"Living Trust" has 2 Settlors, one settlor dies but leaves specific
directions within the trust to name her daughter to position of
"co-trustee" with all the rights the deceased had. Now, the surviving
settlor wants to break the Trust of his own volition, disregarding the
beneficieries rights, by-passing the new "co-trustee" and making a new
Trust with all the proceeds from the original trust with new and
un-related beneficieries... can this be done? |
Clarification of Question by
dianelyn-ga
on
15 May 2004 17:02 PDT
Can this be done without the consent of the new co-trustee and the
beneficieries? There is nothing stated within the trust that money
and realestate belong to one person, it was established as a Living
Family Trust with both settlors being equal.
|
Request for Question Clarification by
pafalafa-ga
on
15 May 2004 17:18 PDT
I really think this is a question that only a legal professional in
the jurisdiction of the trust could answer.
Everything depends on specific details:
--what does the original trust have to say (if anything) about the
death or incapcity of one of the settlors?
--what do you mean when you say the settlor left "specific directions
within the trust"? How were these directions communicated, and to
whom? Why do you suppose they were "within" the trust? Were they
entirely consistent with the stipulations of the original trust?
--And why, if you don't mind my asking, are you asking us...? What
has your own lawyer had to say on this?
If you care to let us know any more information, it may be possible to
point you to some pertinent sources of information on this issue that
might prove helpful to you. I doubt anyone other than a lawyer in
your jurisdiction can provide a definitive answer to your question,
however.
Let us know how you would like us to proceed.
And best of luck in a difficult situation.
pafalafa-ga
|
Request for Question Clarification by
richard-ga
on
15 May 2004 21:18 PDT
Hello dianelyn:
It would be helpful to know the governing law of the trust - - usually
there's a clause in the document that tells what that is. Please let
us know if there is such a provision, or if there isn't, then the home
state of the settlors.
In addition, you'll need to type into the Clarification of Question
box a whole lot of the actual words of the trust. Usually there are
two or three pages of substantive provisions, with the rest being the
(usually standard) powers of trustees, etc. If you will type as much
of the substantive provisions as you can [but leave out peoples' names
and other identifying information], plus the paragraphs that talk
about revoking or amending the trust (they're usually not in the first
few pages), I should be able to answer your question.
Thanks
Richard-ga
|
Clarification of Question by
dianelyn-ga
on
16 May 2004 00:09 PDT
First of all, this Trust was done in the state of Arkansas 8 years ago
by my Mother and Step-father. In Section 5, "SUCCESSOR TRUSTEE" it
reads: upon the death of step-father, if he is first to die, then
Mother shall remain as sole trustee, and any and all powers enumerated
herein shall be exeercisable by the surviving Trustee alone. Upon the
death of "mother", if she is the first to die then "step-father" and
"mother's daughter" shall serve as Co-Trustees. In the event that
"mother's daughter" is unable or unwilling to serve in such capacity
with "step-father" then "mother's son" shall serve as Co-Trustee. All
powers of the Trustee shall be exercised jointly. Upon the death of
"step-father" & "mother", or upon the death of one or the incompetency
of the other, then "mother's daughter" is hereby appointed as
Successor Trustee of this Trust. If "mother's daughter" is unwilling
or unable to serve in such capacity, then "mother's son" is appointed
as Successor Trustee. However, in Section 8 "RIGHTS RETAINED BY
SETTLOR" During the lifetime of both the Settlors herein, and upon the
mutual consent of both Settlors, or if one Settlor is deceased or
incompetent, then upon the consent of the surviving and competent
Settlor, the following rights and powers are hereby reserved: a) to
revoke this instrument entirely and receive from the Trustee all of
the trust property.
