ACTS OF Independent Significance in a Will PDF

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New York Trust and Estates EPTL Lecture...

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Trust and Estates Notes Spring 2020

ACTS OF INDEPENDENT SIGNIFICANCE IN A WILL All jurisdictions give effect to devises that identity the property of the devisee by reference to acts and facts that have independent legal significance. However if testator appears to be trying to manipulate estate planning!wont be given effect, but if doing something that is done with independent significance, it will be given effect. • The meaning of a dispositive or other provision in a will may be supplied or affected by an external circumstance referred to in the will, UNLESS the external circumstance has no significance apart from its effect upon the will. o Statement cannot be too easily manipulated • The act must be independent of changing the testamentary plan in order for the court to allow it • These examples were found to have independent significance: o Devise of all my property to whoever shall take good care of me and maintain, nurse, clothe, and furnish me with proper medical treatment o Devise to party who may be farming my farm and taking care of me at death o I give to my son whatever is in the 2nd drawer of my desk (iffy) o I give to my son the furniture in my summer house (iffy) • These examples were NOT found to have independent significance: o I give everything to whomever I blow a kiss at last. o I give everything to the last person to whom I send a musical CD to (this is clearly manipulating) RENUNCIATIONS You do not have to accept property that you are entitled to receive Why would you to renounce? • Tax purposes. o Maybe you want your issue to get the gift instead of you

▪ Anything you get by gift is NOT taxable income. However, if you don’t need the money and the income on the gift would be taxable income for the next year in your high tax bracket, you may want to let your issue take it if they are in a lower bracket. Need to keep anti-lapse statute in mind though. o Maybe you are rich and want to engage in generation skipping ▪ Generation skipping transfer tax is one that imposes a tax when a person tries to skip a generation o Property taxes on property could be too high • Maybe you have creditors that collect on the property if you take it, so you may want to let your kids take it instead & then the creditors cannot collect on it • May not want gift b/c of conditions • Property may need a lot of work and could cost too much time/money • Don’t like the person who gifted it to you • You want to let it pass to someone who truly needs it • Maybe property has a mortgage or would be hard to sell • Maybe you don’t want to be disqualified for government benefits Disclaimers Under State Law • Relation-back doctrine o A disclaimer was considered to relate back to date of the transfer and operate as a non-acceptance. o All claims of creditors and government taxing authorities seeking to arbitrate ownership rights to the disclaimant were ineffective. Disclaimers Under Federal Law • A disclaimer incurs no federal tax consequences IF the disclaimer is a “qualified disclaimer” o Qualified disclaimer must be: ▪ Irrevocable and unqualified ▪ In writing ▪ Filed w/in 9 months of the later of the time of the transfer or the disclaimer’s 21st bday (NOTE: 21ST BDAY EXCEPTION IS NOT IN NY STATUTE!!)

▪ Disclaimant must not have accepted the interest or any of its benefits ▪ Interest must pass, without direction by the disclaimant, to either the transferor’s spouse or a person other than the disclaimant • FEDERAL LAW TRUMPS STATE LAW! But a state disclaimer law may affect the manner of obtaining qualification of a disclaimer for tax purposes IF it contains more restrictive rules than the federal statute Restatement on Renunciation • When an attempted prior interest fails b/c it is renounced by the person to whom it is limited, a succeeding interest is NOT accelerated so long as a condition precedent to such succeeding interest continues unfulfilled....