Lapse, Ademption, & Exoneration of Liens***

Question 1

T executes a will in 06. It provides “I give the sum of $6k to my sister Paula and leave the residue to my brother, X.” Paula dies in 07. She survived by H and two kids. Paula has a will which leaves all of her estate to H.

T dies in 12. Who takes the $6k in a state without an anti-lapse statute? In a state with an anti-lapse statuteWhy?

Answer 1

W/o an ALS, Brother takes all because the gift will have lapse

W/ an ALS, Paula’s kids split the $6,000

Under an ALS, when the beneficiary named in the will dies before T (and the beneficiary is T’s descendant, sibling, or niece/nephew), the gift lapses and the issue of the deceased beneficiary take in the beneficiary’s place.

Question 2

When does PA’s anti-lapse statute apply?

Answer 2

When the predeceasing beneficiary is T’s descendant, sibling, or child of sibling who leaves issue who survive T.

Question 3

How can lapse not apply?

Answer 3

Anti-lapse statute.

Question 4

If the case of a gift to T’s sibling or to child of a sibling, the gift will lapse to the extent it would pass as a result to T’s _____ or ______.

Answer 4

Own spouse or issue.

Question 5

T executes a will in 06. It provides “I give the sum of $6k to my sister Paula and leave the residue to my wife, W.” Paula dies in 07. She survived by H and two kids. Paula has a will which leaves all of her estate to H.

T dies in 12. Who takes the $6k? Why?

Answer 5

The gift would lapse and would pass to W, as a gift to T’s sibling or to child of a sibling, the gift will lapse to the extent it would pass as a result to T’s spouse or issue.

Question 6

“I devise Blackacre to the children of my friend, John. I leave the residue to my sister X.” At the time T executes, John has 3 kids: A, B, and C. Thereafter and during T’s lifetime, Bates has another child, D and his son A dies, leaving A Jr.

T dies. He is survived by John Bates, B, C, D, A Jr. AND by his sister, X. Who takes Blackacre? Why?

Answer 6

B, C, and D take Blackacre equally. Not A Jr.

When there is a CLASS GIFT to a group of persons generically described as a class and some class member predeceases T and the lapse statute does not apply, the surviving class members take.

Question 7

“I devise Blackacre to the children of my brother, John. I leave the residue to my sister X.” At the time T executes, John has 3 kids: A, B, and C. Thereafter and during T’s lifetime, Bates has another child, D and his son A dies, leaving A Jr.

T dies. He is survived by his brother John, B, C, D, A Jr. AND by his sister, X. Who takes Blackacre? Why?

Answer 7

B, C, D, and A Jr.

Because the class involved family, the anti-lapse statute applies and A Jr. is qualified to take. PA’s lapse statute applies when the predeceasing beneficiary is T’s dependent, sibling, or CHILD OF A SIBLING who leaves issue who survive T.

Question 8

“I devise all the rest, residue, and remainder of my estate in equal shares to my good friend Alan, my business partner Betty, and my daughter Carla.” Alan predeceases T, leaving a child (Alan Jr.) who survives T. T, a widower, is also survived by Betty, Carla, and by his only son (Stephen). Who takes the residuary estate? Why?

Answer 8

1/2 to Betty, 1/2 to Carla.

If the residuary estate is devised to two or more persons AND the gift to one of them fails for any reason, the surviving residuary divisees take the entire residuary estate in proportion to their interests in the residue.

Question 9

“I devise all the rest, residue, and remainder of my estate in equal shares to my good friend Alan, my business partner Betty, and my daughter Carla.”

Carla predeceases T, leaving a child (Carla Jr) who survived T. Alan and Betty also survive T.

T, a widower, is survived by Alan, Betty, Carla Jr, and by his only son (Stephen). Who takes the residuary estate? Why?

Answer 9

1/2 to each Alan, Betty, and Carla Jr.

This reverts back to lapse. Carla was T’s decedent and she left issue. Thus, Carla Jr. steps in for Carla.

Question 10

Money needed to pay expenses and claims is raised by selling . . . place in order of first sold to last. Also, what is this called?

General gifts, residuary estate, subject matter of demonstrative and specific gifts, intestate property

Answer 10

Abatement

Intestate Property
Residuary Estate
General gifts
Subject matter of demonstrative and specific gifts.

Question 11

Type of bequest: I devise Blackacre to my son John.”

Answer 11

Specific bequest

Question 12

Type of bequest: I devise my car to my son John”

Answer 12

Specific bequest

Question 13

Type of bequest: I give the sum of $5k, to be paid out of the proceeds of my sale of my Acme stock, to my sister Sarah.

Answer 13

Demonstrative legacy

Question 14

Type of bequest: I give al the rest, residue, and remainder of my property to my wife.

