Construction and Interpretation

Thank you to WIlls, Trusts and Estates Prof Blog for the post regarding Fisk University, Cy Pres and Georgia O’Keefe’s Art Collection.

Melanie B. Leslie (Professor of Law, Benjamin N. Cardozo School of Law) recently published her article entitled Time to sever the dead hand: Fisk University and the cost of the cy pres doctrine, 31 Cardozo Arts & Ent. L.J. 1-18 (2012). The introduction to the article is available below:

In 1949, painter Georgia O’Keeffe donated 101 valuable paintings and photographs to Fisk University, a prominent and historically important African-American university in Nashville, Tennessee. The donated art was part of a larger collection amassed by her late husband, Alfred Stieglitz, a prominent artist and collector.  Stieglitz’s will gave O’Keeffe a life estate in his collection, which included works by Picasso, Cezanne, Renoir, Toulouse-Lautrec, O’Keeffe, Demuth, Hartley, Dove and Walkowitz.  Stieglitz’s will also gave O’Keeffe the discretion to distribute the collection to nonprofit organizations of her choosing for the purpose of ensuring public access to the paintings to promote the study of art.  At O’Keeffe’s death, any pieces in his collection that she had not donated were to be distributed to nonprofit organizations "under such arrangements as will assure to the public … access thereto to promote the study of art."

O’Keeffe divided Stieglitz’s collection among six institutions: the Metropolitan Museum of Art, the Philadelphia Museum of Art, the National Gallery of Art in Washington, the Art Institute of Chicago, the Library of Congress, and Fisk University.  The donation to Fisk, a small university with no museum experience, was unusual. In choosing Fisk, O’Keeffe was making a strong social statement – the South was racially segregated at that time, and O’Keeffe wanted to ensure that the art would be displayed in a place that welcomed both black and white members of the public.

But although she wanted to benefit Fisk, O’Keeffe – like many donors before and after – could not bring herself to relinquish complete control to the donee. Instead, she imposed a series of restrictions designed to ensure both the proper display and care of the art work and the creation of a perpetual memorial to Alfred Stieglitz. To achieve those ends, O’Keeffe stipulated in a series of letters to Fisk’s President that the donated art must always be displayed together as one collection titled the Alfred Stieglitz Collection ("the Collection"), and that Fisk could never sell any piece in the Collection.  She also required that the Collection be housed in as safe a building as possible and kept under surveillance at all times when the room was not locked.  O’Keeffe severely limited the University’s ability to loan the artwork, directed that no other art work could be shown in the same room as the Collection without her consent, prohibited the removal or change of any mounting or matting of photographs, and required that the walls of the room where the Collection was displayed be painted white or some other very light color chosen by O’Keeffe. Several years later, O’Keeffe donated four paintings from her own collection, including one of her own paintings, Radiator Building – Night, New York ("Radiator Building"), to Fisk, with the stipulation that the paintings be added to the Collection. 

O’Keeffe appears to have given little, if any, consideration to the impact the perpetual restrictions might have decades down the line. Like many donors who make restricted gifts, she failed to imagine how life might change in the years following her death. For example, she  does not appear to have contemplated that Fisk might cease to exist; that the University might one day lack funds to maintain the Collection; that the matting on the photographs might deteriorate; or that she might not be around to approve the paint color of the walls. She gave no guidance as to how Fisk should respond to changed circumstances or as to which of her objectives – benefitting Fisk, creating a perpetual memorial in honor of Stieglitz, keeping the Collection together, prohibiting sale of the Collection, and ensuring the Collection remained in the South – should be given priority in the event that changed circumstances should cause them to come into conflict. 

What happened sixty years later was predictable – changed circumstances, unforeseen by O’Keeffe, rendered it impossible for Fisk to comply with all of the restrictions. Fisk was on the brink of insolvency, and had to choose whether to close the University and relinquish the Collection, or find a way to replenish its endowment and properly care for the Collection.  Fisk decided to sell two paintings – including Radiator Building. The Tennessee Attorney General approved of the sale, subject to certain conditions, and Fisk, seeking court approval, filed an action for a declaratory judgment.  The O’Keeffe Museum of Santa Fe, New Mexico ("the Museum"), and later, the Attorney General of Tennessee, intervened to enforce the sale prohibition.  After six years of litigation and two appeals, a chancery court granted Fisk permission to sell a fifty percent interest in the Collection to the Crystal Bridges Museum in Arkansas for thirty million dollars. The deal allows Fisk to exhibit the Collection six months of every year.  The payment of thirty million dollars will ensure both that Fisk will survive and that it will be able to afford to properly care for and exhibit the artwork. 

