Speaking of costly decisions …
Dad had three sons. He wrote a will that left one of his sons, Charlie, a savings account worth about $150,000.
Then Dad died, leaving a total estate of $1.5 million. His will was admitted to probate and soon thereafter the executor transferred the $150,000 savings account to Charlie.
After Charlie assumed ownership of the savings account, he sued to set aside the will. He calculated that his rightful share should have been one-third of the estate, or $500,000, instead of the paltry savings account he was bequeathed under the will.
Charlie did not attempt to give back the $150,000 before he sued. Bad move.
Charlie ran straight into a buzz saw known as the “acceptance-of-benefits doctrine.”
Here is how it shakes out. Any person interested in an estate can contest its administration in probate court. The person must prove to the court that he has a property right in, or claim to, the estate being administered.
That is called “standing” and it is intended to keep the riffraff out of the probate case. Stated more artfully, anyone without standing is a “mere meddlesome intruder” and cannot contest the will.
A person’s standing is a threshold question, meaning that it is decided at the very beginning of a will contest. The proponent of a will, who is often the named executor, presents the standing question to the court by filing a motion in limine. Once the contestant establishes an interest in the case, then the burden shifts to the will’s proponent to defeat that interest.
One of the most common ways to defeat a will contestant is to show that the contestant has already accepted benefits under the will.
This is considered an affirmative defense that “estops” the contestant from pursuing his claim.
The doctrine is based on a concept of equity – a person cannot accept a benefit under a will while seeking to nullify that same will.
Now let us apply the law to Charlie. Charlie was a person interested in Dad’s estate because he was a beneficiary under the will. Charlie clearly had standing.
But the executor defeated Charlie’s standing by showing that Charlie had already accepted the savings account as a bequest under the will. Charlie’s standing was therefore wiped out by the affirmative defense of estoppel based upon the acceptance-of-benefits doctrine.
Charlie countered with an argument that the doctrine did not apply to him because if he won, he would have received more than the $150,000. His acceptance of the savings account was just part of the potential bigger benefit.
That argument was destined to fail. According to the Texas Supreme Court, the doctrine does not depend upon either the value of the benefits accepted or the amount that would have been inherited if Dad had died without a will. The doctrine merely asked if Charlie received the savings account because of the will. The answer to that was a resounding “yes.” Charlie, therefore, did not have standing to contest Dad’s will.
There are a few takeaways from Charlie’s case. First, a will beneficiary who wants to contest the will should not accept any distribution, big or small, under the will.
Second, an executor who suspects a beneficiary is thinking about filing a will contest should consider doing an early distribution to that beneficiary to defeat standing.
Third, a beneficiary who accepts a distribution may be able to salvage standing by attempting to return the distribution to the estate.
Virginia Hammerle is an attorney with Hammerle Finley Law Firm whose practice includes probate law, estate planning and contested litigation. To receive her newsletter, contact her at firstname.lastname@example.org. This column is for general information only and does not constitute legal advice.