John O‘Grady, O’Grady Law Group
Many people think that a trust is about what’s going to happen after they die: who is going to inherit what.
But that’s secondary to a trust’s primary purpose, which is to make end-of-life plans legally defining how you and your assets should be taken care of in the event that you become incapacitated. Even trust beneficiaries sometimes challenge those whose estates they are named in – even while their benefactors are still alive.
For example, Betty Jean Brown lived in an $11,000-a-month assisted living facility, but her monthly income was only $3,000. Her estate conservator petitioned to sell her house to make up the difference, but Elisabeth Fife objected because she was supposed to inherit the house after Brown’s passing. The court ruled that Fife’s inheritance rights were secondary to Brown’s ongoing care needs, allowing her conservator to sell the property. So, when naming remainder beneficiaries, choose people who won’t put their greed ahead of your needs. Siegel v. Fife, Case No.B253746 (Cal.App. 2nd , Feb. 26, 2015, Steele, J.)
Protect Your Assets from Untrustworthy Trustees
The five children whose fathers died in a 2008 explosion at the Imperial Sugar Refinery in Port Wentworth, Pennsylvania had already suffered the grief of losing a parent, but sacked Chatham County Probate Court clerk Kim Birge added financial salt to their emotional wounds by misappropriating more than $81,000 being held in a trust for them until they came of age to receive it. In a letter to the Chatham County Commission Chairman, attorney Brent J. Savage charged that the Probate Court should be made to replace the missing money because they were negligent in giving Ms. Birge full access to the funds despite knowing of her gambling addiction. Savage will likely file a lawsuit against the Court for repayment of the funds, interest, damages and legal fees.
This case illustrates the importance of talking with your estate planning lawyer about ways to ensure that only trustworthy trustees have access to trust fund monies you’ve set aside for yourself and your loved ones.
Understanding Fiduciary Duties
In a fiduciary relationship, the trusted one (such as trustee) is legally bound to act in the best interests of a principal as defined by law and the trust document. But fiduciary duties don’t apply to all parties in every case. For example, Pearl Burt named her daughter Sally Gordon the sole beneficiary of the Pearl Burt Trust.
As co-trustee of this trust, Dan Bizek won a $987,747 judgment against Gordon and then attempted to collect by attaching the court’s ruling to Gordon’s interest as a beneficiary in the Wallace and Pearl Burt Trust. Bizek alleged that Gordon had violated her fiduciary duties under Probate Code § 16004(c) by moving funds from one trust to the other. But Bizek was only a creditor and not a beneficiary of the Wallace and Pearl Burt Trust, so the court ruled that Gordon did not have any fiduciary obligation to him. Talk with your estate lawyer about the limits of your vast fiduciary duties if you are named as trustee. Vance v. Bizek, Case No. B243061 (Cal. App. 4th 1155, Aug. 12, 2014, O’Donnell, J.)
About the author:
John O‘Grady, O’Grady Law Group, was the 2012 chair of BASF’s Estate Planning, Trust & Probate Section.