Why did resolution of this conflict require six years of litigation and the expenditure of enormous amounts of charitable and public dollars? The blame lies with the law itself: the centuries-old doctrine of cy pres, which requires courts to determine how the donor would have responded to the changed circumstances, combined with the law’s lack of clarity about who has standing to speak for the donor, practically guarantee that years of litigation will ensue when a charity finds itself unable to comply with a gift restriction. In the Fisk case, the law’s fuzziness allowed the Museum – an unrelated third party – to make a grab for the Collection under the guise of effectuating donor’s intent. The fact-specific cy pres standard also enabled the Tennessee Attorney General to make it extraordinarily difficult for Fisk to craft a solution involving entities located outside the state of Tennessee.  Although the court ultimately approved Fisk’s contract with the Crystal Bridges Museum, that approval came at an extraordinarily high cost.

The doctrine of cy pres holds that donor’s intent is of paramount value. Courts must therefore prioritize effectuation of intent over other concerns, such as donees’ present needs or the inefficient use of charitable dollars.  This preoccupation with perpetual enforcement of donor intent is justified as necessary to encourage charitable bequests and protect donors’ property rights.  Yet what the law giveth, it taketh away: the law’s commitment to donor intent stops short at granting to donors standing to enforce the restrictions they create.  Instead, enforcement power is given to the attorneys general of each state. 

The Fisk litigation is just one of several recent epic battles over restricted charitable gifts and changed circumstances, but it is important because it neatly illustrates the problems that the law creates and highlights the need for legal reform. After elaborating on this point, I examine the Uniform Trust Code ("UTC"), which changes cy pres law in significant ways. I show how application of certain UTC provisions to the Fisk case would have reduced the length of the litigation and the corresponding waste of charitable assets, to some degree. I then argue that further reforms are necessary. I suggest that perhaps the time has come to consider limiting the duration of restrictions on charitable gifts. To offset any chilling effect that such a time limit might have on charitable giving, we might allow donors and their heirs to enforce restrictions during the period of enforceability.

The question of the rights of inheritance of adopted persons has a long history in this Commonwealth. Until 1855, adoption needed the approval of the state legislature. Then the legislature got out of the adoption business, moving it to the judicial system. The Wills Acts of 1855, 1887, 1889 and 1911 all stated that adopted children had the same rights to inheritance as the adoptive parents’ natural children.

But, what about adopted grandchildren and more remote descendants? What were their rights in regard to inheritance? That question was slow in being addressed. The question of adopted grandchildren’s standing to inherit was raised especially when a child who had no natural children passed away. Often that child’s siblings didn’t want to see this share go "out of the bloodline" to adopted children.

Another issue was how late in life a child could adopt and still have the adopted children considered as issue in "Grandfather’s Estate." The Wills Act of 1917 set a cut-off date of the date of the signing of the Will in question. Any child adopted after the date of the signing of Grandfather’s last Will would be presumed not to be counted among his child’s children or more remote descendants. The idea was to stop this sort of thing: the 65 year old son adopts his 30 year old girlfriend so she would inherit his share.

Relief from that presumption came in a curious way with the Estate of Caves in 1937. With this case, the court ruled that if the decedent dies intestate, grandchildren adopted any time before grandfather’s death were included as issue. This meant that adopted children were given more protection in the case of intestacy than if a Will governed distribution.

This remained the law until the Wills Act of 1947 was passed. The rebuttable presumption became that adopted grandchildren of a testator were assumed to be issue of the testator and therefore inherit along with his or her fellow grandchildren. However, the grandchildren had to be adopted before the death of the testator. This moved the "cut-off date" forward for both the testamentary case and the intestate case, but still left those children adopted after Grandfather’s death out in the cold.

This remained the case until 1972. In January of 1972, the Court agreed to hear the Estate of Tafel. The children of the decedent, Tafel, were enjoying the income of a trust created in his Will, with the remainder to be distributed to his child’s issue, if any, and if none, the remainder was to be given over to the other siblings. One of Tafel’s children, a son, had adopted two children after his father’s death. The law at the time supported the presumed intention of the testator: if the son with the adopted children dies before his trust is distributed, the remaining amount would go to his brothers and sisters. Before the case was decided, a new Wills Act was passed in June of 1972 that eliminated the "cut-off date" of the grandparent’s death. The Court had for years wanted to address this issue, and so the court’s ruling, delayed until November of 1972, made new case law that exists today.

