Sunday, October 20, 2013

Gifts Under Your Will - Failures


Gifts Under Your Will - Failures

In recent blogs, we have been talking about gifting under your Will.  Last week, conditional gifts, were those with strings attached.  What happens if gifts go wrong?  How can that be?  You mean that your dying wish was not respected?  Perhaps you made a gift, but you did something to the object of the gift prior to death, and never changed your will.  Or something worse, your precious stuff was unwanted?  Yup, this happens.

One category of gift failures is Ademption.  Ademption is the extinction or withdrawal of a gift because you, the gifter, did something that essentially revoked the gift or acted with an intent to revoke.  Most common form of ademption is where the item is gone or extinguished.  Thus, if a gift is made in a Will of a certain thing, say a building, and you, the Testator of your Will, decide to sell the building, or it is condemned, foreclosed, or even lost by destruction, that gift may be adeemed.  If your gift is gone, you may get nothing.  But in the law, words are critical, so “may” is very important.

The law does not like ademption, so there are laws that seek to save the gift, in some part or in kind.  Look to PC §21131 and following to address a variety of circumstances.  So if the building was sold, you may get the money from the sale of the building instead of the building or comparable value received from the loss of the building.  It may be that all you get is whatever is leftover.  However, there can be circumstances where the property is sold to care for the testator, and thus this need in the present overrides a right in the future.  Moral of this story, we need to consider the specific facts and circumstances of any specific gift, depending on whether you are the giver or the givee.  Better moral, review and revise your Estate Plan periodically so that you leave more to your heirs, with clear intent, and not create a squabble over your bones.

Another type of ademption is by advancement.  Just like it sounds, if someone is given something as and advance against their inheritance, they don’t get to double dip and get it twice.  They must account for what they got and get only what they are due.  This advance will be treated as a satisfaction of the inheritance in the Will, if the Will provides for a deduction of the lifetime gift, that there is a writing made with the Will that says the gift is an advance against an inheritance, that the receipt and advancement is acknowledged by the recipient, or that specific property is already given over, and is unique enough to not be given again.  One problem with advancements is that sometimes we are giving percentages or values, and not so much a specific thing.  In that case, we will need to determine the value or percent given and create an appropriate offset.  The possible arguments here are obvious.

Another category of gift failures would be abatement.  If there are more gifts than assets to go around, and all gifts cannot be satisfied in full, then the law kicks in to dictate what we look at, how we gather it together and how we give it out.  PC § 21400 and following gives us the order of abatement and abatement within classes, and as one might expect, we eliminate from the more general first, and try to satisfy the more specific.  For example, anything not included in the Will, an omitted asset, maybe acquired after the Will was made, will get absorbed, along with anything caught in the residuary gifts, and will be used to try to satisfy specific gifts.  Also, gifts to friends or charities will be absorbed in order to allow gifts to the family to take priority.  If you want things done differently, the same moral to the story, review and revise your Estate Plan periodically so that you leave more to your heirs, with clear intent, and not create a squabble over your bones.

In the future, we will be talking about specific gifts of money and personal property.  After that we will talk about real estate.  Then we will talk about giving the family business.  Following those specific discussions, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.