b) To change the Trustee designated herein. c) To change the
beneficiary, the respective share or shares, and the plan of
distribution. d) To withdraw from the operation of this trust any or
all property held therein. e) To alter or amend this Trust Agreement
in any other respect. f) Nothing contained in this paragraph 8 shall
be deemed as authority for, nor shall it permit the amendment or
alteration of any of the provisions contained hereing regarding the
Family Trust "A", except by "Mother" as hereinabove set out. The
portion of "A" that concerns us states "The marital homeowned by the
Trust Estate shall be kept and maintained by the Trust and
"step-father" shall have a right to live in such home for a period
ending with his death or two years from the date of "Mother",
whichever shall occur first. Upon the death of "step-father" or two
years from the date of the death of "Mother", then such real estate
shall be sold in a commercially reasonable manner and 1/2 of the
proceeds distributed to "step-father" and 1/2 to the children of
"Mother", one, two, & three, equally, share and share alike, per
stirpes.
The rest of the trust holds cash, stocks etc.. designated to be used
for the care of either of the surviving settlors then any remainer to
be distributed equally to the three surviving children of "mother".
Now, "step-father" wants the whole of the Trust disolved, all
beneficiaries canceled and all proceeds of the estate to go to various
charities of his choice, with no regard to "mother" wishes after 38
years of marriage. The reason I'm asking you for this answer is
because I am not the designated new trustee, my sister is. She is
trying to contact the attorney who wrote the trust...I know she will
do her best to protect all of us, including my step-father who seems
to be losing it. I just want this information for my own curiosity.
We all want my step-father to have the best of care and are willing to
help him in anyway. We have no idea why he is doing this.. he is 84
years old and is in good physical health. My siblings were with him
all last week in Arkansas, doing grounds work, blacktopping his
driveway, scouring the house, preparing frozen meals for him. He
never indicated he was doing anything with the trust, my sister just
got a letter from an attorney requesting that she sign over a grant
for the house and property and revoke the trust, she said she could
not with out the consent of the other beneficiaries (myself and
brother).. then she called this attorney and in the course of the
conversation he said she (and us) had no rights to the trust or
property and "step-father" could do as he wished. My sister then
asked him "then why do you need my signature at all"... at this he
became very angry and said he would get back to us. I guess my
further question would be ... Why have a trust at all if as soon as
your eyes are closed someone can change it to suit themselves. So,
can you give me any answers? The deed to the "marital home" is
written for "tennants in common", not "joint tennancy" so it was clear
that my mother's heirs would be entitled to 1/2 the proceeds from that
property.
|
Hello and thank you for your question.
In this case the most significant provision of the trust is the one that provides:
"if one Settlor is deceased ..., then upon the consent of the
surviving and competent Settlor, the following rights and powers are
hereby reserved: a) to revoke this instrument entirely and receive
from the Trustee all of the trust property...."
So unless either of the arguments that I discuss below are good enough
to suport a different result, the likely result is that step-father
has the right to require daughter, as trustee, to sign over all the
trust property to him.
What are those arguments?
First of all, if step-father is not competent, then he does not
qualify to make the demand. But from what you say in your question, I
do not think this is worth pursuing. The first step in having
somebody declared incompetent is to have his personal physician sign
an affidavit to that effect. Here, since step-father seems to know
what he wants, and in the context of this being a disagreement over
money, I do not think it's worth trying. And even if step-father is
incompetent, he would then have a guardian/conservator who would
probably make the same demand for the funds. You might then make a
technical argument that the trust requires that step-father be
competent (so that if he isn't, nobody can exercise his power to
revoke on his behalf) but a court of equity might not see it that way.
Let me know (by Request for Clarification of Answer) if you want to
hear more about what it would take to have step-father declared
incompetent.
If step-father is competent, there is still one argument that the
daughters could make against step-father now being able to exercise
the power to revoke that the trust gives him: Some courts have
construed joint wills and joint revocable trusts as including an
inherent agreement by the parties not to change the terms of their
wills (trusts) after the first spouse's death.
The problem with this argument is that the words of the trust seem
exactly opposite to your being able to argue that step-father when he
signed the trust was contractually bound not to exercise the power to
revoke that the words of the trust give him.
