Changes in Beneficiaries and Property After Will Execution Flashcards
What are the Different Types of Testamentary Gifts?
1) Specific Devise or Legacy: A gift of a particular item of property distinct from all other objects in the testator’s estate
- Example — I leave my TV to W
2) General Legacy: Gift of a general economic benefit payable out of the general assets of the estate
- Example — I leave $10,000 to Walter
3) Demonstrative Legacy: A gift of a general amount that is to be paid from a particular source or fund
- Example — I leave $10,000 to Walter from my account at XYZ Bank
A demonstrative legacy is a hybrid. It is treated as:
- A specific legacy to the extent the source of payment is available
- A general legacy to the extent of any shortfall of that source of payment
What is the Residuary Estate?
The residuary estate, and hence a gift of the residue, consists of the balance of the testator’s property after paying (1) debts, expenses, and taxes; and (2) specific, general, and demonstrative gifts
What is Ademption by Extinction?
Ademption refers to the failure of a gift because the property is no longer in the testator’s estate at the time of their death
- Ademption applies ONLY to specific devises and bequests.
- Neither general nor demonstrative legacies are adeemed by an absence of cash or the specific asset in the estate; they will be satisfied by selling (or directly giving) other assets.
What is the Majority View of Ademption by Extinction?
Most courts apply the identity theory of the common law, under which the ademption issue is decided solely on the basis of an objective test: whether the specifically bequeathed property is a part of the testator’s estate at her death.
Under this approach, the Testator’s INTENT is IRRELEVANT. The courts do not speculate on the reasons why the property was not in the estate or what the testator might have intended.
What are the Common Statutory Exceptions to the Ademption by Extinction Doctrine?
- Replacement Property: Some states allow the beneficiary to receive replacement property if the testator replaced the gifted item with another similar item
- Balance of Purchase Price: If the testator sold the gifted item and the purchaser still owes money to the testator, some states allow the beneficiary to receive the remaining money
- Proceeds of Condemnation Award or Insurance: Some states allow the beneficiary to receive a condemnation award paid after the testator’s death or casualty insurance proceeds for the loss of the property if they are paid after the testator’s death.
- Proceeds from Sale by Guardian or Conservator: If the testator became incompetent and the specifically devised property was sold by a guardian, the beneficiary may be entitled to a general pecuniary legacy equal to the amount of the proceeds.
What is Ademption by Satisfaction?
A testamentary gift may be satisfied in whole or in part by an inter vivos transfer from the testator to the beneficiary after the execution of the will, if the testator intends the transfer to have that effect.
- Most states REQUIRE a writing or specific instructions in the will before the gift is deemed a satisfaction.
- In UPC states, the doctrine DOES NOT apply unless the testator provides for satisfaction in the will or a contemporaneous writing, or the devisee acknowledges, in writing, the gift as one in satisfaction.
What happens When the Property’s Value Increases After Execution of Will?
Specific Gifts: Appreciation and depreciation of specifically gifted property between will execution and death is normally irrelevant.
Increases Occurring Before Testator’s Death: Income on property goes into the general estate, but improvements to real property go to the specific devisee.
Increases Occurring After Testator’s Death: Any increase to specific gifts occurring after the testator’s death passes to the specific beneficiary because the beneficiary is deemed to own the property from the time of the testator’s death.
What is the Common Law vs. Modern Approach to Stock Splits and Stock Dividends?
Common Law — A specific bequest of stock includes any additional shares produced by a stock split but does not include shares produced by a stock dividend.
UPC/Modern — The UPC and nearly all states also include stock dividends. The beneficiary will also take an increase in securities caused by a merger or corporate reorganization.
What is the Common Law vs. Modern Approach to Exoneration of Liens?
UPC and Large Number of States: Liens on specifically devised property are NOT exonerated (paid off with estate funds) unless the will so directs. This means the beneficiary takes the property subject to the debt.
Common Law: Liens on specifically devised property ARE exonerated
What is Abatement?
Abatement is the process of reducing testamentary gifts in cases where the estate assets are not sufficient to pay all claims against the estate and satisfy all bequests and devises.
If the testator does not set out an order of abatement in the will, testamentary gifts will usually abate in the following order:
- Property passing by intestacy
- Residuary estate
- General legacies
- Demonstrative legacies
- Specific bequests and devises
Within a class, abatement is pro rata. In some states, personal property in each category is used before real property in that category.
What is a lapsed Gift?
A gift lapses if the beneficiary predeceases the testator or if the beneficiary is treated as not surviving the testator because, for example, the beneficiary disclaimed or did not survive long enough.
What is an Anti-Lapse Statute?
Nearly all states have anti-lapse statutes that operate to save the gift if the predeceasing beneficiary was in a specified degree of relationship to the testator (for example, descendant of the testator, the testator’s parent, or the testator’s grandparent) and left descendants who survived the testator. These descendants take by substitution. The statute applies unless a contrary provision appears in the will.
What is the Common Law vs. Modern Approach to Lapsed Gifts?
Common Law — The deceased beneficiary’s share passed by intestacy. The share is not allowed to be divided by the surviving residuary beneficiaries (no residue of a residue rule)
Modern — The deceased beneficiary’s share is allowed to be divided in proportion to the surviving residuary beneficiaries to their interests in the residue
What is the Rule for Class Gifts when dealing with Lapsed Gifts?
If a will makes a gift to a class, ONLY the class members who survive the testator take a share of the gift, unless the will provides otherwise or the anti-lapse statute’s requirements are met.
