Opinion ID: 2570551
Heading Depth: 1
Heading Rank: 1

Heading: analysis

Text: We begin our analysis by stating that the trial court never reached any factual issues concerning the validity of Betty's claims or whether they had been properly preserved or asserted in the Will C. Taliaferro Estate proceedings. This is not an appeal from any portion of a probate proceeding under Chapter 59 of our statutes, and our opinion must not be construed to condone, condemn, or even suggest the proper procedure to preserve and raise issues in such an action. This is a Chapter 60 action in which Betty is the plaintiff and the trusts, their trustees, and the various trust beneficiaries are the named defendants. Betty's motion raised the limited contention that she is entitled to reimbursement from the T & B Trust for the debts and expenses of Will which she voluntarily paid, and our decision is limited to resolving that question. In her first argument Betty concedes in her appellate brief that: Neither the Taliaferro and Browne Trust nor the Will C. Taliaferro Trust ... provided for the payment of decedent/grantor's last debts and expenses except for the expenses of trustor's last illness and funeral [a reference to the Will C. Trust]. She asserts that the trial court's earlier order requiring the T & B Trust to pay the federal estate taxes and Kansas inheritance taxes of Will's estate is inconsistent with the trial court's denial of her motions for reimbursement. She notes that her spousal share was not subject to taxes. She then reasons that since many of the debts and expenses she voluntarily paid lowered the overall tax by being claimed as deductions for the estate, the refusal to grant her motion for reimbursement resulted in indirectly charging her share of the estate with the taxes in direct violation of the holding of Jackson, 217 Kan. 448. The argument of the T & B Trust is more persuasive. The T & B Trust contends the rulings are not inconsistent because the T & B Trust was legally obligated to pay the taxes irrespective of the trust language, and that this was not contested or appealed, whereas Betty's motion for reimbursement and the trial court's ruling regarding the motion for reimbursement were based on the trust language. In denying Betty's motions, the trial court correctly stated that the T & B Trust document contains no language which would authorize the expenses sought to be reimbursed by Betty Taliaferro. By its language, the trust did not require or even permit payment of the personal expenses of Will Taliaferro. Any language in the T & B Trust document relating to payment of expenses, costs, fees clearly is limited to expenses of the trust. We agree with the trial court's ruling and the arguments of the T & B Trust trustee. The payment of the taxes by the T & B Trust is an issue totally separate and distinct from the claim for reimbursement. The requirements of Jackson were followed. Betty was not required to pay any part of the taxes. When she took it upon herself to pay out of her own funds certain debts and expenses purportedly attributable to her late husband and his last illness and funeral, she did so unilaterally and voluntarily, and for no reason other than her own personal sense of moral obligation. Whether the federal estate and Kansas inheritance taxes were correctly figured and whether the deductions claimed on those taxes were correctly claimed is not at issue in this appeal. That some of the items she paid for may have been claimed as deductions on the estate's federal estate taxes and Kansas inheritance taxes, causing those taxes to be lower, does not mean her share of the estate was charged with or reduced by the taxes themselves. Furthermore, the T & B Trust is not authorized or even permitted to make the payments Betty requests, and the trial court properly so held. Second, Betty asserts in her brief: The Trial Court Erred When It Ruled, As a Matter of Law, Will C. Taliaferro Could Create a Spendthrift Trust to Avoid Payment of His Lawful Debts and Expenses. Generally speaking, a spendthrift trust is a trust created to provide a fund for the maintenance of a beneficiary and at the same time to secure the fund against [the beneficiary's] improvidence or incapacity. Provisions against alienation of the trust fund by the voluntary act of the beneficiary or by his [or her] creditors are its usual incidents. In re Estate of Sowers, 1 Kan. App.2d 675, Syl. ¶ 2, 574 P.2d 224 (1977). Betty notes the general rule that one may not place his or her own property into a trust for his or her own benefit and provide that the funds shall not be subject to the claims of his or her creditors, and may not use such a trust to defeat the lawful demands of those creditors. See Herd v. Chambers, 158 Kan. 614, 622-28, 149 P.2d 583 (1944); In re Estate of Sowers, 1 Kan. App.2d 675, Syl. ¶ 7. K.S.A. 33-101 reinforces this principle in the following terms: All gifts and conveyances of goods and chattels, made in trust to the use of the person or persons making the same shall, to the full extent of both the corpus and income made in trust to such use, be void and of no effect, regardless of motive, as to all past, present or future creditors; but otherwise shall be valid and effective. (Emphasis added.) The T & B Trust does not dispute these general principles regarding a trustor's creation of a personal spendthrift trust, but takes the position they have no application to the present case because the trial court never ruled the T & B Trust was a spendthrift trust and because Betty is not a creditor of Will, his estate, or the T & B Trust. The