I have found a case, in the State of Utah, that closely matches your
facts. In that case the surviving spouse ultimately was allowed to
revoke the trust. The surviving spouse won the case in the trial
court, lost the case on appeal in the Utah Court of Appeals, and
finally won the case in the Utah Supreme Court:
"In Matter of West Est., [948 P.2d 351 (Utah 1997),] the Utah Supreme
Court found no contractual obligation for a surviving spouse not to
revoke a joint revocable trust, in light of the express language of
the trust instrument. In that case, the children of a husband and wife
contested the ability of the husband to revoke a joint revocable trust
after the wife's death. The children were contingent beneficiaries of
the trust, which held the marital residence. The children sought a
declaration that the husband could not revoke the trust by
quitclaiming the residence to himself and his second wife following
the first wife's death. The trial court held that the trust had been
validly revoked; the court of appeals reversed. The Utah Supreme
Court, however, held that the trust authorized the settlors, as joint
trustees, to sell or otherwise dispose of the residence and thereby
revoke the trust; and that, upon the first wife's death, the husband
succeeded to all powers previously belonging to the couple as joint
trustees, including the power to dispose of the residence. The Supreme
Court of Utah then held that the husband had not breached any
fiduciary duty as sole trustee when he transferred the residence to
himself and his second wife."
The above is quoted from BNA Portfolio 860: Revocable Inter Vivos
Trusts. The link below is to the Table of Contents; the material
itself is only available to subscribers to the service.
http://www.bnatax.com/tm/docs/860_TOC.doc
In the Utah case there was no successor trustee, which in my view made
it easier for the children to argue that the surviving spouse was
breaching a fiduciary duty when he took the trust property for
himself. In your case there is a successor trustee (daughter) and as
a fiduciary she is required to fulfill the requirements of the trust,
including it seems to me the provision that gives step-father the
right to demand that she hand over the property to him.
Based on the above, I conclude that stepfather probably can compel
daughter to deed the house and convey the other trust property to him.
As the disclaimer below notes, this Answer is not legal advice, which
Google Answers cannot provide. Since daughter is named in the trust
as successor trustee, she has a legal obligation to do the right
thing. I stongly suggest that daughter obtain the advice of an
attorney before she signs or refuses to sign the deed. I would be
interested to hear what her attorney thinks of this answer.
Search terms used:
arkansas statutes
"joint revocable trust" title
Thank you again for bringing us your question. If you find any of it
unclear, please request clarification. I would appreciate it if you
would hold off on rating my answer until I have a chance to reply.
Sincerely,
Google Answers Researcher
Richard-ga |
Request for Answer Clarification by
dianelyn-ga
on
16 May 2004 08:18 PDT
Thank you for your answer up to this point, however, and I think it's
my fault for not being clear enough, but this Trust was done in a
"Part A" and "Part B", with all of "Part A" pertaining to my mother's
personal funds and her 1/2 of the house. Her 1/2 of the property is
part of "Part A". The funds from "Part A" have all been distributed
per her wishes and the wording of the Trust which is why she had the
all the property deeds changed from "joint tennancy" to "tennants in
common" to insure we would receive our share of her property. We had
already realized that our step-father would probably retain control of
the funds and there is nothing we can do about that... but we are
concerned about the house and property. This part was very clear...
it is to be sold and split. I will let you know what the attorney
says.
|
Clarification of Answer by
richard-ga
on
16 May 2004 16:55 PDT
Hello again.
You'll have to help me out a bit more to understand the facts.
Can you tell me how much of this is correct? Maybe you can comment on
the following by the numbers.
1. In this joint revocable trust, your mother was the source of the
funds in trust "A" and step-father was the source of the funds in
trust "B". I guess the trust has a provision that says that upon the
death of either of them, whatever mother contributed is allocated to
trust A and whatever stepfather contributed is allocated to trust B
2. Since they previously owned their home as joint tenants, they
signed a new deed as tenants-in-common, and before Mom's death they
deeded both halves of the home to Mom and step-father as trustees of
the joint revocable trust.
