October 15, 2014
Authored by: Luke Lantta
If you want to challenge a trust’s validity, you can’t also accept a distribution from that trust. You have to choose. This is known as the doctrine of election. In fact, as the Michigan Court of Appeals recently determined in In re William W. Weigle Revocable Trust (unpublished), in Michigan, once you’ve filed suit, you can’t then try to give it back.
In this case, William W. Weigle executed a trust amendment in 2007 under which the petitioners – who were Weigle’s neighbors – were to receive a one-half interest in Weigle’s house and 72% of the balance of the trust assets while respondent – who was also Weigle’s neighbor – was to receive the remaining 19% of the trust’s assets. Weigle later amended his trust to grant petitioners all interest in the house and respondent 100% of the remaining trust assets. Upon Weigle’s death, the co-trustees of the trust executed a deed of trust conveying the house to the petitioners and the deed was recorded.
Petitioners later sued to compel a transfer of the property they were to receive under the 2007 trust amendment because they claimed that the 2007 trust amendment was made pursuant to an oral contract with Weigle not to revoke that trust provision and the later amendments constituted a breach of that contract. Petitioners also apparently raised arguments about fraud, undue influence, and a failure to read trust documents before signing them. Respondent sought to dismiss petitioners’ claims based on the doctrine of election because petitioners received and accepted benefits from the trust and did not tender back the distributions. At that point, petitioners tried to tender back the property.
The attempt to tender back did not work because, under Michigan law, “[i]f a party wishes to challenge the validity of the trust after accepting the distribution, then the party must withdraw the acceptance by tendering back the distribution before initiating the action.” The court also rejected the petitioners’ creative claim that they hadn’t availed themselves of the later amendments because they received the house under what they claimed was the valid 2007 trust instrument. The reason for rejecting this argument was based on the maxim that a trust instrument includes both the terms of the trust and any amendments and must be read and construed as a whole.