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When it comes to estate planning, an ounce of prevention is worth a pound of cure. Equally important, continuing consultation with a knowledgeable lawyer need not be time consuming or costly. Periodic reviews can ensure that estate papers provide for changes in circumstances and the law that would later prove difficult and expensive to resolve when the testator's wishes must be implemented.
The example of George Wagner serves as a cautionary tale. In 1961, George, a childless bachelor, executed a last will and testament providing for a testamentary trust on his death, without a residuary clause. He appointed a corporate trustee as his trustee and executor, and bequeathed his property on his death to the trustee, in trust, for the benefit of his sister, Elizabeth, while she lived. On Elizabeth's death, the trustee was to end the trust and distribute its property "only" to the "Ancient Free and Accepted Masons of Maywood, Illinois, Maywood Lodge No. 869," with no interest to vest until the "the day upon which the Trust herein created shall terminate." When George died in 1978, his will was admitted to probate, the trustee was appointed executor as he wished, and the trust was created with funds of $250,000.
Elizabeth died in 1986 in California, but nobody told the trustee, who administered the trust funds until 1995, when it learned Elizabeth had died. By then, the trust funds totaled over $500,000. The trustee also learned that the Maywood Lodge had been disbanded in 1982 and merged into another Masonic lodge, Pleiades Lodge No. 478.
The trustee's duty was to fulfill George's testamentary objectives, but because George did not say how to distribute the trust funds if the Maywood Lodge ceased to exist, the trust could be interpreted in different ways. If George meant to benefit any Masonic lodge into which the Maywood Lodge merged, the trust funds should go to the Pleiades Lodge. If George meant to benefit "only" the Maywood Lodge, his bequest lapsed when the Maywood Lodge was dissolved, and the trust funds should be distributed under the law of intestacy.
To resolve this issue, the trustee filed a complaint for construction of the trust in court, asking for directions on how to distribute the trust funds. A genealogical search found two paternal cousins of George in California, and the trustee named them and the Masonic lodges as defendants to the suit. George's cousins and the Pleiades Lodge each asserted exclusive rights to the trust funds. There were no surviving witnesses who might have had insight as to George's testamentary intent. The court was left to decide which legal doctrine to apply in the circumstances.
The court might have chosen the doctrine of deviation, which applies when a situation arises that is not covered by a trust's specific provisions and was not anticipated by the settlor or testator. Under this doctrine, the court must gauge the overall purpose of the trust and fulfill the settlor's intent by authorizing deviation from the trust's terms, ascertaining as best it can what the settlor most likely would have done in circumstances that he or she did not contemplate. There are similar doctrines for charitable trusts, but those did not apply because George's will did not contain an expression of charitable intent.
Alternatively, the court might have chosen the clear language rule, which holds that the court's primary goal is to ascertain the settlor's intentions, initially by looking to the trust language. If the words of the trust instrument are clear, the court must presume that they express the settlor's intention and apply the language verbatim, without resorting to evidence of intent existing outside the trust instrument.
The court would have had a hard time making a decision. George plainly did not want his property distributed to strangers and had not anticipated that the Maywood Lodge would cease to exist before Elizabeth died. These circumstances would have occasioned application of the doctrine of deviation. But the language of the instrument was also unambiguous: the trustee was to distribute the trust property "only" to the Maywood Lodge, thereby excluding the Pleiades Lodge and leaving the trustee no choice but to distribute the trust funds under the law of intestacy. Either way, the court would at best have been approximating George's intent.
In the end, the court did not need to resolve the controversy. The putative claimants settled the case, dividing the trust funds evenly. But the situation need not have arisen. Had George even occasionally consulted with a lawyer knowledgeable in estate planning, he could easily have updated his will and testamentary trust to include viable contingent beneficiaries if the Maywood Lodge ceased to exist before the time came to distribute his trust funds, and to include a residuary clause to distribute any remainder.
The case shows why clients should cultivate an ongoing relationship with lawyers who are well versed in estate planning, keep abreast of developments in the law, and will serve as a continuing resource as circumstances and needs change.
© 2013 Much Shelist, P.C.