3. Trust A was paid out to Mom's children after her death as she intended.
4. Since the house hasn't been sold yet, I guess the house is still
titled to Mom and step-father as trustees without specifying the A and
B shares.
5. But now the lawyer who drafted the trust has asked daughter, as
successor trustee to Mom, to sign an instrument revoking [trust A?]
[trust B?]
6. And you want to make sure that when the home is sold, Mom's
children as beneficiaries of trust A still get half the proceeds.
Most importantly, I need you to help me determine whether the
revocation language that I quoted in my answer
["if one Settlor is deceased ..., then upon the consent of the
surviving and competent Settlor, the following rights and powers are
hereby reserved: a) to revoke this instrument entirely and receive
from the Trustee all of the trust property...."]
applies to trust A as well as to trust B.
Because if it does, I am concerned that step-father can take what's
left of trust A for himself (the half of the house), contrary to what
Mom intended and contrary to what deeding the house from joint tenancy
to tenants-in-common was intended to accomplish.
I look forward to hearing from you.
Richard-ga
|
Request for Answer Clarification by
dianelyn-ga
on
16 May 2004 18:48 PDT
Hello Richard, first of all, the attorney who wrote the original trust
is not the same one who step-father is consulting with now and who is
trying to write a new trust. Seems he went to the original attorney
to revoke the trust and was not satisfied or did not like his answers
so he went to another one and this is the one who is handling things
for step-father, while we are trying to retain the original lawyer.
In the "Declaration of Trust" section it states.."However, certain
amounts shall be held separately as "Family Trust A" and shall be
separately managed, invested and distributed according to the separate
provisions concerning such assets as shall be hereinafter set out.
Then under part 1. ADDITIONS: That any person shall be allowed either
now or at any time hereafter, while this trust is in existence, to
make additions thereto subject only to the consent of the Trustee.
With the exception of the assets to be held as "Family Trust A", all
of the assets of the trust may be co-mingled and treated as part of a
single trust. Then in Section 4: We reserve the right, pursuant to
Section 4 or Act 814 of the Acts of the General Assembly of the State
of Arkansas for 1979(section 28-25-107, Arkansas Code of 1987
Annotated), to make disposition of tangible personal property by
attaching or associating with this Trust subsequent to its execution a
written dated statement list signe by us or in our handwriting
designating the legatees of items of tangible personal property. Then
Section 6 DISTRIBUTION: The trustees shall pay all of the net income
of this trust to the settlors during their lives or the life of the
said survivor thereof no less frequently than annually. In addition,
the Trustees shall distribute in cash or in kind such portions of the
principal of the trust estate as, in the Trustees' sole discretion, is
believed to be needed or desirable for the support and general welfare
of each of the Settlors herein. The Trustees are authorized to make
such distributions directly to either of the Settlors, without the
Trustees being liable to see to the application thereof. The
provisions of this paragraph 6 are subject to the separate provisions
for distribution of the "Family Trust A".
Thank you for giving this so much time and going into detail,
whereever possible I have typed directly from the trust so all
writings of that nature are correct per this trust. Also, in Part 7
DEATH OF A TRUSTEE: Section a) Certain assets owned by Mother shall be
held and distinguished as "Family Trust A". These assets shall be in
the sole exclusive authority of "Mother" and upon her death,
incompetency or inability to serve as such Trustee over such trust
assets then "mother's daughter" is appointed as successor trustee.
These assets shall be segregated from all other trust assets. Upon
the death of "Mother", whether she is the first or last to die of the
Settlors herein, then the assets held as "Family Trust A", after
payment therefrom for proportional share of any and all taxes or other
expenses then due from the trust itself, the "Family Trust A" bearing
a proportional share based upon that ration to which the assets of
"Family Trust A" are in relation to the entirety of the assets of the
"Family Trust", shall be distributed to the children of "Mother", One,
Two and Three, share and share alike, per stirpes.
