Changes in Beneficiaries and Property after Execution Flashcards
Lapse
Gift lapses if the beneficiary predeceases the testator
Anti-Lapse
CA law applies anti-lapse to save the gift if the predeceasing beneficiary: (1) was KINDRED of the testator or kindred of a surviving or former spouse of testator (blood relative); and (2) left DESCENDANTS who survived the testator
Descendants take by substitution and TAKE PER CAPITA WITH REPRESENTATION
Applies to wills and revocable trusts and class gifts
NOTE: does not apply if predeceasing beneficiary is a spouse (only kindred of spouse)
Specific Devise
Gift of a particular item of property (look for “my”)
Real property is always specific. Antique cars are always specific
General Devise
gift of a general economic benefit payable out of the general assets of the estate without specifying a source of the payment
Usually a dollar amount or 100 shares of XYZ stock, generally
Demonstrative Devise
gift of a general amount that is to be paid from a particular source or fund
Hybrid: specific as to source of payment, but general to the extent of any shortfall of that payment
Residuary Devise
All other property remaining after paying out the other gifts and paying debts, expenses, and taxes
Ademption by Extinction
Applies only to SPECIFIC devises
Common Law: gift automatically fails if the property is no longer in the testator’s estate at the time of death. DOES NOT look to intent
California: INTENT is IMPORTANT to determine whether general or specific devise, and if T intended gift to fail. CA does not favor ademption and uses various devices to avoid it, such as labeling it as general/demonstrative
Common Ex of CA rule:
(1) securities changing form (corporation changed devise, not testator);
(2) conservator sells off the assets (testator did not sell the property, conservator did);
(3) Eminent Domain Award or installment sale (no ademption for proceeds paid after testator’s death. If you can trace proceeds paid during testator’s lifetime into ONE BANK ACCOUNT, beneficiary can argue that easy tracing means testator intended no ademption and that beneficiary should take allproceeds, even those payable during testator’s lifetime)
Ademption by Satisfaction
When testator gives beneficiary an inter vivos down payment on a devise. 4 ways to establish ademption by satisfaction:
(1) will itself provides for a deduction of the inter vivos gift
(2) testator declares in a contemporaneous writing that the gift is a satisfaction
(3) beneficiary acknowledges in a writing (at any time) the satisfaction
(4) the property given in the satisfaction is the same property that is the subject of the specific gift (both ademption by satisfaction and extinction)
When beneficiary receives satisfaction but predeceases testator
If Issue would take under anti-lapse, it is treated as if issue received the satisfaction
If not cash, use fair market value measured at the time the transferee came into possession of the property
After-acquired property
will passes all property the testator owned at death, including her after-acquired property (property acquired after will was executed)
Increase during Testator’s lifetime
Stock dividends or splits paid during testator’s lifetime go tot he BENEFICIARY if the stock is owned by testator at testator’s death
Increase after testator’s death and during probate
Specific devise – all increase goes to the beneficiary
General devise – do not receive any increase (exception: money gifts earn interest if not distributed one year after testator’s death, from one year anniversary until distribution)
Abatement for general creditors and debts of the decedent
Process by which certain gifts are decreased
Order of abatement: (1) Property passing by intestacy; (2) residuary estate; (3) general gifts to persons other than testator’s relatives; (4) general gifts to testator’s relatives; (5) specific gifts to persons other than testator’s relatives; (6) specific gifts to testator’s relatives
Demonstrative Gifts – treated as specific gifts to the extent they can be satisfied from the designated fund
Pro rata abatement within each category
Exoneration
Common Law: if gift had an encumbrance, executor was required automatically top ay off the debt before passing it off to the beneficiary
CA view: no automatic exoneration. Devisee takes gift subject to encumbrance, unless will states otherwise.
NOTE: general provision that says “pay off all my debts” is insufficient to exonerate
Abatement with omitted people
Abatement may occur when necessary to pay for an omitted child or spouse. Look for interchange between omitted people and abatement on essays. Order:
(1) Abate property not passing by the decedent’s will or trust; (2) then abate from all beneficiaries of testator’s will and trust PRO RATA, in proportion to the value of the gift received
NOTE: no distinction regarding type of gift
BUT EXCEPTION: specific gifts may be exempt if abating it would defeat the OBVIOUS INTENTION of the testator.
