Inheritance & financial planning

Be Specific With Your Future Wishes

| By Richard M. Birch III

To say it’s important to specifically include anyone that you wish to be inheriting your assets by name is truly an understatement. Courts have, at times, sided against individuals likely intended to be the recipients of an inheritance simply because the language in the legal documents was vague. 

So along those same lines, and reiterating the importance of being specific when drafting estate documents, here is another example of how the smallest word can make a huge difference.

No Hollywood Ending Here

Peter Bing was a New York City doctor who set up and funded Trusts for six grandchildren. At the time, he had no grandchildren, so he was being forward thinking. Except, since no grandchildren yet existed, the trusts were not superficially named. They were given names such as “The First born grandchild of Peter Bing; The Second born grandchild of Peter Bing, etc.”

Fast-forward 30 years and Peter now has two children. Mary also had two children from her husband, and Stephen had no children to his wife. Stephen Bing, however, made it big from investing in Hollywood films, most notably, “The Polar Express” and “Beowulf,” among others.

While still married to his wife, Stephen had relationships with two other women and each resulted in a child; Kira and Damian. The latter of which was to the actress Elizabeth Hurley. At the time, Stephen denied being the father to both children.

Who’s Checking On Whom Here?

Clearly, paternity of the two children does not remain in question. In regards to the first child, Kira, her mother was not seeking to prove paternity, but rather it was her husband, the billionaire owner of MGM studios, who was trying to get out of paying child support during their divorce.

He hired a private investigator to go through Stephen’s trash to find something, anything, containing DNA, (dental floss in this case) which was then used to prove paternity. Paternity of the second child was proven more traditionally, via a court ordered test.

As per the language of the Trusts, they were to be paid out to the unnamed grandchildren in October 2020. A few months prior, Stephen committed suicide. His father, and the original creator of the trusts, Peter, was still living.

When Peter, the grandfather, originally created the trusts, he never imagined the funds going to children he never met. He signed an affidavit with a declaration stating his position that the Trusts were only intended for Mary’s in wedlock children and gave such to the third-party Trustee of the Trusts. 

Using this, the Trustee refused to pay out to Stephen’s children. Not surprisingly, a court battle ensued. It should be noted that when drafting the Trust documents, there was no provision included for a scenario where a Trust never actually had a beneficiary. If you recall, six Trusts were set up, but only four grandchildren existed – not that there was any definition for the term, “grandchild,” within the Trust. Most believed that Kira and Damian would ultimately prevail with about $250 million in each Trust, which was a significant issue.

The Verdict

In the lower court they did prevail. The Court noted that “grandchildren are grandchildren,” and current law makes no distinction regarding in or out-of wedlock. If the grandfather wanted to make such a distinction, he should have done so when crafting the Trust.

On appeal however, surprisingly, the Court found against the out-of-wedlock children and granted the full value of the Trusts to Mary’s two children.

The Court used a few different factors in making this judgment, most notably, the fact that the children never resided with their father, never had any type of relationship with him, and, for all intents and purposes, did not exist in his life. Never even meeting Damian, they also never had a relationship at any time with the grandfather. 

Secondly, the Court gave great weight to the affidavit of the grandfather spelling out his intentions when creating the Trust – even if the language used was wanting – and deferred to the decision of the Trustee to not pay out.

Was the Ruling Fair?

That’s up to interpretation. But what is not is the fact the entire, multi-year-long very expensive court battle could have been avoided. Let me stress the importance of definition. One must carefully define “grandchildren.” Think about it. Who knows what advances in medical technology may make possible in ways we cannot possibly think of now?

In fact, there was a recent case to determine intended heirs after a woman decided to have a child using her deceased husband’s frozen DNA while married to her second husband. Situations like this can quickly become complicated.

Secondly, if you can, always replace vague terms with actual names. If you have a future unborn person as a beneficiary, please put his or her name in as soon as you know if a girl or a boy. Have provisions in the documents to cover all realistic scenarios you can think of.

Please contact me at The Meredith Group today if you have questions. I would happy to help.

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