Pg 16 Flashcards
Under the California exception to the identity theory for ademption it provides for characterization of a disposition of property as a change in form to ensure that nothing is lost. What are the different ways you can do this?
– securities acquired because of an action initiated by the ORGANIZATION
– securities of another organization that were gotten as a result of MERGER consolidation, re-organization, or other distribution
– securities of the same organization gotten from a plan of REINVESTMENT
What does it mean for the exception to the identity theory for ademption if you characterize a disposition of property as a change in form through securities that were acquired due to an action of the organization?
If a testator left a friend shares in a puppy rental business and the shares went from $10-$20 a share, but the business likes having low share prices so they do a stock split, which means that anyone that already has shares now gets two $10 shares instead of one $20 share. That means that the testator now owns 200 shares. Those 200 that he owns at death were really the same as the 100 that he owned when he made the will. The company is the one that split them and the testator had no control, so the courts will trace the original 100 that turned into 200 and the friend will get all of those stock even though the will only says 100.
What is a limitation with regard to the exception to the identity theory for ademption that allows for the characterization as a change in form when the security that was required happened because of an action initiated by the organization?
If instead of a stock split, the corporation offered the testator the right to buy 100 additional shares and he did that after he made the will where he gifted 100 of his existing shares, that is not a change in form of the original 100 shares, but a separate batch that wasn’t meant for the friend
What is involved in the California exception to the identity theory for ademption that deals with characterizing the property as a change in form when the securities of another organization were gotten because of merger, consolidation, reorganization, or some other distribution?
If the testator bought 100 shares of a dog grooming business, and he left them in his will to a friend, but then google bought out the business, so instead of having 100 shares of the dog grooming business worth $10 each, he now owns two shares of Google that are worth $500 each. The court will treat those google shares as the same as the dog grooming shares and just say that they changed form.
What is good wording for characterizing property as a change in form under the identity theory exception for adoption?
“The change in form from CorpA to CorpB does not affect the validity of the gift. CorpB just replaced CorpA’s stock in the estate, so the beneficiary will take the CorpB stock.”
What is involved in the exception to the identity theory for ademption that deals with characterizing property as a change in form when securities of the same organization are gotten from a plan of reinvestment?
If the testator owned 100 shares of a dog grooming business and the business became very profitable, so it reinvested its profits into the corporation by opening more stores, which made the stock price go up to $15 a share, and the testator had willed his 100 shares to a friend, the friend will enjoy that added value when he gets the stock at death.
What happens with regard to characterizing property as a change in form when securities from the same organization are gotten from a plan of re-investment and there has been a stock dividend?
This happens when a corporation pays the profit that it makes to it shareholders through a dividend. Stock dividends use extra money per share to buy all of the shareholders an extra half share of stock. So the stock price stays the same, but now instead of only having 100 shares, you have 150 shares. If this happens, then anyone that was willed those shares would get the extra shares that the company bought for the shareholder because they were due to the original shares that were in the will.
What happens with regard to characterizing property as a change in form when securities of the same organization are gotten from a plan of re-investment and there has been a cash dividend?
This happens when a corporation just cuts a check to the shareholders for profit. If the testator owned 100 shares in a corporation and he willed those 100 shares to a friend, and then the corporation sent him a check for $500, as long as that money was distributed before he died, it just becomes cash in his estate and it does not go to the friend on death.
What are the basic rules for if a testator owns stock and he leaves it to a friend in his will, regarding what extras he might expect?
- things the friend will not get: stock if it is sold before the testator dies, extra stock that the testator buys later, the value of sold stock, or any cash dividends that are issued to the testator from the company
– things that the friend will get: extra stock from a stock split, stock dividends, different stock that comes because of a merger or acquisition. The reasoning is that all of these result from a change in form of the original stock that was left to the friend, so the friend who is originally devised the original gift of stock gets the extra or different securities
What is involved in the intent theory for ademption?
This is the minority UPC approach. It asks what the testator intended. If the testator meant for the devisee to lose out on the gift at death, then that’s what happens. If not, then the beneficiary can get replacement or cash value of an original item as long is it can be shown that is what the testator wanted
What is ademption by satisfaction?
This is when the testator promises something like a vacation home or 100 shares of stock in his will, but then he can’t wait, so he just transfers the title of those things right away. At death he no longer has those items because he already gave them to the devisee
What is abatement?
If there are not enough assets in an estate to satisfy a gift in a will, then the property that hasn’t yet been disposed of by the will is consumed first, then residuary devices, then general devices, then demonstrative, and last specific. If there is more than one devise in a specific category, that category is exhausted pro rata before moving to the next level
If a testator made $100,000 worth of gifts in a will, but only has $70,000 to probate at death, as long as the will says what to do in that situation, it is followed. If it doesn’t say, what is the default rule?
Abatement with the earlier on the list being cut or eliminated first. And shares abate pro rata within each class: – class 1: property not disposed of by the instrument – class 2: residuary gifts: anything that is left over after specific and general gifts – class 3: general gifts to non-relatives – class 4: general gifts to relatives – class 5: specific gifts to non-relatives – class 6: specific gifts to relatives. Demonstrative gifts are treated like specific gifts
