{"id":378,"date":"2010-10-10T21:53:10","date_gmt":"2010-10-11T04:53:10","guid":{"rendered":"http:\/\/fiduciarydutiesblog.com\/?p=378"},"modified":"2010-10-10T21:53:10","modified_gmt":"2010-10-11T04:53:10","slug":"weinberger-v-morris-%e2%80%93-distribution-is-not-what-was-expected-from-trust-agreement","status":"publish","type":"post","link":"https:\/\/fresnolawyerblog.com\/?p=378","title":{"rendered":"Weinberger v. Morris \u2013 Distribution is Not What Was Expected From Trust Agreement"},"content":{"rendered":"

Here\u2019s a recent case in which the result cannot be what the decedent intended.\u00a0 As a starting point, let\u2019s discuss the law of wills.<\/p>\n

When a distribution is made by will (or by intestate succession), the gift is effected at the time of death.\u00a0 Absent a disclaimer, the recipient and his or her heirs are entitled to the property.\u00a0 If the recipient dies before the transfer is completed from the estate, his heirs take the property when the transfer is subsequently finished.<\/p>\n

Most of us would have expected the same result with an estate planning trust.\u00a0 If a gift to a child made by a trust takes effect at the death of the parent, we would expect that the gift became \u201cpermanent\u201d if the child survived the parent, even if the final distribution was delayed.<\/p>\n

Alas, things are never as settled or certain with a trust agreement.\u00a0 In Weinberger v. Morris<\/strong> (Sept. 24, 2010) 2010 WL 3720812, 2010 Daily Journal D.A.R. 15,073, the child survived the parent, but died before final distribution from the trust.\u00a0 The court held that the property passed to a different family member (not the child\u2019s heirs) based on a slanted reading of the trust agreement.\u00a0 Here is the court\u2019s analysis.<\/p>\n

\u201cDuring her lifetime, Mrs. Weinberger had two children, Sheila and Robert . . . On October 12, 1996, Mrs. Weinberger executed a declaration of trust [ ].\u00a0 On the same date, Mrs. Weinberger executed a quitclaim deed transferring her Atoll Avenue property to the Trust.\u201d<\/p>\n

Stop here.\u00a0 This meant that Mrs. Weinberger wanted the Atoll Avenue property to be distributed in accordance with the trust agreement.\u00a0 What did the trust say?<\/p>\n

\u201cThe Trust provided that after Mrs. Weinberger’s death . . . all trust assets, save the personal effects which Mrs. Weinberger requested distributed in separate written instructions, were to go to Sheila<\/strong>.\u201d<\/p>\n

\u201cArticle 5.2 of the Trust instrument provided that, if Sheila died prior to receiving final distribution, the undistributed principal and income was to go to Davis.\u00a0 Article 5.2 further provided that, if all of the named beneficiaries died prior to final distribution of the Trust estate, its remainder was to go to the heirs of the trustees.\u201d<\/p>\n

Most of us would conclude that daughter Sheila received the property if she survived her mother, which she did.\u00a0 \u201cMrs. Weinberger died in May 1997.\u00a0 On December 22, 1997, Sheila recorded an Affidavit Death of Trustee\/Trustor.\u201d<\/p>\n

Sheila almost certainly believed the Affidavit of Death was sufficient to complete the distribution.\u00a0 Here is the critical fact that caused the distribution to bypass Sheila.\u00a0 “After recording the affidavit of Mrs. Weinberger’s death as trustee\/trustor of the Trust, Sheila never executed, delivered or recorded \u2013 in her role as successor trustee of the Trust \u2013 any documents to transfer the Atoll Avenue property out of the Trust and to herself as the beneficiary of 100 percent of the Trust estate.<\/strong>\u201d<\/p>\n

So what, you ask?\u00a0 Why do Sheila\u2019s heirs lose out on the inheritance?\u00a0 \u201cSheila died in September 2002 . . .\u00a0 In November 2005, Davis recorded an Affidavit \u2013 Death of Trustee disclosing that Sheila had died.\u00a0 At the same time, Davis, as Successor Trustee, executed a quitclaim deed transferring the Atoll Avenue property out of the Trust, and to himself. Davis recorded the quitclaim deed in December 2005.\u201d<\/p>\n

