Changes in beneficiaries and property after will execution

Question 1

Classification of gifts

Answer 1

Important for issues like ademption, satisfaction, and abatement

Based on type of property and type of beneficiary

Question 2

Classification based on type of property - devise, bequest, legacy

Answer 2

A devise is a gift of real property and the recipient of a devise is a devisee

A bequest is a gift of personal property

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

Question 3

Specific devise or legacy and specific bequest of general nature

Answer 3

A specific devise or legacy is a gift of a particular item of property distinct from all other objects in the testator’s estate

A specific bequest of a general nature is not distinguishable from the rest of the testator’s estate until the testator dies
- leave my computer to X

Question 4

General legacy

Answer 4

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

Gift of 100 shares of xyzzy stock or 100 acres of property in smith country can also be general legacies if the testator never owned those items and intended the executor to purchase them for the beneficiary

Question 5

Demonstrative legacy

Answer 5

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 designated fund in sufficient, balance will usually be paid from other assets of the estate

Question 6

Residuary estate

Answer 6

Residuary estate and a gift of the residue consists of the balance of the testator’s property after paying
- debts, expenses, and taxes, and
- specific, general, and demonstrative gifts

Some use this for the forgotten items and some use as the main disposition of their property

Question 7

Ademption

Answer 7

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

Does not get anything if the item given is not in the estate

Question 8

Identity theory - ademption

Answer 8

Under the identity theory applied in most states, the demotion doctrine is an objective test that does not take into account the testator’s probable intent

If the property is not in the estate at the testator’s death, adeemed and reason it is not in the estate is immaterial

Question 9

Ademption - specific devises and bequests

Answer 9

Ademption applies only to specific devises and bequests

Most states follow the identity approach so that if specifically bequeathed property is not in the testator’s estate at death, the bequest is adeemed and the beneficiary takes nothing

Does not take a substitute gift nor the value of the gift and beneficiary cannot trace into the proceeds of the sale of the gift even if identifiable

Most states - court will not inquire into the testator’s intent or the reason the property is no longer in the estate

Question 10

Partial ademption

Answer 10

A gift may be partially adeemed - testator devises a large tract of land and then conveys a portion of the tract during their life

Beneficiary takes the remaining portion

Question 11

Ademption - general or demonstrative legacies

Answer 11

Neither general nor demonstrative legacies are adeemed by an absence of cash or the specific asset in the estate
- satisfied by selling or directly giving other assets

Question 12

Avoiding ademption

Answer 12

To avoid ademption, a court will attempt to construe a gift of securities as a general legacy, unless the testator specifically stated, MY 200 shares of Acme stock”

Question 13

Ademption exception - replacement property

Answer 13

Some states allow the beneficiary to receive replacement property if the testator replaced the gifted item with another similar item

Question 14

Ademption exception - balance of purchase price

Answer 14

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

Question 15

Ademption exception - proceeds of condemnation award or insurance

Answer 15

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

Question 16

Ademption exception - proceeds from sale by guardian or conservator

Answer 16

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

If a guardian or conservator is appointed for the testator after the will is executed and the bequeathed property is sold by the guardian, the beneficiary is entitled to the sale proceeds
- at least to the extent they have not been expended for the testator’s care

Question 17

Ademption by satisfaction

Answer 17

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 a gift is deemed a satisfaction

Question 18

Ademption by satisfaction - UPC

Answer 18

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

However, writing is not required if the testator gives specifically described property to the beneficiary
- in this case, there is both a satisfaction of the legacy and an ademption

Question 19

Increases to property after execution of will - appreciation and deprivation

Answer 19

Appreciation and deprivation of speficially gifted property between will execution and death is normally irrelevant

Question 20

Increases to property after execution of will - income on property before death

Answer 20

Income on property that occurs before death goes into the general estate, but improvements to real property before death go to the specific devisee

Question 21

Increases to property after execution of will - increases occurring after death

Answer 21

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

Question 22

Securities acquired after will execution - stock splits and stock dividends

Answer 22

At 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
- 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

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

Question 24

Exoneration of liens

Answer 24

While the common law and some states follow the contrary view, the UPC and a large number of state provide that liens on specifically devised property are not exonerated (paid off with estate funds) unless the will so directs

Beneficiary takes property 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

Question 26

Abatement order

Answer 26

If 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 devices

Within a class, abatement is pro rate
- in some states, personal property in each category is used before real property in that category

Question 27

Abatement - demonstrative legacies and specific / general legacies

Answer 27

To the extent they can be satisfied from the designated source, demonstrative legacies are treated as specific legacies for abatement purposes

To the extent the fund is insufficient, demonstrative legacies are treated as general legacies for abatement purposes

Question 28

Lapsed gift

Answer 28

A gift lapses if the beneficiary predeceases the testator or if the beneficiary is treated as not surviving the testator

Question 29

Distribution of lapsed gifts

Answer 29

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

Question 30

Anti-lapse statute

Answer 30

Nearly all states have these - operate to save the gift if
- the predeceasing beneficiary was in a specified degree of relationship to the testator (descendant of testator, testators parent or grandparent) and
- left descendants who survived the testator

Take by substitution

Statute applies unless a contrary provision is in will

Question 31

Words of survivorship and contrary will provision - anti-lapse statute

Answer 31

In most states, words of survivorship are considered a contrary will provision and the anti-lapse statute will not be applied

Under UPC, mere words of survivorship are not sufficient to negate application of the anti-lapse statute

Question 32

Lapse in residuary gift - common law

Answer 32

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 the common law rule and do not allow the surviving residuary beneficiaries to divide the deceased beneficiary’s share among them
- unless the will specifies this

Instead, deceased beneficiary’s share passes by intestacy

Question 33

Lapse in residuary gift - most states today

Answer 33

Most states have replaced this no residue of a residue rule with one allowing the surviving residuary beneficiaries to divide the share in proportion to their interests in the residue

But if anti-lapse statute’s provisions are met, that statute takes precedence and the deceased beneficiary’s descendants take

Question 34

Class gifts

Answer 34

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 35

Beneficiary dead when will executed

Answer 35

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, rules that apply to lapsed gifts also apply to void gifts