Changes In Beneficiaries and Property After Will Execution

Question 1

Classification of Testamentary Gifts - Significance

Answer 1

• matters for the sake of issues like ademption, satisfaction and abatement

Question 2

Devise - Definition

Answer 2

• gift of real property
• recipient = devisee

Question 3

Bequest - Definition

Answer 3

• gift of personal property

Question 4

Legacy - Definition

Answer 4

• gift of personal property in a will, usually of money
• recipient is called a legatee

Question 5

Specific Devise or Legacy

Answer 5

• a gift of a particular item of property distinct from all other objects in the testator’s estate
• specific bequest of a general nature is not distinguishable from the rest of the testator’s estate until the testator dies (ex: “I leave my computer to X” instead of a statement providing the specific model of the computer)

Question 6

General Legacy

Answer 6

• a gift of general economic benefit (often a dollar amount) payable out of the general assets of the estate without requiring any particular source of payment

Question 7

Demonstrative Legacy

Answer 7

• gift of a general amount that is to be paid from a particular source or fund
• hybrid -> treated as a specific legacy to the extent the source of payment is available and a general legacy to the extent of any shortfall of that source of payment
• if the designated fund is insufficient, the balance will usually be paid from other assets of the estate

Question 8

Residuary Estate

Answer 8

• consists of the balance of the testator’s property after paying:
  1) debts, expenses, and taxes AND
  2) specific, general, and demonstrative gifts
• some testators use he residuary for the “forgotten” items that weren’t dealt with earlier in the will
  -> vs. others use the residuary gift as the main disposition of their property

Question 9

Ademption by Extinction

Answer 9

• ademption refers to failure of a gift b/c the property is no longer in the testator’s estate at the time of their death
• applies ONLY to specific devises and bequests
  -> most states follow the “identity” approach -> if specifically bequeathed property is not in the testator’s estate at death, the bequest is adeemed + beneficiary takes nothing (no substitute gift, no value of gift, can’t trace into the proceeds even if identifiable)
  -> in most states, court won’t inquire into testator’s intent or reason the property is no longer in the estate

Question 10

Partial Ademption

Answer 10

• ex: where testator devises a large tract of land + then conveys a portion of the tract during their life
• beneficiary takes the remaining portion

Question 11

Ademption - General or Demonstrative Legacies

Answer 11

• ademption does NOT apply to general or demonstrative legacies
  -> neither are adeemed by absence of case or the specific asset in the estate
  -> will be satisfied by selling (or directly giving) other assets
• to avoid ademption, court will attempt to construe a gift of securities as a general legacy

Question 12

Common Statutory Exemptions to the Ademption Doctrine

Answer 12

• replacement property
• balance of purchase price
• proceeds of condemnation award or insurance
• proceeds from sale by guardian or conservator

Question 13

Ademption - Replacement Property

Answer 13

• some states allow beneficiary to receive replacement property of testator replaced the gifted item with another similar item (ex with computer)

Question 14

Ademption - Balance of Purchase Price

Answer 14

• if testator sold gifted item + purchaser still owes money to the testator, some states allow beneficiary to receive the remaining money

Question 15

Ademption - Proceeds of Condemnation Award or Insurance

Answer 15

• some states allow beneficiary to receive a condemnation award paid after testator’s death or casualty insurance proceeds for the loss of the property if they are paid after testator’s death

Question 16

Ademption - Proceeds from Sale by Guardian or Conservator

Answer 16

• if testator became incompetent + 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

Question 17

Ademption by Satisfaction

Answer 17

• 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 writing or specific instructions in will before the gift is deemed a satisfaction
  -> UPC states - doctrine doesn’t apply unless testator provides for satisfaction in the will or a contemporaneous writing, or the devisee acknowledges in writing the gift as one in satisfaction
• writing not required if testator gives specifically described property to the beneficiary (in this case, both a satisfaction of the legacy and an ademption)

Question 18

Accession

Answer 18

• increase to property after execution of will

Question 19

Accession - Specific Gifts

Answer 19

• appreciation + depreciation of specifically gifted property between will execution + death normally irrelevant

Question 20

Accession - Increases Occurring Before Testator’s Death

Answer 20

• income on property goes into the general estate, but improvements to real property go to the specific devisee

Question 21

Accession - Increases Occurring After Testator’s Death

Answer 21

• any increase to specific gifts occurring after testator’s death passes to the specific beneficiary b/c the beneficiary is deemed to own the property from the time of the testator’s death

Question 22

Securities Acquired After Will Execution - Stock Splits and Stock Dividends

Answer 22

• at common law, specific bequest in stock includes any additional shares produced by a stock split
• BUT does not include shares produced by a stock dividend
• today, UPC and nearly all states also include stock dividends
• beneficiary will also take an increase in securities caused by a merger or corporate reorganization

Question 23

Securities Acquired After Will Execution - Newly Purchased Securities

Answer 23

• beneficiary does not take new securities that have been purchased or acquired by the reinvestment of dividends

Question 24

Exoneration of Liens

Answer 24

• UPC + large number of states provide that liens on specifically devised property are NOT exonerated (i.e. paid off with estate funds) unless the will so directs
• means that beneficiary takes subject to the debt

Question 25

Abatement

Answer 25

• 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 testator does not set out an order of abatement in the will, testamentary gifts will usually abate in the following order (ones at the bottom are most likely to be paid out):
- property passing by intestacy
- residuary estate
- general legacies
- demonstrative legacies
- specific bequests + devisees

Question 26

Abatement - Reminders

Answer 26

• within a class, abatement is pro rata
• in some states, personal property in each category is used before real property in that category
• demonstrative legacies - treated as specific legacies for abatement purposes to the extent that they CAN be satisfied from the designated source, + to the extent that they CAN’T be satisfied from the designate fund, they’re treated as general legacies

Question 27

Lapse of Gifts

Answer 27

• gift lapses if beneficiary predeceases the testator OR if beneficiary is treated as not surviving testator (ex b/c beneficiary disclaimed or did not survive long enough)

Question 28

Distribution of Lapsed Gifts

Answer 28

Who receives a lapsed gift is controlled by:
- express terms of the will
- rule of law (such as an anti-lapse statute)
- residuary clause
- intestacy

Question 29

Anti-Lapse Statutes

Answer 29

• nearly all states have anti-lapse statutes -> operate to save the gift if the predeceasing beneficiary was in a specified degree of relationship to the testator (ex: descendant of the testator, testator’s paren, or testator’s grandparent) + left descendants who survived the testator
  -> these descendants then take by substitution
• statute applies unless contrary provision appears in the will
  -> in most states, words of survivorship are considered a contrary will provision, + anti-lapse statute will not be applied
  -> BUT under UPC, mere words of survivorship not sufficient to negate application of the anti-lapse statute

Question 30

Lapse in Residuary Gifts

Answer 30

• if a will devises the residuary estate to two or more beneficiaries and one of them predeceases the testator (and the anti-lapse statute does not apply) some states follow common law + do not allow surviving residuary beneficiaries to divide the deceased beneficiary’s share among them (unless will specifically allows this)
  -> instead, the deceased beneficiary’s share passes by intestacy
• BUT most states have replaced the “no residue of a residue” rule w/ one allowing the surviving residuary beneficiaries to divide the share in proportion to their interests in the residue
  -> anti-lapse statute takes precedence though where it applies

Question 31

Class Gifts

Answer 31

• 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

Question 32

Beneficiary Dead When Will Executed

Answer 32

• if a will makes a gift to a beneficiary who was dead at the time the will was executed, the gift is void
• in many states, the rules that apply to lapsed gifts also apply to void gifts