Wills, estate plans, and trusts can undergo many changes before they become effective. In some situations, parties may wish to change the terms of an estate planning instrument but do not fully carry out the changes. In a case involving the distribution of assets from a revocable trust, the Tennessee Court of Appeals at Jackson held that a trust had not been modified prior to the grantor’s death.
Frye v. Kimball arose out of a dispute between trust beneficiaries regarding two trusts formed by their late parents. The trusts contained a significant amount of real estate holdings, rental properties, and lease payments. Each trust, one entitled with the husband’s name and one with the wife’s name, was given one-half interest in each of the parties’ real estate assets.
The underlying trusts both provided that upon the death of one of the original trustees, the successor would be designated in the following order: 1. The surviving spouse, 2. The son, 3. The daughter. The trust documents further provided that upon the death of both the grantor and the surviving spouse, the assets would be distributed in a certain manner. The grantors’ son would receive 70% of the estate, including certain farm land. The daughter was to receive 20% of the estate, including the property upon which she lived. Additionally, the daughter’s descendant was to receive 10% of the residuary estate.
The father died in 2005, without ever modifying the terms of his trust agreement. His surviving wife then became the trustee. Shortly thereafter, she modified the terms of her own trust, in order to grant her daughter 70% of the trust assets, including the farmland occupied by the son. The mother’s trust instrument then granted the son 20% of the estate, including the daughter’s residence. The trust preserved the grant of 10% of the residuary trust to her granddaughter.
As a result of these changes, the son filed a petition in chancery court to remove the mother from the position of trustee. During the litigation over that matter, the mother passed away and the son effectively became the successor trustee of both trusts. Later, the son alleged that he and his mother had reached a settlement with regard to several trust issues, shortly before her death. Of note, the settlement provided that the mother would renounce the modifications she made to her trust, that the son would act as co-trustee, and that the lawsuit would be dismissed.
The son acknowledged that the settlement agreement was not signed by either party, but he still argued that the court should enforce its terms. At that point, the granddaughter (whose mother had predeceased her) objected to the enforcement of the settlement agreement. She also contended that the trust assets should have been distributed following her grandmother’s death. The trial court declined to enforce the terms of the settlement agreement because it had not been executed prior to the mother’s death.
After the case was appealed, the appellate court agreed with the trial court that neither the settlement nor the revocation of trust terms had been executed. The court also addressed the son’s contention that the granddaughter was not entitled to her share of the estate assets. The appellate court held that there had been no appointment of trust assets by the grantors’ daughter, so her share passed through intestate succession. Therefore, the Court of Appeals affirmed the judgment of the trial court.
If you or someone you love needs assistance with a trust issue, the Nashville estate planning attorneys at Martin Heller Potempa & Sheppard have the resources to resolve your dispute. Our lawyers can also help you plan for the future, eliminating the likelihood of future disputes. To speak with one of our skilled lawyers, contact us by emailing firstname.lastname@example.org, or call (615) 800-7096.