Opinion ID: 6536712
Heading Depth: 2
Heading Rank: 1

Heading: EFM's Petition for Instructions

Text: [¶5] On September 20, 2017, EFM filed a Petition for Instructions with the district court, requesting an instruction ... confirming that [EFM], in its capacity as trustee of the Trust, may make distributions of Trust property in further trust for the benefit of the Trust's beneficiaries, also known as 'decanting.'  It also sought the court's approval of its proposal to decant the Trust property into two separate trusts (the Decanter Trusts) as follows: (1) a parcel of the Ranch, known as the Watts property, would be placed into a yet-to-be-formed limited liability company and the interests of the company would be distributed to Edward as trustee of a new trust created for the benefit of Edward and his descendants, and (2) the remainder of the Ranch would be distributed to EFM as trustee of a new trust created for the benefit of Darla, Julie, and Julie's descendants. According to the Petition, the Watts property represented 17.2% of the Ranch and was the only section of the Ranch with cash flow potential. The portion of the Ranch being placed in Darla and Julie's Decanter Trust operated at a loss, but Darla and Julie had agreed to use their personal assets to ensure its continued operation. [¶6] EFM alleged Bruce's untimely and unexpected death caused the Trust to be inadequately funded for its intended purposes. It also claimed the Trust had reasonably maximized its income earning potential. The Trust had an oil and gas lease with Evertson Well Service, Inc., but it expired on December 31, 2016, and Evertson Well Service had declined to renew it. The Trust received a modest income from cattle ranching and the leasing of farm land, but such income was insufficient to cover its operating expenses. Moreover, EFM desire[d] to continue observing the Settlor's general intentions that the Ranch not be used for commercial hunting to generate income. 5 [¶7] EFM also averred the Trust's operating expenses are currently as reasonably efficient as they can be without causing detriment to the operation of the Ranch ....  According to the Petition, [t]o enable continued funding of its operations to date, the Trust has borrowed funds from a company that is ultimately beneficially owned by Darla Evertson, Julie Wamsley, and Julie Wamsley's descendants. While the Trust could repay some of the indebtedness currently outstanding, it would not be able to fully repay future indebtedness and, as a result, the company was not willing to continue to lend to the Trust. EFM further alleged that although it had elected not to be compensated for its services as Trustee, it would begin charging for its services if the proposed decanting was not permitted. [¶8] EFM identified three purposes for the proposed decanting: (1) allowing Trust property to continue to be enjoyed by the Settlor's intended beneficiaries with favorable transfer tax and asset protection treatment for as long as possible; 6 (2) solving the current uneconomic and impossible circumstances of the Trust due to it having been unintentionally underfunded by the Settlor[;] and (3) allowing the Settlor's intended beneficiaries to enjoy trust assets in an amicable manner by separating beneficiaries who do not get along with each other. (Footnote added.) [¶9] In support of its authority to decant, EFM pointed to Paragraph 2.1.2 of the Trust Agreement: During the Settlor's Wife's life, the Trustee shall distribute to one or more of the Settlor's Wife and the Settlor's descendants as much of the net income and principal of the trust as the Trustee may at any time and from time to time determine, in such amounts or proportions as the Trustee may from time to time select, for any purpose. EFM also claimed the proposed decanting was authorized under Wyoming law, in the best interests of the beneficiaries and consistent with the intent of the Settlor. [¶10] Darla and Julie agreed with the Petition's allegations and confirmed their willingness and ability to secure funds necessary to pay for the ownership and operation of the trust assets that will be in their decanter trust. Edward, however, objected to the Petition, claiming the proposed decanting (1) contradicted Bruce's intent and the Trust Agreement, (2) was not permitted under Wyoming law, (3) constituted a breach of EFM's duty of impartiality, and (4) was based on a flawed appraisal. 7 He sought a full accounting of the Trust's assets to evaluate the proposed decanting.