Answer 14

Residuary bequest

Question 15

What is a general legacy?

Answer 15

A gift of a general pecuniary amount.

Question 16

What is a demonstrative legacy?

Answer 16

A gift of a pecuniary amount with instructions as to funding.

Question 17

When do specific gifts to T’s spouse or issue abate?

Answer 17

Last

Question 18

What happens when a specific gift no longer exists when T dies?

Answer 18

The gift is adeemed.

Question 19

T bequested a demonstrative legacy of $5,000, to be paid out of proceeds from the sale of Acme stock, to her son. T sold her Acme stock in 2010. T dies in 2012. Does ademption apply to this gift? Why or why not?

Answer 19

No.

Ademption does not apply to demonstrative legacies. The gift will be funded with available property.

Question 20

Assume a will is executed before T is declared incompetent. If specifically devised property is sold by the conservator OR if condemnation award or insurance proceeds relating to the property are paid to the conservator, what does the specific devisee get? When will the devisee get nothing?

Answer 20

A general legacy equal to the net sales price, condemnation award, or insurance proceeds.

Nothing if the testator’s disability has been adjudicated to have ceased and the testator survives the adjudication by one year.

Question 21

In the ademption context, a specific devisee has the right to the remaining property specifically devised AND (3)

Answer 21

Any balance of purchase price owing from purchaser when K is still executory at T’s death;

Any amount of condemnation award for the taking of property, to the extent unpaid at T’s death; AND

Any amount of fire or casualty insurance proceeds unpaid at death.

Question 22

“I give and bequeath my Rembrandt painting to my daughter Dora.” The painting was destroyed by fire in 2014. The painting was insured and the ins. co. duly paid its full value of $150k to T. T dies. Is Dora entitled to the insurance proceeds? Why or why not?

Answer 22

No. The gift is deemed. Insurance was already paid.

Question 23

“I bequeath my 100 shares of stock is XYZ to my son, Simon.” At his death, T owned 200 shares of stock in XYZ, with the extra 100 resulting from a stock split 6 months after execution. How many shares does Simon take? Why?

Answer 23

All 200.

A specific devisee takes “any additional or other securities of the same entity owned by the testator because of action INITIATED BY the entity, including any acquired by exercise of purchase options.

Question 24

“I bequeath my 100 shares of stock is XYZ to my son, Simon.” XYZ was subsequently bought by ABC. As part of the buy out, ABC gives all XYZ shareholders 1 shares of ABC for every 2 shares of XYZ. When T dies, he owns 50 shares of stock in XYZ. How many shares does Simon take? Why?

Answer 24

All 50.

A specific devisee is entitled to securities of another entity owned by the testator as a result of a merger, consolidation, reorganization, or other similar action initiated by the entity.

Question 25

“I bequeath my 100 shares of ABC common stock to Al. I bequeath 200 shares of XYZ stock to Bob.” Thereafter, T sells all her of ABC stock and all of her XYZ stock.

What are A’s rights? What about B? Why?

Answer 25

A is deemed because gift was specific (my)

B takes XYZ stocks because gift was general. Executor will purchase the shares.

Question 26

“I devise Blackacre to my son, Sly. I devise my residuary estate to my wife, Wynnona.” At T’s death, Blackacre is subject to a mortgage that is security for a note on which T was personally liable. Sly demands that the executor pay off the mortgage (i.e., exonerate the lien) so that Blackacre will pass free and clear. Is he so entitled? Why or why not?

Answer 26

No.

A specific devisee of encumbered property is not entitled to have the encumbrance paid out of the residuary estate UNLESS the will shows such intent.

Question 27

“I devise Blackacre to my son, Sly. I devise my residuary estate to my wife, Wynnona. All my debts should be paid from my residuary estate before it passes.” At T’s death, Blackacre is subject to a mortgage that is security for a note on which T was personally liable. Sly demands that the executor pay off the mortgage (i.e., exonerate the lien) so that Blackacre will pass free and clear. Is he so entitled? Why or why not?

Answer 27

No.

A general direction in the will to pay debts does not show the requisite intent to have the subject encumbrance paid.

Question 28

“I devise Blackacre to my son, Sly, free and clear from any encumbrances. Those debts relating to Blackacre should be paid from my residuary estate. I devise my residuary estate to my wife, Wynnona. All my debts should be paid from my residuary estate before it passes.” At T’s death, Blackacre is subject to a mortgage that is security for a note on which T was personally liable. Sly demands that the executor pay off the mortgage (i.e., exonerate the lien) so that Blackacre will pass free and clear. Is he so entitled? Why or why not?”

Answer 28

Yes. The will demonstrates the requisite intent to give Blackacre to Sly free and clear.