August 22, 2013
Authored by: Steve Dawson
An upcoming vacation, particularly one that involves flying, often encourages individuals to revisit their existing estate planning—or perhaps even to put a new estate plan into place—to ensure that their estate will be disposed of as they wish if they do not return safely. The worst case scenario people worry about rarely happens. People return home, carry on with their lives, and their updated estate planning documents continue to be operative. Yet there is a long history of cases in Missouri (going back to at least 1872) dealing with “conditional” wills and trusts. A conditional will or trust is one that states that the document has no effect unless a specified condition, such as the failure to return safely from a trip, occurs.
In the most recent case addressing a conditional trust, Rouner v. Wise, the Missouri Court of Appeals for the Western District considered whether a decedent’s handwritten amendment to his revocable trust was intended to impose a condition precedent to the effectiveness of the amendment. The Amendment provided, “[i]f you are reading this it means that Jo & I have met our demise either going to or coming back from Phoenix.”
The decedent, K.R. Conklin, executed a three-page amendment to his revocable trust while he was en route to the airport for a trip to Phoenix with his wife, Jo. The amendment added his two stepchildren (Jo’s biological children) as beneficiaries of the trust, in addition to his two biological children, who were already beneficiaries of the trust. The amendment read:
Am writing this in the car on the way to KC, MO so excuse the penmanship.
If you are reading this it means that Jo & I have met our demise either going to or coming back from Phoenix.
The [T]rust has not been updated for several years so I will express my desire on how I wish everything to be handled.
The amendment then went on to describe how the trust property should be divided among his two biological children and his two stepchildren.
The decedent returned safely from Phoenix, but died unexpectedly years later, and the trust amendment was discovered in a file folder with the Decedent’s life insurance policy information. The two stepchildren filed a petition seeking a judgment from the court declaring them beneficiaries of the trust and compelling the decedent’s two biological children, who were also the trustees of the trust, to distribute the trust’s assets in accordance with the terms of the trust amendment.
The trial court determined that the trust amendment was conditional and that the decedent intended the amendment to be operative only if the decedent and his wife did not return from Phoenix. In reaching this conclusion, the court allowed extrinsic evidence to be admitted to prove the decedent’s intent. The trial court admitted evidence from the decedent’s family that the decedent only drafted the amendment to placate his wife’s fears about the trip and that he only saved the amendment thereafter because he was a “pack rat.” Generally, extrinsic evidence is only admitted to construe a will or trust if the document is ambiguous on its face.
The Court of Appeals reversed, following the maxim that “courts should ‘hesitate to construe language of purpose or occasion for making a will as establishing a condition precedent to the very effectiveness of the will’.” According to the Court of Appeals, the language about the decedent meeting his demise on his Phoenix trip was written to express the decedent’s motivation and occasion for drafting the amendment, not to impose a condition precedent to the validity of the amendment.
The Court of Appeals further held that it was inappropriate for the trial court to admit extrinsic evidence of the decedent’s intent, holding that extrinsic evidence is admissible to construe a will or trust only when it is intended to clarify explicit designations in the document (such as who was the intended beneficiary or what piece of property was being described). Extrinsic evidence, the court said, is not admissible when it is introduced for the sole purpose of determining whether the decedent intended the document to be conditional or absolute.
The other point at issue on appeal was whether the decedent’s biological children violated the trust’s no-contest clause by litigating the validity of the trust amendment. The no-contest clause stated that any person who contested the validity of the trust would lose his or her interest in the trust. The stepchildren argued that the biological children violated the no contest clause. The court succinctly resolved that argument by pointing out that it was the stepchildren who initiated the litigation and that the biological children, as trustees of the trust, had a “duty to represent the trust in all proceedings, actions, suits and claims against it.” Therefore, the Court of Appeals ruled, the participation of the biological children in the litigation could not have violated the no contest clause because such participation was required of them in fulfilling their duties to the trust as trustees.
Therefore, in sum, the handwritten amendment was held effective and the stepchildren, in addition to the biological children, were able to inherit from the decedent as beneficiaries of his trust.