\"China\"<\/a><\/p>\n

\u201cRobert contend[ed that] Davis never acquired any right, title or interest in the assets held by the Trust.\u00a0 More specifically, Robert argue[d] that the assets owned by the Trust irrevocably vested in Sheila on the death of Sue Weinberger.\u00a0 Robert contend[ed] that he [was] entitled \u2013 as Sheila’s sole heir \u2013 to the assets which were once held by the Trust [because the] Trust did not exist after the death of Sue Weinberger and certainly not after Sheila Weinberger’s recording of her Affidavit Death of Trustor\/Trustee on December 22, 1997.\u201d<\/p>\n

On appeal, the court rejected this argument.\u00a0 Explained the court, \u201cRobert’s argument implicates the \u2018merger doctrine,\u2019 which may be summarized as follows:\u00a0 When the sole trustee of a trust and the sole beneficiary of the trust become one-and-the-same person, the duties of the person, in his or her role as trustee, and the interests of the person, in his or her role as beneficiary, \u2018merge,\u2019 meaning that the trust terminates as a matter of law, and the trust’s assets irrevocably vest in the beneficiary.\u201d<\/p>\n

Wow.\u00a0 That\u2019s an old theory from real property law, and not the best analogy.\u00a0 The better analogy comes the law of wills.\u00a0 To no avail for Robert, as the court held that, \u201cThe language employed by Mrs. Weinberger in her trust instrument provided that, upon her death, the trustee would pay certain expenses and distribute her personal effects in accord with her written directions, and distribute the remainder to Sheila.\u00a0 If Mrs. Weinberger’s trust instrument ended there, then Robert’s argument might prevail, but it did not.<\/strong> Mrs. Weinberger’s trust instrument further provided in Article 5.2.A: \u2018If Sheila should die prior to receiving final distribution, the undistributed principal and income of such beneficiary’s share shall be held, administered and distributed for the benefit of Lee Davis.\u2019\u201d<\/p>\n

\u201cWe see no language in Mrs. Weinberger’s trust instrument indicating that it imposed upon a trustee an affirmative duty to make a prompt distribution of the Trust’s assets to Sheila upon Mrs. Weinberger’s death.\u00a0 At the same time, the Trust included express language governing the contingency of Sheila’s death prior to a distribution of trust assets to her<\/strong>.\u201d<\/p>\n

\u201cThe primary cases cited by Robert [ ] involved a will, meaning any interpretation of the instrument had to be rendered in light of the public policy favoring the \u2018prompt\u2019 distribution of an estate.\u00a0 Depending upon its terms, a trust may serve significantly different purposes than a will<\/strong>.\u201d<\/p>\n

Correct.\u00a0 Now, to hold against Robert, the court has to state that this was a property management trust, not an asset distribution (aka estate planning) trust.\u00a0 Which it cannot do, but it could bend the language to serve its own purposes.\u00a0 \u201cTaylor involved an instrument which included no language regarding the time limits for distribution of estate assets . . .\u00a0 The language found in Mrs. Weinberger’s trust instrument gives no such indication that she intended a prompt distribution of her trust’s assets.\u201d<\/p>\n

Oh, the mischief that comes from these non-probate distributions.\u00a0 Time to change your trust agreements.<\/p>\n

Weinberger v. Morris<\/strong> (Sept. 24, 2010) 2010 WL 3720812, 2010 Daily Journal D.A.R. 15,073<\/p>\n","protected":false},"excerpt":{"rendered":"

Here\u2019s a recent case in which the result cannot be what the decedent intended.\u00a0 As a starting point, let\u2019s discuss the law of wills. When a distribution is made by will (or by intestate succession), the gift is effected at the time of death.\u00a0 Absent a disclaimer, the recipient and his or her heirs are […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,5,9],"tags":[],"class_list":["post-378","post","type-post","status-publish","format-standard","hentry","category-case-law","category-developments","category-trusts-and-estates"],"_links":{"self":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts\/378"}],"collection":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=378"}],"version-history":[{"count":0,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts\/378\/revisions"}],"wp:attachment":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}