In In Re Akerson, a June 11, 2021 opinion, the Nebraska Supreme Court held that an $875,000 charitable bequest to a nursing home facility did not lapse, and thus reversed the probate court’s decision invaliding the bequest and passing it through the residue of decedent’s estate.
The Facts of In re Akerson
Nelda M. Akerson was a lifelong resident of Hamilton County, Nebraska. She died in June 2017 at age 85. Her will, executed in June 2011, was admitted to probate in January 2018, and Ronald E. Akerson (Ronald), the nephew of Akerson’s late husband, was appointed personal representative for the estate.
The residuary of Akerson’s estate was divided one half to Ronald and one half to various other relatives. The relevant article of Akerson’s will stated:
I give the sum of Eight Hundred Seventy-five Thousand and no/100 Dollars ($875,000.00) to HAMILTON MANOR, Aurora, Nebraska, for its unrestricted use, as determined by its Board of Directors.
The charitable bequests in this paragraph shall bear no portion of the costs of administration nor estate or inheritance tax.
Hamilton Manor was a nursing home facility owned by Hamilton County and operated through the Hamilton Manor Board of Trustees. Akerson wanted to gift money to Hamilton Manor, because she appreciated the rehabilitation services she and her sister received there.
Prior to Akerson’s death, Hamilton Manor went through some financial difficulties. By July 2016, Hamilton County had loaned Hamilton Manor a total of $925,500.
In December 2016, Hamilton County and Hamilton Manor, through its board of trustees, entered into a “Consulting and Bed Transfer Agreement” (the Agreement) with Quality Care Solutions, LLC (QCS). Under the Agreement, QCS was to construct a new nursing home in Aurora by March 1, 2018.
The initial consulting phase of the project in which QCS agreed to consult with Hamilton Manor on the day-to-day operations of the facility was to continue until the new facility became operational, at which point Hamilton Manor would transfer its licenses to operate 60 nursing home beds to QCS. The Agreement stated that the board of trustees “intend[ed] to continue to operate and manage the [nursing facility] until such time as [QCS] has constructed a new 60-bed nursing home” and that “Hamilton Manor shall continue to be licensed as a nursing facility and certified for participation in the Medicare and Medicaid programs in the name of and under the authority of Hamilton Manor and the [board of trustees].” The board of trustees agreed to close its facility and cease all operations upon the opening of the new facility.
As of June 6, 2017, Hamilton Manor continued to operate as a skilled nursing facility. Thereafter, QCS completed construction of the new facility. By April 2018, Hamilton County ceased operating Hamilton Manor and transferred its bed licenses to QCS. Hamilton County demolished Hamilton Manor, and on June 27, 2019, sold the real property on which Hamilton Manor sat for $275,000. The board of trustees continues to exist and operates a separate checking account in the name of Hamilton Manor for the purpose of winding up the nursing home business.
The Probate Litigation
Akerson died in June 2017, and her will was admitted to probate in January 2018. In the fall of 2018, Ronald, as personal representative, recognized the $875,000 charitable bequest to Hamilton Manor in the estate’s federal estate tax and Nebraska inheritance tax filings. But in September 2019, Ronald petitioned the probate court of Hamilton County for construction of Akerson’s will, asking that the court find the charitable bequest to Hamilton Manor had failed and order the proceeds to be administered as part of the residue of the estate.
Hamilton County and the board of trustees filed a response stating that the bequest vested upon Akerson’s death.
The Nebraska county court found that the bequest to Hamilton Manor had lapsed, finding that because of the Agreement, Hamilton Manor ceased to exist prior to Akerson’s death. The court ordered the $875,000 to be distributed to Akerson’s heirs in accordance with the will’s residuary clause.
Hamilton County and the board of trustees appealed.
The Cardinal Rule In Nebraska Will Construction Is Ascertaining and Effectuating the Testator’s Intent
The cardinal rule in construing a will is to ascertain and effectuate the testator’s intent if such intent is not contrary to the law. Read about a Nebraska will construction case here.
Section 30-2341, Nebraska Statutes, states: “The intention of a testator as expressed in [her] will controls the legal effect of [her] dispositions.”
