changes in distribution of testamentary gifts Flashcards
classification of gifts that can be made by a will
a) Specific Gift: A gift of tangible property; only that asset can satisfy the gift.
1) Example: “I devise Blueacre (my Dell computer) to my son John.”
b) Demonstrative Legacy: A general amount, but Testator designates specific source from which to be paid.
1) Note: it designated source doesn’t have enough cash, the demonstrative gift turns into general legacy
2) Example: “I bequeath $5,000, to be paid from the proceeds of sale of IBM stock, to Donna.”
c) General Legacy: a general amount (dollar/stock)
1) Example: “I give the sum of $5,000 (50 shares of IBM) to George.”
d) Residuary Disposition: “I give all the rest, residue and remainder of my estate to my brother Jim.”
e) Intestate Property: If partial intestacy results because Will poorly drafted without residuary clause and no anti-lapse application.
1) Example: “I give $100k to John.” John predeceases, no residuary clause, no anti-lapse.
abatement (reduction of legacies) to satisfy creditors’ claims
a) General Rule: When more claims against estate than assets to pay gifts under Will → gifts abate (not given effect) so creditors’ claims can be satisfied first.
b) Order of Abatement: Absent provision in Will, debts and expenses are first paid out of:
1) any intestate property and residuary property first (treated the same); THEN
2) general legacies (abate pro rata); THEN
3) demonstrative legacies (abate pro rata); THEN
4) specific gifts; AND ONLY THEN
5) dispositions qualifying for estate tax martial deduction.
6) TIP: the gifts that the testator put the most thought are abated last.
(a) Within each gift class, no distinction made between real and personal property.
ademption (failure of gift)
a) General Rule: If testator makes Specific Gift of property in will and that property cannot be found or is not owned by testator at death → gift fails under Doctrine of Ademption, without regard to testator’s probable intent.
aka specific loses if gift can’t be found
TIP: Ademption only applies to specific gifts. Demonstrative gifts turn into general legacy if designated source doesn’t have enough cash, and other assets can be sold to satisfy a demonstrative legacy
TIP: reason asset is not in estate is irrelevant (so even if asset taken by eminent domain or condemnation, ademption still applies)
b) Exceptions
1) Casualty Insurance: beneficiary takes insurance proceeds for lost, damaged, or destroyed property to the extent paid after death
2) Executory Contract: beneficiary takes proceeds paid after death for contract not performed at death.
3) Sale by Guardian or Conservator of Specifically Bequeathed Property: beneficiary entitled to receive the money or property into which proceeds from sale or transfer can be traced and have not been spent. If proceeds can’t be traced → ademption. (EPTL § 3-4.4)
specific gifts of encumbered property-no exoneration of liens
a) CL/MBE: if testator made specific property gift subject to mortgage lien (or similar) on which testator was personally liable, beneficiary entitled to have the lien “exonerated” and paid from residuary estate.
b) NYS: by statute, liens on specifically devised (general provisions for payments of debts are insufficient) property are NOT exonerated unless the Will specifically directs exoneration of encumbered property. Devisee or distributee takes subject to mortgage (no assignment, so devisee or distributee not personally liable; neither is estate—no one is) (unlike MBE).
1) Testator must specifically direct that the estate extinguish the lien on the property.
(a) Just Debts Clause: a general provision in Will for payment of debts is insufficeint. EPTL § 3-3.6.
bequests of shares of stock and other securities
a) Publicly-Traded Stock: gift of stock in publicly traded company is general legacy (doesn’t adeem), UNLESS testator says “I give my . . . stock” → intention to make specific bequest (adeems).
1) Effect: for ademption purposes, stock is treated as a gift for a certain value if sold before death.
b) Closely Held Stock: gift of shares in closely held corporation is presumptively a specific bequest (adeems)
c) Stock Splits: gifts of shares of stock where stock split occurs are treated as specific bequest for purposes of split
1) Note: Specific bequest treatment for stock split whether or not a possessive pronoun (“my”) was used and/or whether the stock was publicly traded or closely held.
2) Mere Change in Form (stock-for-stock exchange in a merger): does NOT trigger ademption (can directly trace the exchanged shares).
