DISTRIBUTION OF THE ESTATE: WHAT DOES A BENEFICIARY TAKE?

Question 1

Issues

Answer 1

After-acquired property
Increase during Testator’s lifetime
Increase after Testator’s death and during probate
Abatement
Exoneration

Question 2

After-Acquired Property

Answer 2

It is property acquired after the Will was executed

A will passes all property the testator owned at death, including afteracquired property.

Question 3

Increase During Testator’s Lifetime

Answer 3

Rule: Stock dividends or splits paid during testator’s lifetime go to the beneficiary if the stock is owned by testator at testator’s death.

Question 4

Increase After Testator’s Death and During Probate
[A] Regarding specific devises, all increase goes to the beneficiary:

Answer 4

1. Stock dividends
2. stock splits
3. rents
4. Cash dividends
5. Interest on indebtedness

Question 5

Increase After Testator’s Death and During Probate
[A] Regarding General devises

Answer 5

As a general rule, general devisees do not receive any increase.

Exception: General pecuniary gifts earn interest on such gifts not distributed one year after testator’s death

Question 6

Abatement

Answer 6

The process by which certain gifts are decreased

Question 7

When abatement arises:

Answer 7

[1] When it is necessary to pay for the share of the omitted child or omitted spouse or omitted domestic partner.
[2] When there is an omitted child or omitted spouse or omitted domestic partner, the gifts of devisees have to be decreased to come up with the statutory share of the omitted child or omitted spouse or omitted domestic partner.
[3] Thus, whenever you have an omitted child or omitted spouse or omitted domestic partner, there will almost certainly be the related issue of abatement.

Question 8

Order of abatement for omitted children and omitted spouses and omitted domestic partners:

Answer 8

[1] First abate property not passing by the decedent’s will or revocable inter-vivos trust.
[2] Then abate from all beneficiaries of testator’s will and
revocable inter-vivos trust pro rata, in proportion to the value of the gift received.

Question 9

Exception for Order of abatement for omitted children and omitted spouses and omitted domestic partners:

Answer 9

Exception for specific gifts: the court can exempt the specific gift if abating the specific gift would defeat the obvious intention of the testator. This obvious intention must appear from the language in which the specific devise is created, or from the general terms of the will or trust.

Question 10

Note that the order of abatement for omitted children and
omitted spouses and omitted domestic partners is not the order of abatement to pay off general debts of the decedent. The order to pay off general debts of the decedent is:

Answer 10

[i] intestate property;

[ii] residuary gifts;

[iii] general gifts to non-relatives;
[iv] general gifts to relatives;

[v] specific gifts to non-relatives;
[vi] specific gifts to relatives. To the extent they can be satisfied from the designated fund, demonstrative gifts are treated as specific gifts.

Question 11

Exoneration

Answer 11

The debt is extinguished

Question 12

Exoneration Common law view:

Answer 12

If testator devised a specific gift subject to an encumbrance (e.g. a mortgage) for which testator was personally liable, the executor was required automatically to pay off the debt before passing the property to the beneficiary.

Question 13

Exoneration CA:

Answer 13

No automatic exoneration

In California, the devisee takes the specific gift subject to the encumbrance, unless the testator’s will states that the specific gift is to be exonerated. Moreover, a general direction “to pay all my just debts” is not sufficient to exonerate. If the gift is exonerated, in the absence of a contrary intention in the will, other specific gifts do not abate.