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WHAT CAN YOUR SPOUSE REACH IN A DIVORCE?

WHAT CAN YOUR SPOUSE REACH IN A DIVORCE?

August 15, 2016

Authored by: Stacie J. Rottenstreich and Edward Peck

 

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In the recent decision, Pfannenstiehl v. Pfannenstiehl, the Massachusetts Judicial Supreme Court overruled the appeals court decision and concluded that assets held in a discretionary trust created by a third party, where the husband is but one potential beneficiary of the trust, is not a marital asset to be divided on divorce.

Filing Trust Modification As Public Record Started Statute Of Limitations

December 23, 2015

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Fiduciaries should always be thinking of ways to get the statute of limitations started.  Why have a claim hanging over your head for many years, when you can take actions that shorten the time in which a claim may be brought against you?  Typically, we think of getting that time running in terms of sending regular account statements to the trust beneficiaries.  In Domino v. Braswell, the Court of Appeals of Mississippi got us thinking about another way to start the clock running:  by publicly recording documents.

A grantor, the trustees, and the beneficiaries of a trust modified the trust to correct a clerical error.  The trust modification was filed as a public record in 1997.  After the grantor died, in 2013, a complaint was filed challenging the modification.  In Mississippi there is a ten-year statute of limitations for

How Property Was Titled Did Not Control Disposition Of Asset

December 9, 2015

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A deed transfers a lake cottage to a revocable living trust.  Title to the cottage is still in the name of that trust when the grantors die.  The cottage gets distributed according to the terms of that trust, right?  According to the Wisconsin Court of Appeals in Simon v. Sheedy, maybe not.  It depends whether someone can show that the grantors wanted the asset disposed of in another way.

Patrick and Margaret Sheedy created a revocable living trust in 1995.  They deeded their lake cottage along with some other properties to that trust.  Under the terms of the 1995 trust, the cottage would essentially end up being jointly owned by the Sheedys’ children.  In 2004, Patrick and Margaret created another revocable trust, the terms of which were different from the 1995 trust.  In particular, the cottage was to be distributed to only one of the

Failure To Fulfill Trust Requirements As Grounds For Trust Termination

November 11, 2015

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Trust instruments occasionally permit the trustees – sometimes with or without the beneficiaries’ consent – to terminate the trust early under certain circumstances.  Why continue a trust or be forced to go into court when, for example, its purpose has been fulfilled?  The Elaine Radlick-Trupp Revocable Trust gave the trustees broad authority to terminate the trust.  The trustees could discontinue the trust when they determined discontinuance to be justified, when it was not economically sound to continue, or when they determined that termination was in the best interests of the beneficiaries because of unforeseen circumstances.  In the Michigan case of Trupp v. Naughton (unpublished), several of the co-trustees of the trust may have inadvertently triggered the termination provision through their actions.

The trust contained two real properties and we will focus on one – the cottage.  Three of Elaine’s children were beneficiaries

Calling Captain Obvious?

Calling Captain Obvious?

November 5, 2015

Authored by: Kathy Sherby and Stephanie Moll

 

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With some minor exceptions, the facts are the same in PLR 201525002& PLR 201525003. In these PLRs, the Grantor transferred funds to an irrevocable trust for the Grantor’s own benefit and the benefit of several charities. In each case, the trust was created in a state other than the state of residence of the Grantor. In addition to the Trustee, each trust had an Investment Advisor, a Distribution Advisor, a Charity Distribution Advisor and a Trust Protector, none of whom were trust beneficiaries, except that the Charity Distribution Advisor was the Grantor’s spouse who was a potential appointee.

