March 13th, 2013

It usually takes a lot to convince a judge to terminate a trust.  The grantor wanted assets held in trust for a reason.  Therefore, if you want to go against the grantor’s intent and terminate a trust, then you better give the court a very good reason why termination is appropriate.  And, there may very well be good reasons to terminate a trust.  That’s why many states have a statutory method for terminating or modifying a trust.

In Kristoff v. Centier Bank, Amy Jean Kristoff tried to use Indiana‘s statute to terminate or modify a trust created by her mother.  The Court of Appeals of Indiana found that Amy did not satisfy her burden under the statute because Amy could not demonstrate the existence of circumstances not anticipated by the settlor of the trust.

What were the unanticipated circumstances Amy was claiming warranted termination of the trust? (more…)

March 6th, 2013

Many fiduciary litigation concepts, like undue influence, lack of capacity, or breach of fiduciary duty, can be difficult for the lay people of a jury to understand.  For lay people, sometimes the actual law doesn’t always match up to what they may think is right or wrong.  So, when a case actually ends up going to the jury, the temptation for the lawyers litigating it may be to try to drive some last points home through the jury charges by repeating the law several times.

In Burkhalter v. Burkhalter, however, after a jury returned a verdict vindicating an alleged undue influencer, the Court of Appeals of Iowa granted a new trial on the claims because of a faulty jury charge regarding undue influence.  The appellate court found that the charge was either unduly repetitive and therefore faulty or through its unnecessary repetition gave undue emphasis to otherwise correct statements of law.

Let’s check out the faulty jury charge on undue influence. (more…)

February 25th, 2013

There are reasons why trust beneficiaries may want to waive or disclaim their interests in a trust.  But, if multiple class members intend or agree to collectively waive their interests, they may want to make sure that each class member actually waives his or her interest.  Otherwise, as we recently saw in the Georgia Supreme Court’s decision in White v. Call, the holdouts may wind up with everything. (more…)

February 20th, 2013

When it comes to so-called ‘rejected’ adopted children, many of us are most familiar with the outrage in 2010 when a Tennessee woman sent her adopted son back to Russia on a one-way flight after claiming the 7-year-old had bouts of violence.  But what about the inheritance rights of these adopted children?  Do they have any?

We previously looked at the inheritance rights of biological children adopted out of a family.  Today we’ll turn to the inheritance rights of adopted children who are adopted out of a family in the Matter of Svenningsen, a case of first impression in New York. (more…)

February 18th, 2013

We’ve previously looked at the question of who needs to be joined as a party to trust litigation.  In blogging about a petition for accounting in Illinois in which all trust beneficiaries were not named as parties, we said:

Failure to Join Necessary Parties.  Not all of the contingent trust beneficiaries were parties to the lawsuit.  If they were all joined to the lawsuit, the federal court would lack jurisdiction to hear the case because there would not have been diversity jurisdiction insofar as the suit wouldn’t have been between citizens of different states.  The Court, therefore, had to determine whether all trust beneficiaries were required to be parties to a lawsuit for an accounting.  By the very nature of the claim for an accounting, the other trust beneficiaries were not necessary parties.  First, complete relief could be accorded among the plaintiffs and the trustee without joinder of the other beneficiaries.  Second, the other beneficiaries’ ability to protect their interests would not have been impaired by their absence from the case.

We intentionally distinguished that situation from one where trust beneficiaries are seeking to remove a trustee.  In that type of case, all beneficiaries likely would need to be joined as parties because removal of a trustee affects everyone.

What about deciding whether a no-contest clause in a trust was triggered?  Do all trust beneficiaries need to be joined as parties to that type of litigation?

In Graves v. Vitu, a federal court in Virginia weighed in on that question when it tossed from federal court the latest chapter in multi-generational litigation between the descendants of Colonel Theodore Clay Northcott, founder of the famous Luray Caverns tourist attraction. (more…)

February 12th, 2013

We know that very few cases actually end up making it to trial.  Some reports put the number of cases that settle or that are dismissed before trial around 97 percent.  Many of those that settle likely settled as a result of court-ordered mediation.  As fiduciaries find themselves increasingly the target of litigation, here’s a word of caution out of Florida about the scope of releases in settlement agreements and an admonition about knowing exactly what it is you’ve agreed to.

The trustee of the Julian Marie Breslow Revocable Trust and Pompano Masonry Corporation participated in a court-ordered mediation with Joseph Anastasi, they reached a settlement, and they executed a mediation agreement.  As part of that settlement, the Breslow Trust and Pompano agreed that their release of claims against Anastasi extended to Anastasi’s wife and children.

