Estate Planning Newsletter – October 2016

February 7th, 2017   •   Comments Off on Estate Planning Newsletter – October 2016   



In the case of the Estate of Warren Elrod, the Tennessee Court of Appeals dealt with the issue of the definition of “Children” regarding the decedent’s IRA.  In the IRA Adoption Agreement, the decedent provided that the beneficiary would be his wife, and the contingent beneficiary would be his “Children.”  The decedent’s wife predeceased him, and at the time of his death, the legal issue addressed by the Court was the intent of the decedent in use of the term “Children” in the beneficiary designation for the IRA, and whether the term “Children” would include the decedent’s stepchildren.  The IRA provided that it was governed by New York law, and the Court of Appeals went through a detailed analysis of New York law.  The Court found the definition of the term “Children” in the IRA document to be ambiguous.  The Court exercised its equity powers to seek to do what the Court thought the decedent intended.  The Court found that because the term “Children” was ambiguous, it could be susceptible to more than one meaning to a reasonably prudent person, as evidenced by varying definitions among dictionaries, New York statutes, and Tennessee statutes.  The Court ruled that stepchildren were included within the term “Children.”


What is most relevant about the Elrod case and the decision reached by the Court are the facts about family relationships.  The decedent had a son from a first marriage and never had a relationship with his son, although he frequently attempted to do so.  In effect, the biological son ignored his father and rebuffed numerous efforts by the father to have a relationship with the biological son.  The biological son did not even attend his father’s funeral.  After his divorce from his first wife, the decedent remarried and became actively involved in the lives of his step-children, although he never adopted them.  The decedent treated his stepchildren as his children and referred to them as his children.  The decedent’s Will left his assets among his stepchildren and his biological children in equal shares (so that in effect the biological son received one-third of the decedent’s probate estate).  Based on the facts in the case, both the Trial Court and the Court of Appeals ruled that the definition of “Children” under the IRA would include the stepchildren.  So it appears the Court may have reached the result it thought best to accomplish the decedent’s intentions, even though many scholars would disagree on the legal theory behind the Court’s decision, or say a different result might be reached by a Court considering Tennessee law only.


MY RECOMMENDATION:  In the Elrod case, the decedent updated his Will after his second wife died.  However, he failed to update the beneficiary designation on his IRA.  Over the years, I have reported on cases where other courts have reached a different result.  Be sure and remind your clients to understand all aspects of how assets transfer at death.  Everyone needs to update beneficiary designations.  The provisions of a Will do not cover an asset for which there is a beneficiary designation (unless the beneficiary designation is the estate of the decedent).

Yours very truly,


 William C. Bell, Jr., Attorney at Law