a commercial general liability policy issued by USF Insurance Co. to provide coverage for its officers, including Leo. One afternoon, Leo and two Deters Tower employees were working on a TV tower in Council Bluffs when they fell from the tower to their deaths. The workers' families filed a negligence suit against Leo's estate. USF refused to defend the Deters estate against the suit and pay any resulting claim and did not provide a reason for this response. Is USF liable to the Deters estate for this refusal? If so, on what basis might the Deters estate recover, and how much? [ Deters v. USF Insurance Co., 797 N.W.2d 621 (Iowa App. 2011)] (See Insurance.)

Answer 2

Liability Insurance:
Insurance is a type of contract and is generally governed by contract laws. In a liability insurance policy the insurance company has a duty to make reasonable efforts to settle any claim arising from any event that is mentioned in the insurance contract.
If settlement cannot be reached to the insurer should defend the insured against any consequent suit.
Bad Faith Action:
A bad faith action in insurance refers to a legal term that represents a wrongful and unfair action of insurance company against the insurer.
Person L and M owned a company engaged in providing television and radio's antennas and tower services. They were insured under a general liability policy by Company U. Once, two employees of the company died after falling from the TV tower.
Worker's family member filed a negligence suit against L and M. L and M asked U to defend them but it refused without providing any reason.
In the above question the refusal of U to protect L and M can be considered as a bad faith action. It is the duty of the insurer to defend the insured against any claim, atleast till the limit of the value of insurance policy.
Company U is liable for its refusal and L and M can recover the amount that is ordered as settlement from Company U. They are also entitled to recover some punitive damages from U.
Thus, it can be concluded that U can be held liable for his bad faith action and L and M can recover the amount from U.

Question 3

Timing of Insurance Coverage. On October 10, Joleen Vora applied for a $50,000 life insurance policy with Magnum Life Insurance Co. She named her husband, Jay, as the beneficiary. Joleen paid the insurance company the first year's premium on making the application. Two days later, before she had a chance to take the physical examination required by the insurance company and before the policy was issued, Joleen was killed in an automobile accident. Jay submitted a claim to the insurance company for the $50,000. Can Jay collect? Explain. (See Insurance.)

Answer 3

Person JV applied for a life insurance policy of $50,000 and made her husband J the beneficiary. After two days she was killed in an automobile accident before giving the physical examination. However, she had already paid her first year's premium. It needs to be determined whether her husband can claim the insurance.
The general principles guiding common law is also applicable in an insurance contract. However, insurance policy of each state might differ. An insurance contract would become binding if the person applying for the insurance have paid the premium as consideration and both the parties have the required contractual capacity.
In this case, Person JV has already paid the first year's premium for the contract. However, she had not given the medical examination. The policy was also not issued by the insurance company. In this case, if the insurance company would have imposed some conditional acceptance on the insurance like medical examination, then J cannot collect the insurance benefit.

Question 4

What are the four essential elements of a trust? What is the difference between an express trust and an implied trust?

Question 5

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
Is an insurance broker the agent of the insurance applicant or the agent of the insurer?

Question 6

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What are the four essential elements of a trust? What is the difference between an express trust and an implied trust?

Question 7

Sheila makes out a will, leaving her property in equal thirds to Toby and Umeko, her children, and Velda, her niece. Two years later, Sheila is adjudged mentally incompetent, and that same year, she dies. Can Toby and Umeko have Sheila's will revoked on the ground that she did not have the capacity to make a will? Why or why not? (See Wills.)

Question 8

Undue Influence. Susie Walker executed a will that left her entire estate to her grandson. When her grandson died, Susie executed a new will that named her great-grandson as her sole beneficiary and specifically disinherited her son, Tommy. At the time, Tommy's ex-wife was living with Susie. After Susie died, Tommy filed a suit, claiming that her will was the product of undue influence on the part of his ex-wife. Several witnesses testified that Susie had been mentally competent when she executed her will. Does undue influence appear likely based on these facts? Why or why not? [ In re Estate of Walker, 80 A.D.3d 865, 914 N.Y.S.2d 379 (3 Dept. 2011)] (See Wills.)

