Estate Issues Flashcards
What is NY’s Negative Bequest Rule?
EVEN IF a Will does not make a COMPLETE distribution of the estate, resulting in partial intestacy→ words of disinheritance are given FULL EFFECT
We treat any NEGATIVE bequests as if the beneficiary has PREDECEASED the testator
Anti-lapse statutestill is operative (if beneficiary was an ISSUE or sibling)
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)
** Similar to Advancement (intestacy)
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
- There is NO satisfaction of legacy UNLESS proved by…
Is it possible to incorporate into a Will by reference to an extrinsic document?
NO! NY does NOT recognize incorporation by reference
Incorporation by reference = “I devise all things listed on the piece of paper in my desk”
EVERYTHING has to be formally executed (i.e. 7 part test)
What are non-testamentary acts AND are they valid?
Non-testamentary 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 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
2) General legacies abate pro-rata (proportionally) 3) Demonstrative legacies abate pro-rata
4) Specific legacies abate
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 contract (e.g. the sale of a house)to extent paid AFTER death
* * If contract 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 (with 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 amount
* * NOTE: it’s irrelevant when dealing with stock splits whether the testator used “my” language, and/or whether the stock was publicly-traded or closely-held
4) Corporation merges & stock is converted → no ademption because 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) Right of survivorship
Joint bank account; payable on death securities, etc)
2) Contract
Life insurance policies; employee benefits payable to person OTHER than decedent or decedent’s estate
3) Trust
The terms of the trust will govern the disposition of the trust assets)
4) Decedent held a power 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 amount (AND net elective share amount)?
Applies to BOTH PROBATE and INTESTATE estates
Elective share = the GREATER of…
1) $50k; OR
2) 1/3rd of the augmented estate(= net probate estate + testamentary substitutes)
Net probate estate = the value of the estate AFTER payment of debts, BUT before payment of estate taxes
Testamentary subsitutes = certaintransferred non-probate assets to other persons
--------------- Net elective share = 1) Elective share/augmented estate MINUS 2) Elective share amount (calculated above) MINUS 3) Any gifts to SPOUSE from Will MINUS 4) Any joint tenany property between SPOUSE & SURVIVING SPOUSE
** NOTE: IF negative, elective share is SATISFIED (no right of election)
** IF positive, electiveis NOT satisfied by the gifts, others contribute pro rata
What are the 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 accounts
**NOTE: watch out for pre- & post- marriage scenarios
3) Lifetime transfers with strings attached
Revocable trusts; or trusts where testator retained a life estate AFTER 1992
4) Employee pension, profit-sharing and deferred compensation plans
* * NOTE: if the plan is a “qualified plan”→ only 1/2 is a T-Sub
5) Gifts made within 1 yr of death
>$14k; Gifts causa mortis; regardless of amount
6) U.S. government bonds (and other pay on death arrangements)
7) Powers of appointment (property over which the testator held a PRESENTLY exercisable general power of appointment)
* * 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 the 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 within 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 (elective share estate)?
Net Probate Estate PLUS All T- Subs PLUS Survivorship estates between TESTATOR and 3rd PARTY (made DURING marriage)
Consideration Furnished Test = Surviving spouse has the burden of proof as to the decedant’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 between TESTATOR and SURVIVING SPOUSE (Only contribute 1/2 of this T-Sub. Period)
PLUS
Surivorship estates between TESTATOR and 3rd PARTY (made BEFORE marriage)
Consideration Furnished Test, BUT onlly contribute 1/2 of the amount as T-Sub
