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How Far Can A Grantor Go In Eliminating The Duty To Account?

December 1, 2016

Authors

Luke Lantta

How Far Can A Grantor Go In Eliminating The Duty To Account?

December 1, 2016

by: Luke Lantta

Trusts are often used to transfer wealth privately without the messiness of a public estate administration.  That financial privacy can get blown, however, when trusts become the subjects of very public litigation.  In open court and in publicly available filings, dollar figures, assets, and dirty laundry can get thrown about for anyone to see.  This is especially true in trust accounting actions, which dig into the financials: income, expenses, assets, investment performance, and so on.  In Estate of Fuller, however, the Court of Appeals of Mississippi indicated that a grantor may be able to shroud a trust in greater secrecy through restrictive language in the trust instrument.

The trust at issue was a private trust that provided that the trustee would not “be required to account to any

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Differentiating Between Trustee-Level Acts And Corporate-Level Acts

February 11, 2015

Authors

Luke Lantta

Differentiating Between Trustee-Level Acts And Corporate-Level Acts

February 11, 2015

by: Luke Lantta

When trustees are put in control of family entities held in trust, it may pay to clearly differentiate the capacity in which the trustee takes an action.  Is the trustee taking a trustee-level action or is the trustee taking a corporate/partnership/entity-level action?

When we last looked at Rollins v. Rollins, the Georgia Supreme Court was holding that where, under the terms of a trust, a trustee is put in control of a corporate entity in which the trust owns a minority interest, the trustee should be held to a corporate level fiduciary standard when it comes to his or her corporate duties or actions.  The Georgia Supreme Court then remanded the case to the Georgia Court of Appeals for further consideration in light of that standard.

In the latest round of Rollins v. Rollins, the Georgia Court

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Representative Versus Individual Capacity: It Can Make A Difference

January 28, 2015

Authors

Luke Lantta

Representative Versus Individual Capacity: It Can Make A Difference

January 28, 2015

by: Luke Lantta

There is a difference between a person acting in her individual capacity and acting in her representative capacity.  We have seen that this difference may matter when signing documents.  And we have seen that it may also matter when filing a lawsuit that involves trust property.  Now, in Kozinski v. Stabenow, a Florida appellate court tells us that it may also matter when seeking to surcharge a trustee and personal representative.

In this case, after the trustor died, the trustee of a trust created by the trustor filed a notice of trust.  The trustee was also the representative of the trustor’s estate and filed a separate petition for administration of the estate.  The two cases were consolidated and a petition was filed by two beneficiaries of the will and trust to

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If You Think You Can Represent Yourself as an Executor, Think Again!

June 12, 2014

Authors

dkasakove

If You Think You Can Represent Yourself as an Executor, Think Again!

June 12, 2014

by: dkasakove

In a recent case before the New York Surrogate’s Court, an executor, the only beneficiary under a will, tried to represent the estate pro se.  Big mistake!  The Court, in Matter of Van Patten, held that the executor was improperly practicing law without a license.

The background is as follows: Decedent Philip Van Patten was an income beneficiary of a trust under the will of Charles A. Van Patten.  Carole Van Patten was the executor of the estate of Philip.  After the trustee filed an accounting for the trust under Charles’ will, Carol, as executor of Philip’s estate, filed pro se objections to the trustee’s accounting.  The trustee moved to dismiss the objections asserting that the executor lacked legal capacity to sue, arguing that Carol could not represent the interests of the estate pro se.

The court agreed and noted that while

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Distributable Net Income Is Not Synonymous With Net Income Owed To Income Beneficiaries

April 1, 2014

Authors

Tiffany McKenzie

Distributable Net Income Is Not Synonymous With Net Income Owed To Income Beneficiaries

April 1, 2014

by: Tiffany McKenzie

It is uncommon to see modern trusts that require distribution of all income but preclude distribution of any principal to a beneficiary.  Since the characterization of income and principal can be subject to multiple interpretations, precluding any distribution of principal often can lead to legal disputes.  In Favour v. Favour (not for publication), the Arizona Court of Appeals disagreed with an Arizona superior court’s ruling that “the income beneficiary of [a] Martial Trust is entitled only to the annual ‘distributable net income (“DNI”)… reported on the federal income tax return, and no more than that.”  The Will also specified that it was intended to qualify as “qualified terminable interest property” (“QTIP”) for which an election could be made under Section 2056(b)(7).

