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Lapse, Ademption and Exoneration of Liens
Terms in this set (17)
What does it mean for a gift to "lapse"?
Lapse = beneficiary predeceases the testator (Void: beneficiary dies before execution of will)
If there is no a anti-lapse statute:
1. If will includes residuary clause, then lapsed gift becomes residue
(as long as failed gift not a residuary gift)
2. If will does not include residuary clause or residuary gift lapses, property passes intestate
How does Florida treat lapsed gifts?
(1) If a devisee (beneficiary) is of a specified relationship to the testator
(grandparent or lineal descendant of a grandparent of the testator)
(2) is survived by descendants who survive the testator,
= the descendants are substituted for the predeceased devisee.
How are adopted children treated under FL's antilapse statute?
For anti-lapse statute purposes, adopted child is a lineal descendant of the adoptive parents
T executes will in 2011; it provides (inter alia) "I give the sum of $5,000 to my sister, Paula."
Paula dies in 2012; 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 2017.
Who takes the $5,000?
Paula's two kids split the $5,000
Antilapse statute says Paula's will leaving estate to H is "common error" and Paula can't say otherwise.
What is the Class Gift rule?
When there is a gift by will to a group of persons generically described as a class ("children," "nephews" and "nieces," etc.)
and some class member predeceases the testator
and the lapse statute does not apply,
= the surviving class members take.
I devise all the rest, residue and remainder of my estate in equal shares to my good friend Alan Andrews, my business partner Betty Bates and my sister Carla Carter."
Alan Andrews predeceases T, leaving a child (Alan Jr.) who survives T.
T, a widower, is also survived by Bates and by Carter.
Who takes the residuary estate?
Answer: One-half each to Bates & Carter
RULE: If the residuary estate is devised to two or more persons,
and the gift to one of them fails for any reason,
= the surviving residuary devises take the entire residuary estate in proportion to their interests in the residue.
What is abatement?
Process by which certain gifts decrease -
e.g., when necessary to pay for omitted spouse or child OR for general debts
In what order are the gifts sacrificed (abatement) to satisfy funeral expenses, expenses of administration, creditors' claims when the estate is partially insolvent? (Same rule for revocable trusts)
Start at bottom and work up
(1) Real or personal property passing by partial intestacy.
(2) Next, the residuary estate (both real and personal property) is abated.
(3) Next, general legacies, which abate pro rata.
(4) Finally, specific devises and bequests.
What is ademption?
When property that is to be disposed of in a will is no longer in the testator's estate at the time of his death
= then it is considered adeemed by extinction
What are the statutory exceptions that Florida recognizes to ademption?
A specific devisee has the right to the remaining specifically devised property and:
(1) Any balance of purchase price owing from purchaser when contract is still executory at T's death.
(At common law, equitable conversion would apply, and T would no longer own real property, but merely a claim to the remaining purchase price.)
(2) Any amount of condemnation award for taking of the property, to the extent unpaid at T's death.
(3) Any amount of fire or casualty insurance proceeds unpaid at death.
(4) Property acquired as a result of a foreclosure of a security interest on a specifically devised note.
Example: T sells land for a note and leaves the note to B in his will. Later, T gets property in foreclosure of the note. B gets the property.
What is Florida's view of property that has been partially adeemed?
If a portion of devised property is not in the testator's estate at the time of death, the gift will be adeemed partially.
At the time of testator's death, the part that still belongs to him is not adeemed and will pass to the beneficiary.
Example: Black acre is 200 acres, but A sells 50 acres, the remaining portion of 150 acres will pass to the beneficiary.
Some years before her death T sold Blackacre, which was specifically devised to John. What is the effect on the devise to John?
John's gift is adeemed; he takes nothing.
"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.
How many shares does Simon take?
Specific devisee takes "any additional or other securities of the same entity owned by the testator because of action initiated by the entity, excluding any acquired by exercise of purchase options."
(Same rule for revocable trusts)
Tax Shelters was acquired by Ling-Temco-Vought, and as a part of the merger each shareholder was given one share of LTV for every two shares of Tax Shelters, Inc.
At T's death he owned 50 shares of LTV stock.
Does Simon get the LTV stock?
Specific devisee gets "securities of another entity owned by the testator as a result of merger, consolidation, reorganization, or other similar action initiated by the entity."
(Same rule for revocable trusts)
"I bequeath my 100 shares of Coronado common stock to A; I bequeath 200 shares of Baker Company stock to B."
Thereafter T sells all of her Coronado stock and all of her Baker stock.
What are A's rights?
What are B's rights?
A's gift is specific = So A is adeemed.
B's gift is not specific = Personal representative will buy the shares needed to fund B's gift.
What is Florida's view of exoneration of liens?
In Florida, devises are not subject to exoneration unless the will expressly provides for exoneration.
Exoneration requires satisfaction of the lien from the residuary assets of the probate estate.
The will has to expressly say the encumbered property (lien) shall be paid by the residue of the estate.
"I devise Gatoracre to my son, Sylvester. I devise my residuary estate to my wife, Willette."
At T's death Gatoracre is subject to a mortgage that is security for a note on which T was personally liable.
Sylvester demands that the personal representative pay off the indebtedness ("exonerate the lien") so that Gatoracre will pass to him free and clear of the encumbrance.
Is he so entitled?
A specific devisee of encumbered property is not entitled to have the encumbrance paid out of the residuary estate unless the will shows such intent.
"A general direction in the will to pay debts does not show such an intent."
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