Facts
- Attorney John Johnson prepared Helen Fay Henes’s will in 1979.
- Henes’s will included a residuary clause giving the residue of her estate, “together with property to which I may have a power of appointment at the time of my death,” to a trustee to be held and administered under the will’s trust terms.
- In 1982, Johnson also assisted Henes and her sister, Elizabeth Henes Motes, in creating an irrevocable trust (the Motes/Henes Trust) funded with approximately $6 million from redeemed business interests.
- The trust divided the property into separate shares and granted each sister a testamentary power of appointment over her own share.
- The trust conditioned exercise of each power on the sister appointing “by specific reference” to the trust in her last will and testament.
- Johnson included the power-of-appointment provision because the trust was irrevocable, and he expected each sister could change dispositive choices later through changes to her will.
- Johnson believed Henes intended her trust share to pass into her residuary estate at death and believed the existing will language would accomplish that result; Henes did not amend her will after the trust’s execution to mention the trust by name.
- Henes died in 1983, before Motes, with her 1979 will still in effect and without a will clause naming the trust as the source of the power.
- The trustee (Bank of Bentonville) and Motes petitioned for a declaration that Henes’s will did not validly exercise the trust power because it lacked the required specific reference; the trial court ruled that the will’s general language was sufficient.
- The trustee and Motes appealed to the Arkansas Supreme Court; Motes’s children were named as opposing parties in the litigation over distribution.
Issues
- When a trust requires a power of appointment to be exercised “by specific reference” to the trust, does a will’s general gift of “property to which I may have a power of appointment at the time of my death” effectively exercise that trust power?
Decision
- The Arkansas Supreme Court affirmed.
- The court held Henes’s will effectively exercised the testamentary power of appointment created by the Motes/Henes Trust, even though the will did not mention the trust by name.
- The court concluded that the circumstances—including the coordinated estate-plan documents and the drafter’s testimony—showed Henes meant to exercise the power and to direct her trust share into her will’s residuary trust scheme.
Legal Principles
- To exercise a power of appointment effectively, the donee must (1) intend to exercise the power and (2) express that intention in a manner that meets the donor’s imposed conditions (as reflected in Restatement (Second) of Property, Donative Transfers § 17.1).
- In construing wills and related donative instruments, Arkansas courts seek to carry out the testator’s intent where lawful, and they avoid constructions that defeat that intent through unnecessary technicality.
- A “specific reference” condition is commonly meant to prevent accidental exercise of a power; where the record shows the exercise was deliberate, a court may treat a general reference to powers of appointment as sufficient in context.
- Extrinsic evidence may be considered to determine whether the testator intended to exercise a power of appointment, including testimony from the attorney who drafted coordinated estate-planning instruments.
Conclusion
In Motes/Henes Trust, Bank of Bentonville v. Motes, the Arkansas Supreme Court held that Henes’s 1979 will—by directing that property subject to any power of appointment she held at death pass under her residuary clause—validly exercised the testamentary power granted to her in the later, irrevocable Motes/Henes Trust, despite the trust’s requirement of “specific reference,” because the surrounding circumstances demonstrated a purposeful exercise consistent with her estate plan.