Friday, February 16, 2018
Why Clarity In Will/Trust Language Matters
I am often asked the questions at lay-level seminars whether a person can write their own will. While the answer is “yes,” it probably isn’t the best idea. Why? One of the primary reasons is because unclear language might be inadvertently used. Some words have multiple meanings in different contexts. Other words may simply be imprecise and not really require the executor or trustee to take any particular action concerning the decedent’s assets. The result could be that the decedent’s property ends up being disposed of in a way that the decedent hadn’t really intended.
Sometimes these problems can still occur when a will or trust is professionally prepared. A recent Texas case involving the disposition of ranch land illustrates the problem. Because of the imprecise language in a will and trust, a ranch ended up being sold without the decedent’s heirs having an option to purchase the property so that the land would stay in the family.
Imprecise language in wills and trusts and the problems that can be created - that’s the topic of today’s post.
The Peril of Precatory Language
In the law of wills and trusts, precatory words are words of wish, hope or desire or similar language that implores an executor or trustee of the decedent’s estate to dispose of property in some particular way. These types of words are not legally binding on the executor or trustee. They are merely “advisory.” However, words such as “shall” or “must” or some similar mandatory-type words are legally binding. Other words such as “money,” “funds,” or “personal property” are broad terms that can mean various things unless they are specifically defined elsewhere in the will or trust. Litigation involving wills and trusts most often involves ambiguous terms.
In Estate of Rodriguez, No. 04-17-00005-CV, 2018 Tex. App. LEXIS 254 (Tex. Ct. App. Jan. 10, 2018), a beneficiary of a trust sued the trustee to prevent the sale of ranchland that was owned by the decedent’s testamentary trust. The decedent died in early 2015 leaving a will benefitting his four children and a daughter-in-law. A son was named as executor and the trustee of a testamentary trust created by the decedent’s will. The primary property of the decedent’s residuary estate (after specific bequests had been satisfied) was the decedent’s ranchland. The residuary estate passed to the testamentary trust. Three of the children and the daughter-in-law were named as beneficiaries of the trust.
The trustee decided to sell the ranchland, and the daughter-in-law attempted to buy the ranch to no avail. She sued, seeking a temporary restraining order and an injunction that would prevent the trustee from selling the ranch to a third party that the trustee had accepted an offer to purchase from. The third party also got involved in the lawsuit, seeking specific performance of the purchase contract. The daughter-in-law claimed that the contract between the trustee and the third party violated a right-of-first-refusal that the trust language created in favor of the trust beneficiaries. The trial court disagreed and ordered the trustee to perform the contract. The daughter-in-law appealed.
The appellate court noted the following will language: “I hereby grant unto my…Executor…full power and authority over any and al of my estate and they are hereby authorized to sell…any part thereof…”. The trust created by the will also gave the trustee the specific power to sell the corpus of the trust, but the language was imprecise. The pertinent trust language stated, “My Trustee can sell the corpus of this Trust, but it [is] my desire my ranch stay intact as long as it is reasonable.” Another portion of the trust stated, “If any of the four beneficiaries of his estate wants to sell their portion of the properties they can only sell it to the remaining beneficiaries.” The daughter-in-law claimed the trust language was mandatory rather than precatory, and the mandatory language granted the trust beneficiaries the right-of-first-refusal to buy the ranchland. She claimed that the decedent desired that the ranchland stay intact, and had mentioned that intent to others during his life.
The appellate court disagreed with the daughter-in-law. Neither of the trust clauses, the court noted, required the trustee to offer to anyone, much less the beneficiaries, the chance to buy the ranchland on the same terms offered to another potential buyer. While the language limited a beneficiary’s power to sell to anyone other than another beneficiary, it didn’t restrict the trustee’s power to sell. There was simply nothing in the will or trust that limited the trustee’s power to sell by creating a right-of-first-refusal in favor of the trust beneficiaries. The decedent’s “desire” to keep the ranchland intact was precatory language that didn’t bar the trustee from selling it to a third party. In addition, there was no right-of-first-refusal created for the beneficiaries. The contract to sell the ranchland to the third party was upheld.
For many farm or ranch families, a major objective is to keep the farmland/ranchland in the family. That might be the case regardless of whether the family members will be the actual operators down through subsequent generations. However, the recent Texas case points out how important precise language in wills and trusts is in preserving that intent.