What Does it Mean?

Just when you think estate planning can’t get any more complex, we see a court case that proves us wrong.  The case below arises out of a dispute about a devise in a will to a beneficiary that died before the testator.  The central issue was whether Ohio’s anti-lapse statute protected the devise or if the devise lapsed and became part of the testator’s residual estate.  Believe it or not, the answer to that question lies within the word “means.”  Below we discuss the Third District Court of Appeals’ decision and how it reached its conclusion that the word “means” narrows the definition of devise in Ohio’s anti-lapse statute which may create an outcome for families and loved ones that the law or legislature did not intend.   

What it means to “lapse” and Ohio’s anti-lapse statute.  To understand the context and importance of this case, it helps to have a little understanding of Ohio’s common law lapse rule and anti-lapse statute.  Traditionally, at common law, a devise given to a person who predeceases the testator is said to “lapse.”  Devise, as used here, is a general term that is used to mean “the act of giving property by will.” This is an important distinction to make because, as you will learn later, the court had to interpret devise differently under Ohio’s anti-lapse statute.  

If you think about it, it makes sense that a devise would lapse when the beneficiary predeceases the testator because you cannot give property to someone who is already dead.  But under the lapse rule, all surviving heirs of that predeceased beneficiary also lose out on any assets that the beneficiary would have been entitled to.  Instead, the lapsed devise will either become part of the testator’s “residual estate” – where it will be distributed pursuant to the terms of a residuary clause contained within the testator’s will – or it passes through intestate succession.    

The common law rule of lapse has been criticized for the harsh results that it produces.  This is especially true when the lapse rule is applied to wills containing a devise to a child or close relative that predeceases the testator.  For example, Farmer A has no children and wants to give the farm to a family member that will continue the farming operation.  Farmer A’s siblings, however, hope that they get the farmland to sell for a premium price.  Farmer A decides to execute a will that gifts the farm and all associated assets to his nephew who has been helping him on the farm for the past few years.  Farmer A probably hoped or believed that after he was gone, his nephew was going to continue the farming operation and prepare his sons to take over the farm and keep Farmer A’s legacy alive.  However, Farmer A’s nephew was in a horrific tractor accident and passed away shortly after Farmer A executed his will.  Not long thereafter, Farmer A’s health declined, and Farmer A passed away.  In this scenario, the nephew’s sons would not be entitled to the farm because the lapse rule essentially voids the gift to the nephew. Instead the farm is likely to be passed to Farmer A’s siblings and will be sold. 

To remedy the harsh results, Ohio enacted its anti-lapse statute which can be found in Ohio Revised Code Section 2107.52. In the event that a beneficiary dies before the testator, Ohio law “protects” the devise and prevents the devise from being extinguished by the common law lapse rule.       

However, Ohio’s anti-lapse statute only applies in certain situations. First, a devise must be to: 

• a grandparent; 
• a descendant of a grandparent (descendants of a grandparent include your siblings, children, parents, aunts, cousins, etc.); or
• a stepchild of the testator  

If any one of the individuals listed above (also referred to as “devisees”) dies before the testator and leaves surviving descendants, then two situations can occur: 

1. If the devise is an individual devise (i.e. the devise is not to a group or class of individuals like “my children” or “my grandchildren”) a substitute gift is created in the devisee’s surviving descendants.  The surviving descendants are entitled to the property that the devisee would have been entitled to, had the devisee survived the testator. 
2. If the devise is in the form of a class gift, a substitute gift is created in the surviving descendants of any deceased devisee. 

Ohio’s anti-lapse statute requires any devise that fails to become part of the testator’s residue or “residual estate.”  If the devise cannot become part of the residue, then it passes by intestate succession.  This overview of Ohio’s anti-lapse statute is very brief and does not cover the many nuances that are contained within the statute.  If you have more questions regarding Ohio’s anti-lapse statute you can visit the statute here or contact a knowledgeable estate planning attorney.  

Case Background.  Now we get to the reason for this post. We will first discuss the background information of the case before diving into the court’s analysis and holding.  In 2019, Theodore Penno passed away leaving a validly executed will which read: 

ITEM II.        I hereby give, devise and bequeath my farm located in Butler Township, Mercer County, Ohio, and any interest that I may have in any farm chattel property to my brother, JOHN PENNO. 

ITEM III.       All the rest, residue, and remainder of my property, real and personal, of every kind, nature, and description, wheresoever situated, which I may own or have the right to dispose of at the time of my decease, I give, devise, and bequeath equally to my brother, JOHN PENNO and my sister, MARY ANN DILLER, absolutely and in fee simple, share and share alike therein, per stirpes. 

***

ITEM V.        I hereby appoint my niece, LINDA PENNUCCI and my niece, PHYLLIS DILLER, or the survivor of them, as Co-Executors of this my Last Will and Testament.  

