Source: http://www.fiduciarylawblog.com/category/will-trust-construction/page/2
Timestamp: 2017-08-21 02:30:03
Document Index: 208601038

Matched Legal Cases: ['§ 15', '§ 15', '§ 15', '§ 15', '§ 15', '§ 15', '§ 15', '§ 15']

Will & Trust Construction | Fiduciary Solutions blog | Page 2
This entry was posted in Administration of Estate, Administration of Trust, Conservator, Fiduciary Litigation, Guardian, Legislation, Life Insurance, Personal Representative, Powers of Attorney, Trustee, Will & Trust Construction on October 7, 2014 by admin.
Trying to Avoid Trusts and Estates Litigation Arising from Divorce
Divorce is often a catalyst for trusts and estates litigation, particularly when the possibility of divorce was not contemplated in an estate plan.
One of the most common scenarios that causes litigation is an irrevocable trust in which the spouse is a trustee and/or beneficiary, but there is no language addressing what happens if the couple gets divorced. This situation is often further complicated if the irrevocable trust is part of a larger wealth transfer plan involving several generations. A dispute over the rights of a former spouse might be avoided if divorce is expressly addressed in the trust document.
The Colorado Probate Code does not address what happens with an irrevocable trust upon divorce, but it does address the effect of divorce on many aspects of estate planning, such as powers of attorney, funeral instructions, wills and revocable trusts.
Colo. Rev. Stat. § 15-11-804 is a detailed statute regarding the effect of divorce on probate and nonprobate transfers. Generally, it provides that any revocable disposition, fiduciary appointment or power of appointment granted to the former spouse or the former spouse’s relatives prior to divorce is revoked. The exceptions include a court order, separation agreement, or governing instrument that expressly states otherwise.
In addition, Colo. Rev. Stat. § 15-11-804 provides that spouses’ interests in property as joint tenants with rights of survivorship are automatically severed and they become tenants in common upon divorce.
Unless expressly provided otherwise, divorce, annulment and legal separation automatically revoke a delegation to a spouse to direct the disposition of the declarant’s last remains. Colo. Rev. Stat. § 15-19-107(4). The same is true for an agent under a medical durable power of attorney. Colo. Rev. Stat. § 15-14-506(5)(c). A spouse’s power as agent under a financial power of attorney is severed at the time a dissolution of marriage action is filed. Colo. Rev. Stat. § 15-14-710.
The provisions of the probate code addressing the effect of divorce should be reviewed carefully, because the definitions and the points of revocation or severance vary depending on the particular statute. Also, most automatic revocations in the code can be overridden by specific language in the governing document. There may be unique circumstances where a couple wants to avoid the automatic revocation provided by the code and in those situations, the governing document should state so clearly.
To the extent that the possibility of divorce can be addressed, particularly when drafting irrevocable trusts, it could help mitigate the litigation that can result if a couple decides to separate down the road.
This entry was posted in Fiduciary Litigation, Will & Trust Construction on May 20, 2014 by admin.
Using a Power of Appointment to Enable the Decedent’s Intent To Be Upheld (even if it might violate public policy)
Individuals have a right to give their property to whomever they see fit. However there are certain limitations that the law over time has imposed, typically based upon a public policy theory. One of those is safeguarding the institution of marriage. But isn’t testamentary freedom also a public policy? One interesting case where these two public policies clashed, but a power of appointment allowed the decedent’s intent to be upheld, was In Re Estate of Feinberg, 919 N.E. 2nd 888 (Ill. 2009). Max Feinberg was an Illinois dentist who was very tied to his Jewish heritage and wanted it preserved in his family. His trust contained a beneficiary restriction clause which read as follows::
3.5(e) A descendant of mine, other than a child of mine who marries outside the Jewish faith (unless the spouse of such descendant has converted or converts within one year of the marriage to the Jewish faith) and his or her descendants shall be deemed to be deceased for all purposes of this instrument as of the date of such marriage.
Max’s plan was to give 50% of his estate to his grandchildren in lifetime trusts, but to disinherit any of them who did not marry in the Jewish faith (or whose spouse did not convert to the Jewish faith.) When Max died, none of the grandchildren were married. Would this condition have been void as against public policy because it was a condition subsequent and attempted to restrain marriage? I think that is a distinct possibility. However, the Illinois Supreme Court did not have to address that issue because Max’s wife, Erla, altered his plan in a significant way by exercising a power of appointment give to her by Max in his document. By the time Erla died, four of the five grandchildren had married outside of the Jewish faith. Only one grandson qualified under the beneficiary restriction clause. Erla’s exercise of the power of appointment provided that upon her death, instead of a lifetime trust, $250,000 was to be given to each of her grandchildren who at the time of her death had complied with Max’s beneficiary restriction clause. If a grandchild had not complied, their share was given to their parent instead.
