A recent case involving a will devising “personal effects” to a family member is a good reminder of the need to be detailed and complete when drafting a will, and the importance of residuary clauses.
In 1990, Mildred Ethridge drafted a will that included the following provisions:
I, MILDRED L. ETHRIDGE, (femme sole) of Midland County, Texas, for the purpose of the distribution of my entire estate, real, personal and mixed, which I wish to have take effect at my death, do make, publish and declare this to be my Last Will and Testament, and I do hereby revoke all former wills and testamentaries heretofore made by me at any time.
I hereby appoint and name Fred D. Davis, Jr. as Independent Executor and trustee of my estate, to serve without bond. I give Fred D. Davis, Jr. all my personal effects to clear my estate after my death.
I give and bequeath my 1/2 ownership in my residence and homestead…to Patricia Petosky.
Mildred passed away in 1994. Prior to her death, she gifted her 1/2 ownership interest in the homestead to someone else, leaving Davis as the only named party under the will. Davis was named executor of her estate.
At her death, Mildred had money in checking accounts and miscellaneous property including furniture and a television. She also had mineral interests that were not specifically devised in her will or included in the inventory submitted to probate. The mineral lessee began paying royalties to Mildred’s estate and Davis opened a checking account to receive these royalties. Believing he was entitled to her entire estate, he transferred the royalty payments from the estate’s checking account into his personal account.
In 2010, Mildred’s heirs discovered they may have been entitled to royalties under her estate. They argued that the mineral interests did not pass under her will. At trial, the court had to construe the meaning of the term “personal effects.” The court held that this term as more limited than “personal property” and rule that it included only the furniture and television owned by Mildred, but did not include her bank accounts, receivables, and interest in oil, gas, other minerals, royalties, real property, or other personal property. As to these assets, the court held she died intestate and the intestate succession laws should govern distribution.
Davis appealed the court’s decision regarding the definition of “personal effects.” The Eastland Court of Appeals affirmed the trial court’s ruling. [Read full opinion here.]
The court noted that, when interpreting a will, a court seeks to ascertain the intent of the testator based on the language included in the will itself. Terms used in a will are to be given their “plain, ordinary, and generally accepted meaning” unless the will shows they were used in a technical or different sense.
First, Davis argued that the initial clause in her will stated that her intent was to dispose of her entire estate, real, personal, and mixed. It was her intent, Davis argued, to divide her property into two categories–the 1/2 interest in the Oxford House, and then everything else, which she referred to as “personal effects.” Davis argues the court should broadly interpret the phrase “personal effects” because Mildred was not an attorney and her will was not drafted by an attorney.
The court rejected this argument. Under the law, the term “personal effects” generally refers “to articles bearing intimate relation or association to the person of the testator” such as clothing, jewelry, toiletries, glasses, dentures, and luggage. Mineral interests do not fall within the scope of “personal effects.” Further, Mildred indicated she intended to dispose of her entire estate, real, personal and mixed. By stating she left only her “personal effects” to Davis, it appears she did not intend for that to include her real property as well.
In light of this, Mildred’s will did not dispose of her entire estate. When a person drafts a will, there is a presumption that he or she intends to dispose of the entire estate. That presumption is strong, noted the court, but can be overcome in situations where the testator fails to provide for complete distribution of property. In that situation, the testator is found to have died intestate as to the property not included in the will. In this scenario, the court upheld the finding that Mildred died intestate as to her mineral and royalty interests and her bank accounts.
Thus, the court affirmed. Davis was entitled only to the furniture and television, while the bank accounts, mineral interest, and royalty interests passed through intestacy.
First, I think the most important reminder from this case is the need for including a residuary clause in a will. Even the most carefully drafted may omit certain assets. Whether that be something the testator simply forgot, something purchased after a will was drafted, or something that the testator thought was covered by the will that simply was not, this can certainly happen. One way to avoid the issue here, where a portion of the estate passed outside the will via intestate succession is to ensure that a will has a residuary clause. This clause simply disposes of any estate assets that remain after all of the other devises in the will have been made. In this case, for example, had there been a residuary clause, the bank accounts, mineral rights, and royalty rights would have passed to the person named in the residuary clause. A sample residuary clause could be: “I give the rest, residue, and remainder of my estate to my husband.”
Second, when writing a will, it is important for the testator to do his or her best to think of all assets owned. I always recommend that before delving into will drafting or other estate planning, parties gather information on their assets, agricultural business, farm and ranch. This includes an inventory list that identifies all major assets including real property, vehicles, equipment, mineral rights, royalty interests, bank accounts, retirement savings, investment portfolios, and personal property of significant value such as jewelry, artwork, and firearms. Having a complete inventory list can help to ensure one’s will does bequeath all of one’s assets.
Third, it is important to continue to update a will after it is drafted. This is particularly important if major life changes occur such as births, deaths, divorces, or the sale or purchase of assets. It is good practice to do a quick review of one’s will each year to ensure that changes do not need to be made.
Fourth, I always recommend that people at least consider using an attorney to draft a will. There are certain documents that I think people can adequately draft themselves without too much worry. Wills, however, are so important and their interpretation is so critical that using an attorney to ensure that the testator’s wishes are carried out is generally well worth the cost. Additionally, while there is an up-front cost to have a will drafted by an attorney, it will almost always be less than the cost of litigating a will dispute down the road.
Finally, for anyone serving as an executor of an estate, it is important to ensure that the executor understands what assets exist and how they are to pass under the will. Here, it was the executor’s belief that mineral and royalty rights were included in the term “personal effects” that caused the issue leading to litigation. Executors should be extremely careful and prudent before deeding over any assets from an estate.
Source: isTexas A&M AgriLife Extension, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.