Specific bequest of stock in a will

On Feb 9, 8:00 am, "royzim" <royzi...@comcast.net> wrote:
> Here's one of those few legal questions where the answer may be
> shorter than the question. I suspect there's a clear-cut answer but,
> so far, I can't find it on the internet.

Where gobs of money and contentious relatives are concerned, the answer is almost always "maybe."  Just ask Anna Nicole Smith.

This is also one very good reason not to include narrowly worded specific bequests like the one you discuss, in a Will.  IMO it's petty and unnecessary for a testator to do that with fungible, nontangible property of no sentimental value, although it may make sense with heirloom items like Grandma's wedding ring, a stamp collection, etc.

I also feel that,.other than to ensure that herlooms wind up going to the person testator wants to have them, such specific bequests are best used for various legatees whom testator wants to specially favor in a direct way but not for the residuary bequest (which is usually the largest hunk of estate assets) to testator's primary heirs, especially if those are her children.   Is the 500 shares _all_ she gave to Junior?   What did his other siblings (if any) get?  Or did she just want to give him that stock as a token, leaving the bulk of her estate to the National Endowment for the Arts or something?

AFAIC, stock is money, period.   Mom could bequeath $x to Cousin Ned and it wouldn't matter whether that was in the form of BP stock,  Amalgamated Buggy Whips, or cash greenbacks.   Ned could then go out and buy on the open market the same amount of stock as if he were given it directly.  Moreover, he can pick for himself which companies he wants to invest in.

Of course there are capital gains tax consequences to sale of stock, and the legatee is normally entitled to a stepped up basis as of testator's date of death, but IIUC (and I am NOT a tax lawyer) the estate would be too, if the executor just sold the stock and converted it to cash and then paid the legatees in cash or equivalent.

One other reason testators may bequeath specific stock is that, as in your case, they may write the will long before they die, and a bequest which seemed generous at the time (say, $1000, or even $10,000) may be a drop in the bucket these days, barely enough for a month's groceries.  Since stocks typically appreciate in value faster than inflation, this is one way of providing that testator's special gift to her favorite niece will still have real value when it comes time to execute the Will.   But again, those shares in Consolidated Whale Oil, or some 1990's dotcom for that matter, could be worthless by the time testator dies.   Much better IMO to simply review and revise the Will every few years to make sure a bequest still accomplishes what testator really intended.  But that's just me.

> The mother of a friend of mine recently passed away. In her will,
> written in 1984, she left my friend 500 shares of Standard Oil of
> Indiana stock.

[500 1984 shares, renamed Amoco, became 1,000 in 1989,  then 2,000 shares in 1998 as a result of 2-for-1 splits; BP then bought out Amoco in a 1.3233 stock trade]

> I know that the 500 shares of Amoco have become 662 shares of BP in
> the acquisition, but my question is this: Should the two stock splits
> of Amoco be included in the calculation of the number of BP shares to
> be given to my friend?

Normally, the property included in a testamentary estate.is determined as of the date of death of the testator.  But since Amoco doesn't exist as a company anymore, if there is a legatee (such as your friend) who wants to contest that interpretation of the Will, a court would have to decide what the testator originally intended.  It could be argued both ways.

> In other words, should the will be interpreted
> to mean 500 shares at the time of her death (662 shares of BP) or
> today's equivalent of 500 shares at the time the will was drafted
> (2,647 shares of BP after factoring in the two Amoco splits)?

Obviously, your friend would be best served by arguing for the latter interpretation.   But he should be prepared to hire a lawyer to defend that view in court since it is unlikely the other legatees would just roll over and agree.

Good luck,

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