Trusts February 2002 Flashcards
(4 cards)
The “blanket exercise” clause in Testator’s will did not effectively exercise the power of appointment given to Testator by Mary’s will because Mary’s will required Testator to refer specifically to the power when exercising it.
In most states, a general residuary clause in a will (e.g., “I give all of my estate. . .”) does not exercise powers of appointment. The situation is different if the general residuary clause is coupled with what is called a “blanket exercise” clause (e.g., “including all property over which I have a power of appointment”), as is the case here. Under these circumstances, any power of appointment held by the donee is exercised, unless the donor of the power of appointment specifically required the donee to refer to the instrument creating the power when exercising the power.
Here, Mary, the donor of Testator’s special power, expressly required that Testator specifically refer to her will in which the power was created if Testator, as donee of the power, sought to exercise the power. Testator’s will contained only a blanket exercise clause, which failed to satisfy a condition on the exercise of the power imposed by the donor. Thus, the power was not effectively exercised.
Testator’s general testamentary power created by Frank’s will was effectively exercised by a blanket exercise clause.
No facts indicate that Frank imposed a specific reference requirement with respect to the general testamentary power that Frank, as donor, granted Testator, as donee. Therefore, under the rule that a blanket exercise clause is effective to exercise powers absent a specific reference requirement (see Point One(a)), Testator’s will effectively exercised the general testamentary power of appointment.
At common law, Daughter takes the family home free of the mortgage. Under the law of most states today, Daughter takes the home subject to the mortgage on which Testator was liable at the time of his death. The mortgage is not payable from the assets of Testator’s estate.
Under the common-law doctrine of exoneration, the specific devisee of encumbered real property was entitled to have the mortgage on the property paid from the estate as a debt of the decedent unless there was evidence of a contrary intent on the part of the testator. See, e.g., Martin v. Johnson, 512 A.2d 1017 (D.C. 1986).
On the other hand, many states have adopted statutes contrary to this common-law rule of exoneration. For example, the Uniform Probate Code provides that “a specific devise passes subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts.” Unif. Probate Code § 2-607. In states with statutes of this type, the specific devisee of encumbered property takes subject to the mortgage notwithstanding the fact that the will contained a clause directing the executor to pay the decedent’s debts.
Courts have also held that a general directive to pay debts is insufficient to evidence an intent to exonerate the devisee of specifically devised property. See, e.g., Griffin v. Gould, 72 Ill. App. 3d 747, 391 N.E.2d 124 (1979). Depending on the underlying state law, Daughter takes either subject to the mortgage or free of the mortgage.
The insurance proceeds payable as a result of the theft of the watch shortly before Testator’s death should pass to Son as the specific devisee of the watch. There is, however, contrary authority.
Under the doctrine of ademption, if the subject matter of a specific devise is not in the probate estate at the time of the testator’s death, the bequest to the devisee adeems (or fails). See generally William H. McGovern, Jr. & Sheldon F. Kurtz, WILLS,TRUSTSAND ESTATES 295 (2d ed. 2001). However, if the property was destroyed by fire or lost by theft and proceeds of insurance are paid to the executor of the estate in settlement of claims against the insurance company, some courts hold that the insurance proceeds are payable to the specific devisee as a substitute for the specifically devised property. See White v. White, 105 N.J. Super. 184, 251 A.2d 470 (1969); accord In re Estate of Wolfe, 208 N.W.2d 923 (Iowa 1973); Unif. ProbateCode § 2-606.
However, some state courts have held to the contrary, finding that the insurance proceeds pass as part of the testator’s residuary estate. In re Estate of Wright, 7 N.Y.2d 365, 197 N. Y. S. 2d 711, 165 N.E.2d 561 (1960). They find that the insurance policy is a separate and distinct asset from the property subject to the specific devise and that the proceeds, as specifically undisposed property, pass to the residuary legatees under the will.
It seems that the majority rule stated in Wolfe, 208 N.W.2d 923, as well as in the Uniform Probate Code and some other state codes is the better rule because it is more likely to accord with the reasonable expectations of a testator.
