Opinion ID: 1892003
Heading Depth: 1
Heading Rank: 2

Heading: funding of the trust

Text: The Vice-Chancellor held that Mrs. Law's will required that the Trust's corpus should have been funded with $225,000 instead of the $204,610, that Mr. Law turned over to the Trustees after he deducted the estate administrative expenses, taxes and funeral expenses from the $225,000. [5] The Trustees urge that the Court of Chancery erred in its determination that they bore the responsibility of ensuring that the funding of the Trust was correct because they claim that it was the duty of Mr. Law as executor to distribute the correct assets from Ms. Law's estate to the Trust and because Mrs. Law's will as a matter of law directed that administration expenses be deducted from the amount to be placed in the Trust. Mrs. Law's will provides in part: Item Second: All inheritance, estate and succession taxes (including interest and penalties thereon) payable by reason of my death, shall be paid out of and be charged generally against the principal of my residuary estate without reimbursement from any person. . . Item Fifth: I give, devise and bequeath. . .all the rest, residue and remainder of my estate. . .in the following manner: (A) If the time of my death occurs in the calendar year 1982, and the net value of my assets is less than $225,000.00, then all of such assets are to be placed in trust, as hereinafter set forth. If my assets total more than $225,000.00, then any such excess over and above $225,000.00, I hereby give, devise and bequeath unto my husband, William A. Law. . . Mrs. Law died in 1982 and the estate assets exceeded $225,000. The Trustees argue that the will provides that Mrs. Law intended that the costs of administration be deducted from the $225,000, as was done by Mr. Law. To support their contention, the Trustees rely on this Court's decision in Dutra De Amorim v. Norment. [6] Norment holds that a seminal rule of trust law is that the trustor's intent controls the interpretation of the instrument in the light of the circumstances surrounding its creation. [7] The Trustees are incorrect in their reliance on Norment, however, because although Mrs. Law's primary concern was the support of Mr. Law, her intent that the Trust be funded with $225,000 is clear from the language of her will that specifically provides that the Trust be established with $225,000, as the Court of Chancery correctly determined. [8] The Trustees also allege that it was not their responsibility to ensure that the Trust was established with $225,000 because 12 Del. C. § 2319 provides that Mr. Law, as the executor, bore the responsibility of ensuring adequate funding of the trust. 12 Del. C. § 2319 states in part: Whenever an executor or administrator makes an assignment of any investment or transfers or delivers any personal property of any testator or intestate to a guardian or trustee as payment in whole or in part of a specific legacy or of a distributive share, such guardian or trustee shall give to the executor or administrator, for the purpose of accounting by the executor or administrator in the settlement of the estate only, a receipt therefor at the valuation fixed in the appraisement of the estate of such testator or intestate. . . This statute does not relieve the Trustees of their fiduciary duty to ensure that the Trust was adequately funded. [9] In order to have met their fiduciary duty, the Trustees should have questioned why the Trust was funded with less than $225,000 as mandated by Mrs. Law's will. The damages for this breach should be $6,794.33, representing the Remaindermen's actual one-third interest in the Trust, and not the entire $20,382. .