Question 9

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
Is an insurance broker the agent of the insurance applicant or the agent of the insurer?

Question 10

Insurance Provisions and Clauses. Darling's Rent-a-Car carried property insurance on its cars under a policy issued by Philadelphia Indemnity Insurance Co. The policy listed Darling's as the "insured." Darling's rented a car to Joshuah Farrington. In the rental contract, Farrington agreed to be responsible for any damage to the car and declined the optional insurance. Later, Farrington collided with a moose. Philadelphia paid Darling's for the damage to the car and sought to collect this amount from Farrington. Farrington argued that he was an "insured" under Darling's policy. How should "insured" be interpreted in this case? Why? [ Philadelphia Indemnity Insurance Co. v. Farrington, 37 A.3d 305 (Me. 2012)] (See Insurance.)

Question 11

In June 2013, Bernard Ramish set up a $48,000 trust fund through West Plains Credit Union to provide tuition for his nephew, Nathan Covacek, to attend Tri-State Polytechnic Institute. The trust was established under Ramish's control and went into effect that August. In December, Ramish suffered a brain aneurysm that caused frequent, severe headaches but no other symptoms. In August 2014, Ramish developed heat stroke and collapsed on the golf course at La Prima Country Club.
After recuperating at the clubhouse, Ramish quickly wrote his will on the back of a wine list. It stated, "My last will and testament: Upon my death, I give all of my personal property to my friend Bernard Eshom and my home to Lizzie Johansen." He signed the will at the bottom in the presence of five men in the La Prima clubhouse, and all five men signed as witnesses.
A week later, Ramish suffered a second aneurysm and died in his sleep. He was survived by his mother (Dorris Ramish), his nephew (Nathan Covacek), his son-in-law (Bruce Lupin), and his granddaughter (Tori Lupin). Using the information presented in the chapter, answer the following questions.
1. Does Ramish's testament on the back of the wine list meet the requirements for a valid will?
2. Suppose that after Ramish's first aneurysm in 2014, Covacek contacted an insurance company to obtain a life insurance policy on Ramish's life. Would Covacek have had an insurable interest in his uncle's life? Why or why not?
3. What would the order of inheritance have been if Ramish had died intestate?
4. What will most likely happen to the trust fund established for Covacek on Ramish's death?

Question 12

A Question of Ethics-Will Requirements. Vickie Lynn Smith, an actress and model also known as Anna Nicole Smith, met J. Howard Marshall II in 1991. During their courtship, J. Howard lavished gifts and large sums of money on Anna Nicole, and they married on June 27, 1994. J. Howard died on August 4, 1995. According to Anna Nicole, J. Howard intended to provide for her financial security through a trust, but under the terms of his will, all of his assets were transferred to a trust for the benefit of E. Pierce Marshall, one of J. Howard's sons. While J. Howard's estate was subject to probate proceedings in a Texas state court, Anna Nicole filed for bankruptcy in a federal bankruptcy court. Pierce filed a claim in the bankruptcy proceeding, alleging that Anna Nicole had defamed him when her lawyers told the media that Pierce had engaged in forgery and fraud to gain control of his father's assets. Anna Nicole filed a counterclaim, alleging that Pierce prevented the transfer of his father's assets to a trust for her by, among other things, imprisoning J. Howard against his wishes, surrounding him with security guards to prevent contact with her, and transferring property against his wishes. [ Marshall v. Marshall, 547 U.S. 293, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006)] (See Wills.)
1. What is the purpose underlying the requirements for a valid will? Which of these requirements might be at issue in this case? How should it apply here? Why?
2. State courts generally have jurisdiction over the probate of a will and the administration of an estate. Does the Texas state court thus have the sole authority to adjudicate all of the claims in this case? Why or why not?
3. How should Pierce's claim against Anna Nicole and her counterclaim be resolved?
4. Anna Nicole executed her will in 2001. The beneficiary-Daniel, her son, who was not J. Howard's child-died in 2006, shortly after Anna Nicole gave birth to a daughter, Dannielynn. In 2007, before executing a new will, Anna Nicole died. What happens if a will's beneficiary dies before the testator? What happens if a child is born after a will is executed?

