For many people, the idea of receiving a gift brings a happy sense of anticipation. Gifts are associated with special occasions and creating meaningful exchanges within personal relationships. In the legal world, however, a gift holds specific rights and responsibilities. When the gift comes through a will, the will’s construction and dispersal follow a specific set of rules.
Many people use will-based estate planning as a tool to pass along the bounty of their life’s work and to acknowledge their personal relationships. In general, a will allows the will-maker (commonly known as a testator, in legal terms) to pass along personal property, ownership in real estate, and to give gifts to specific individuals. When a person includes a specific item to a named individual in the will, there is a specific method to giving, receiving, and even refusing the gift. It is the joint responsibility of the personal representative (sometimes referred to as the “executor”) to make certain that the gift is disbursed in the manner intended by the will maker.
Method of Distribution
The method of distribution starts with the personal representative. In the will, a personal representative is named for the distribution of the entire will. The personal representative must follow the will’s exact language. Even when the language appears on its face to be reasonably clear, the distribution process can reveal weaknesses or ambiguities.
Intent of the Gift-Maker
A dispute can develop as to the intent of the will maker. At other times, disputes arise when the gift’s recipient, otherwise known as a beneficiary, will elect to refuse the gift. And at still other times, will disputes result from a lack of specificity or vagueness as to the actual gift.
Using the example of a will maker who collects fine art and puts pieces into the will, let’s take a look at some scenarios where there could be complications.
If the fine art collector includes in her will the gift of “all paintings in the residence,” some issues might be: Does the gift encompass paintings stored offsite? What about paintings that are on loan to another party at the time of her death? Are any pieces of art still being paid off on an installment payment plan? Does the gift’s beneficiary obligate him or herself to pay the debt? Another situation arises when the recipient refuses the gift.
Statutory Treatment of Gifts Made by Will
ARS § 14-2609 specifies how these issues might be handled:
Gift given during lifetime of the will-maker satisfies gift under certain circumstances
“A. Property a testator gave to a person while the testator was alive is treated as a satisfaction of a devise in whole or in part if any of the following requirements are met:
- The will provides for deduction of the gift.
- The testator declared in a contemporaneous writing that the gift is in satisfaction of the devise or that its value is to be deducted from the value of the devise.
- The devisee acknowledged in writing that the gift is in satisfaction of the devise or that its value is to be deducted from the value of the devise.”
In practical terms, this statute discusses the conditions under which the distribution of property by will is satisfied by an inter vivos gift (a gift made while the testator was alive).
It may sound like an obvious distribution. Borrowing from the earlier example of the artwork, if a person receives the painting, isn’t that sufficient to satisfy the distribution? Sometimes it is obvious. But if the gift is cash, or if the gift includes multiple parts and only one part is distributed, the impact of the overall distribution may be muddied.
Partial gifts given during the lifetime of the beneficiary are valued at the time of receipt or the testator’s death, whichever occurs first.
“B. For purposes of partial satisfaction, property given while the testator was alive is valued as of the time the devisee came into possession or enjoyment of the property or at the testator’s death, whichever occurs first.”
This section applies in a situation where a gift is given, in part, before the personal representative has begun distribution. For example, the situation occurs where a gift is given before or at the time of death, instead of after the will has been filed in probate court. Where the gift continues to accumulate value after its partial distribution – such as stock that is liquidated, in part, but the bulk remains invested – the timing of when the beneficiary received the partial distribution may affect future distributions.
Other Applicable Code Sections
The two examples above deal with lifetime gifts. There are many other examples of how the law treats gifts.
Gifts to a group, or class, of beneficiaries
Where a will-maker designates a group of beneficiaries, the issue of how to distribute the gift may be complicated for a personal representative if the will does not specify when the class of beneficiaries is determined or how to divide the gift among the class members. See ARS § 14-2708 for rules regarding this situation.
This section applies where the beneficiary dies before the will-maker. It also addresses issues of alternative gifts. The issue of gifts that have been spoiled or no longer exist are also covered here, in ARS § 14-2603.
While this list in not exhaustive, finding the relevant information is generally as easy as contacting an experienced probate attorney. In Scottsdale, Arizona, Berk Law Group, P.C. may help answer your questions and serve your probate needs.