Opinion ID: 1322238
Heading Depth: 2
Heading Rank: 2

Heading: Application of S.C.Code Ann. 62-7-112 and Seifert

Text: Appellant contends the probate court erred in applying § 62-7-112 and Seifert to the Dreher Trust. We agree. The probate court found the co-trustees paid income to Decedent; filed tax returns; and invested, monitored, and reported the assets of the Dreher Trust. The probate court also found § 62-7-112 specifically prohibited invalidation of the Dreher Trust because Decedent retained substantial control of the Dreher Trust until his death. Based on these findings, the probate court concluded the Dreher Trust was not illusory. In Seifert, the inter vivos trust was revocable, and the settlor had extensive powers over the trust. The trustee's role was custodial, and the trustee was prohibited from exercising any powers of sale, investment, or reinvestment during the settlor's lifetime without the settlor's written notice or certification of the settlor's incompetence. 305 S.C. at 355-56, 409 S.E.2d at 338. In the instant case, Decedent retained the powers to revoke the trust, to withdraw all or any part of the principal, to name a substitute or successor co-trustee, and to revoke the co-trustee requirement; he was a co-trustee and could sell, manage, invest, and reinvest trust property; [3] and as a trust beneficiary, he received income during his lifetime. Moreover, any benefit Appellant received from non-probate assets of Decedent's estate are irrelevant to the determination of whether the Dreher Trust is illusory because, as the surviving spouse, Appellant had a statutory right to take an elective share of one-third of the decedent's probate estate. [4] See also Gallagher v. Evert, 353 S.C. 59, 67, 577 S.E.2d 217, 221 (Ct.App.2002) (Any benefits the surviving spouse may obtain through non-probate assets of the deceased spouse's estate are immaterial to the surviving spouse's right to seek an elective share of the [probate] estate.). We conclude Decedent retained substantial control because he retained such extensive powers over the assets of the trust that he ha[d] until [his] death the same rights in the assets after creation of the trust that he had before its creation. Seifert, 305 S.C. at 357 n. 2, 409 S.E.2d at 339 n. 2; [5] see also id. at 355-56, 409 S.E.2d at 338 (referencing the illusory transfer test to determine whether a revocable inter vivos trust was illusory) (citing Moore v. Jones, 44 N.C.App. 578, 261 S.E.2d 289, 292 (1980) (only that where, as here, the settlor retains up to the instant of his death powers over the trust assets so extensive that in a real sense he had the same rights therein after creating the trust as he had before its creation, such assets should be considered part of his estate insofar as the statutory rights granted the settlor's surviving spouse . . . .) and Newman v. Dore, 275 N.Y. 371, 9 N.E.2d 966, 969 (1937) (describing the illusory transfer test as the test of whether the [settlor] has in good faith divested himself of ownership of his property or has made an illusory transfer. `The `good faith' required of the . . . settlor in making a valid disposition of his property during life does not refer to the purpose to affect his wife but to the intent to divest himself of the ownership of the property. . . .') (internal citation omitted)). We find the Dreher Trust is illusory and thus invalid for elective share purposes, but remains valid for all other purposes.