In the most recent installment of the McGuireWoods Fiduciary Advisory Services annual multipart series on recent fiduciary cases, developments in the law concerning various topics are examined through the following:
Potter v. Potter, 252 A.3d 17 (Maryland May 26, 2021). A provision in a Maryland LLC operating agreement purporting to “automatically and immediately” transfer a deceased member’s interest to a designated successor failed to effectively transfer the property because the provision was testamentary in nature and the operating agreement failed to satisfy the will execution requirements under Maryland law.
In re Matter of ABB Trust, 491 P.3d 1120, No. 1 CA-CV 19-0845 (Arizona May 2021). Addressing a claim by beneficiaries that the income beneficiary exerted undue influence over the settlor, who caused the trust protector to amend the irrevocable trust.
In re Estate of Trevino, 474 P.3d 223 (Colo. App. 2020). Where a POD account pledged as collateral for a loan could pay the loan in full after owner/decedent’s death, the personal representative had authority over the account only to the extent necessary to pay off the loan after applying the estate’s liquid assets to pay off the debt.
In re Estate of McAleer, 248 A.3d 416 (Pennsylvania April 7, 2021). While the Supreme Court of Pennsylvania held that trust beneficiaries are entitled to receive and examine billing invoices of a trustee’s legal counsel if the fees are paid from trust assets in the instant case, an evenly split decision by the Supreme Court of Pennsylvania failed to resolve whether Pennsylvania recognizes the fiduciary exception to attorney-client privilege claims by trustees.
Ferri v. Powell-Ferri et al., Superior Court of Connecticut, June 10, 2021 (Unpublished Opinion). The Superior Court of Connecticut held that the wife was not engaging in vexatious litigation because she believed the facts she alleged and because the decanting of the trust was troubling behavior in the context of a divorce.
In re Trust Created by McGregor v. McGregor., 308 Neb. 405, 954 N.W.2d 612 (NE. 2021). The Nebraska Supreme Court held that the settlement agreement was in conflict with a material purpose of the father’s trust and therefore would not be enforced.
Marshall v. Marshall., No. 14-18-00094-CV, No. 14-18-00095-CV (TX. 2021). The Court of Appeals of Texas held that the Texas Citizens Participation Act was designed to protect the wife and son’s conduct, by allowing them a right to petition the court, and that in terrorem clauses are violated only when conduct is inconsistent with the express language of the in terrorem clause.
Wing v. Goldman Sachs Trust Co., N.A., 274 N.C. App. 144, 851 S.E.2d 398, 400 (2020), review allowed, 856 S.E.2d 107 (N.C. 2021), and review allowed, 856 S.E.2d 98 (N.C. 2021). A trustee has a duty to remain neutral regarding competitive claims between putative beneficiaries and may be required to freeze payments while a court determines the rightful beneficiaries.
Schreier v. Drealan Kvilhaug Hoefker & Co., P.A., 992 F.3d 674 (8th Cir. March 26, 2021). A trustee’s conclusory claims for malpractice, tort and RICO against an accounting firm and a law firm that administered the trust were insufficient and properly dismissed on summary judgment.
Matter of Horst Revocable Trust. Nevada Supreme Court rules that a trustee’s mailing of notice without all provisions applicable to the beneficiary did not trigger the 120-day statute-of-limitations period for the beneficiary to contest the trust’s validity.
In re Estate of Michael R. Brinkman, 953 N.W.2d 1 (Neb. 2021). The Nebraska Supreme Court holds that a will defining the term “issue” to include one child while failing to name another child does not disinherit the unnamed child, and such unnamed child is included in the term “issue.”
Matter of Merrill, ___ A.3d ___, 2021 WL 1538884 (N.H. April 20, 2021). The Supreme Court of New Hampshire held that the value of assets a trust holds for the benefit of a beneficiary should not be included in the marital estate of the beneficiary and the beneficiary’s spouse, for purposes of equitable division in a divorce proceeding where the trust’s provisions restrict both voluntary and involuntary transfers of the beneficiary’s interest in the trust.
Matter of Earley, ___ A.3d ___, 2021 WL 1773905 (N.H. May 5, 2021). The Supreme Court of New Hampshire held that where a valid spendthrift provision protects a beneficiary’s interest in a trust by prohibiting the voluntary or involuntary transfer of such interest, the interest cannot qualify as marital property subject to equitable division under New Hampshire law.
Ochse v. Ochse, 2020 WL 6749044 (Ct. App. Tex. November 18, 2020). Under Texas law, where a beneficiary of a trust is identified only by her relationship to another individual (i.e., spouse), but not by a specific name, a gift still qualifies as a bequest to a particular person, rather than a class capable of changing, where the identifying term could only refer to a specific individual at the time the agreement is executed and the terms of the agreement do not otherwise indicate that the identifying term is capable of including future changes in the number and/or identity of beneficiaries.
Plofchan v. Plofchan, 855 S.E.2d 857, 859, 2021 Va. LEXIS 27, *1, 2021 WL 1220752. The Virginia Supreme Court held that the trustees and an attorney-in-fact had standing to challenge the defendant’s revocation of a trust and power of attorney.
Fournier v. Secretary of the Executive Office of Health and Human Services, 170 N.E.3d 1159 (Mass. July 23, 2021). The Massachusetts Supreme Judicial Court ruled that a limited power of appointment does not cause a trust to be a “countable” asset for purposes of determining eligibility for Medicaid benefits.
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Posted by Anthony Tran, Associate Editor, Wealth Strategies Journal