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Bequests: Legal challenges to seemingly straightforward gifts

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By Henri L. Cancio-Fitzgerald, J.D.

It sounds pretty simple.  In order to make a bequest, a testator (donor) conveys their testamentary intent to make a gift to a surviving party through a document that meets the State’s Statute of Wills.  In other words, “I give, devise, and bequeath said property to Charity.”  Complexity in the form of legal challenges may arise when the seemingly simple bequest language is susceptible to equally reasonable, but competing interpretations.

Best Practices to Avoid Legal Challenges

Based on my review of case law in the area of bequests and potential challenges that could occur as a result of drafting, I would recommend the following best practices to a person reviewing bequest language:

1.  Make sure the bequest is specific.

A Virginia court[1] found that a bequest of “personal property” only included tangible personal property.  As a result, the charitable beneficiary did not receive $130,000 in stock certificates and travelers’ checks–i.e. “intangible personal property.”  If the testator intends that all tangible and intangible property be included in the bequest, it should be stated in the testamentary instrument.

2.  Make sure that the bequest instrument clearly makes a distinction between a “general bequest” and a “residuary bequest.”

Usually, taxes are paid before the residuary bequest is fulfilled, resulting in a reduced gift amount.  A general bequest can be satisfied from any of the general assets of the estate.  A North Carolina court[2]recently found that a gift was a general bequest as opposed to a residuary bequest through principles of interpretation; however, if the court had found otherwise, the charity would have received less than 75% of the intended gift.  It is not a good idea to leave your organization’s gift open to judicial interpretation.

3.  Where appropriate, use a savings clause in the document.

In a Missouri court[3], a testamentary bequest to the Washington University Dental Alumni Fund failed since the dental school did not exist when the estate was distributed.  As it turns out, the dental school had merged into the medical school, and no testamentary provisions referred to the medical school.  A savings clause would have saved this gift.  For example, “I give, bequeath, and devise XYZ stock to ABC Foundation or its successors in interest.”

4. Watch for bequest ademption.

Ademption occurs when a testamentary bequest is deemed to be satisfied during the donor’s lifetime.  For example, a donor devises $100,000 to ABC Charity in his will.  Subsequent to the execution of the will and prior to the donor’s death, the donor gives the charity $100,000.  The executor could state that the gift was adeemed by satisfaction during the donor’s lifetime and the testamentary bequest could fail.  It would be left to the court’s interpretation (not the donor’s) whether the donor intended to give $100,000 to the charity or $200,000.  This situation could have been avoided if the bequest language read “I give, bequeath, and devise the sum of $100,000 to ABC Charity, exclusive of gifts made to ABC Charity during my lifetime.”

Conclusion

It may not be practical to imagine that all legal challenges to a bequest can be avoided.  In the end, it is a practice in interpretation of the donor’s intent and frankly, the best witness (the donor) is unavailable.  However, it is practical to make the donor’s intent more susceptible to a single interpretation.  This is a practice in anticipating the things that could “go wrong” and drafting the appropriate preventative language.

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Henri L. Cancio-Fitzgerald, J.D.,
Assistant Vice President, Planned Giving Advisor
Wachovia National Center for Planned Giving


[1] Turner v. Reed, The Circuit Court of Page County (Rec. No. 982588)(1999)
[2] Central Carolina Bank v. Wright, North Carolina Court of Appeals (Case No. COA95-1325)(1996)
[3] Obeymeyer v. Bank of America, Missouri Court of Appeals- Eastern District (Case No. ED81603) (2003)

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