Court Divines Testator’s Intent Over Non-Probate Assets

July 5, 2010 | Erin Herbold

 

A longstanding legal rule is that if language contained in a testamentary instrument (such as a will or testamentary trust) is unclear as to the disposition of probate assets, the court should try to determine the testator’s intent based on extrinsic evidence that helps explain the language.  But, that rule applies to assets that are properly disposed of by the testamentary instrument.  Some assets are not governed by testamentary instruments – they are non-probate assets.  For example, they have a designated beneficiary or a survivorship designation.  The language in a will has no impact on such assets, irrespective of whether the language in the testamentary instrument is clear or not.  Well…at least that is what we thought.  In this case, the court construed what it believed to be ambiguous language in a decedent’s will with the effect of changing the beneficiary designation of a non-probate asset.

This case deals with a father’s attempted testamentary disposition of his IPERS retirement account with a survivor benefit in excess of $58,000.  The father executed a will in 1999 and died in 2008. The first two sections of the will provided for the payment of his debts and funeral expenses. The third section, however, stated that any remaining property was to be converted to cash with the proceeds distributed to his siblings. The will specified that the decedent’s son had already been “adequately provided for” through insurance benefits and an IPERS survivor benefit for his inheritance.  Unfortunately, before the decedent executed his will he had designated his estate as the beneficiary of the IPERS account.  

In 2008, the son filed a petition asking the trial court to construe his father’s will to find that he was entitled to receive the IPERS account. The trial court denied the son’s petition finding that there was a “patent ambiguity” regarding the use of the phrase “adequately provided for” and that should be a trial to resolve the ambiguity. At trial, a long-time friend of the decedent testified that the father often complained about his son. The trial court found that there was not enough evidence to establish that the father intended to leave the IPERS funds to the son. 

On appeal, the Iowa Court of Appeals examined the issue of the will’s construction and whether the father intended to leave the IPER’s account to his son. The son argued that the IPERS account is a “specific and identifiable asset that cannot be confused with other assets” and that his father referred to the bequest in the past tense, indicating that he intended the asset to go to the son. 

The court examined whether or not the third section of the will was to be construed as a specific bequest to the son. In Iowa, a specific bequest is “a bequest of particular thing that can be distinguished from others of the same kind.” The primary goal of will construction is to manifest the intent of the testator. Thus, relying on the language of the will the appellate court held that the will should have been construed as granting the IPERS account to the son. The court believed that the will clearly indicated that the account had been given to the son- even though the beneficiary designation was never changed in reality. The court determined that the decedent clearly indicated in the will an intent to provide “adequately” for his son – even if it was with an asset that the decedent’s will did not control.  In re Estate of Prosser, No. 0-290/09-1504 (Iowa Ct. App., Jun. 30, 2010).