T&E Litigation Update - McEachern v. Budnick; Bank of America v. Center for Human Development; Lombardi v. Director of the Office of Medicaid

Author:

Mark E.Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.

McEachern v. Budnick

In McEachern v. Budnick, 81 Mass. App. Ct. 511 (April 2, 2012), the Appeals Court addressed the question of what constitutes valid "delivery" of a trust amendment to make it effective. 

In the revocable trust instrument, the grantor, who was also the sole trustee, expressly excluded her son as a beneficiary. In two subsequent amendments, the grantor added language by which certain real property was to be distributed to her son upon her death. Upon executing these amendments, however, the grantor retained the originals in her possession, telling her lawyer that she wanted to hold them until she decided whether she actually wanted to provide anything for her son.

After the grantor's death, her daughter, the successor trustee, brought an action to evict the son from the real property. He argued in opposition that he is the rightful owner pursuant to the trust amendments. The Superior Court agreed, granting summary judgment in his favor and holding that the trust amendments were effective when executed because the grantor was also the sole trustee, and so delivery was automatic. 

The Appeals Court reversed and remanded for further proceedings to determine the grantor's intent. In so doing, the Court explained that delivery means more than physical transfer of possession. "Under Massachusetts law, delivery of a written instrument amending a trust ... is principally a question of intent."

Bank of America v. Center for Human Development

In Bank of America v. Center for Human Development, 81 Mass. App. Ct. 1127 (April 9, 2012), a decision issued pursuant to Rule 1:28, the trustee of a testamentary trust sought instructions as to whether the share of trust income paid to the Child and Family Service of Pioneer Valley ("CFS") should continue to be paid to its successor by merger, or alternatively to the remaining charitable beneficiaries designated in the trust. The probate court ruled that as a result of the merger, CFS ceased to exist within the meaning of the trust and ordered its share of the trust income to be divided amongst the remaining designated charities. The Appeals Court vacated and remanded the probate court's judgment, explaining that there was insufficient evidence to establish whether CFS ceased to exist as a result of the merger. The Court noted that the objecting party, the Young Women's Christian Association of Western Massachusetts, had not filed a brief in support of its position, and that the Attorney General had not made its position known.

Lombardi v. Director of the Office of Medicaid

In Lombardi v. Director of the Office of Medicaid, Case No. 11-P-1208, 2012 Mass. App. Unpub. LEXIS 479 (April 17, 2012), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed a determination of an applicant's ineligibility for long-term care benefits. The question presented was whether MassHealth could consider a court-approved transfer of assets, pursuant to a court-approved estate plan, in determining eligibility for benefits. The Court rejected the applicant's argument that a probate court can insulate asset transfers from being considered.

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625. 

The Impact of the Massachusetts Uniform Probate Code on Trust Administration

Author:
Eric P. Hayes, Esq., Goodwin Proctor LLP

Goodwin Proctor recently issued this alert which can be found here:

The Massachusetts Uniform Probate Code (the “MUPC”) became fully effective on March 31, 2012. Article VII of the MUPC governs certain aspects of trust administration. A bill to enact the Massachusetts Uniform Trust Code (the “MUTC”), which will repeal Article VII of the MUPC, is pending before the legislature. The MUTC contains provisions that give trustees more flexibility in administering trusts, reduce the necessity for court intervention and clarify the rights of the trust beneficiaries. Until it is enacted, however, Article VII of the MUPC is in effect. While some of provisions of the MUPC will only apply to trusts that become irrevocable after March 31, 2012, certain administrative provisions likely also apply to trusts irrevocable prior to that date.

Below are some highlights of the MUPC and issues to consider:

A Trustee’s Duty to Provide Information to the Beneficiaries

• A trustee is required to notify the beneficiaries within 30 days when a trust becomes irrevocable or a trustee is appointed thereafter. 
• A trustee is required to provide information about the trust at the request of the beneficiaries.
• Upon request, a beneficiary is entitled to receive annual accounts and a final account of the administration of the trust.

Principal Place of Administration of the Trust

• A trustee is under a continuing duty to administer a trust in a place appropriate to the trust’s purposes and its efficient management.
• The provisions of a trust relating to the place of administration control unless compliance is contrary to the purposes and efficient management of the trust. 
• If a principal place of administration becomes inappropriate, a court can remove a trustee and appoint a trustee in another state or country. 
• The views of adult beneficiaries are to be taken into account in determining the suitability of a trust’s place of administration.