After the settlement was finalized, the trustee of the Breslow Trust refused to sign the release of claims.  What was the trustee’s reason? (more…)

February 7th, 2013

When trust beneficiaries fight, the trustee usually ends up stuck in the middle.  The trustee is often then forced into taking a position in the dispute.  Not surprisingly, judges tend to be very interested in what the trustee thinks, especially if the trustee is a corporate fiduciary.  Chances are that the trustee’s position in the litigation is aligned with one set of beneficiaries but is adverse to the positions being advocated by another set of beneficiaries.  So, how far can or should a trustee force the issue of upholding the settlor’s intent as expressed in the trust instrument?  In Shelton v. Tamposi, the Supreme Court of New Hampshire gives us some thoughts under the Uniform Trust Code in a case involving an in terrorem clause, and the court suggests that there is a bright line the trustee shouldn’t cross. (more…)

February 4th, 2013

There is a surprising but growing split of authority on the extent of fiduciary duties a trustee owes to beneficiaries of a revocable trust other than the settlor.  Remarkably, state appellate courts are dealing with these issues for the first time now.  We previously took a look at this issue when a Missouri appellate court ruled in In re Stephen M. Gunther Revocable Living Trust that “[b]ecause the trustee owed no duty to the beneficiaries prior to the settlor’s death, they are not entitled to an accounting of trust transactions prior to that date.”  In ruling this way, Missouri joined other states, such as Louisiana, in reaching this conclusion.  We also looked at an Arizona appellate court apply Michigan law to reach the same conclusion.  Seemed to make sense.

But, in late 2012, a closely divided California Supreme Court ruled in In re Estate of Giraldin that after a settlor’s death, remainder beneficiaries of a revocable trust have standing to sue the trustee for breach of fiduciary duty to the settlor occurring while the trust was revocable “to the extent that violation harmed the beneficiaries interests.”  In ruling this way, California joined other states, such as Florida, in reaching this conclusion.  The gist for these states is that once the settlor dies, the beneficiaries succeed to the settlor’s interest in the trust and a trustee shouldn’t get away with wrongdoing it might have concealed during the settlor’s lifetime.

So, now in In the Matter of Trust #T-1 of Mary Faye Trimble, Judith R. Cunningham, Trustee, Iowa has weighed in for the first time.  What side did it come down on? (more…)

January 29th, 2013

Last year we delved into some of the problems associated with trust termination.  And we learned that some jurisdictions, like Maine, abolished the presumption that a spendthrift provision is a material purpose of a trust.  Therefore, in states like Maine, a spendthrift clause may not necessarily prohibit the termination of a trust.

Today, we turn to Arkansas, a state that – unlike Maine - has codified the common law presumption that “[a] spendthrift provision in the terms of the trust is presumed to constitute a material purpose of the trust.”  Ark. Code Ann. § 28-73-411(c).  But, that’s not our focus today.  Today, we want to look at what type of situation might permit termination of a trust when a statute permits trust termination where “the trust’s purposes, as expressed in or implied by the circumstances surrounding the trust, as a result of circumstances not foreseen to the settlor are not effectively being fulfilled or are frustrated.”  Ark Code Ann. § 28-69-401(a).  In other words, what is an unforeseen circumstance that might warrant trust termination?

In Buckalew v. Arvest Trust Company, N.A., Kathy Buckalew argued that changes in circumstance between the establishment of a trust and the settlor’s death warranted termination of the trust.  What were these alleged changed or unforeseen circumstances? (more…)

January 24th, 2013

The role of experts in breach of fiduciary duty cases is an emerging and unsettled area of law.  Of course there will always be questions about whether an expert is qualified to offer an opinion.  But there are additional quirks when a state codifies the standard of care required of a trustee thereby creating a statutory standard of care.  Does a plaintiff need expert testimony establishing that the trustee breached the statutory standard of care?  Perhaps.  But does that testimony necessarily result in an expert impermissibly testifying on the ultimate issue of liability?  Again, perhaps.

It’s questions like these that cause us to pay close attention when one of the rare ‘expert opinion’ decisions gets issued in a breach of fiduciary duty case.  Just this week in Sierra v. Williamson (2013 WL 228333), the United States District Court for the Western District of Kentucky gave us some insight on expert testimony in a trust case involving allegations of undue influence and breach of fiduciary duty.  So, what clues did the federal court give us on how to qualify – or disqualify – experts in these cases?

(more…)