Sunday, October 27, 2013

Gifts Under Your Will – Specific Gift Types


Gifts Under Your Will – Specific Gift Types


When talking about types of gifts under your Will, there are a few basic notions to consider.  First, what is being given, money, personal property, real property, and how these are distinguished under the law.  Next, whether the gift is specific, general or demonstrative.  Then there is some wrap up of these concepts.

In California, all property is either real or personal.  Civil Code §657.  The distinction is that Real Property is land and all things attached or incidental or appurtenant to land, not readily moveable.  Civil Code §658.  Personal Property is everything that is not Real Property, or pretty much everything else.  Civil Code §663.  Personal Property is then broken down into other considerations, such as tangible, being actual things you can touch or hold, and intangible, such as rights and privileges.  Tangibles are things like cars, antiques, art, jewelry and even pets.  Before you get goofy on who cares about things you can’t hold, how about patents, copyrights, and stocks, which now a days seems even more significant in wealth.

When dealing with the drafting of your Will, whether real property or personal property, whether tangible or intangible, the key to success in the gifting it in the proper identification of the unique item being given. While most of us may know what “my gold ring” might mean, what if you have more than one?  The goal is specificity to avoid confusion.  Problem is that lawyers are creatures of habit and history.  We tend to use language that beckons to formalities of the past.  It is best to try to draft with clear, simple language, knowable in basic context.  As they say in the military, KISS – Keep It Simple, Stupid.

That was more on the what, so, focusing on Personal Property first, now on to the how and why.  A “Specific Gift” is a gift of specifically identifiable property.  PC §21117(a).  Again, a Specific Gift could be tangible, like the family piano, or intangible, like Apple stock.  It simply must be described with sufficient specificity.  Why do a Specific Gift?  Personal reasons mainly, but sometimes the identification and division has other impact.  A Specific Gift also entitles the recipient to all income derived on that item after the date of death, less any expenses related.  A Specific Gift also gets preference.  As you recall, when discussing Abatement, if other gifts have to be abated, Specific Gifts will be last to be abated for satisfaction issues.  The biggest problem with Specific Gifts is that your holdings change over time, and therefore, these specifics might change too.  A gift of my “100 shares of Apple stock” is great, when that is all you have.  But what happens years later if the Apple stock is long gone, or if you now have 10,000 shares?  The devil is in the details.  Good intentions and great details may lead to lack of clarity and confusion.

A “General Gift” is a gift defined by exclusion, that is, a general gift is a transfer from the general assets of a person, that does not give specific property.  PC §21117(b).  Also capable of being tangible or intangible, it is typically, “all” of the property or a specified amount of a general lump of property.  An example is a “pecuniary gift” or a gift of money.  “I give $10,000 to my sister” is a general gift, in that specific currency is not identified and it is a fixed sum.  Unless otherwise stated, pecuniary gifts will also generally accrue interest.  The problem of a pecuniary gift is that it presumes there is money to dole out.

Another “General Gift” is a demonstrative gift, which is general gift, but from a specified fund or property from which the transfer is primarily to be made.  PC §21117(c).  Thus the gift comes from the estate generally, without being a certain item.  For example, you could give, “two horses from my herd that I keep at Ranch X”. 

A final thought for General Gifting is another pecuniary gift, but this time the right to certain money, but over time.  This is an Annuity under PC §21117(e).  For example, all profit from Ranch X, paid annually, is an annuity.   An annuity may designate a specific fund or property as the source of the periodic payment.

These are some examples of gifts pertaining to personal property.  Next time we will discuss gifts of Real Property.  After that, 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.