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Bequest Management

Recent Cases of Interest for Bequest Managers: 2023 Edition

August 22, 2023
Recent Cases of Interest For Bequest Managers: 2023 Edition

This blog is the first in what CCK plans as an annual review of selected cases illustrating issues that arise during estate administration.  The cases involve situations like those that charitable bequest managers might face in the course of their work.

The review, which covers the period from July 1, 2022, to June 30, 2023, is highly selective and by no means exhaustive.  It is the result of our staff’s review of hundreds of decisions to pick more than a dozen that are interesting “shop talk” for experienced and new bequest managers.  Some of the cases involve charities and some do not.  But, the issues that arise for charitable beneficiaries during estate administration are mostly like those faced by other legatees.

The cases discussed are all real.  We have endeavored to present only so much of the factual background as needed to appreciate the significance of the decisions.  We have included citations to all of the cases for those who wish to pursue additional research.

Relaxation of Formalities

More frequently than ever, “noncompliant” wills (i.e., those failing to meet the strict requirements of the state’s Wills Act) are being admitted to probate.  A dozen jurisdictions have adopted Section 2-508 of the Uniform Probate Code (UPC).  That section, often called the “harmless error” provision, goes far beyond the holographic will exception and permits the probate of credible documents that do not conform to the Wills Act.

For example, the UPC harmless error rule is in effect in California.  The case of Estate of Berger, 91 Cal.App. 5th 1293 (2d Dist. 2023) shows the reach and flexibility of the exception.  In Berger, a long-estranged girlfriend offered for probate a decades-old typewritten letter sent to her by the decedent.  The letter (which announced the writer’s intent to leave her estate to her girlfriend) was neither witnessed nor notarized and referred to significant assets no longer in the decedent’s possession at the time of death.  Nonetheless, the court admitted the letter to probate as the decedent’s will.

Even more interesting are cases from two states – Maryland and Louisiana – that have not enacted the UPC provision.  These decisions involve judicial creation of a harmless error exception.  In Estate of Steiner, 279 A.3d 1091 (2022), the testator disinherited her adult son in a problematic codicil that lacked a formulaic attestation by the witnesses.  Although such an attestation was the norm in Maryland for a century, the court gave effect to the codicil because of the overall authenticity of the document.  Similarly, in Succession of Simms, 354 So.3d 24 (La.App. 1 Cir. 10/19/22), the court issued a similar ruling in a comparable case.

Why These Cases Matter:  Statutes and judicial decisions are slowly liberalizing the standards for wills. Probate courts are accepting increasingly more non-compliant documents.  Depending on the facts, these “will substitutes” can be beneficial or devastating to a charity.  The case of Estate of Counselman, Docket A-1456-21 (N.J.App. 2023) is a great example.  The testator’s 2017 will left her multi-million-dollar estate to nine charities.  In 2021, she prepared, but did not sign, a will that reduced the charities’ shares by 70 percent.  On motion by the executor (also a beneficiary of the 2021 version) the court admitted the unsigned 2021 document to probate in lieu of the 2017 will.  At last report, an appellate court had granted permission for the charities to conduct additional discovery into the circumstances surrounding the 2021 revision. When significant funds are at issue, a charity may well find itself in the forefront of a controversy over one of these non-compliant wills. 

No Contest Clauses:  Still Alive and Kicking

The no-contest clause, also known as the “dead hand from the grave,” is the testator’s effort to silence post-mortem dissent by disinheriting any beneficiary challenging the will.  Such clauses are disfavored today, and many states have adopted statutes or case law permitting “probable cause” or “good faith” challenges to wills containing those provisions.

Butler v. Stegmaier, 884 S.E.2d 806 (2023) shows the perils of ignoring a no-contest provision.  There, an heir (Butler) raised a legitimate challenge to probate the testator’s most recent will.  The Virginia Court of Appeals acknowledged that two-thirds of the states had adopted exceptions to no-contest clauses and that some of those exceptions were created by courts.  Nonetheless, the tribunal declined to follow suit and revoked the portions of the probated will that had provided gifts to Butler.  He took nothing under the will.

Meiri v. Shamtoubi, 297 Cal. Rptr. 3d 397 (Cal.App. 2022) is even more surprising.  California law permits “probable cause” challenges.  Here, Meiri made a credible challenge to a trust with a no-contest clause, but well after the filing deadline. The court not only rejected the challenge as untimely, but stripped Meiri of her inheritance.  The court reasoned that since a time-barred filing will likely be rejected, it cannot, by definition, have “probable cause” for success.  Meiri triggered the full consequences of the no-contest clause by filing her doomed challenge.

