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 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…)

August 21st, 2012

We’ve taken a look at the Florida appellate courts’ seemingly endless string of cases reversing trial courts that have removed fiduciaries without notice and an opportunity to be heard.

In Kountze v. Kountze, we have yet another reminder of this basic rule, but this time in the context of removal of a trustee and with a little different twist. (more…)

July 11th, 2012

In fiduciary litigation cases, it’s common to encounter courts and practitioners who don’t really appreciate the difference between a litigant’s individual capacity and that litigant’s representative, fiduciary capacity.  In other words, the two capacities tend to get conflated.

In Beekhuis v. Morris, a Florida appellate court reminds us that there really is a difference between someone acting individually and that same person acting in a representative capacity as a fiduciary. (more…)

May 23rd, 2012

Section 737.307 of the Florida Statutes provides for a limitation of actions against a trustee in two circumstances.  The first limitations period is six-months.  The second limitations period is four years.  So, what’s the distinguishing characteristic between the two limitations periods? (more…)

February 9th, 2012

Pursuing fiduciary litigation cases in federal court can be tricky.  Not only does a plaintiff have to contend with the possibility of jurisdiction destroying defendants, but a plaintiff also has to deal with the ‘probate exception’ to federal jurisdiction.

In Downey v. Keltz, the United States District Court for the Northern District of Illinois did a succinct job of explaining that a petition for an accounting does not implicate the ‘probate exception’ and likely does not require that all trust beneficiaries be parties to the litigation.  A petition to remove a trustee, however, likely would invoke the ‘probate exception’ and would require all trust beneficiaries to be parties to that litigation.

Let’s take a look at how the Court got there. (more…)

January 10th, 2012

Trust litigation often involves many components.  If there is a dispute with a trustee, the plaintiffs often request removal of the trustee, an accounting, and damages.  As a practical matter, courts will often deal with the various requests for relief in a piecemeal fashion.  Thus, a court may enter an order removing a trustee and appointing a successor trustee many months before actually reaching a decision whether the trustee did, in fact, breach its fiduciary duties.

When these matters are addressed through separate orders, the question often becomes “can I appeal and when?”  In Guardianship & Protective Services, Inc. v. Setinsek, an Ohio Court of Appeals addressed that question under Ohio law. (more…)

October 19th, 2011

Plenty of trust instruments are set up to permit a beneficiary to act as trustee.   When the trust has more than one beneficiary, however, the testator or grantor potentially sets that trustee-beneficiary up for conflict of interest claims.  In these situations, prudent testators or grantors typically appoint a neutral co-trustee to serve with the trustee-beneficiary and require the trustee-beneficiary to take no part in self-encroachments or self-distributions.

In Faville v. Burns, the Illinois Court of Appeals considered whether a trustee-beneficiary has a conflict of interest with his co-beneficiaries of a trust.  The trial court had dismissed the co-beneficiaries’ efforts to remove the trustee-beneficiary based on a conflict of interest.  The Court of Appeals, however, reinstated the removal claim.  (more…)