Lapsed Gifts and the VA Anti-Lapse Statute

Question 1

1) lapsed gifts and the VA Anti-Lapse statute

Answer 1

when a beneficiary named in a will dies BEFORE the testator/drafter of the will (before will takes effect) - the gift FAILS or LAPSES

If a will beneficiary dies during the testator’s lifetime, the gift “lapses” or fails.

Question 2

distinction - when gift is VOID vs. when gift LAPSES

Answer 2

If the beneficiary dies BEFORE the EXECUTION of the will - then the gift is VOID

if the beneficiary dies AFTER the EXECUTION but BEFORE TESTATOR’S death - then the gift is considered to have LAPSED

Question 3

so who receives the lapsed gift??

Answer 3

controlled in order:
a) express terms of the will
b) applicable anti-lapse statute
c) residuary clause; then
d) intestacy statute

Question 4

what if Virginia’s ant-lapse statute?

Answer 4

unless there is NO contrary provision in the will (express terms of the will) - VA’s anti lapse statute operates to save a testamentary gift IF the predeceasing benefiaicy was a GRANDPARENT OR LINEAL DESCENDANT of the TESTATOR’S grandparents.

The beneficiary’s descendants that survive the testator are SUBSTITUTED as TAKERS under the anti-lapse statute.

Question 5

what if the beneficiary does not have any descendants under anti-lapse??

Answer 5

then anti lapse does not apply and the gift would then pass according to the next controlling rule:
3) residuary clause; if not then
4) intestacy statute

Question 6

lapse in the residuary gift

Answer 6

If a residuary gift lapses and the anti-lapse statute does not apply (if it does apply - then apply anti-lapse!) , the residuary beneficiaries who survive the testator take the deceased beneficiary’s share in PROPORTION to their interest in the residue.

(i.e. “I leave residuary of my estate to A, B, and C” - A predeceases testator. A’s share will be distributed to B and C) - MODERN VIEW (avoids common law rule that A’s share would pass through intestacy)

Question 7

what is a VOID gift??

Answer 7

If a will makes a gift to a beneficiary who was dead at the time the will was executed, the gift is void. The anti-lapse statute and “surviving residuary beneficiaries rule” also apply to void gifts.

Question 8

does anti-lapse apply to void gifts? or only to lapsed gifts??

Answer 8

The anti-lapse statute and “surviving residuary beneficiaries rule” also apply to void gifts.

Question 9

“treatment of CLASS GIFTS”

Answer 9

only class members who SURVIVE the testator take the gift, UNLESS there is a contrary will provision or the anti-lapse statute applies

Question 10

a) adopted or non marital children in class gifts

Answer 10

A gift in a will or trust to someone’s “children,” “grandchildren,” “descendants,” “issue,” or “heirs” PRESUMPTIVELY includes an ADOPTED CHILD –> unless a contrary intent is demonstrated by the terms of the instrument.

A NONMARITAL CHILD is presumptively included in the above class gifts if they would be deemed related to the designated ancestor for purposes of intestate succession (see 1.4.3, above)
- father married mother before or after child’s beirth
- established by clear and convincing evidence that
1) the man openly cohabited with mother during entire pregnancy
2) man consented to be named on child’s birth certificate
3) man allowed child to use his surname
4) claimed child on tax return/government document
5) man adjudged father in paternity suit// ordered to pay child support
6) man admitted in paternity court or in writing under oath
7) genetic tests

Question 11

when does the Virginia anti-lapse statute not apply?

Answer 11

The Virginia anti-lapse statute does not apply to
- life insurance designations,
- rights of survivorship, and
- other nonprobate transfers.

Question 12

what is “ademption by extinction”?

Answer 12

when specifically bequeathed property is NOT in the testator’s estate at death - the bequest is “ADEEMED” or FAILS

Question 13

when does ademption by extinction apply?

Answer 13

ademption applies only to SPECIFIC DEVISES and BEQUESTS (where testator wants beneficiary to receive a specific piece of property in the estate and only this property) (testator would receive nothing)

A specific bequest may be partially deemed.

If the bequest is of the testator’s INTEREST in the property (and not the property itself - ademption will not apply)

Question 14

what is the doctrine of retroactive equitable conversion??

Answer 14

VA rejects the doctrine of retroactive equitable conversion - thus an option to purchase specifically devised property does not adeem the gift

Question 15

exam tip - if you see testator die in a car accident or house fire

Answer 15

may be an ademption issue if there was a specific gift of the car or the house

remember - statutory exception in VA allows for the beneficiary to receive insurance proceeds for the car or the house if there is a casualty loss - and the loss covers the house or the car

Question 16

does ademption apply to general or demonstrative legacies?

Answer 16

no!! generally not

Question 17

what is a ‘general’ legacy?

Answer 17

a general legacy is a bequest of a DOLLAR AMOUNT that is payable out of the GENERAL ASSETS of the estate without a claim on any particular source of payment.

when possible, courts will construe a bequest of securities as a general legacy - in order to avoid ademption.

Question 18

what is a ‘demonstrative legacy’?

Answer 18

a demonstrative legacy is a gift of a GENERAL AMOUNT that identifies a PARTICULAR asset as the PRIMARY SOURCE of payment

Question 19

what is a gift of “my 200 shares?

Answer 19

this would be considered a SPECIFIC bequest of the shares, so ademption would apply

Question 20

what are some statutory exception to the ademption doctrine?

Answer 20

a) sale by guardian or conservator
b) certain proceeds to extent unpaid at testator’s death
c) corporate reorganizations, mergers, etc.

Question 21

a) sale by guardian or conservator

Answer 21

If specifically devised property is sold by a guardian, conservator, or agent acting under a DURABLE POWER OF ATTORNEY –> or if fire or casualty insurance proceeds are paid to the guardian or conservator as the result of loss or damage to the property, –» the specific beneficiary is entitled to a GENERAL LEGACY equal to the NET SALE PRICE or INSURANCE PROCEEDS

however - above rule does not apply if, after the sale or casualty, it is adjudicated that the testator’s disability has CEASED, and the testator survives the adjudication by one year.

Question 22

b) certain proceeds to extent unpaid at testator’s death

Answer 22

In cases not involving a guardian or conservator, the statute provides that a specific devisee has a right to:
(1) any amount of a condemnation award for the taking of property by eminent domain; and
(2) any proceeds from fire or casualty insurance on the property.

However, the right is only to the extent that these amounts are paid after death.

Question 23

c) corporate reorganizations, mergers, etc.

Answer 23

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

Question 24

satisfaction of legacies

Answer 24

in VA - an inter vivos gift to a will beneficiary is NOT treated as being in partial or total satisfaction of a legacy UNLESS;
1) the testator declares in a contemporaneous writing that the gift was intended to satisfy a legacy;
(2) the beneficiary acknowledges in writing that the gift is in satisfaction; or
(3) the will expressly states that legacies are to be reduced by such inter vivos gifts.

These are the exclusive means of proof provided by statute, and other evidence of the testator’s intent is not admissible.

Question 25

Stock splits and stock dividends

Answer 25

A specific devisee of stock is entitled to any additional or other securities owned by the testator because of action initiated by the entity, other than securities acquired by the exercise of a purchase option.

Question 26

interest on cash legacies not paid within one year

Answer 26

If a cash legacy is not paid within one year, the beneficiary is entitled to INTEREST until it is paid.

This rule does not apply to marital deduction formula cash bequests.