Why These Cases Matter: “Probable cause” means that the challenge has a better-than-even chance of succeeding.  Even so, our firm advises charities to tread lightly in dealing with these provisions.  No-contest cases are replete with hidden minefields and expert advice is in order when the stakes are high.  An example of such a minefield appears in In Slosberg v. Giller, 876 S.E.2d 228 ( 2022), where the Georgia Supreme Court acknowledges that a beneficiary may launch a good-faith challenge to the validity of a trust with a no-contest clause.  If the trust is invalid, it (including the no-contest clause) ceases to have legal effect.  However, it appears that a good faith but unsuccessful challenge to a trust would subject the movant to disinheritance.  The chilling effect of that possibility effectively negates the (limited) “probable cause” safe harbor in Georgia.  It will be interesting to see if analogous issues arise in other states with broader “probable cause” exceptions.

Although popular guidebooks sometimes depict estate administration to be a nationally uniform process, state laws vary and can make a big difference.  MacDowell, a Louisiana resident, executed a will in 2014.  A year later he revoked it in a handwritten, unwitnessed document.  Both documents were valid under Louisiana law.

MacDowell later moved to Florida, where he died. His daughter and son-in-law (the Caveglias) sought to open an intestate estate proceeding in Florida.  Heinen (MacDowell’s life partner) objected on the grounds that the 2015 revocation was invalid under Florida law and thus could not revoke the 2014 will.  The Caveglias countered that since both wills originated in, and were valid in, Lousiana, the law of that state should control.

The court sided with Heinen, noting Florida’s complete rejection of holographic wills and, by implication, of holographic revocations, regardless of where executed.  The 2014 will (which benefitted Heinen) was admitted to probate.  Caveglia v. Heinen, 359 So.2d 745 (Fl.App. 2023).

Laws of foreign countries can sometimes wreak havoc with estate plans.  In another Florida case, a woman dying in Argentina gave her property manager a power of attorney (POA) with instructions to transfer some Florida real estate to her long-time partner.  The property manager complied, and the woman died shortly thereafter.  Her descendants argued – successfully – that the property transfer was invalid because the POA, while legal in Argentina, lacked the witnesses required under Florida law.  The realty thus went to her estate and not to her boyfriend.  Parisi v. Kingston, 357 So.3d 1254 (Fl.App. 2023).

By contrast, meticulous international estate planning can often avoid these problems.  In Estate of Sweet, 520 P.3d 827 (Nev.App. 2022), Ms. Sweet lived in Maryland but executed her will in Portugal.  Her surviving spouse sought to probate the will in Nevada, where Sweet owned real estate.  Sweet’s daughter objected on the grounds that the document was signed in a foreign country.  The Nevada Court of Appeals made short work of that one, finding that the will was valid in Maryland (the domicile of the decedent).  It was admitted to probate.

(It is interesting to note that Nevada looked to the law of Maryland to assess the will, the opposite of the approach taken by Florida in the Caveglia case above.  This demonstrates that there are conflicts of law about conflicts of law!).

Sometimes, peculiarities of domestic law can dramatically affect probate cases.  In Mississippi Baptist Foundation (MBF) v. Fitch, 359 So.2d 171 (Miss. 2023), MBF had inherited valuable mineral rights from decedent McCool in 1969.  The will was probated in Louisiana.  In 1969, Mississippi’s mortmain laws mandated that charities sell inherited realty within ten years of a bequest, or the property reverted to the decedent’s heirs.  MBF never sold the interests.  The mortmain laws of Mississippi were repealed in 1993.

Almost 30 years later, in 2019, MBF became engaged in a dispute with McCool’s heirs over ownership of the mineral rights.  MBF attempted to probate McCool’s now half-century-old will in Mississippi to quiet title to the rights.  The Mississippi Supreme Court sided with the heirs, ruling that MBF’s failure to comply with the mortmain law in effect in 1969 was not excused by the subsequent repeal of the statute.  MBF had lost its title to those rights in 1979.

Why These Cases Matter:  If an estate has a “multi-jurisdictional” flavor (domestic, foreign, or both), the attentive bequest manager will keep that file on their radar, especially if the gift is significant.  The sudden appearance of a conflict of law can turn routine estate administration into contentious litigation.

Estate Assets: Identification, Classification, and Preservation

Ideally, the inventory will list all estate assets.  It is the role of the executor to identify, inventory, and protect/preserve those assets.  In Zarsky v. White ___ SW 3d ___ (Tx.App. 2022), 2022 WL 17491238, the court found a breach of fiduciary duty in the executor’s failure to obtain flood insurance on the decedent’s lakeside house, which was subsequently leveled by Hurricane Harvey.  The value of the home was lost as an estate asset.

Legal claims relating to the decedent (personal injury, wrongful death, medical malpractice, workers’ compensation) are sometimes overlooked by executors.  These are assets, and often valuable ones.  Courts routinely reject late filings, as in Rossi v. Atrium Medical Center, 212 N.E.3d 21 (Oh.App. 2023) where claims of wrongful death and medical malpractice were barred due to the executor’s failure to file them within the period specified in the statute of limitations.

