May 14th, 2013
May 10th, 2013
Almost invariably, settlors give their trustees broad powers regarding trust property. Often these broad powers include the power to convey and encumber trust property and the power to loan trust property. But, sometimes, the settlor also gives the trustee specific instructions with respect to specific trust property. In Hamel v. Hamel, the Kansas Supreme Court interpreted a trust instrument that gave the trustee broad general powers, but also specific directions regarding a specific piece of real property, and examined the interplay between the two provisions. (more…)
May 7th, 2013
Not surprisingly, in Estate of Burnett, the Michigan Court of Appeals reaffirmed that a guardian or conservator can file a complaint for divorce on behalf of the incapacitated spouse over whom the guardianship or conservatorship is placed.
For the family law readers out there, the other interesting question answered by the appellate court was that the trial court had jurisdiction to enter a judgment of divorce between married persons of the same sex even though Michigan’s state constitution prohibits recognition of a marriage entered into by two individuals of the same sex. Click on the link above for more details.
Illinois Supreme Court Punts Question Of Whether Doctrine Of Election Extends To Challenges To Trust Amendments
May 2nd, 2013
In Estate of Boyar, the Supreme Court of Illinois had an opportunity to address an important question of Illinois trust law: whether the “doctrine of election” applicable to will contests should be extended to challenges to amendments to living trusts in cases where the trust serves the same purpose as a will. The trial court decided it did. The Illinois appellate court also decided it did. The Illinois Supreme Court, however, decided that there was no reason for the lower courts to address whether the doctrine of election should be extended to living trusts because that doctrine couldn’t be invoked under the circumstances present in the case. Nevertheless, we get some good insight into when the doctrine of election could come into play in whatever contexts it might be applicable.
First, some quick facts. (more…)
April 29th, 2013
If we were to identify hot topics in fiduciary litigation during 2012 and 2013, this one would be scorching: what duties do trustees owe the remainder beneficiaries of revocable trusts? We’ve explored the topic in some detail here, here, and yet again here.
Last week, over at Bryan Cave‘s Private Client Group blog, TrustBryanCave, Kathy Sherby and Stephanie Moll wrapped up a three part series on this topic. Readers of this blog will definitely be interested:
April 24th, 2013
Thomas and Michael Tessier allegedly bilked Frederick and Thaddeus Jakobiec and the estate of their mother, Beatrice Jacobiec, out of millions of dollars. One part of that scheme allegedly involved the theft of approximately $100,000 in life insurance proceeds due a trust benefiting Thaddeus. After Beatrice’s death, Thomas was rummaging through Beatrice’s items and found that a life insurance policy existed on the life of Beatrice. That policy was payable to a trust known as the Smillie Trust. So began this alleged criminal enterprise.
Thomas and Michael filed an ex parte petition to remove Frederick as trustee and install Michael as the trustee of the Smillie Trust for the benefit of Thaddeus. Nearly simultaneously, Thomas fraudulently created a second trust for Thaddeus. Through alleged fraud, forgery, and subterfuge, Thomas convinced the insurance company to pay the death benefit to the fraudulent trust rather than to the correct trust. Thaddeus sued the insurance company for breach of the insurance contract by making out the insurance proceeds check to the wrong trust thereby allowing Thomas to steal the money.
In Jakobiec v. Merrill Lynch Life Insurance Co., a New Hampshire federal court dismissed the claims against the insurance company and a federal appellate court agreed. The reasoning was that, even if the insurance company made a mistake by making out the check to a fraudulent trust, the insurance company was not the cause of the beneficiary’s loss. Because the Tessiers were hellbent on stealing the money and because they had gained control of the legitimate trust, too, they would have stolen the money even if the insurance company had made the check out to the correct trust.
You have to wonder how far this protection extends. (more…)
April 19th, 2013
We’ve looked at a lot of cases to figure out who needs to be named as a party in trust litigation. And we’ve assumed that, if a party is suing to have the trust declared invalid or is suing the trustee for breach of fiduciary duty, then all trust beneficiaries need to be joined as parties to the litigation. That may be the rule, but where there’s a rule there’s apparently an exception. In Harvill v. Harvill (link provided by Justia.com), a federal court in Tennessee gives us guidance on possible exceptions. (more…)
Form Health Care Power Of Attorney Does Not Create A Presumption Of Undue Influence For Property Transactions
April 16th, 2013
We’ve previously noted that litigation involving powers of attorney is popular right now. Powers of attorney take on particular importance in undue influence cases because they can turn the case on its head by creating a presumption of undue influence. The reason why is that a power of attorney can create a fiduciary relationship between the principal and agent.
But not all powers of attorney are created equal. In In re: Estate of Stahling, an Illinois appellate court recently answered the important question of whether a health care power of attorney creates a fiduciary relationship with respect to the execution of a deed transferring property to the agent which, as a matter of law, raises a presumption of undue influence. (more…)
April 10th, 2013
We often see trust beneficiaries sue a trustee to compel an accounting of the trust’s receipts, disbursements and assets. A court should start with the trust instrument to determine whether an accounting is required and, if so, to whom and what it should contain. That’s what an Illinois federal court did in Drewry v. Keltz.
The trust instrument there required that “[e]ach Successor Trustee shall render an account of his/her receipts and disbursements and a statement of assets to each adult vested beneficiary.” The plaintiffs were adult vested beneficiaries of the trust who had made requests for the successor trustee to provide an accounting, which the trustee did not provide. The federal court ordered the trustee to provide the plaintiffs with an accounting of his receipts and disbursements on behalf of the trust and a statement of the trust assets within 30 days of the order.
We’re interested in this opinion for two issues that weren’t central to the court’s decision.
Court Dismisses Widow’s Action For Damages Against Trustees For Allegedly Fraudulent Information Return
April 5th, 2013
Right now we are all in the peak of tax return filing season. As part of the tax return process, many tax practitioners file information returns for the entities they represent. Any person, including a corporation, partnership, individual, estate, and trust, who makes a payment (such for as rent, wages, salaries, and annuities) must file an information return with the IRS to report the payment. But what happens if a false information return is filed with the IRS?
In 1996, Congress enacted 26 U.S.C. § 7434(a), which gives victims of fraudulent filing activities a damage remedy against the perpetrators. The provision applies whenever “any person willfully files a fraudulent information return with respect to payments purported to be made to any other person.” It allows the subject of the false information return to recover from the person filing the return the greater of $5,000 or actual damages flowing “as a proximate result” of the fraudulent return including costs incurred in dealing with deficiencies resulting from the return, court costs and, in the court’s discretion, “reasonable attorneys fees.”
In Vandenheede v. Vecchio, the U.S. District Court, Eastern District of Michigan, recently granted the Defendants’ motion for summary judgment based on the fact that violations of 26 U.S.C. § 7434(a) fall on the “filer,” and not on every person involved in preparing the return. The Plaintiff, Mary C. Vandenheede (“Vandeheede”), filed suit against the co-trustees of her husband’s revocable trust for, among other things, filing a false and fraudulent tax form. The facts are as follows: (more…)