Court Removal of a Trustee

• The trust beneficiaries may petition a court to remove a trustee; unlike prior law, MUPC provisions do not require that the beneficiaries show cause for removal.
• A trustee may also petition a court to remove a co-trustee.
• The MUPC provides that the court will grant such a petition if it determines that removal is in the best interests of the beneficiaries.

Compromise Agreements

• A trustee and beneficiaries may enter into compromise agreements resolving questions regarding the construction or interpretation of a trust instrument, disputes between beneficiaries and/or a trustee, the powers and authority of a trustee, the approval of a trustee’s accounts and other issues.
• The court will approve an agreement if it finds that the controversy is in good faith and the effect of the agreement on persons represented by others, such as a parent or guardian, is just and reasonable.

 Virtual Representation

• Absent a conflict of interest: 

1. In some matters personal representatives and trustees can represent persons interested in an estate or trust. 
2. Conservators and guardians can represent a ward/protected person. 
3. Parents can represent their minor and unborn children, but not grandchildren and their issue. 
4. A beneficiary with a substantially identical interest in the trust can represent unborn and unascertained beneficiaries. 

• There are some open questions as to how these provisions will be applied. Personal representatives and trustees will need to identify conflicts of interest and situations in which virtual representation is not appropriate.  

Time Limits on Commencing Legal Proceedings Against a Trustee

• Actions against a trustee in connection with a final account must be commenced within the first to occur of the following: 

1. Six months after a beneficiary’s actual receipt of a final account that fully discloses material matters. 
2. Three years after a beneficiary actually received a final account and was informed of the location of the trust records for review, even if the account does not fully disclose a material matter. 

• · This provision only applies to a final account.

Boston Bar Files Amicus Brief Urging SJC to Clarify Estate Planning Law

The Boston Bar Association released the following announcement earlier today to members:

Chapter 524 has created uncertainty in the law of trusts and estates and has compromised the ability of parties to rely on the law in place at a given time in preparing estate plans, making distributions from trusts, and advising clients with regard to trust administration -- Boston Bar Association Amicus Brief Filed on April 30, 2012

Picture this estate planning nightmare now playing out in Massachusetts:

Mr. Smith established a trust to care for his daughter, Mary. Mary, in turn, had one biological daughter and one adopted daughter. Under the law as it stood when Mr. Smith set up his trust, only Mary's biological daughter would be a beneficiary of Grandpa's trust. That was before 1958, when the term "issue" was used to refer only to biological children.

Long after her father died, Mary turned to an attorney for guidance on how best to compensate for this inequitable situation. She drafted a will leaving her entire estate to her adopted daughter, and nothing to her biological daughter, because her biological daughter would automatically receive an equally generous sum from Mr. Smith's trust.

In 1958, an enlightened Massachusetts Legislature broadened the definition of "issue" to include adopted children as well as biological children. This legislation was not retroactive, however, and Mary was therefore correctly advised that both of her daughters were still provided for equally. Mary later died, secure in the belief that she had arranged for a fair and equal allocation of the family assets between her two daughters.

Fast forward to 2008. The Massachusetts Legislature now passes Chapter 524 of the Acts of 2008 -- amending the definition of "issue" to include adopted children in pre-1958 trusts. What few people realize at the time is that this new law also changes the property rights attached to that definition.

Thanks to Chapter 524, Mary's adopted daughter now has a windfall, receiving the benefits of her mother's entire estate and also a one half interest in Grandpa Smith's trust, which had previously belonged to her sister alone. This is not the outcome Mary intended when she drafted her will.

In a case with similar facts now pending before the Massachusetts Supreme Judicial Court, Rachel A. Bird Anderson v. BNY Mellon, N.A., et al., SJC-11122, the Boston Bar Association has filed an amicus brief urging the Court to clarify estate planning law as it relates to Chapter 524.

As the brief notes, "Families often rely on [established principles of construction] in making irrevocable alternate arrangements, such as gifts or bequests made in favor of adopted children who were (until the effective date of Chapter 524) not beneficiaries of certain family trusts."

The BBA amicus brief urges the SJC to provide answers to two important questions:

Is the retroactive application of Chapter 524 to instruments executed prior to 1958 constitutional?

If so, what are the consequences for actions taken by fiduciaries in reliance on Chapter 524 prior to the SJC's determination that such an application is constitutional?

The answers to both questions are of substantial importance to those concerned with matters of estate planning and trust administration within the Commonwealth.

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.