The Distribution Advisor had the power to direct the Trustee as to whether to make Quarterly Distributions, Support Distributions and Special Contingent Distributions to the Grantor, and also had the power to direct the

Federal Courts Don’t Want To Hear Your Domestic Disputes Involving Trusts

October 29, 2015

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There may be good strategic reasons to get a trust litigation case into federal court, especially if you’re the trustee.  But, just because you meet the diversity jurisdiction requirements to get the case into federal court doesn’t mean the federal court will hear the case.  The court may still find that an exception to otherwise perfectly good diversity jurisdiction exists.  While we more regularly see federal courts invoke the probate exception to diversity jurisdiction in fiduciary litigation cases, in McCavey v. McCavey-Barnett (unpublished), a federal appellate court affirmed a Georgia district court’s decision to not hear a trust dispute based on the domestic relations exception to diversity jurisdiction.

The case that the federal court declined to hear involved allegations concerning an inter vivos family trust.  A husband and wife deeded a house to a trust of which they were co-trustees.  They transferred that

When Can A Trust Be Reformed To Add Remainder Beneficiaries?

August 26, 2015

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We’ve looked at a lot of cases where courts have permitted trust reformation or modification.  In many of these cases, trusts had been modified to avoid unintended or adverse tax consequences, to fix a scrivener’s error, or to tweak some administrative provision.  A Florida appellate court’s ruling in Megiel-Rollo v. Megiel causes us to add another potential circumstance to that list: adding remainder beneficiaries.  Adding beneficiaries gets to the core of a trust’s dispositive provisions, so let’s turn briefly to the unique circumstances underlying this decision.

The grantor created a revocable trust naming herself as trustee and beneficiary during her life.  Upon her death, the grantor’s assets were to be “divided between the Beneficiaries as tenants in common in proportion to their respective interests as set forth in the [S]chedule of [B]eneficiaries.”  The term “Beneficiaries” was also a defined

Limits Of Exculpatory Clauses In Trusts

August 12, 2015

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Many trustors want to give their trustees wide berth to administer the trust.  In a lot of cases that makes sense because the trustee does not need someone second guessing every discretionary act taken during the life of a trust.  One way a trustor may try to give a trustee room in administering the trust is by including an exculpatory clause in the trust that relieves the trustee from liability for actions that might otherwise be considered a breach of duty.  Of course, trustees appreciate these kind of clauses.  Some jurisdictions defer to these clauses; some do not.  In Rafert v. Meyer, the Supreme Court of Nebraska invalidated a provision in a trust that provided that the trustee had no duty to pay the insurance premiums on 3 insurance policies that constituted the corpus of the trust, had no duty to notify the

Could Trust Protector Amend Procedure For Removing Himself?

July 2, 2015

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We have looked at a number of chapters of the Wellin trust disputes in South Carolina and how they are shaping trust protector law.  A recent district court opinion in one of the cases, McDevitt v. Wellin, digs a little deeper into the authority of the trust protector, namely if the trust protector had the authority to amend the procedure for his own removal.  Not surprisingly, the opinion turned on the language used by the trustor in the trust when describing the trust protector’s powers.

The trust protector purported to amend the trust and to change the procedure for his own removal.  It was argued that the amendment was invalid because, through the amendment, the trust protector was increasing his own power and this increase in power was impermissible under the trust instrument.  The court turned to two

Trust Reformation Was Not A Remedy For Failing To Complete An Estate Plan

June 24, 2015

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With several recent cases in which Massachusetts courts have permitted trust modification, we might have started to think that trusts would be liberally reformed in Massachusetts.  The Appeals Court of Massachusetts’ decision in Lesanto v. Lesanto (Rule 1:28 decision), however, reminds us that certain requirements must be met to reform a trust.

In October 2005, Paul Lesanto executed a will and the Paul Lesanto 2005 Revocable Trust (“First 2005 Trust”).  The bulk of Lesanto’s estate would pour over into the First 2005 Trust.  In 2010, however, Lesanto executed a new trust document that retained the name “The Paul Lesanto 2005 Revocable Trust” (“Second 2005 Trust”), but specifically provided that “[t]he Grantor wishes to establish a Trust which may receive property which the Grantor may transfer to it.  The Grantor hereby revokes all prior Trusts.”  (Emphasis in original.)   The Second 2005 Trust had different

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