Question 13

Wills and Intestacy Laws. Benjamin is a widower who has two married children, Edward and Patricia. Patricia has two children, Perry and Paul. Edward has no children. Benjamin dies, and his will leaves all his property equally to his children, Edward and Patricia, and provides that should a child predecease him, the grandchildren are to take per stirpes. The will was witnessed by Patricia and by Benjamin's lawyer and was signed by Benjamin in their presence. Patricia has predeceased Benjamin. Edward claims the will is invalid. (See Wills.)
1. Discuss whether the will is valid.
2. Discuss the distribution of Benjamin's estate if the will is invalid.
3. Discuss the distribution of Benjamin's estate if the will is valid.

Question 14

Critical Thinking Legal Question. Statistics show that the extent of risk assumed by insurance companies varies depending on the gender of the insured. Many people contend that laws prohibiting gender-based insurance rates are thus fundamentally unfair. Why might gender discrimination be fair when it comes to insurance premiums when it is clearly unfair (and illegal) in housing or employment?

Question 15

What is an insurable interest? When must an insurable interest exist-at the time the insurance policy is obtained, at the time the loss occurs, or both?

Question 16

FACTS Alberto and Karelli Mila were insured under a homeowners' liability policy. "Exclusion k" of the policy stated that coverage did not apply to "bodily injury arising out of sexual molestation, corporal punishment or physical or mental abuse." Verushka Valero, on behalf of her child, filed a suit in a Florida state court against the Milas, charging them with negligent supervision of a perpetrator who had sexually molested Valero's child.
The Milas filed a claim asking their insurer to defend against the charges. The insurer had become insolvent, so the claim was submitted to the Florida Insurance Guaranty Association, Inc. (FIGA). FIGA is a nonprofit corporation created by the Florida legislature to evaluate and resolve claims when insurance companies become insolvent (a similar insurance guaranty association exists in nearly every state). FIGA refused to pay the Milas' claim and asked the court to rule that it had no obligation under the policy to provide such a defense. The court issued a summary judgment in FIGA's favor. Valero and the Milas appealed, arguing that exclusion k was ambiguous.
ISSUE Was the term of the Milas' insurance policy that excluded coverage for "bodily injury arising out of sexual molestation" ambiguous as to whether it covered acts by someone under their supervision?
DECISION No. A state intermediate appellate court affirmed the lower court's judgment. The exclusion applied to preclude coverage in this case.
REASON The Milas pointed out that a different exclusion, exclusion l, used the phrase "by any person" and exclusion k did not. Thus, the Milas contended, it was not clear whether exclusion k applied only to acts of an insured. The court read the entire list of twelve exclusions together and concluded that the phrase in exclusion l was "superfluous." Even if the phrase "by any person" had been used in exclusion k, coverage might still have been denied, as in this case. Valero and the Milas also cited decisions from other jurisdictions to support their argument. The court found these decisions to be "not helpful" because they considered exclusions in isolation, not in the context of other exclusions.
What If The Facts Were Different? Suppose that exclusion k, instead of exclusion l, had used the phrase "by any person." Would the result have been different? Explain.

Question 17

Ralph dies without having made a will. He is survived by many relatives-a spouse, children, adopted children, sisters, brothers, uncles, aunts, cousins, nephews, and nieces. What determines who gets what? (See Wills.).

