Playing the State Law Lottery: What to Consider When the Bequest is Ambiguous
One of the most wrenching decisions for a nonprofit executive is deciding what to do when a major donor writes an estate plan that, somehow, seems confusing. Do you risk irritating the donor by suggesting a redraft? Or do you keep silent, fingers crossed that everything works out? That is a difficult decision.
This hypothetical tale – based on real cases – is intended simply to bring the problem into perspective.
Sally is the Director of Gift Planning at the Society of the Holy Spirit, a religious charity. For many years, Joanne Brahms has been one of the Society’s most generous supporters and has repeatedly promised a large bequest. She recently completed her will, in which the operative clause (“Gift Language”) reads as follows:
I leave my home to my dear friend Wolfgang “Moe” Zart, my personal property to my niece Viv Aldi and all the rest and residue of my estate to the Society of the Holy Spirit to be used for its general purposes.
Sally knows that the “rest and residue” consists of bank accounts and stock worth in the $10 million range, as well as a near-worthless condominium in an undesirable building. She also knows from talking with Joanne that she intends to leave only her household effects and her car to her niece, yet Sally is uneasy with the broad term “personal property,” which could be read to embrace the financial accounts as well.
If a probate court adopted that reading of the Gift Language, Ms. Aldi would be a very rich young woman, leaving the Society “out in the cold” with nothing more than a condominium of little value.
Summoning her courage, Sally called Brahms to express her concern. Joanne reassured Sally that the language of the will would accomplish her intention to provide a gigantic bequest to the Society. Brahms refused to draft a clarifying codicil, citing the death of her estate planning attorney as a major impediment. Brahms died three years later and her unchanged will was admitted to probate.
Does the Society get the windfall bequest?
Maybe and maybe not. As with so many of these issues, state law controls.
In some jurisdictions, courts would award the Brahms fortune to the niece on the basis that “personal property” has a clear and established meaning and includes financial accounts. The so-called “plain meaning rule,” a staple of will interpretation for centuries, would support this counter-intuitive result. (Our hypothetical is based in part on the Maryland case of Emmert v. Hearn, 309 Md. 19 (1987), where the court adopted a similar position).
But don’t courts look to “extrinsic evidence” where the will is ambiguous, as it is here?
Certainly, ambiguity is one of the main reasons that courts look “outside” the testamentary document for clarification of the decedent’s intent. However, ambiguity – much like beauty – is in the eye of the beholder and, ironically, the meaning of “ambiguity” is itself quite ambiguous.
Historically, courts have found two types of ambiguities in wills.
“Patent” ambiguities are those evident from a reading of the will itself. This would be the situation if a testator left “one-third (3%) of my estate to Joseph Smith.” Does the will intend 3% or 33 1/3%?
“Latent” ambiguities refer to provisions that become troublesome only when one considers facts extraneous to the will itself. An example of this would be a case in which a testator left a bequest to “my nephew” without specifying which of his three nephews he meant.
Older cases tend to permit “extrinsic evidence” in cases of latent, but not patent, ambiguity. (The resolution of patent ambiguities seemed to proceed on a case-by-case basis, usually by applying arguably applicable rules of construction.)
CCK TIP: A modern, but by no means universal, trend is to permit the consideration of extrinsic evidence to clarify any ambiguity, latent or patent.
So where does that leave the Society?
Recalling that this is only a hypothetical, we still believe that the outcome would be wholly dependent on state law, involving both statutes and prior decisions. The uncertainty results from these considerations:
1. It is not clear that the Gift Language is ambiguous.
Although the Emmert decision has been criticized by courts in other states, there is a good argument to be made that “personal property” is a well-defined and precise term, at least in the context of estate litigation, if not in popular usage.
If courts start looking to extrinsic evidence to ferret out idiosyncratic meanings of everyday expressions, do we risk opening the floodgates to a torrent of probate litigation concerning clear and unambiguous wills?
2. If the Brahms will is deemed ambiguous, how will the court resolve the ambiguity?
The Society would argue that the will contains a “latent” ambiguity because once we realize the nature of the estate in question, it becomes clear that the “rest and residue” of the estate is just about worthless if the niece gets all the personal property including the financial accounts. The Society would suggest that Ms. Brahms certainly did not intend the residuary gift provision in her will to be an empty gesture.
At that point, if the court agreed to consider extrinsic evidence, the Society might still have a problem. From what we know, the only evidence of the intent of the residuary clause are the conversations between Sally and the decedent. (Remember that the drafting attorney is deceased).
Even though Sally is an “interested” witness, she has an impeccable reputation for honesty. Can she testify and save the bequest for the charity? Back to state law.
3. The “Dead Man’s Statute” may prevent Sally from testifying.
Many states have enacted versions of the “Dead Man’s Statute,” which prevents a party from giving self-serving testimony about communications from a now-deceased person. Where in force, the rule applies in probate proceedings and would certainly bar Sally’s testimony in our hypothetical. “Death having closed the lips of one party, the law closes the lips of the other.” Estate of Cunningham, 94 Wash. 191 (1917).
CCK POINTS TO PONDER:
- The hypothetical illustrates the importance of careful drafting of testamentary provisions and – as if this was needed – another reason for employees of charities to steer clear of over-involvement in the process.
- In “real life,” the Brahms estate would likely have resulted in a lengthy and expensive process of negotiating a settlement between the niece and the charity. The Society would need to hire an experienced probate lawyer to represent its interests and to assess the strength/weakness of its positions.
- When Sally saw the will and Brahms refused to change it, is there anything Sally could have done to create good evidence of the testator’s intent?