Charities battle over $1-million bequest

Deepa Bharath

NEWPORT BEACH -- Two reputed charities have locked horns over a local

woman’s estate, court documents show.

The Salvation Army and Orangewood Children’s Foundation will go to

court to ask a judge to decide who gets to keep Newport Beach resident

Penney Sue Bolton’s $1 million.

Bolton, a widow who had no children, died in March 2001, stating in

her will that her estate be equally divided between her two favorite

charities: the Salvation Army and Orangewood Children’s Foundation.

But her estate involved two parts. There was no question about how

$2.8 million of her money was to be divided because it was clearly stated

in her will. Accordingly, the Salvation Army and Orangewood received

equal shares.

The question now is how the $1 million still left in her individual

retirement account is to be distributed.

The conflict arose because Bolton, while designating the beneficiaries

of that account, named the Salvation Army as the “primary” and Orangewood

as the “contingent” beneficiary -- which means the money would go to the

Salvation Army, and Orangewood would get it only if the Salvation Army

ceased to exist.

The Salvation Army says it is entitled to all of the $1 million, based on how Bolton designated the beneficiaries. But Orangewood contends that

it is entitled to half of that money because Bolton showed her intent

when she said in her will that apart from $45,000 that she gave to two

other charities the remainder of her estate “will be divided equally

between the Salvation Army and Orangewood Children’s Foundation.”

Bolton “intended” all of her estate -- including the IRA account -- to

be divided equally between the two charities, said Michael Lawler,

attorney for the executor of Bolton’s estate.

“She obviously did not know what ‘primary’ and ‘contingent’ meant,” he

said. “She just went ahead and filled in the blanks provided in that

form.”

Lawler said it didn’t make sense because the words “primary” and

“contingent” often refer to individuals, not entities. If one individual

died, the other got the money. But in this case, it is highly unlikely

that a national organization would cease to exist -- something Bolton

didn’t quite understand at the time -- he said.

Lawler added that Bolton’s stock broker said during a deposition that

his client did want the money to be equally divided between the two

charities. He said she said so herself during a phone conversation.

But Douglas Smith, attorney for the Salvation Army, maintains that IRA

assets are separate from the assets that are mentioned in a person’s will

and that Bolton “clearly states who is to be the primary beneficiary and

who is to be the contingent beneficiary.”

“Orangewood has no evidence to prove that [Bolton] wanted the IRA

funds to be equally distributed,” he said.

Richard Rawls, the attorney representing Orangewood, said this is a

“unique situation” -- one for which he cannot find a precedent.

“What we’re all trying to do here is to make sure [Bolton’s]

intentions are carried out,” he said. “Sometimes, it’s easier to

determine those intentions. Here, there seem to be several different

interpretations.”

But it was evident from the beneficiary designation form that Bolton

had trouble filling it out, Rawls said.

“She did not have help doing it and made mistakes in the form,” he

said.

All that was available was a “bad” copy of the form Bolton filled out,

Lawler said. The original, it is believed, was lost during the terrorist

attacks on the World Trade Center, which was also the headquarters for

Morgan Stanley Dean Witter.

However, the terms of the will do not dictate how IRA funds are to be

distributed, Lawler explained.

“But the will does give an indication of the individual’s intent,” he

said.

Lawler agreed it was an unusual case.

“I see ambiguities in trusts and wills every week,” he said. “But this

kind of a situation is rare.”

Lawler said he expected the case to settle and that he is surprised

that it didn’t.

“Here you have Orange County’s and the nation’s most reputed charities

fighting over a million dollars,” he said. “They’re all good, and their

intentions are good. It’s just a strange situation.”

The trial is set for May 7 at the Orange County Superior Court,

Lamoreux Justice Center in Orange.

* Deepa Bharath covers public safety and courts. She may be reached at

(949) 574-4226 or by e-mail at o7 [email protected] .