§ 24  Advancements and Gifts in Satisfaction  [139-142]

 

Suppose that during her lifetime a parent gave substantial gifts — of different amounts — to two of her three children.  When she dies, should a court adjust the children’s shares of the estate so that the combination of lifetime and at-death transfers treats each child equally?  That is the basic question addressed by the related doctrines of “advancements” and “satisfaction.”

 

         A.  Advancements

 

Lifetime gifts intended to come out of an intestate share are called advancements.  Two questions predominate.

 

               1.   Identifying an “Advancement”

 

The most common candidate for an advancement is a gift from a parent to a child.  To decide whether to characterize a gift as an advancement, we look to the donor’s intention regarding the impact of the gift on the donee’s share of the estate.  Was it intended to be independent from, or part of, the donee’s inheritance?  See, e.g., Miller v. Richardson, 85 S.W.2d 41 (Mo. 1935)

 

Traditionally, the law presumed that gifts of land or a substantial amount of personalty from parents to children were advancements.  To avoid litigation, several states treat gifts as advancements only if the donee acknowledges them as such, or if the donor indicates in a contemporaneous writing that the gift is meant as an advancement. See UPC § 2-109. 

 

               2.   Calculating the Shares from a “Hotchpot”

 

If a particular gift is considered an advancement, courts conduct what is called a “hotchpotch” calculation.  Each advancement is added to the total amount available for distribution from the estate.  Each heir’s respective share is then calculated with reference to this “hotchpotch,” the donee is credited with the gifts already received, and the rest of the property is distributed.  For an example, see text pages 140-141.

 

         B.  Satisfaction

 

Lifetime gifts intended to take the place of gifts made by will are gifts in satisfaction of the bequest.  Because will beneficiaries need not be heirs, satisfaction potentially covers a wider range of lifetime gifts than does the advancements doctrine.  For example, depending upon the donor’s intention, a will provision giving “$15,000 to Knox College” might have been satisfied by a lifetime gift of that amount to the college.  Also, UPC § 2-609 allows a lifetime gift to one person to satisfy a testamentary gift made to another.

 

Because the doctrine centers on intention, the same sorts of proof problems surrounding advancements arise here as well.  The UPC again requires a writing.  See UPC § 2-609.

 

Once a lifetime gift is identified as one which changes the testamentary gift, the shares under the will must be adjusted accordingly.  Sometimes a hotchpotch calculation will be necessary.

 

§ 25  Misconduct  [142-145]

 

Another way an expected share can change is for a beneficiary to lose the share by the beneficiary’s own misconduct.  Most commonly, slayers are denied the benefits of their crimes.  Sometimes courts have imposed a “constructive trust” on the slayer’s share and ordered it transferred to someone else.  Most jurisdictions now have relevant statutes, but many are incomplete, so the common law may fill gaps.

 

         A.  Constructive Trusts

 

The constructive trust is a flexible device for remedying bad conduct in a broad range of situations.  Here, it serves to remove title from the slayer who would otherwise get it, and pass that ownership to someone else.  Despite the label, a constructive trust is not really a trust, but a remedy, a way of shifting title.  See In re Estate of Mahoney, 220 A.2d 475 (Vt. 1966).

 

         B.  Statutes

 

A large number of states have statutes denying slayers property in certain circumstances.  Because many statutes cover some topics but not others, here is a series of questions you can ask about whatever statute you face:

 

·        What bad actions disqualify the slayer?

·        What property interests are affected?

·        What is the effect of applying the statute?

·        Is a bona fide purchaser who takes from the slayer protected?

 

States with incomplete statutes would do well to consider UPC § 2-803.

 

§ 26  Assignments of Expectancies  [145-146]

Someone might expect to come into some money after a relative dies, but want to give someone else the right to get those funds when the time comes.  The tenuous nature of such an “expectancy” has led courts to restrict severely the situations in which any transfer would be effective.  According to orthodox doctrine, outright transfers of expectancies are not allowed.  Courts will, however, enforce contracts to transfer expectancies, if the agreement is supported by fair consideration.  See Scott v. First National Bank, 168 A.2d 349 (Md. 1961).

 

§ 27  Disclaimers  [146-149]

 

Beneficiaries use disclaimers (a/k/a “renunciation”) to change the distribution of an estate by refusing to accept its benefits, most commonly to save taxes.  Both state and federal law apply to disclaimers.  See UPC § 2-801, IRC § 2518.  State law determines ownership; federal law determines tax consequences.  Thus, it is possible to disclaim property effectively under state law, but at the same time, fail to follow the federal rules, and lose the tax benefits.