Debts and other payments owed to the decedent are another neglected class of assets.  In a recent case, an attorney for the personal representative had his law license suspended for failure to resolve the decedent’s entitlement to tax refunds and unclaimed property (together valued at almost $175,000). Kentucky Bar Association v. Calilung, ___S.W.3d____ (Ky. 2023), 2023 WL 2623209  (Our attorneys have assisted bequest management clients to recover assets from state unclaimed property registries.  These are sometimes bequest gifts that were not identified during estate administrations many years earlier.)

Finally, in any of the nine “community property” states (CA, TX, AZ, NV, ID, WA, LA, WI, NM), an executor’s misclassification of separate assets as community property will prevent that asset from becoming part of the probate estate, and thus not available to charitable beneficiaries.

In the curious case of Bean vs. Bean, 658 S.W.3d 401 (Tx.App. 2022), the testator’s surviving spouse sought to have certain space artifacts (such as a hammer the decedent, a former astronaut, used on the moon) treated as community property.  The decedent’s sole surviving child objected, and the court reclassified the artifacts, valued well into seven figures, as separate property and therefore part of the probate estate.  The court analyzed both the testator’s treatment of the objects during his lifetime and, most important, the preemptive effect of a federal statute intended to allow astronauts to retain such items.  (This is another example of a competing laws problem, in this case, federal vs. state.)

Why These Cases Matter:  Every charitable bequest manager knows that it is wise to keep an eye on the executor (or administrator, or trustee, or the attorneys that represent them).  Most cases run smoothly, though delay is a big problem.  Embezzlement occurs in a small percentage of the cases, but typically for large amounts.  These, however, are not the only risks that should be monitored.  Fiduciaries have a duty to identify, protect, and conserve estate assets. 

Typically, that involves making prudent investments, but non-cash assets may require various kinds of protection.  Charities having a large stake in an estate should not hesitate to raise concerns about unprotected or unidentified assets.  There is no need to do that in every case, but only in those that raise questions.  The “moon mementos” case illustrates the community property wrinkle, but also serves as a reminder that noncash assets can be extremely valuable.  It is worth making the extra effort to research the worth of an unfamiliar item. Consider this: In 2022, a modern (1952) baseball card featuring Mickey Mantle sold for $12.6 million.  

Many charities have a “familial” relationship with parent or affiliated organizations.  Sometimes, these relationships include revenue-sharing arrangements and/or tacit or explicit understandings of the ownership of assets.  These affiliations came to the forefront in several recent cases.  In Derblom v. Archdiocese of Hartford, (SC 20584) (March 14, 2023), the Archdiocese closed a local Catholic school, and a group of affected parents opened their own stand-alone parochial school to replace it.

The closed school had just received a multi-million-dollar bequest.  The assets of the closed school reverted to the Archdiocesan education office, but the parents involved with the new school laid claim to the windfall as the successor in interest to the old school.  The court refused to divest the Archdiocese of the gift, stating that there was no legal basis for the parents’ claim that the new school was the “successor in interest” to the old.  It treated the bequest as an unrestricted gift to the Archdiocesan education program.

The case of In Re Matthews Revocable Trust 979 N.W.2d 259 (Neb. 2022) is at least superficially inconsistent with the Derblom decision.  In Matthews, a local Lutheran church, one of about two hundred that belonged to the regional Synod, had ceased operations.  Later, it received a share of the Matthews trust along with several other charities.  The Synod, an administrative body but not itself a church, claimed the share of the defunct church.

The court declined to transfer the bequest to the Synod, instead dividing the lapsed gift among the other charitable beneficiaries.  The primary rationale for the decision was that the Synod was purely an administrative body, not one that operated the same charitable mission as a local church.  The court also questioned whether the Synod was the “successor” of the closed church.

A significant California case, Breathe Southern California v. American Lung Association, 305 Cal.Rptr.3d 533 (2023), addresses the interpretation of an affiliate bequest-sharing agreement that existed between the American Lung Association and its former affiliate, now known as Breathe Southern California.  While the opinion addresses the applicability of the agreement to three contested bequests, its logic and significance goes well beyond those facts.  Specifically, it is fair to say that it calls into question the legitimacy of many bequest-sharing agreements.

Most sharing agreements divide bequests between affiliate and parent, each to use it consistent with its mission.  The Breathe opinion, although directed at a slightly different issue, challenges that model.  The court stresses the importance of strict compliance with donor intent and suggests that where a bequest is for one entity, it is inconsistent to divide it between two entities even if the two entities are planning to use it for the same purpose.  Such a division is the sine qua non of revenue-sharing arrangements.  This case calls the practice into question.  

Why These Cases Matter:  These decisions should be a wake-up call for affiliated charity groups.  In bequest cases, courts are not going to “rubber-stamp” a related entity’s unsupported claim to be a successor beneficiary or co-legatee.  The Breathe decision is particularly significant as it uses donor intent as the yardstick to measure the viability of revenue-sharing agreements.  In short, it adopts a rule that division of contributions is only acceptable if the donor is aware of the plan at the time of the gift and/or expressly sanctions it in a gift instrument such as a will or trust.