Chapter 34 - § 34.23 • EXONERATION AND MARSHALLING OF ASSETS

• Jurisdiction: Colorado

§ 34.23 • EXONERATION AND MARSHALLING OF ASSETS

There are two related doctrines of equity that may affect a certain number of estates. The doctrine of marshalling of assets may be invoked when there are both secured and unsecured claims involved.⁸⁷ Marshalling of assets is required under the Code in multi-state administrations.⁸⁸ See § 30.10 regarding exoneration.

Prior to adoption of the Code, a typical case in which the doctrine of exoneration was brought into play was one in which a testator made a specific devise of property, and later a lien, voluntary or involuntary, attached to the property. If the lien was voluntary and resulted in enhancing the personal estate of the testator, the law usually presumes an intent that the personal estate remove the lien rather than burdening the devisee with it. The result was usually different if the lien attached before making the will, as in the case of a purchase-money mortgage. If the lien was involuntary, such as in the case of ad valorem taxes, there usually was no exoneration.⁸⁹

Another situation in which one or the other, or both, of the doctrines arise with some frequency is the case of an insurance policy on the life of the insured on which he or she has borrowed, and the question is whether the beneficiary is entitled to the allowance of a claim against the estate for the amount of the loan and interest. The general rule is that where the borrowing is from the insurance company, pursuant to the options in the policy, the claim will not be allowed since the beneficiary takes subject to all of the terms of the policy.⁹⁰ A different result usually occurs when the policy is pledged to a third party, but presumed intent is frequently a critical factor in the decision."

The Code disposes of the distinctions outlined above regarding specific devises by stating a rule of non-exoneration (in the absence of a will provision to the contrary), regardless of a provision in a will for the payment of debts, but leaves open the question of exoneration as to nonprobate assets.⁹¹ See § 30.10.

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Notes:

^[87] New York Life Ins. Co. v. Brown, 76 P. 799 (Colo. 1904).

^[88] C.R.S. § 15-12-815.

^[89] Robinson v. Tubbs, 344 P.2d 1080 (Colo. 1959); see Ryan...