Chapter 3 Testate or Intestate 2007 Pearson Education

Chapter 3 Testate or Intestate © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Learning Objectives n n Understand the difference between a gift, a devise and a bequest in a will Understand the difference between per stirpes and per capita distribution Understand the consequences of dying intestate Understand the key family rights provided in the law to protect an estate Wills, Trusts, and Estates Administration, 3 e Herskowitz 2 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Legacies vs. Devises Legacy n Devise Gift of personal property; also known as a bequest n specific legacy n demonstrative legacy n general legacy Wills, Trusts, and Estates Administration, 3 e Herskowitz 3 n Gift of real property n specific devise © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Residuary Disposition n n Most typically disposing of the remainder of a testator’s property after all debts and taxes have been paid and all bequests and devises have been given. Also disposes of items that have been overlooked, or where the initial gift failed Accomplished through a residuary clause which, in effect, catches the unaccounted for property This prevents the property from falling into intestacy Wills, Trusts, and Estates Administration, 3 e Herskowitz 4 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Abatement vs. Ademption Abatement n n Ademption Reduction of gifts to pay taxes and debts State law determines the order of what assets are sold to pay the estate debts Wills, Trusts, and Estates Administration, 3 e Herskowitz 5 n n When an asset in the will is transferred outside the will before the testator’s death This gift has “adeemed, ” and the intended recipient gets nothing in its place © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Anti-Lapse Statutes n What are they? n n Statutes that alter the common law by preventing the failure of a gift to a beneficiary when the beneficiary dies before the testator How? n n By substituting the dead beneficiary’s issue or heirs instead But, the testator’s intent that the gift should lapse will trump an anti-lapse statute Wills, Trusts, and Estates Administration, 3 e Herskowitz 6 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Per Stirpes Distribution Bobbie (d. 2009) Tina’s child 1/5 interest of Bobbie’s estate because mother died, she shares equally with her uncles Tina (d. 2005) Todd 1/5 interest of Bobbie’s estate Tina’s Child 1/5 interest of Bobbie’s estate because mother died, she shares equally with her uncles Tina’s child 1/5 interest of Bobbie’s estate because mother died, she shares equally with her uncles Wills, Trusts, and Estates Administration, 3 e Herskowitz 7 Ted 1/5 interest of Bobbie’s estate © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Per Capita Distribution Bobbie (d. 2009) Tina’s child no interest of Bobbie’s estate because mother did not survive Bobbie Tina (d. 2005) Todd 1/2 interest of Bobbie’s estate Tina’s Child no interest of Bobbie’s estate because mother did not survive Bobbie Tina’s child no interest of Bobbie’s estate because mother did not survive Bobbie Wills, Trusts, and Estates Administration, 3 e Herskowitz 8 Ted 1/2 interest of Bobbie’s estate © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Intestacy n What is it? n n What happens in intestacy? n n n Dying without a will (or a will declared to be invalid) Intestacy statutes control the distribution of the decedent’s intestate… By prioritizing the decedent’s relatives… Starting with the surviving spouse (if any)… And then searching for heirs based on “consanguinity, ” starting with surviving children (if any) Consanguinity? n n Heirs—historically, this meant blood relations Adopted relations are now treated as blood relations Wills, Trusts, and Estates Administration, 3 e Herskowitz 9 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Lineal and Collateral Consanguinity n Lineal Those who are directly related to the decedent n n Examples: n n n parents, grandparents: (ascendants) children, grandchildren: (descendants) Wills, Trusts, and Estates Administration, 3 e Herskowitz Collateral Those who are not directly related to the decedent Examples: n n 10 siblings, cousins aunts, uncles © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

The Problem of The Pretermitted n Who are they? n n n Child or surviving spouse who is born or married to the testator after the testator writes a will As a result, these persons are left out of the will, unless the will covers these situations What happens? n n Pretermitted spouses or children usually inherit under intestacy laws… Unless, inter alia, the testator intended to disinherit the pretermitted children, or if there was a pre- or postnuptial agreement Wills, Trusts, and Estates Administration, 3 e Herskowitz 11 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Escheat n n The act of the decedent’s property transferring to the state, because there are no surviving relatives or kin to inherit the decedent’s property, either under a will or intestacy Escheat can be avoided by having a will that has a residuary clause for friends or charities Wills, Trusts, and Estates Administration, 3 e Herskowitz 12 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Other Family Rights n Homestead Exemption n n Homestead Allowance n n Some states provide that a cash allowance related to the home’s value be free from creditors’ claims Exempt Property n n In states where this is allowed, the family homestead is free from all creditors’ claims Some states provide that certain personal property of the decedent is free from creditors’ claims Family Allowance n Many states provide a cash allowance—coming from the estate—for family members during the estate administration Wills, Trusts, and Estates Administration, 3 e Herskowitz 13 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

The Statutory Share n n A statutory allowance, giving a surviving spouse the right to elect to take a percentage of the testator’s estate—as determined by state law— rather than inheriting under the will … prevents a spouse from being disinherited Beware: the statutory share of the surviving spouse is often smaller when there are surviving children from a prior marriage Related to this is dower and courtesy, abolished in most states. Wills, Trusts, and Estates Administration, 3 e Herskowitz 14 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Inheritance Curiosities n Beneficiary murders benefactor n n n “felonious slayer” statutes provide that the murderer is treated as if he or she predeceased the decedent, preventing a wrongful inheritance the UPC also provides for a similar result with the decedent’s non-probate assets Beneficiary and benefactor die simultaneously n n beneficiary is treated as if he or she predeceased the decedent the UPC allows for a 120 -hour window for simultaneous death Wills, Trusts, and Estates Administration, 3 e Herskowitz 15 © 2011, 2007, 2001 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.