When one of the grandchildren sued, both the trial court and the appellate court held the beneficiary restriction clause was invalid as against public policy and held that the grandchildren who had married outside of the Jewish faith would still receive their interests. The Illinois Supreme Court reversed. The Court stated that it didn’t have to deal with the issue of whether or not Max’s beneficiary restriction clause was a condition subsequent and was trying to control what the children did or didn’t do in the future. The Court only had to deal with Erla’s exercise of the power of appointment which was based upon the marital status of the grandchildren at her death —- either they qualified or they didn’t qualify.
In the last paragraph of the opinion the Court stated, “It is impossible to determine whether Erla’s distribution plan was the product of her own wisdom, good legal advice, or mere fortuity.” The Court went on to hold that “because no grandchild had a vested interest in the trust assets and because the distribution plan adopted by Erla has no prospective application, we hold that the beneficiary restriction clause does not violate public policy.” In essence, Erla’s exercise of the power of appointment in the way she did allowed the beneficiary restriction clause to be upheld.
This entry was posted in Will & Trust Construction on April 14, 2014 by admin.
From Wags to Riches: Estate Planning for Your Pets
While Trouble, Leona Helmsley’s dog who was left a $12 million trust fund in the late hotelier’s will, may be the most famous four-legged multi-millionaire, Colorado canines can also benefit from trusts created by their owners. An owner concerned about what will happen to his pets after his death or incapacity may, under Colorado law, provide for his pets by trust or will.
Historically, trusts for the benefit of animals were deemed invalid; however, they are now valid in a majority of states. Section 15-11-901 of the Colorado Probate Code specifically recognizes the validity of a trust created for the benefit of the settlor’s pets. This section states that “a trust for the care of designated domestic or pet animals and the animals’ offspring in gestation [at the time the animal becomes a present beneficiary of the trust] is valid.” Consistent with other sections of the Colorado Probate Code, this section places primary importance on the settlor’s intent and provides that “[a] governing instrument shall be liberally construed to bring the transfer within this subsection…, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor’s intent.”
One of the issues that used to militate against the validity of pet trusts (other than the fact that the beneficiaries were not human) was the rule against perpetuities. The concepts of lives in being and measuring lives were difficult to apply to a trust whose main focus was animal lives. For example, should a dog who outlived the settlor by a number of years count as a measuring life for determining the trust termination date? Section 15-11-901 addresses this problem by providing both that pet trusts are an exception to statutory and common law rules against perpetuities and that, unless the trust provides for an earlier termination, the trust shall terminate when there is no living animal covered by the trust.
The statue also provides guidance on the administration of the trust. For example, § 15-11-901(3)(b) provides for distribution of the trust upon termination, and § 15-11-901(3)(a) cautions that except for (1) reasonable trustee fees, (2) expenses of administration, or (3) as expressly provided in the trust, no portion of principal or income may be used for anything other than the benefit of the animal. Section 15-11-901(3) also addresses the designation of trustees and other persons to enforce the trust. In these ways, the Colorado Probate Code treats pet trusts very similarly to more traditional trusts and suggests that, if a dispute were to arise regarding a pet trust, standard principles and rules governing trusts would apply.
In addition to using trusts, a pet owner may also provide for the care of his pets in a will. Although there is no section similar to 15-11-901 addressing bequests to and of pets in a will, there is also no provision of the Colorado Probate Code that suggests such bequests would be invalid.
In addition to being part of the estate planning process, pets can also have a part in estate litigation. For example, in connection with a will contest, our office has used the inclusion of provisions for the care of the decedent’s pets as evidence that the decedent intended a holographic will to be his will. We have also litigated issues about the ownership of animals in formal estate proceedings.
Although there are no reported decisions on § 15-11-901, pet trusts have been the subject of estate proceedings in other jurisdictions. The executors of Leona Helmsley’s estate, for instance, petitioned the court to reduce the size of Trouble’s trust fund. New York law governing pet trusts allows the court to reduce the amount of principal in a pet trust if it is determined that the amount substantially exceeds what is required for the care of the pet. What is considered excessive can certainly vary, as Trouble’s annual expenses were estimated to be around $200,000. Not to worry though, the New York court left $2 million in Trouble’s trust, ensuring that he could continue to live in luxury and would not spend the rest of his days as a paw-per.
This entry was posted in Administration of Estate, Administration of Trust, Testamentary Intent, Will & Trust Construction on March 31, 2014 by admin.