Hopefully this will give you enough information to answer this the
best that you can. I do understand this is not an answer that can be
considered legal advice but it will give me a pretty good idea as to
where we stand in this matter. Thank you, dianelyn
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Clarification of Answer by
richard-ga
on
17 May 2004 05:51 PDT
I'm satisfied that because the language
"Upon the death of "Mother", whether she is the first or last to die of the
Settlors herein, then the assets held as "Family Trust A", after
payment therefrom for proportional share of any and all taxes or other
expenses then due from the trust itself, the "Family Trust A" bearing
a proportional share based upon that ration to which the assets of
"Family Trust A" are in relation to the entirety of the assets of the
"Family Trust", shall be distributed to the children of "Mother", One,
Two and Three, share and share alike, per stirpes."
is effective upon Mother's death, step-father's power otherwise to
revoke or amend the trust cannot block Mother's children from
receiving all of the Family Trust A property.
So if Mother's half of the residence is part of Family Trust A, you
should have no problems getting half the sale proceeds paid to the
children when it is sold, no matter what step-father does with his
power of revocation.
Is there any concern that Mother's half of the residence is not being
held in Family Trust A? Does either the trust or the deed allocate
her half of the residence to Family Trust A? If that's not an issue,
you shouldn't have any problems.
-R
|
Request for Answer Clarification by
dianelyn-ga
on
17 May 2004 07:42 PDT
Hello Richard, I think we're finally getting to solving this problem,
we're not sure if 1/2 of the marital home is held in part "A" since
the reading of the Trust says: "The marital home owned by the Trust
Estate shall be kept and maintained by the Trust and "step-father"
shall have a right to live in such home for a period ending with his
death or two years from the date of the death of "mother" whichever
shall occur first. Upon the death of "step-father" or two years from
the date of the death of "mother", then such real estate shall be sold
in a commercially reasonable manner and proceeds divided 1/2 to
"father" and 1/2 to "mother's" children, one, two and three share and
share alike. Also, per the bank used for this trust, there does not
seem to be a written "Part A"... which seems strange to us, that all
is spelled out and contained in the document that I have that just
"refers" to Part A... would there have to be a separate "Part A"
document? If so, I sure hope the original attorney kept a copy
because the new attorney "step-father" has retained just does not give
straight forward answers to us because he is NOT working for us.
However, within the only conversation my sister had with this man he
stated "step-father" can do as he likes with the property", at which
point my sister said "then why do you need my signature"... he then
got angry and said "because you won't sign". This all seems strange
to us. The above portion starting with "the marital home" is the only
referance to the house within the trust which leads me to believe
there is a "Part A" out there somewhere... is this enough info or do
you think there is a separate written "Part A".... dianelyn
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Clarification of Answer by
richard-ga
on
17 May 2004 08:34 PDT
I think the outcome of this is going to depend on what you can learn
from the attorney who drafted the trust and who did the deed from the
joint tenancy to tenants-in-common.
If you can get the attorney who drafted the trust and deed to concede
that the reason for splitting the joint tenancy was so that the
children could get half the proceeds (once the two-year free-use
period was up), then you should be able to get the attorney also to
call step-father's new attorney and get both sides to agree to make it
so.
Should the other side fail to so agree, and if you have trouble
enforcing the outcome because of the lack of a list of Trust A
property, or lack of clarity in the deed, or the ambiguity in the
trust, don't forget that the fault may be with the attorney who
drafted the trust and deed. After all, that attorney in preparing the
joint trust was representing both Mother and step-father, and it was
that attorney's professional obligation to get it right.
So my prediction is, the attorney who drafted the trust and deed will
realize that if this doesn't work out as intended, that attorney may
find himself (herself) being sued by Mother's children for
professional negligence. And that realization will give that attorney
a powerful incentive to get the other side to agree to split the
proceeds.
-R
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