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One of the issues we have not discussed at great length is the issue of clauses which grant property interests to beneficiaries which do not vest immediately at the time of the testator’s passing. These are often referred to as “remainder interests,” as they are not immediately realized but are nonetheless substantial and legally recognized. Remainder interests can often lead to controversies for a variety of reasons; one reason is because, depending on how a given will is worded, certain beneficiaries may not be eligible to receive benefits within a certain timeframe. If, for example, a given beneficiary does not inherit a certain piece of property within 21 years, then the interest in that property held by the beneficiary may be void under the so-called “Rule Against Perpetuities.” Under the Rule Against Perpetuities, a property interest is void unless it vests within 21 years after the death of some “life in being” at the time the interest be created.
In the case of In re Estate of Snyder (1950) – also referred to in the case law as Snyder’s Estate v. Denit (1950) – an issue arose regarding the transfer of assets between immediate beneficiaries (a son and daughter of the testator) and multiple remainder beneficiaries (grandchildren and great-grandchildren). Let’s examine this case in a bit of detail so we can better understand these kinds of complex scenarios.
Facts of the Case
The testator in this case, John Snyder, executed his will in 1911, and at that time his son was aged 53 and his daughter was aged 58. When the will was executed in 1911, the daughter already had three children, the testator’s grandchildren. Within the will, the testator developed a “residuary estate trust”: the trust had multiple “tiers,” with Tier 1 transferring all available net income to the son and daughter, Tier 2 transferring the remaining available net income to the grandchildren, and Tier 3 transferring the remaining available net income to the great-grandchildren.
Several substantive issues arose, but the primary issue related to the possible applicability of the Rule Against Perpetuities: the caveators argued that, since the will did not specifically prevent additional grandchildren being included later (supposing either the son or daughter had children later), the rule was arguably violated, because the great-grandchildren may not have received any benefits until after 21 years had passed since the deaths of everyone alive at the time of the execution of the will (in 1911).
The validity of the residuary trust was initially struck down by the trial court, as the court determined that a “strict reading” rendered the language in violation of the rule. The case then went before the Maryland Court of Appeals.
Ruling & Analysis
The Court of Appeals reversed the previous decisions, holding that the residuary trust was indeed valid. Although a strict reading of the will could conceivably support an interpretation which included grandchildren born after the will was executed, the Court of Appeals determined that the testator intended to include only those grandchildren who were alive at the time of his passing. Because of this revised reading of the will by the appellate division, the court could reasonably hold that the Rule Against Perpetuities had not been violated. In making its determination, the court also introduced the principle of “favoring validity” whenever two competing interpretations are theoretically possible: if one interpretation would violate a certain rule, and the other interpretation would render the will valid, the interpretation favoring validity is ordinarily selected.
Again, this was the primary issue at hand in this case, but there were others. One of the other issues involved interpreting gendered pronouns, and determining whether the allocation of a feminine pronoun to female beneficiaries should have been expanded to include male beneficiaries as well.
As readers can see quite easily, cases such as these show clearly the importance of having a qualified attorney during the process of creating a will, especially when you intend to create a highly complex instrument such as a residuary estate trust. If you intend to create a complex, multi-tiered instrument like this one, be sure to partner with an experienced estate planning lawyer.
Contact the Murphy Law Firm for Additional Resources
Readers who would like to learn more about residuary clauses in wills, beneficiaries who hold remainder interests, establishing irrevocable trusts, establishing revocable trusts, or any other related estate planning matter, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-1187.
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