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…)

May 16th, 2012

When settling a fiduciary litigation case, it’s a fairly common practice to agree to the creation of a reserve fund from which to pay various estate or trust related expenses that will be incurred in the future.  Recent litigation out of Florida reminds us that when creating a reserve fund, you will want to be specific about what expenses can be paid from the reserve. (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…)

September 12th, 2011

A lot of family trust disputes get resolved either through pre-litigation settlement agreements or pre-trial settlement.  Unfortunately, poor drafting of a settlement agreement often defeats the purpose of the original settlement by leading to litigation concerning the settlement agreement itself.  In Purcella v. Purcella, the Wyoming Supreme Court reminds us that if you are going to enter an agreement altering the terms of an original trust, you need to be explicit that you are actually altering the terms of the original trust. (more…)