As an initial matter, the Nebraska Supreme Court established that Akerson intended to create a charitable gift to Hamilton Manor, stating:
Initially, we establish that Akerson’s will created a gift, or devise, to Hamilton Manor that is charitable in nature. Under the relevant provision, Akerson gave $875,000 to Hamilton Manor, “for its unrestricted use.” Immediately thereafter, Akerson referred to the devise to Hamilton Manor, and other devises contained in the same article, as “charitable bequests.” Additionally, under Nebraska law, nonprofit nursing homes are classified as charitable institutions. 12 Thus, Akerson intended to leave $875,000 to Hamilton Manor as a charitable gift.
When Does a Charitable Bequest Lapse Under Nebraska Law?
If a beneficiary charitable organization has ceased to exist at the time a will goes into effect, the charitable bequest or gift lapses under Nebraska law.
Here, Hamilton County and the board of trustees argued that because Hamilton Manor was actively operating as a nursing home on the date of Akerson’s death, the devise vested on that date, and that such vesting was not invalidated by the terms of the Agreement that Hamilton Manor would close at a future date. Pursuant to the provisions of Akerson’s will, Akerson intended Hamilton Manor, by and through Hamilton County and the board of trustees, to receive the $875,000.
Ronald argued that the court correctly found that the Agreement rendered the bequest to Hamilton Manor ineffectual. Ronald contends that on the date of Akerson’s death, Hamilton Manor was no longer carrying out the charitable objectives and purposes for which the bequest was given, and that the bequest’s failure is akin to the failure of a condition subsequent.
The Nebraska Supreme Court began by reviewing the timeline of events:
The undisputed timeline is that Hamilton County and the board of trustees entered into the Agreement on December 1, 2016. The Agreement provided for consultation services, the construction of a new nursing facility, and the closing of Hamilton Manor, all by March 2018. Akerson died on June 6, 2017. The Agreement came to fruition in April 2018, at which time Hamilton Manor closed and transferred its bed licenses to QCS.
Title To Nebraska Real And Personal Property Passes Immediately Upon Death
In Nebraska, title to both real and personal property passes immediately upon death to the decedent’s devisees or heirs, subject to administration, allowances, and a surviving spouse’s elective share. In addition, the provisions of a will take effect and become operative at the time of the death of the testator, unless the will expressly provides for vesting at a later time.
Apply this well-settled law, the Nebraska Supreme Court determined that at the time of Akerson’s death, Hamilton Manor still operated as a skilled nursing facility and was capable of receiving the gift. So long as Hamilton Manor was willing and able, at the time of Akerson’s death, to use the charitable gift for the general promotion of health and governmental services in Hamilton County, then the gift would not lapse:
Here, as of the date of Akerson’s death, even though Hamilton Manor was scheduled to close approximately 9 months later, it is uncontested that Hamilton Manor still provided the services of a skilled nursing facility. As such, the Agreement did not prevent Hamilton Manor from carrying out the general charitable objectives and purposes of the gift. As Hamilton County and the board of trustees point out, the Agreement established that Hamilton Manor intended to continue its normal operations until construction of a new 60-bed nursing facility was completed. The Agreement contemplated the possibility that construction of the new facility could not be completed and that the Agreement could be terminated.
A Charitable Bequest Does Not Fail If There Is Any Possibility It Can Be Achieved
Section 30-2342.01(a) Nebraska Statutes states that “no gift, devise . . . for . . . charitable, or benevolent purposes, which in other respects is valid under the laws of this state, shall be invalid or fail . . . by reason that it is . . . impossible to achieve.”
Legacies and devises to the uses of charity are entitled to peculiar favor and are regarded as privileged testaments, and will not be declared void if they can by any possibility, consistent with law, be considered as good. So courts of equity go to the length of their judicial power rather than that such a trust should fail. Allebach v. City of Friend, 118 Neb. 781, 226 N.W. 440 (1929).
Favorably viewing Akerson’s charitable gift and endeavoring to carry it into effect, the Nebraska Supreme Court concluded that under the undisputed facts, the charitable bequest did not fail, nor did it become impossible to execute in strict accordance with the charitable purposes and objectives of Akerson’s will.