trial court did not rule that Will could create a spendthrift trust to avoid the payment of his lawful debts and expenses. In fact, at the hearing on Betty's motion for reimbursement the trial court stated that it never understood either trust to be a spendthrift trust and it was puzzled by Betty's argument in that regard. When the trial court asked for an explanation on the matter, Betty's attorney responded: Well, I guess the point I was making was that the probate estate in this matter was insolvent. These [the assets held in the trusts] were the only assets really that the creditors of the decedent could have reached ... and that is really the point that I was trying to bring up. And I believe that creditors could have pursued these assets once Mrs. Taliaferro had disclosed to them that there were trusts in existence. Betty's argument is spurious. The trial court never ruled that the T & B Trust was a spendthrift trust, and Betty cannot show that she is a creditor of Will's estate or a creditor of the T & B Trust. In a law journal Note, Will Substitutes in Kansas, 23 Washburn L.J. 132, 150-53 (1983), circumstances are discussed where, after a settlor has transferred personal property into a trust for the settlor's own use, creditors can reach the assets of the trust pursuant to K.S.A. 33-101. Betty has failed, however, to show how the rules applicable to such cases apply to her claim. In her reply brief, Betty stated that it would be a misstatement to characterize her approach as being brought under the theory that she is a creditor, and she described the real thrust of her argument on appeal as being that she should be reimbursed because her payment of many of the debts and expenses benefitted the beneficiaries of the trust by significantly reducing the tax obligation of the estate which the T & B Trust was eventually ordered to pay. At oral argument she changed the focus of her theory and asserted she should be viewed as a creditor of the estate, yet she has still failed to demonstrate on what basis she can claim the rights of a creditor. To recover against the estate, a creditor would have to have filed a demand against the estate and have had such demand allowed, yet there has been no such showing in this case. Nor has it been argued or shown that Betty has subrogation rights to creditors whose claims were allowed or that she has any rights other than those of a volunteer. Betty's third and final argument regarding the T & B Trust returns to the language of that trust, which she seemingly earlier abandoned. She asserts her claim fell within the language of Section Ten (R) of the T & B Trust, which states: [T]he Trustee is expressly authorized, in its discretion: (R) To pay any and all expenses, costs, fees (including the Trustee's own fees), taxes, penalties or other charges and, except as otherwise expressly provided herein, to charge the same against the principal or income partly against the principal and partly against the income of the whole or any part of the trust. Section Twelve of the T & B Trust provides for the payment of reasonable compensation to the trustee for services and reimbursement of expenses and the reference in Section Ten (R) to the Trustee's own fees obviously refers to those authorized under Section Twelve. In attempting to bring her claim within the language of the trust, Betty notes the trial court's statement that it appear[ed] ... that the Taliaferro and Browne Trust permits the Trustee to pay expenses for the benefit of the Trust. (Emphasis added). Relying on the trial court's use of the words benefit of the Trust, Betty asserts that her payment of the decedent's debts and expenses that were later claimed as deductions for federal estate tax purposes benefitted the trust by lowering the estate's tax obligation which the T & B Trust was ordered to pay. She believes she should, therefore, under the clear, unambiguous language of the trust, at least be reimbursed in a sum equal to the amount of tax savings that could be attributed to the claimed deductions since that is the amount by which the T & B Trust was benefitted. The language of Section Ten (R) can only be construed to refer to the fees, costs, and expenses of the trust and not to those of Will personally. The payment of federal estate taxes and Kansas inheritance taxes by the trust was in no manner based on Section Ten (R) of the Trust. The T & B Trust's incidental benefit from the action of another cannot be equated with a debt owed or an expense incurred. Moreover, the payment of the expenses specified in Section Ten (R) is purely in the discretion of the trustee, and the trustee did not exercise his discretion in favor of Betty in this case. These are sad facts of a family in turmoil, but none of Betty's various theories of relief entitle her to reimbursement of the debts and expenses she voluntarily paid, and the trial court was correct in so ruling. Finally, Betty argues that the trial court erred by concluding that it did not have jurisdiction over the Will C. Trust. The only motions for reimbursement filed by Betty in this action were the November 1998 motion and the December 1998 amended motion, both of which, by their terms, only sought reimbursement from the T & B Trust. While the trustee and beneficiaries of the Will C. Trust were parties to this action, and although the trial court instructed Betty that she could file a motion against the Will C. Trust if she so desired, Betty did not file such a motion, and no ruling was made as to that trust's obligations to Betty, if any. The Will C. Trust is simply not involved in this appeal. Affirmed.