The Court decided that any adopted child, no matter when adopted and no matter how many generations removed from the testator, would share in the inheritance with all issue. The only restriction is that the rule does not apply when the adoptee is an adult (18 or over) when adopted.

All of these laws and cases addressed what should be assumed to be the intent of a decedent if there was no written statement showing his intention to include or exclude adopted children or more remote issue. Many professionally drawn Wills include definitions, either including or excluding adopted children, and such definitions can change the rule about adult adoptees.

A person may change the rule of the statute by specifying in a Will whether adopted children will inherit equally with natural-born children. Inheritance by grandchildren and more remote issue can be similarly specified. If the presumption of today’s law is not what you want, be sure to address it in your next Will or Codicil.


Today I listened to the ALI-ABA Webcast "Virtual Representation in Trust and Estate Dispute Resolution:  Opportunities and Risks",  You can check at the ALI-ABA website to find out when the online version will be available – i highly recommend it.  This concept will be increasingly valuable in the resolution of trust and estates disputes.  The ALI-ABA course description reads: 

"Virtual representation," which has long-existed in the common law and is embodied in a variety of state statutory schemes, seeks to protect incapacitated, unborn, and unidentified beneficiaries who can’t protect themselves in trust and estate litigation. This doctrine has become an increasingly necessary tool to bind all parties whose interests are affected by the resolution of such disputes.  As the use of "virtual representatives" to bind absent parties increases, the risks for parties involved in trust and estate disputes of not identifying an appropriate virtual representative have also increased.

Here is a segment of my outline from the PBI seminar on Developments in Fiduciary Litigation:

Virtual Representation PEF Code §§ 7721-7726

  1. Virtual Representation PEF Code §§ 7721-7726

    History: "Virtual representation was a concept in Hanoverian Britain, based on the belief that men without the vote, such as persons in the colonies, or those in Britain who did not have the franchise, were "virtually represented" by Members of Parliament who had been elected by "similar" voters. There were some shopkeepers who voted for MPs, the theory went; therefore all shopkeepers were virtually represented. Men who owned property in North America voted for MPs—some, indeed, sat in Parliament. This, the advocates of virtual representation held, meant that American interests were virtually represented."

    A. "Virtual" means " not in fact"

    B. "The theory of virtual representation is that, if the interests of the representor and representee are closely aligned and are affected in the same way by the decision, the presence of the representor will be sufficient to make every argument that the represented party would make."

    C. Representatives provided there is no conflict of interest [emphasis added] with respect to the matter at issue:

    1.   Guardian represents the ward

    2.   Agent under a power of attorney represents the principal

    3.   Living sui juris members of class represent other class members who are minors, unborn, unknown or unascertained

    4.   Predecessors in interest – where property will pass to a person or class upon the occurrence of a future event, but will pass to another person or class upon the occurrence of an additional future event, the class who would take on the first event represent those who would take on the second event

    5.   Unknown or unascertained beneficiaries – Person represents all minors or unborn individuals or persons whose identity or location is unknown or not reasonably ascertainable if the interest of the persons represented are substantially identical with respect to the particular question or dispute involved.

    6.   Donee of a general power of appointment – represents all potential appointees (objects) and all takers in default even if a conflict of interest exists

    7.   Donee of a limited power of appointment – represents all potential appointees (objects) and all takers in default who are also potential appointees.

    B.  Judicial proceedings

    An order or decree binding the virtual representative is binding on the persons, or class of persons represented if the trustee notifies the representative in writing whom they represent and they do not decline representation and they act in good faith

    C.  Non-judicial proceedings

    Notice, consent, approval, waiver or release by the representative is binding on the persons, or class of persons represented if the trustee notifies the representative in writing whom they represent and the do not decline representation and they act in good faith.

Whom are a person’s heirs? Heirs are those who inherit a decedent’s property if he or she dies without a will. The law has long established that a surviving spouse has a right to receive a share, and then children, or other lineal descendants, inherit. If there are no lineal descendants, then parents are heirs, then grandparents, siblings, nieces and nephews, and so forth.

In a world where there are multiple marriages, many children born to unmarried parents, in vitro fertilization, and unconventional living situations, how does one determine whom are a person’s heirs? Recent developments in technology, including DNA tests, are raising challenges to well-settled principals of the common law.

A Florida case, Doe v. Doe, decided by Florida’s 2nd District Court of Appeals in September 2009, was about this problem. The facts of Doe are uncomplicated. Chester Jr. and Eleanor, his wife, executed trusts which provided for a gift to their grandchildren. One of the grandchildren was Catherine, who was the daughter of Chester III (son of Chester Jr. and Eleanor) by virtue of his name appearing on her birth certificate and a court order entered in the domestic relations division following Chester III’s divorce from Catherine’s mother.

