Estate issues Flashcards
How are lifetime gifts from testators (post-Will execution)to beneficiaries treated?
Satisfaction of legacies →a lifetime gift (made after a Will’s execution) to a beneficiary named in the testator’s Will was PRESUMPTIVELY made in partial or total satisfaction of the legacy (to be taken into account when distributing the testator’s property in death)
NY has REJECTED “Satisfaction of legacies” doctrine
There is NO satisfaction of legacy UNLESS proved by…
1) a CONTEMPORANEOUS WRITING made at the time of the gift; AND 2) signed by the DONOR or DONEE
Is it possible to incorporate into a Will by reference to an extrinsic document?
NO!
NY does NOT recognize incorporation by reference
EVERYTHING has to be formally executed (i.e. 7 pt test)
What are “nontestamentary acts” AND are they valid?
“Nontestamentary acts”:lifetime acts that have their own purpose or motive independent of any testamentary purpose that occur after a will is executed should be given FULL effect in the distributions made.
E.g. “car I own at my death”; “contents of chest”; “furnishings in my living room”
EXCEPTION: this is NOT VALID for title documents (e.g. deeds, stock certificates, bank passbooks); THESE can only be transferred as mandated by law
What are the 5 types of testamentary gifts that can be included in a Will?
1) Specific gift - only that asset can satisfy the gift
“I devise my computer to my son, Seth”
2) Demonstrative legacy - A general amount from a specific source “
I bequeth $1MM to be paid from proceeds of sale of my house”
3) General legacy - Gift of a general dollar amount
“I give the sum of $56MM to Jim”
4) Residuary disposition
“I give all the rest, residue and remainder of my estate to my brother Jim.”
5) Intestate property - If a partial intestacy results because Will has no residuary clause OR something in residuary clause given to a friend who predeceased so anti-lapse does not apply
What is an “abatement of legacies” to satisfy creditors’ claims?
When there are MORE claims against an estate than there are assets…
Order of abatement of testators’s property to pay debts and claims (absent provision in the will): FIRST PAID FROM….
1) Intestate & residuary property abate THEN 2) General legacies abate pro-rata (proportionally) THEN
3) Demonstrative legacies abate pro-rata THEN 4) Specific legacies abate AND ONLY THEN…
5) Items that qualify for the estate tax marital deduction
What is theademption doctrine?
If a testator makes a SPECIFIC GIFT of property, and the property CANNOT be found or is no longer OWNED by the testator at the time of her death→ the gift FAILS (he loses)
Does NOT apply to Demonstrative gifts:If there is no cash available from the specified source, the gift will turn into a GENERAL LEGACY (i.e. other assets will be sold to satisfy a demonstrative legacy)
EXCLUSIONS:
1) Beneficiaries can collect insurance proceeds for lost, damaged or destroyed (specific) gifts paid AFTER death
If paid BEFORE death, then gift would adeem and beneficiary gets nothing
2) Beneficiaries can collect proceeds from an executory K (e.g. the sale of a house)to extent paid AFTER death
If K was completed by time of death, the gift adeems and beneficiary gets nothing
3) Beneficiary is entitled to receive money or property into which the proceeds from the sales that CAN be traced
Are specific gifts of encumbered property (w/ liens) “exonerated” at time of distribution?
NO! Liens on specifically devised property are NOT exonerated UNLESS the will specifically directs exoneration (i.e. using proceeds from residuary estate)
NOTE: a general provisions for payments of debt in a Will do NOT exonerate specific liens – must specifically direct exoneration If not exonerated, the property passes subject to the lien
How are bequests of shares of stock (and other securities) treated?
Depends…
1) Stock in closely held corporation→ adeems if sold (i.e. it’s specific)
2) Stock in publicly traded company→ does NOT adeem (i.e. it’s general)
If stock does not exist, beneficiary would get paid the value of the shares from other assets EXCEPTION:Stock in publicly traded company ARE specific giftsif the testator bequeathes “my XYZ stock”→ adeems
3) Stock Splits→ treated as a specific bequest no matter what so beneficiary will get all the shares INSTEAD of the original amt NOTE: it’s irrelevant when dealing w/ stock splits whether the testator used “my” language, and/or whether the stock was publicly-traded or closely-held
4) Corp merges & stock is converted → no ademption b/c change in form, not substance (i.e. this wasn’t a sale)
What are non-probate assets?
