Trustor’s Intent is Paramount
All states require that a Will or a Codicil to a Will be in writing and witnessed (unless the Will is a holographic Will, which means it is entirely in the handwriting of the Testator (creator of the Will)). Florida additionally requires that all testamentary directives in Wills and Trusts be in writing and witnessed. Florida Statutes Section 736.0405(2)(b). Most states do not require that a trust or an amendment to a trust be witnessed. However, because a trust is contractual in nature, it is good practice to have the signature of the Trustor (the Grantor or creator of the trust) acknowledged by a notary public. One last note – it is not necessary to register or record your trust anywhere, although some states require a copy of the trust be recorded if the Trustor is transferring the ownership of real estate to the trust.
Getting back to the Florida Statute, a Trustor created a revocable living trust in Florida. This was likely done for ease of administration, to avoid probate upon her death, and assure that her testamentary wishes were carried out. The terms of the trust included a provision requiring the trustee “to pay such sums from principal as [the Trustor] may direct at any time.” The trust named a corporate trustee and her son as co-trustees.
For seven years prior to her death she had instructed the corporate co-trustee to pay the private school and college education expenses of her cousin’s grandson, Hunter. Shortly before her death, she sent a note to the co-trustees advising them as follows:
As you know, I have agreed to pay Hunter’s college education at Yale, as I have for the last two years. Thank you for your assistance with the logistics. He will be beginning his junior year in September 2010 and his senior year in 2011. Please make arrangements so that his costs will be paid for those two years as well. The cost for his junior year is forty-nine thousand eight hundred dollars, which you will see when the school sends the documentation in the next month or so. Thank you for taking care of this on my behalf.
The note did not qualify as an amendment to her trust, because it was not witnessed, as required by the Florida statute. The Trustor died shortly after sending the note. The corporate successor co-trustee paid for the next semester tuition, but refused to make any further payments.
The grandson sued for breach of oral and written contracts, promissory estoppel, and breach of trust. The co-trustees raised the defenses of statute of frauds and an interpretation of the trust which nullified the note upon the Trustor’s death.
The trial court ruled in the grandson’s favor with regard to the breach of oral contract claim and the breach of trust claim and reserved jurisdiction to consider future damages relating to graduate school tuition. The court also required the co-trustees to disgorge all the funds they removed from the trust to pay for their respective legal expenses. The court specifically held the co-trustees specifically breached their duties as co-trustees by violating Florida Statute Sections 736.0801 (duty to administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries), 736.0804 (duty to act impartially as among the trust beneficiaries), and 736.0804 (duty to prudently administer the trust by considering the purposes, terms, distribution requirements, and other circumstances of the trust).
The co-trustees appealed the trial court’s decision to the Florida Court of Appeals, Third District. The Court of Appeals upheld the trial court’s ruling in Kritchman v. Wolk, Nos. 3D12-2977 and 3D12-2457 (October 1, 2014). In doing so, the Appellate Court relied heavily on the provision in the trust which stated the co-trustees shall pay the sums that the Trustor directs at any time.
There are many lessons that can be learned from this case. First, the expression of wishes to be carried out after death should be in writing. Second, if you want to avoid the litigation that occurred in this case, make sure that the writing meets your state’s requirements for disposition of property through a Will or trust. Third, the Trustor likely could have avoided this litigation had she consulted with a knowledgeable estate planning attorney. Fourth, trustees should pay close attention to the intent of the Trustor, as expressed in the trust and elsewhere, as it is the paramount duty of a Trustee under the law of every state to carry out the Trustor’s intent to the best of the Trustee’s ability to do so. Finally, trustees who breach their duty, even if allegedly in good faith, can suffer consequences such as the disgorgement of legal fees as affirmed by the Court of Appeals in the case.
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