Question 18

FACTS In 1975, William Melton executed a will that, among other things, stated that his daughter, Vicki Palm, was to receive nothing. In 1979, he added a handwritten note to the will, saying that his friend, Alberta Kelleher, was to receive a small portion of his estate. In 1995, Melton sent a signed, handwritten letter to Kelleher. In the letter, Melton said he was returning from his mother's funeral and, because she had died in an automobile accident, he wanted to put "something in writing" leaving Kelleher his "entire estate." Melton also said, "I do not want my brother Larry J. Melton or Vicki Palm or any of my other relatives to have one penny of my estate."
When Melton died in 2008, Kelleher had already passed away, and Palm was his only natural heir. The state of Nevada argued that it should receive everything because Palm had been disinherited. Nevertheless, the trial court applied the state's intestacy laws and distributed the entire estate to Palm. The state appealed.
ISSUE Could Melton bypass Nevada's intestacy laws through a will that disinherited his family but failed to dispose of his property?
DECISION Yes. The Nevada Supreme Court reversed the judgment of the lower court. It held that the disinheritance clause was enforceable and that Melton's estate should go to the state of Nevada.
REASON Under the common law, the courts have developed two rules to determine whether a disinheritance clause should apply to any property that is not distributed by the will. Under the English rule, a disinheritance clause is enforceable only if "at least one … heir remained eligible to receive the intestate property." Under the American rule, the testator must "affirmatively dispos[e] of the entire estate through a will." Many courts follow the American rule because disinheritance clauses create complications when they are applied to intestate property.
For example, some courts say that such clauses "create an undesirable 'mixing' of the probate and intestacy systems by requiring courts to alter the distribution scheme provided in the intestacy statute." The state of Nevada, however, has rejected the common law rule by defining a will to include a "testamentary instrument that merely … excludes or limits the right of an individual or class to succeed to property of the decedent passing by intestate succession." As a result, Melton could disinherit his family without giving his property to someone else. Therefore, the state was entitled to Melton's property.
For CRITICAL analysis-Legal Consideration Based on the information presented here, did Melton have testamentary intent when he wrote his letter? Why or why not?

Question 19

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What is an insurable interest? When must an insurable interest exist-at the time the insurance policy is obtained, at the time the loss occurs, or both?

Question 20

Intestacy Laws A Florida statute provides that the right of election of a surviving spouse can be waived by written agreement: "A waiver of 'all rights,' or equivalent language, in the property or estate of a present or prospective spouse … is a waiver of all lights to elective share." The day before Mary Ann Taylor married Louis Taylor in Florida, they entered into a prenuptial agreement. The agreement stated that all property belonging to each spouse would "forever remain his or her personal estate," "said property shall remain forever free of claim by the other," and the parties would retain "full rights and authority" over their property as they would have "if not married." After Louis died without a will, his only child, Joshua Taylor, filed a petition in a Florida state court for a determination of the beneficiaries of Louis's estate. How much of the estate can Mary Ann elect to receive? Explain. [ Taylor v. Taylor , 1 So.3d 348 (Fla.App. 1 Dist. 2009)]

Question 21

What are the basic requirements for executing a will?

Question 22

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What are the basic requirements for executing a will?

Question 23

Case Problem with Sample Answer-Requirements of a Will. Katherine Hagan executed a will that left her estate to various charitable organizations, such as the Humane Society, and expressly excluded her relatives. When Hagan died, her estate was worth $1.48 million. Janice Benjamin and other Hagan relatives objected to the will. They argued that it was invalid because Hagan had not been of "sound mind" and that the funds should pass to them by intestacy. Should the will be declared void? Why or why not? [ Benjamin v. JPMorgan Chase Bank, N.A., 305 S.W.3d 446 (Ky.App. 2010)] (See Wills.)

Question 24

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

Question 25

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What is the difference between a per stirpes distribution and a per capita distribution of an estate to the grandchildren of the deceased?