Posts Tagged ‘Estate of Hinz’

The Difference Between an Heir and a Beneficiary

APRIL 18, 2016 VOLUME 23 NUMBER 15

Your estate is simple, your family relationships clear, your intentions easy to understand. Why can’t you just write your own will, and save the legal fees?

Because of Esther Hill, that’s why. Actually, that’s not her real name — we change the names of most of the people we write about, because we don’t particularly want later internet searches for their name to turn up our articles high on the list. But her story doesn’t depend on her name.

Esther had two children — a daughter Leslie and a son Leonard. Leslie and her mother were very close — they visited regularly, went on shopping excursions together, and had a strong relationship. Leslie had two daughters, and they visited their grandmother regularly.

Leonard was not married, and lived with his mother in her home in Saratoga, California. She helped support him, and she tried to involve him in family events — but he chose not to participate.

Leslie became sick and died in 1991, and Esther was devastated. Just three weeks after Leslie’s death, Esther hand-wrote her own will. She wrote (with name changes in order to keep our intended level of anonymity):

I, Esther Hill, aka as E. Hill; declare this will, is my only and last testament.

I, name my son, Leonard Hill, as sole heir and executor to manage estate affairs.

In the event of any challenges to said estate, I hereby authorize said Executor to dispense the amount of $1.00, one dollar, to any claimant.

I am confident that my son, as Executor, will also subscribe to my wishes, along lines that were discussed previously and privately in the past. A simple cremation, without ceremony is the wish of Esther Hill.

It turned out that Esther’s estate was worth a little more than $10 million. Leonard filed the will with the California probate courts, and got himself appointed as executor of her estate. He didn’t rush to wrap up her estate, though — three years after her death, he hired a woman to come to the home and help him organize and purge old business files. Two years later, he and the woman who helped him became romantically involved, and ten years later they were married. Still, though, the estate was not closed.

Leonard himself died in 2009, but without having closed his mother’s estate (or making distribution of the remaining assets, after payment of considerable estate taxes). His widow asked the probate court to appoint her to finish up the estate administration, and to determine who should receive Esther’s assets.

Can you see the problem? It’s in the language of that handwritten will, in which Esther names Leonard as her “sole heir.” The difficulty: “heir” has a specific meaning under probate law, and Leonard wasn’t her sole heir.

An heir is a person who would be entitled to a share of the decedent’s estate if the decedent died without issue, and under California law that would mean Leonard and his two nieces. If Esther had not left a will, half of her estate would go to Leonard, and one-quarter each to the two nieces. (Arizona law would be the same, as would the law of most — if not all — other American jurisdictions.)

Did Esther mean to name Leonard as her sole “beneficiary”? Or, perhaps, “devisee”? That last is the word lawyers and judges use to identify a person named as a beneficiary in a will. If she had written that she named Leonard as “sole beneficiary” or “sole devisee,” then he would have been clearly entitled to her entire estate, and his widow would receive Esther’s assets through his estate.

Esther’s granddaughters (Leonard’s nieces) objected. They argued that Esther was simply identifying Leonard as her sole surviving child, and that they should be entitled to one-half of her estate (they acknowledged that Leonard’s widow would receive the other half).

In the contested probate proceeding, various witnesses testified about Esther’s relationships with Leonard, Leslie and the two granddaughters. Some witnesses observed that Esther (and, for that matter, Leonard) talked to the granddaughters from time to time as if they would eventually inherit the property, and others testified that Esther sometimes didn’t seem to approve of her granddaughters. Because the probate court decided that the use of the word “heir” was ambiguous, it considered all that evidence — and ruled that Esther had meant to leave half of her estate to be divided between her granddaughters.

The California Court of Appeals disagreed. It ruled that the word “heir” as used by Esther was unambiguous — she clearly meant “beneficiary.” That was true, according to the appellate judges, because it would make no sense for Esther to write, in effect, that “I name Lester, my son, as my only son”. Furthermore, the final sentence (in which she indicates that she trusts Lester to carry out her wishes) does not change the result, and does not create what the Court of Appeals calls a “secret” trust for the benefit of family members.

What about the effect of Esther’s attempt to create an in terrorem or no-contest provision? If, for example, the will was construed as disinheriting the granddaughters, would they be entitled to receive $1.00 just because they objected? The Court of Appeals acknowledges that Esther’s attempt at creating a no-contest provision was clumsy, but it does not indicate that she intended to give a larger share of her estate to her granddaughters.

One of the three appellate judges disagreed with the other two. In that judge’s mind, the probate court had gotten it right — and the ruling in favor of the granddaughters should be upheld. That judge was outvoted by the other two, however. Estate of Hinz, March 22, 2016.

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