It is easy to take boilerplate terms, provisions and definitions for granted within a will or trust. On occasion, it is difficult to foresee how a beneficiary or their attorney may interpret or misinterpret a term which has (what you believe to be) a commonly-accepted meaning. Other times, lazy drafting or supervision can create new definitions which were not intended depending on the context.
Today, I will briefly examine two cases where commonly-accepted terms were misused, or misinterpreted based on context, with the end result being costly litigation in both cases. (All cases are available through Fastcase.)
In re Donald Bany Revocable Living Trust, Superior Court of Pennsylvania, April 29, 2022
The term “descendants” is commonly used, and accepted, in estate planning forms. You often find this term in a statement of family, and in a residuary clause or class gift. This term, as used in and derived from such clauses, was at issue in this opinion from the Superior Court of Pennsylvania.
Ironically, this case involved a decedent with no descendants under the traditional meaning of that term. However, the scrivener of the decedent’s revocable trust had defined the class of beneficiaries within the statement of family to include the decedent’s niece, her children, her husband, and decedent’s nephew. The problem is that the scrivener did not refer to them as a closed class of “beneficiaries.” Instead, the scrivener defined them as “descendants.”
Where things went awry, however, is in the residuary clause, which contained a primary disposition and a contingent disposition. The primary disposition was to the descendants (presumably as previously defined), per stirpes. The contingent disposition was to the niece, or if she did not survive decedent, then to her husband and the decedent’s nephew.
As pointed out by the niece when arguing that she was the sole beneficiary of the trust, this created an ambiguity when reading the definition of “descendants,” as a class of non-descendants, with the use of “per stirpes,” which follows a family tree inconsistent with the class defined by the term “descendants. More specifically, the term “descendants” included a closed class limited to the niece’s children, but the term “per stirpes” was more consistent in that context with an open class which could include the niece’s living and future grandchildren (although they were not referred to in the definition of “descendants”).
The Orphan’s Court refused to consider extrinsic evidence (submitted by the niece) of her uncle’s intent to disinherit his nephew, in part due to this lower court’s conclusion that there was no ambiguity but instead boiler place [sic] language used by a “lackadaisical scrivener.” However, the niece appealed, as the lower court seemed to have completely ignored the effect of the primary disposition under the residuary clause (using the misdefined term “descendants”), instead holding that the contingent disposition controlled (which applied when there were no “descendants”).
The Superior Court reversed and remanded, finding that the inconsistent use of “descendants” outside of its traditional meaning with “per stirpes” for a misdefined closed class did, indeed, create a “nonsensical” result as argued by the niece.
Takeaway: Do not use terms with commonly-accepted meanings, such as “descendants” and “per stirpes,” outside of their accepted contexts.
Ardire v. Ardire (in re Ardire), New Jersey Superior Court, May 3, 2022
This case revolved around the disposition of a father’s stock in a family corporation, in a situation where father and mother died in close proximity to each other. Given that the mother survived the father by 5 months, the litigated question was whose estate owned the stock – the father’s estate, or the mother’s estate?
Their children were at odds over the disposition of the stock, with one contending that the stock was subject to disposition under the article of their father’s will dealing with personal property and personal effects, and the other arguing that the stock was subject to the residuary clause which contained a pourover to a revocable trust created by the father.
To take a step back outside of the case itself, it is common to have a standalone article of a will or trust that disposes of “tangible” personal property. In many states, it is also custom to refer to a separate memorandum or writing which is incorporated in this article by reference for the purpose of disposing of tangible personal property. Stock in a corporation, however, is known as intangible personal property. The common difference between tangible and intangible property is that the former has a physical presence, and can be picked up and moved around. Perhaps a more subtle distinction is that possession creates a presumption of ownership for tangible personal property only, which is why the possession of a stock or security certificate (which has a tangible form) does not affect the title to the underlying intangible security if the possessor’s name is not on the certificate.
The problem here is that the husband’s will did not use the term “tangible” personal property. Instead, it contained a primary disposition of “personal effects and jewelry, household effects and furniture, automobiles and accessories, and articles of a similar nature” by a separate writing as noted above. The contingent disposition provided that any “personal possessions” not disposed of by the separate writing would pass to the wife.
In this case, one child latched on to the term “personal possessions” to argue that this definition applied to all personal property, tangible or intangible, including the stock in the family corporation. If true, this would mean that the stock was part of their mother’s estate and subject to disposition under her will (the terms of which were not discussed). If not true, this meant that the stock would be subject to disposition under the revocable trust created by their father.
The trial court concluded that the stock was a security, and thus was not subject to disposition under the applicable clause of the will in question since this clause only applied to “personal possessions, personal effects, and tangible personal property” under New Jersey law. The Superior Court, on appeal, agreed.
Central to the Court’s conclusion was the rule of “ejusdem generis,” under which the definition of general terms which follow terms of particular and specific meaning relate back to those terms of particular and specific meaning. In this case, since the general term “personal possessions” was used in the context of a contingent disposition, its meaning related back to the more particular definitions contained in the primary disposition of personal effects. How should the children have known about this relation back? Because the “personal possessions” in question were those not included in a separate writing, which in the prior sentence had been created for the purpose of disposing of more specific classes of particular items.
Takeaway: Context within a clause of a will or trust matters. Be conscious of how terms relate to other clauses, sentences, and paragraphs which immediately precede the clause in question. As a bonus note, I often use the term “such” to invoke this rule of ejusdem generis (for example, saying “such personal possessions” could have created the implication in this case that the definition referred back to the terms in the prior sentence or clause).
Conclusion
I, too, am guilty of these types of errors. For years, I used the term “resulting trust” to refer to subtrusts created through division based on formula or class. In the back of my mind, I reasoned that these trusts “resulted” from the application of that formula, or class division. I knew that “resulting trust” was a term with separate legal significance in equitable remedies, but for some reason the double-meaning did not bother me.
However, I was called out on the misuse by a highly respected practitioner, who was right. This sent me on a brief goose chase, as I wondered where I had derived this misuse of “resulting trust” that I had accepted as customary. I was shocked to discover that a number of IRS Private Letter Rulings also misuse this term in the same context, which made me briefly feel better but also raised my consciousness of what I consume during research. I am reminded of the old saying, “You are what you eat.” I have been eating the wrong term for years, and then misusing it in my own discussions and content. I tell you this to warn you not to make the same mistakes as me, or as the “lackadaisical scriveners” referenced in today’s cases.