As we’ve said before, an estate plan should anticipate the unexpected. Like all states, Arizona law has default rules if there is no plan or if a plan doesn’t specify the testator’s desires. A recent Arizona Court of Appeals ruling grapples with default rules for two often unanticipated events: When a child dies before the parent and when a grandchild is “adopted out” of the family.
The story of Hoyer v. Dougherty goes like this: Verle Dougherty died in 2019 with no Will. By that time, two of his three children, Larry and Lorna, had died. His surviving son, Steven, was appointed Personal Representative to divide the estate among himself and Larry and Lorna’s five kids.
Default Rule 1: Adoption
Steven didn’t have an attorney and had an important question. One grandchild, Klifton Hoyer, had been adopted by his father’s wife (Klifton’s stepmother). Could he still inherit? Steven petitioned the court to ask if Klifton should get Lorna’s third.
Klifton responded by filing a Motion for Summary Judgment with the right answer: Arizona has a specific statute that provides that if a child is adopted by the spouse of a natural parent, the child can inherit from or through both natural and adoptive parents. (A.R.S. 14-2114(B)).
Klifton’s motion also asked that the court provide that he was entitled to his mother’s share of Verle’s estate. Klifton’s motion carried the day, and the Court issued an order that said Klifton, by representation, was entitled to inherit his mother’s share. The Order suggests, but doesn’t explicitly say, that Klifton gets his mother’s third. Later, Klifton took the position that the Order meant just that: he was entitled to a third of the total estate.
Default Rule 2: Division
The problem is, that’s not the proper division under Arizona’s default rules. In Arizona, “by representation” means that the shares of deceased members of a generation are combined and divided among the living members of the next generation. So, in this case, Lorna’s 1/3 and Larry’s 1/3 are to be combined and divided among the five grandchildren, with each grandchild taking 2/15.
Steven petitioned the Court again to ask for a clarification, and the Court confessed that the earlier Order was “inartfully drafted” but did not intend to adopt a division “not allowed under the law.” The Order confirmed that Klifton was entitled to 2/15.
Klifton, not happy with the result, appealed. And lost. The Court of Appeals said, among other things, that the lower court did not make a mistake when it clarified its first Order and said Klifton got 2/15.
The Court further found that Klifton’s appeal was frivolous and imposed sanctions. He has to pay attorneys’ fees for Steven and the four granddaughters (in addition to his own, of course). In granting sanctions, the decision points out that Klifton’s counsel had admitted that there was no legal basis for Klifton to receive 1/3 of the estate, and says, “Klifton’s appeal is not supported by any arguably-sound legal theory.”
Opting out of Default Rules
Klifton clung to the 1/3 he thought he was entitled to too long. But it was the assumption Steven made in his initial petition that set the stage for the dispute. Steve, like many people, thought Larry and Lorna’s 1/3 would be divided among their respective kids. That distribution scheme is called “per stirpes,” and that’s not the default in Arizona.
To illustrate: Say Verle’s estate had been valued at 900,000. Under Arizona law, Steven gets $300,000 and each grandchild gets $120,000. Under “per stirpes,” Steven and Klifton would get $300,000 each, and Larry’s daughters would get $75,000 each. Many believe Arizona’s approach is what most people want. Those of the same generation get the same amount – equally near, equally dear.
If you don’t have an estate plan, you need one to spell out your wishes in the event the unexpected occurs. And if you have plan, review the language. Does it effectively express whether to follow these default rules? If not, make adjustments.
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