Charitable Bequest Upheld Despite Closure of Nursing Home Facility

In the Nebraska Supreme Court case Akerson v. Hamilton County (309 Neb. 470), the court addressed a legal dispute over the validity of a charitable bequest to a nursing home facility that had closed after the death of the donor. The court's ruling clarified how charitable intent in wills is interpreted when a beneficiary organization ceases to exist or faces closure.

This case highlights critical aspects of estate planning, charitable bequests, and how courts ensure that a donor’s charitable intentions are upheld, even in situations where the original beneficiary undergoes significant changes.

Background of the Case

Nelda M. Akerson, a lifelong resident of Hamilton County, Nebraska, passed away in June 2017 at the age of 85. In her will, executed in 2011, she made an $875,000 charitable bequest to Hamilton Manor, a nursing home facility located in Aurora, Nebraska. Akerson’s intent was for the funds to be used for the facility’s "unrestricted use as determined by its Board of Directors." The bequest was noted as charitable and did not require any share of the costs for the administration of her estate or inheritance taxes.

At the time of Akerson’s death, Hamilton Manor was still operational as a skilled nursing facility. However, due to financial struggles dating back to 2009, the facility was facing imminent closure. Hamilton Manor had long been operated by Hamilton County through the Hamilton Manor Board of Trustees, and by 2016, the county had loaned over $925,000 to keep the facility running.

The Closure of Hamilton Manor

In December 2016, in response to mounting financial difficulties, Hamilton County entered into a "Consulting and Bed Transfer Agreement" with Quality Care Solutions (QCS), a for-profit company. Under this agreement, QCS was to construct a new nursing home facility in Aurora, and Hamilton Manor agreed to continue its operations only until the new facility was completed. The closure of Hamilton Manor was planned for March 2018, nearly nine months after Akerson’s death.

By April 2018, Hamilton Manor ceased operating, transferred its nursing bed licenses to QCS, and the original facility was demolished. In June 2019, the property on which Hamilton Manor had operated was sold for $275,000. Despite the closure, the Board of Trustees remained in existence, holding a checking account for the purpose of winding down the remaining business of the nursing home.

Legal Dispute and Probate Court Ruling

In 2018, Ronald Akerson, the personal representative of Nelda Akerson's estate and the nephew of her late husband, recognized the $875,000 charitable bequest in both the federal estate tax and Nebraska inheritance tax filings. However, by September 2019, Ronald filed a petition with the probate court requesting a ruling that the bequest to Hamilton Manor had lapsed and asking for the funds to be distributed as part of the estate’s residue, which would benefit Akerson’s heirs.

The probate court agreed with Ronald’s position, ruling in August 2020 that the charitable bequest had indeed lapsed. The court’s reasoning was that Hamilton Manor was no longer operating as a nursing home by the time the bequest could be distributed and therefore, the gift could not be carried out according to the donor's wishes. As a result, the court ordered the $875,000 bequest to be distributed to Akerson’s heirs under the will’s residuary clause.

Nebraska Supreme Court Ruling: Bequest Did Not Lapse

Hamilton County and the Board of Trustees, however, appealed the probate court’s decision. The Nebraska Supreme Court took up the case to determine whether the charitable bequest to Hamilton Manor had truly lapsed given the closure of the facility after Akerson’s death.

In a key decision, the Nebraska Supreme Court reversed the probate court’s ruling. The high court concluded that the charitable bequest did not lapse because Hamilton Manor was still operational on the date of Akerson’s death, even though it was scheduled to close later. The court emphasized that the closure of the facility did not negate Akerson’s general charitable intent, which was to support the work of Hamilton Manor for the benefit of the local community.

The Role of Charitable Intent

Central to the Supreme Court’s decision was the issue of charitable intent. The court noted that Akerson’s will clearly described the bequest to Hamilton Manor as charitable and for its unrestricted use. Even though Hamilton Manor no longer existed by the time the funds were ready to be distributed, the court ruled that the absence of specific restrictions in the will indicated a broader charitable purpose.

The court also emphasized that Hamilton Manor had not ceased operations before Akerson’s death, and therefore, the bequest vested at the time of her passing. The mere fact that the nursing home was scheduled to close at a future date did not invalidate the gift. Furthermore, Hamilton Manor's charitable purpose continued to exist even in its final months of operation, fulfilling Akerson’s general intent to support the organization.

Final Outcome

In its final ruling, the Nebraska Supreme Court reversed the probate court's judgment and remanded the case with instructions to award the $875,000 bequest to Hamilton County for the use of the Board of Trustees, as intended by Akerson. Additionally, the court ruled that interest should be awarded on the bequest, as the delay in distribution was primarily caused by the petition for construction of the will.

This ruling reaffirms the principle that courts will strive to honor the charitable intent of a testator, even when the circumstances surrounding the beneficiary organization change after the donor’s death. The decision also underscores the importance of specifying alternative beneficiaries or providing clear instructions in estate planning documents to avoid legal disputes when a charitable organization faces closure or reorganization.