Interests in property that are NOT subject to disposition under the Will or via intestacy (i.e. a
Will instruction CAN’T override existing instructions)
CATEGORIES:
1) Property passing by right of survivorship (e.g. joint bank account; payable on death securities, etc)
2) Property passing by K (e.g. life insurance policies; emp benefits payable to person OTHER than decedent or decedent’s estate)
3) Property held in trust (i.e. the terms of the trust will govern the disposition of the trust assets)
4) Property over which the decedent held a “pwr of appointment”
What is the purpose of the elective share statute?
To protect the SURVIVING spouse against disinheritance by giving him/her a MINIMUM share of the testator’s probate or intestate estate
How do you calculate the elective share amt (AND net elective share amt)?
Applies to BOTH PROBATE and INTESTATE estates
Elective share = the GREATER of… 1) $50k; OR 2) 1/3d of the augmented estate(= net probate estate + testamentary substitutes)
Net probate estate = the value of the estate AFTER pmt of debts, BUT before pmt of estate taxes
Testamentary subsitutes = certaintransferred non-probate assets to other persons
Net elective share =
1) Elective share/augmented estate
MINUS
3) Any gifts to SPOUSE from Will
MINUS
4) Any joint tenany property b/t SPOUSE & SURVIVING SPOUSE ("1/2 IN, 1/2 OUT")
IF positive, electiveis NOT satisfied by the gifts, others contribute pro rata
NOTE: IF negative, elective share is SATISFIED (no right of election)
What are 7 key testamentary substitutes (T-Subs) categories?
Testamentary Subsitutes need a LEG UP
1) Totten trusts (bank accounts in testator’s name in trust for another)
2) Survivorship estates (joint tenancies; tenancies by the entirety; joint bank accounts; survivor bank acocunts)
NOTE: watch out for pre- & post- marriage scenarios
3) Lifetime transfers w/ strings attached (revocable trusts; or trusts where testator retained a life estate AFTER 1992)
4) Employee pension, profit-sharing and deferred comp plans
NOTE: if the plan is a “qualified plan”→ only 1/2 is a T-Sub
5) Gifts made w/in 1 yr of death (>$14k; “Gifts causa mortis”, regardless of amt)
6) U.S. gov’t bonds (and other “pay on death” arrangements)
7) Pwrs of appointment (property over which the testator held a PRESENTLY exercisable general pwr of appt)
RULE OF THUMB = If testator has an interest in it and can manipulate it, then it’s a T-Sub (i.e. almost all non-probate transfers)
What are 6 non-testamentary substitutes?
LOGPIT
1) Life insurance proceeds(whether payable to surviving spouse or third party; counter-intuitive) 2) One-half (1/2) of “qualified” pension & profit-sharing benefits
3) Gifts less than $14,000 even made w/in 1 yr. of death.
4) Pre-marriage irrevocable transfers(i.e. gift to a friend before marriage)
5) Irrevocable transfers made more than one year before death (transfers in which grantor did NOT retain power to revoke, invade, consume or dispose of principal)
6) Transfers (irrevocable) with retained life estate made BEFORE 9/1/92 & during the marriage
How do you calculate the augmented estate (a/k/a elective share estate)?
Net Probate Estate
PLUS All T- Subs
PLUSSurvivorship estates b/t TESTATOR and 3d PARTY (made DURING marriage) Consideration Furnished Test = Surviving spouse has the burden of proof as to the decedent’s contributions to the assets, acquisitions (RP) or the deposits in a joint bank account/tenancy held by the deceased spouse & third party; only “consideration furnished” goes into elective share pot
PLUS
Survivorship estates b/t TESTATOR and SURVIVING SPOUSE
Only contribute 1/2 of this T-Sub. Period.
PLUS
Surivorship estates b/t TESTATOR and 3d PARTY (made BEFORE marriage) Consideration Furnished Test, BUT onlly contribute 1/2 of the amt as T-Sub
If positive, how is the elective share satisfied?
TAG LINE = “All beneficiaries contribute pro rata (proportionately)”
CALCULATION:
FIRST: find the fraction that EVERY beneficiary must contribute = Elective share amount / Probate estate value net of elective share
SECOND: multiply every beneficiary’s gift by fraction above
