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The Difference Between an Heir and a Beneficiary

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heir and 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 Hill’s will

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.

Probate court

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.

The difference between “heir” and “beneficiary”

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).

The probate contest

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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Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman

Attorney

Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson

Attorney

Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour

Attorney

Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.