The decedent, Mr. Favour, left a testamentary trust for the benefit of his wife, Susan.  Susan was named as trustee, and the Will directed

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What’s The Correct Fiduciary Standard When A Trustee Controls Family Entities Held By The Trust?

March 27, 2014

Authors

Luke Lantta

What’s The Correct Fiduciary Standard When A Trustee Controls Family Entities Held By The Trust?

March 27, 2014

by: Luke Lantta

As part of wealth planning, trustees are frequently put in charge of corporate entities in which the trust owns an interest.  When it comes to the trustee’s corporate duties and actions with respect to the corporate entity, what is the appropriate standard of care?  Is it a corporate level fiduciary standard or is it the heightened trustee level fiduciary standard? Jurisdictions are split on this issue.  The Georgia Supreme Court in the case of Rollins v. Rollins, is the latest state to weigh in on the issue.  In reaching its opinion, the Georgia Supreme Court resolved some issues, set some thresholds, and left open a few questions.

To understand the Court’s opinion, we must first understand the structure of the trusts and family entities involved.  O. Wayne Rollins established ten irrevocable trusts, the Rollins Children’s Trust (“RCT”), and

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Probate Exception Did Not Apply To Claims Relating To Trust Funded By A Pour Over Will

March 18, 2014

Authors

Luke Lantta

Probate Exception Did Not Apply To Claims Relating To Trust Funded By A Pour Over Will

March 18, 2014

by: Luke Lantta

The probate exception to federal jurisdiction provides that a federal court may not probate a will, administer an estate, or entertain an action that would interfere with pending probate proceedings in state court or with the control of property in the custody of the state court.

After the U.S. Supreme Court’s decision in Marshall v. Marshall, federal courts have generally applied this test to determine whether a case fits within the probate exception: whether a plaintiff seeks an in personam judgment against a defendant, as opposed to the probate or annulment of a will or other relief seeking to reach a res in the custody of a state court, and whether sound policy considerations, specifically, the special proficiency of state courts with respect to the issues presented by a case, militate in favor of extending the probate exception to

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Court Could Not Impose Constructive Trust On Assets Transferred From Trust To Limited Partnership

January 17, 2014

Authors

Luke Lantta

Court Could Not Impose Constructive Trust On Assets Transferred From Trust To Limited Partnership

January 17, 2014

by: Luke Lantta

Whether a particular court has jurisdiction to hear a trust dispute can become increasingly more complicated as trustees, beneficiaries, and assets move to different states.  So, when a lawsuit is filed, a threshold question should be whether the lawsuit was filed in a court with jurisdiction over the parties and the property.

The Nevada Supreme Court’s decision in In re Aboud Inter Vivos Trust highlighted some of these jurisdictional issues when the Court considered whether a district court could impose a constructive trust over assets transferred from a trust to a limited partnership and then from the limited partnership to a corporation.

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Is The Trustee Of A Revocable Trust Answerable To The Remainder Beneficiaries? Ever?

April 29, 2013

Authors

Luke Lantta

Is The Trustee Of A Revocable Trust Answerable To The Remainder Beneficiaries? Ever?

April 29, 2013

by: Luke Lantta

If we were to identify hot topics in fiduciary litigation during 2012 and 2013, this one would be scorching: what duties do trustees owe the remainder beneficiaries of revocable trusts?  We’ve explored the topic in some detail here, here, and yet again here.

Last week, over at Bryan Cave‘s Private Client Group blog, TrustBryanCave, Kathy Sherby and Stephanie Moll wrapped up a three part series on this topic.  Readers of this blog will definitely be interested:

Part 1 takes a look at Pennell v. Alverson, which we previously looked at here.

Part 2 explores the ongoing saga of In re Estate of Giraldin, which we briefly reviewed here.

Part 3 wraps up the discussion with Read More

Federal Court Orders Trustee To Provide A Trust Accounting

April 10, 2013

Authors

Luke Lantta

Federal Court Orders Trustee To Provide A Trust Accounting

April 10, 2013

by: Luke Lantta

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

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