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.

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March 19th, 2013

Time to get into the weeds on the scope of a trustee‘s powers.  There are basically two sources of power for a trustee – the trust instrument and state law.  Where those two intersect, overlap, conflict, or diverge is where you will likely find the bulk of fiduciary litigation about trustee powers.

In Rendall v. Black, the Court of Appeals of Kentucky dug into both the trust instrument and Kentucky trust law to reverse a local circuit court’s ruling that declared a 1994 deed void ab initio based upon the language of a trust agreement.  In doing so, the appellate court got to differentiate between the trustee’s power to distribute income versus the trustee’s power to sell off the corpus of the trust.  And we saw a brief – and curious – appearance of the trust pursuit rule. (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 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…)

October 5th, 2012

When updating a particular estate planning document, it’s a good idea to double check that all estate planning documents reflect the testator or grantor’s desired changes.  So, for example, if you update a will, then it’s good practice to double check that you update any corresponding or affected language in a related trust document.  And, if you’re in the habit of using cover pages for trust documents, it’s best to make sure that the cover page actually reflects the text of the trust instrument.

In In re Eleanor V. Mirek Trust (unpublished), Joanne Kloss contended that Eleanor V. Mirek intended that she be the successor trustee of Mirek’s revocable trust upon Mirek’s death.  The Michigan probate court that heard the case, however, found that Mirek intended for her nephew, Warren Kriskywicz, to serve as the successor trustee.

To reach this decision, the probate court had to sort through inconsistent and conflicting language in Mirek’s estate planning documents. (more…)

July 25th, 2012

A trustee‘s intent is an awfully important thing, but for some reason it often gets forgotten or ignored by courts, lawyers, and litigants.  An area in which the trustee’s intent and the four corners of the trust instrument may be most at risk is when the parties in trust litigation start hammering out a settlement agreement.  What deference is given the trust instrument when the parties settle trust litigation?

In In re the Matter of the Frank J. Rekucki, Sr. Revocable Trust under agreement dated September 8, 1997 (unpublished), the Court of Appeals of Minnesota answered that question under Minnesota law: a lot. (more…)

July 23rd, 2012

Trustees aren’t always one-stop shops.  In some states, trustees can delegate certain investment decisions.  Also, most trust instruments allow trustees to hire people to help them perform certain activities, such as lawyers and accountants.  Occasionally, an aggrieved party sues these people hired to help the trustee.  In these circumstances, the question becomes what duty was owed by the person hired by the trustee.  That question can often be answered by figuring out what that person was hired to do for the trustee.

In Taylor v. Barberino, the Appellate Court of Connecticut recently considered that question as applied to an accounting firm.  A successor trustee sued an accounting firm that was engaged by the trusts to provide accounting services on the grounds that the accounting firm failed to accurately maintain records of the operation of the trusts and failed to properly account for the financial activities of the trusts.  The trial court granted summary judgment to the accounting firm and the appellate court agreed.  Here’s why . . . (more…)

February 15th, 2012

This week, let’s take a look at another case from Florida.  You see a lot of trust instruments that ‘require’ a “corporate co-trustee.”  There are a lot of good reasons why the grantor may have wanted a corporate co-trustee to serve with a family member, friend, or other co-trustee.

Then again, as time goes by, a corporate co-trustee may no longer make a lot of sense.  It could be that the trust has been substantially administered or that the corpus is so small that a corporate trustee’s fee schedule just doesn’t work.  That’s when the beneficiaries and trustees usually get together and go to court to have the trust modified to permit the corporate trustee’s resignation and have the trust modified either to allow a single trustee or to allow an individual to serve as co-trustee.  These things are often done by consent order, which the judge is happy to sign to move another case off his or her docket.

But what happens if the trust instrument specifically prohibits judicial modification? (more…)