Flashcards in Lapse, Ademption, Exoneration of Liens Deck (14):
What does it mean when a bequest lapses?
When a beneficiary named in the will dies (In UPC jurisdictions with 120 hours) before the testator, the gift lapses, which means the gift fails and passes as residue unless it is saved by the states anti-lapsing statute.
What is the UPC's anti-lapsing statute?
When the predeceasing beneficiary is T's grandparent or a lineal decedent thereof who leaves issue who survived T.
Hypo: T executes will in 2006; it provides "I give the sum of $5,000 to my sister, Paula." Paula dies in 2007; she is survived by her husband H and two children. Paula has a will which leaves all of her estate to H. T dies in 2012, who takes the $5,000.
If no anti-lapse statute, then it doesnt pass to anyone, it simply goes into the residue estate.
However, if using the UPC's anti-lapsing statute, then it passes to Paula's two children and they split it because they are a lienal decedent thereof.
What is the class gift rule as it applies to lapsing?
When there is a gift by will to a group of persons generically described as a class and some class member predeceases the testator and the lapse statute does not apply, then the surviving class members take.
What is a general legacy gift?
A gift of specified pecuniary amount.
What is a demonstrative legacy gift?
A hybrid gift of a specified pecuniary amount, but also provides the funding instrument.
What is a residuary bequest?
Whatever is left over at all the specified gifts or bequests are given out.
What is abatement?
When money from the estate must be used to pay of debts and creditors remaining at the time of T's death.
What order is abatement paid in?
1. Intestate property;
2. Residuary bequest;
3. General legacy;
4. Demonstrative Legacy;
5. Specific devise or bequest.
What is adeemed?
When a bequest within a will is a specific item which no longer exists at the time of death, then the person who was supposed to receive said item gets nothing.
Example: will says John gets blackacre. T then sells blackacre. Blackacre does not exist at T's death, so John gets nothing.
Hypo: "I bequeath my 100 shares of stock in Tax Shelters, Inc. to my son, Simon." At his death T owned 200 shares of stock in Tax Shelters, Inc., consisting of the 100 shares he owned when he executed the will, plus 100 shares distributed to T by the corporation six months after the will was executed. Howe many shares does Simon take?
1. Stock splits - Simon takes all 200.
2. Stock dividends - Simon takes only the original 100.
UPC: does not matter what type of stock the additional 100 are, Simon gets it all because a specific devisee takes any additional or other securities of the same entity owned by the testator because of action initiated by the entity, excluding an acquired by exercise of purchase options.
Hypo: "I bequeath my 100 shares of stock in Tax Shelters, Inc. to my son Simon." Tax Shelters was then acquired by Ling-Temco-Vought, and as part of the merger each shareholder was given one share of LTV for every two shares of Tax Shelters. At T's death, he ownded 50 shares of LTV stock. Does Simon get the LTV stock?
Common Law - No. Tax shelter is not LTV, so this is adeemed.
UPC - Yes. A specific devisee is entitled to securities of another entity owned by the testator as a result of merger, consolidation, reorganization, or other similar action initiated by the entity.
Hypo: "I bequeath my 100 shares of Coronado common stock to A; I bequeath 200 shares of Baker company shock to B." Thereafter, T sells all of her Corondo stock and all of her Baker stock. What are A and B's rights?
A's rights - A's bequest was specific, therefore A is adeemed and gets nothing.
B's rights - B's bequest was not specific. So B is not adeemed and he gets either the value of the 200 stock or the estate will buy 200 stock to give him.