Abatement (13-1.3) - Lecture notes 13 PDF

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Trust and Estates Notes from Class Discussion Rule 13-1.3...

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Trust and Estates Notes

Abatement (13-1.3) Abatement is trigged when the estate is not sufficient to satisfy everyone’s bequests, after all administration expenses, debts, etc. are paid, so some people must get less. Satisfaction-in-kind: If someone is getting a cash bequest, the executor is allowed to satisfy it with property of that worth. Abatement Analysis – NOTE: Express/implied intent of testator trumps the abatement order • Creditors are paid off first followed by estate taxes, administration and funeral expenses.  All property of decedent and any income therefrom is chargeable w/ payment UNLESS such property is specifically disposed of, any general dispositions • Abatement priority (meaning, who loses stuff first) is as follows: o Intestacy o Residuary bequests o General bequests (must be done ratably) o Demonstrative bequests (NOTE: can be classified as either specific/general to the extent “closed”) ▪ If open (some of the bequest remains – I.e., still some $ remains in account but not full amount) specific bequest ▪ If closed (adeemed entirely–nothing left)  general bequest o Specific bequest o Bequests to Surviving Spouse that qualifies for marital deduction ▪ If testator leaves residue to wife, this is not eligible for the martial deduction. However, the wife has right to elect against the will because under the statute, she will get nothing. NOTE: EPTL 12-1.2. Order of liability to creditors

• This is almost the same as the abatement statute, but it allows creditors to go after beneficiaries who have received property in the same order as abatement statute. Incorporation by Reference & Pour-Over Trusts • NY doesn’t allow incorporation of another writing by referencing it unless the other writing was itself executed with the formalities required by 3-2.1 (Booth v. Baptiste Church) • Exceptions: o Pour-over trusts (3-3.7) ▪ A testator can dispose of her estate in a lifetime trust only if the trust is named in the will, executed with the formalities of 7-1.17 (in writing, signed by creator and 1 trustee, and either acknowledged or two witnesses present) and was created either prior to or contemporarily with a will. ▪ Valid even if it’s a trust created by someone else, or its amendable or revocable • However, subsequent amendments after testator’s death will not be given effect unless the testator allows for it in the will; must specify that you want trust’s terms to govern, including amendments made after your death. • Legal title vests in trustee when property is poured over • If trust is revoked, the pour-over fails because there is nothing to pour into o Acts of Independent Significance ▪ The meaning of a disposition may be supplied by an external circumstance referred to in the will, unless the external circumstance has no significance a part from its effect upon the will. ▪ Examples of Independent Significance: “I give X to my housekeeper,” “I give trust to my business partners.”

• To revoke such a provision, you would change the will, not find a new housekeeper or business partners. It has some independent significance. ▪ Examples of No Independent Significance: “I give X to the last person I emailed,” “I give X to the last person I mailed a poem to.” • Not valid if you could fiddle around with/manipulate outcome before death. Presumption of Death (2-1.7) When one goes missing, 2-1.7 declares absentee dead and permits estate administration. This is a tough statute to satisfy; after conditions are met, guardian ad litem will try to rebut the presumption on behalf of missing person. • A person is presumed to be dead if: o (1) He has been absent for 3 continuous years; ▪ During this waiting period, SPCA Article 9 allows for the administration & distribution of estate even though absentee is not declared yet. For example, one can be appointed as temporary administrator of absentee’s estate, so he can transfer the car into her own name and continue writing checks to pay insurance premiums. • Not applicable to persons to join the military and become prisoners of war o (2) There was a diligent (exhaustive) search; and ▪ For example, if someone says they saw the missing person somewhere  no good o (3) Absence can’t be satisfactorily explained by anything other than death ▪ For example, if missing person left a note, “I’m leaving because I need a new start”  no good • Date of Death:

o If the absentee was not exposed to specific peril, date of death becomes 3 years after the date of disappearance UNLESS “clear and convincing evidence points to an earlier date.” ▪ If beneficiary died in between date missing and “official” date of death  they are considered to have predeceased the absentee o If person was exposed to a specific peril, then court could determine that the person died on the date of the peril. Two Conditions: ▪ Absence must be consistent with the peril and diligent search must be made • For example, person went out on boating trip & pieces of the boat came back but no body • Matter of Cositino: finding a specific peril by saying that driving a beer truck in the Bronx was perilous • Plot Twist: if missing person comes back, that person challenges the executor for the money still left & seeks accounting. No automatic right to your money back Murderous Heirs (4-1.6) • Slayers can’t profit from their wrongdoing (Riggs v. Palmer), but don’t have to forfeit the property they own per Civil Rights Law 79-b. o Innocent beneficiaries are not disqualified from the slayer’s wrongdoing (Matter of Covert: not good precedent because this was a murder/suicide). o If one’s killing causes him to inherit from someone else, that person is still disqualified (Matter of Macao) • A joint bank account owner convicted of 1st or 2nd degree murder of other joint owner forfeits any $ he didn’t contribute to the joint bank account and has the burden of proving what he contributed • A joint property owner who intentionally/feloniously kills a co-owner is only entitled to the commuted value of a life estate in ½ of the property, which is calculated actuarially based on the age of the killer.

o There is a presumption against the slayer that he would have survived the other (Matter of Matthew)...