Chester Jr. and Eleanor never knew, but Chester III submitted samples from Catherine and himself to two separate laboratories for DNA testing. The test results from each of the two laboratories conclusively excluded Chester III as Catherine’s biological father. Eleanor, who survived Chester Jr., died six years after the results of the DNA tests became known to Chester III.

The trust contained this language: "For all purposes, hereunder, in determining whether any person is a child or descendant, only children and descendants by blood shall be included."

The trustee brought suit to exclude Catherine from the class of trust beneficiaries since the DNA test proved she was not a "descendant by blood." The question before the court was whether DNA test results should be allowed to prove that a child is not an heir?

After a long disquisition, the court said: "To put it in a nutshell, the trusts’ Article XVIII appears in legal instruments, not in a technical paper on genetics. The phrase "descendants by blood" is a legal term of art, not a scientific one. As a legitimate child of one of the settlors’ sons, Catherine qualifies as one of the settlors’ ‘descendants by blood.’"

What is meant by "legitimate" in this context? It has long been a presumption of the law of inheritance that a child born to a married couple is "legitimate" that is, it is the child of both parents. In the days when this presumption developed, DNA testing was not available. Also, a child acknowledged by the father has been presumed an heir.

Questions of the interpretation of wills and trusts always turn on the decedent’s intent. The presumption and interpretations imposed by law are aimed at discerning intent. In this case, what did Chester Jr. and Eleanor intend? Did they want Catherine to share in their estate? Apparently they did. Would they have wanted her to share if they knew their son Chester Jr. was not her biological father? Tough question. How can we know?

The Court closely examined the meaning of the term "descendants by blood" as it has been historically used in wills and trusts. Generally, such expressions were used as a term of art to exclude adopted persons as beneficiaries. Because the blood restriction came to be used long before genetic testing became available, the Court did not want to extend its meaning "to disqualify descendants who were not adopted and who would otherwise qualify as a beneficiary." Therefore, as a legitimate child of Chester III, Catherine qualifies as one of the descendants by blood of Chester Jr. and Eleanor.

Thus, the court held that the DNA evidence would not be used to remove Catherine as a beneficiary.

A different standard and view was applied to the converse case when the court included a child not born in wedlock, who claimed to be an "heir" of the decedent, even though he or she had not been acknowledged and there had been no adjudication of paternity.

We look for more developments in the law around these issues. Will the old common law approach be upheld when the DNA evidence is clear and convincing? What will this do to families?

If you are concerned about who will be considered to be your heirs and beneficiaries because of complex personal relationships, there is an easy solution: make a will. When you make a will you can specify who should be included and how their relation should be determined. Don’t leave it to chance, or years of litigation. Making a will that specifically addresses these issues is the way to make sure your intentions are followed.

When I draft wills and trusts I always include definitions of "child" and "descendant:"

"For purposes hereof, the term "child," however expressed, shall refer to any descendant in the first degree of the parent designated. The term "descendant," however expressed, shall include (i) children or more remote descendants, either naturally born or legally adopted, but only if such descendant was adopted prior to attaining the age of eighteen (18) years, it being my intent that such adoption shall have the same effect as if such individual had been naturally born to the adopting parent or parents; (ii) legitimate descendants only; and (iii) any child or remote descendant in gestation at any time specified in connection with the administration, division or distribution of any portion of my estate."

The thinking is that if my son adopts his new (much too young) girl-friend, Miss Gold Digger – she is not a descendant of mine.

But what if the document does not address the issue?

Professor Gerry Beyer at Wills, Trusts & Estates Prof Blog reports on the case of In re Ray Ellison Grandchildren Trust, 261 S.W.3d 111 (Tex. App.—San Antonio 2008, pet. denied, rehearing filed), Settlor established a trust for the “descendants” of his children.  A dispute arose as to whether descendants included the adopted children of his son who were adopted after reaching adulthood.  The trial and appellate courts agreed that these individuals were not within the class of individuals who would qualify as descendants.

In Ellison, the deceased grantor’s son adopted the three children of his second wife when they were adults – ages 39, 37 and 36.  His two children from his first marriage didn’t want to share with these 3 adoptees.

Surprisingly, the court held, through some very strained reasoning, that the adopted children are not included.  We shall see what happens on appeal.

In the meantime – don’t leave it to litigation – include a definition when you draft.