Wills - Problems Associated With Testamentary Gifts Flashcards
What happens when there are so many claims against the estate that there aren’t enough assets to cover all of the gifts made by the will? (Abatement of legacies to pay claims)
Absent contrary provisions, debts and expenses are first paid out of (1) intestate property); (2) then residuary assets, then (3) general legacy, (4) specific bequests. [within each category no distinction between real and personal property]
Same rules apply in satisfaction of the share of an omitted spouse.
Demonstrative legacy is treated the same as a specific bequest to the extent of the specified property and to the excesses as a general legacy.
What is a demonstrative legacy?
A general amount from a specific source. “I b bequeath $25,000, to be paid from the proceeds of the sale of my Exxon Oil stock, to Sally.”
What if specifically bequeathed property is not in the estate at death? [The “ademption” problem]
If the will makes a specific gift of property, and the property is not owned by T at death, then the beneficiary takes NOTHING.
Does ademption apply to demonstrative or general legacies?
No, It only applies to specific bequests!!
What are the statutory exceptions to the Ademption Doctrine?
(1) Specific beneficiary takes any of the remaining specifically devised proper and
(a) Any unpaid balance of the purchase price (together with any security interest) by reason of sale of the property to the extent paid after T’s death.
(b) Any amount of condemnation award for taking of the property, to the extent unpaid at T’s death.
(c) Any amount of fire or casualty insurance proceeds unpaid at death.
(2) Will executed before T became incapacitated: If specifically devised property is sold by a guardian/conservator, specific devisee has a right to a general legacy equal to the sale price, condemnation award, or insurance proceeds.
What about bequests of stock or other securities?
A specific bequest of stock includes add’l stock of that entity or another entity produced by a stock split or stock dividend and also stock resulting from reorganization/merger after will was executed, but no stock acquired by exercise of a stock option.
Specific bequest of encumbered property - is the lien “exonerated? [i.e T ordered estate to pay off liens before bequest of property]
MA - No b/c of the “exoneration of liens” doctrine unless the will specifically directs exoneration. General provisions to repay debts in NOT an indication that liens are to be exonerated. Thus, beneficiary takes exactly what T owned. Title subject to a mortgage lien.
Majority Rule: Yes b/c liens on specifically devised property are exonerated.