John Penno, Theodore’s brother, passed away approximately three years before Theodore. The only sibling to survive Theodore was his sister, Mary Ann Diller.  John is survived by his two children, David Penno and Linda Pennucci.  Mary Ann filed a complaint for declaratory judgment and for construction of Theodore’s will.  Mary Ann argued that Theodore’s gift to John in Item II should lapse because John passed away before Theodore and the farm and farm property should become part of Theodore’s residual estate and be distributed according to the terms of Item III.  John’s children argued to the contrary and asked the court to find that Theodore’s farm and any farm property be distributed to them alone.    

The issue.  The issue in this case was whether the devise to John in Item II lapsed and became part of Theodore’s residual estate.  If the devise did not lapse, then only John’s children would be entitled to the farm and farm property.  If the devise did lapse, then the farm and farm property become part of Theodore’s residual estate and is then distributed according to the terms of Item III, which would entitle Mary Ann to some portion of the farm and farm property.  The probate court and the trial court found that the devise in Item II did not lapse, and John’s children were entitled to the farm and farm property alone.  Mary Ann then filed her appeal to the Third District Court of Appeals.  

The court’s interpretation of “devise” in Ohio’s anti-lapse statute.  At the center of this case is the definition of “devise” contained within Ohio’s anti-lapse statute.  The statute provides that: 

“Devise" means an alternative devise, a devise in the form of a class gift, or an exercise of a power of appointment.  

The word "means" is bolded and underlined here because it becomes very important to the court’s interpretation of the statute.  

Like the court, Mary Ann and her daughter, Phyllis, also thought the word “means” was very important.  They argued that the gift of Theodore’s farm and farm chattel in Item II was not a “devise” under Ohio’s anti-lapse statute and therefore, the gift to John lapsed when John predeceased Theodore.   Mary Ann and Phyllis reasoned that Theodore’s devise to John was a primary devise and Ohio’s anti-lapse statute only protects an alternative devise, a devise in the form of a class gift, or an exercise of a power of appointment.  The court eventually agreed with Mary Ann and Phyllis.  

The court explained the difference between a primary devise and the other meanings of devise contained within Ohio’s anti-lapse statute.  According to the court, the different definitions are as follows: 

• Primary devise – “is a devise to the first person named as taker.”
• Alternative devise – “is a devise that, under the terms of the will, is designed to displace another devise if one or more specified events occur.”
• Class gift – “is a gift to a group of persons, uncertain in number at the time of the gift but to be ascertained at a future time, who are all to take in definite proportions, the share of each being dependent on the ultimate number in the group.”
• Power of appointment – “is a power created or reserved by a person having property subject to disposition, enabling the donee of the power to designate transferees of the property or shares in which it will be received; esp., a power conferred on a donee by will * * * to select and determine one or more recipients of the donor’s estate.” 

The court examined the definition of “devise” as written in the statute and concluded that the definition only meant alternative devise, class gift, or power of appointment.  The court reasoned that the use of the word “means” conveys that the definition of “devise” in Ohio’s anti-lapse statute is intended to be an exhaustive definition and that the three kinds of testamentary gifts following the word “means” are the only kinds of testamentary gifts capable of qualifying as “devises.”  To help reinforce their conclusion, the court compared the word “means” to the word “includes” and concluded that “means” indicates that there is only one meaning whereas “includes” conveys the idea that there are other items that can be included in the definition of a word, even though they are not specifically stated.

Based on the court’s findings and conclusions, the court ruled that Theodore’s gift to John was a primary devise and was not protected by Ohio’s anti-lapse statute.  The court found that the gift to John must become part of Theodore’s residual estate or pass through intestate succession.  

The court’s ruling may seem counterintuitive to the purpose of the anti-lapse statute, and the court admitted as much. But the court reiterated the concept that it is not the court’s place to change the meaning of a statute as it is written – that obligation is left to the legislature and the legislature alone.  The court argued that if the court’s ruling is an unintended consequence resulting from how the statute is written, the legislature can change the words of the law to more accurately reflect the purpose of the anti-lapse statute.   

Conclusion.  This case demonstrates how one simple word can drastically change the meaning of the law and how that small word can affect a lot of people.  This case is also a great reminder about the importance of planning for all possible scenarios.  Many times, when we create our own estate plan, we must face the reality of our own deaths.  Facing that reality is quite uncomfortable.  But we must also come to terms with the even more uncomfortable possibility that our loved ones pass away before us.  This is why it is important to speak with an experienced and knowledgeable estate planning attorney as you plan for the future.  A good attorney will address not only the immediate needs you have for transferring your assets but will also help you plan for all possibilities so that your intentions are carried out.  

This case is also a good example of why we should update our estate plans when major life events occur.  The death of a beneficiary is definitely one of those instances where you should contact your attorney to update your estate plan so that there is no doubt your loved ones are taken care of when you are gone. 

To read the court’s decision, please visit the Ohio Supreme Court’s website.