Are you a co-trustee with someone else of a loved ones trust? Do you know someone who is a co-trustee? When you are a co-trustee with someone, things can go wrong.

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It doesn’t seem possible for things to go wrong when you have two people being a co-trustee. You may wonder what could go wrong if you have two trustees. When you have two trustees, those people may not agree on everything, which is where the disagreements may come into place.

In the case HALL v. CUTSINGER (345 P. 3d 412 (Okla. Civ. App. Div. 3 2015) a parent and her co-trustee had to bring action against the other co-trustee to recover money and assets her purportedly misappropriated while he was a co-trustee. The trustor and her daughter advanced all of court appointed expert’s fees, and then granting them a judgment against defendant son in the amount of $30,510.35. “With regard to trial court’s order requiring trustor and her daughter, as co-trustee, to advance defendant son’s portion of fees owed court appointed expert, expert was not a party to trustor and daughter’s action to recover money and assets purportedly misappropriated by son as co-trustee, and thus, statutory provisions governing parties seeking to recover costs or fees, or opposing a motion, did not apply.” The trustor and her daughter tried to recover money and assets purportedly misappropriated by son while acting as co-trustee, evidence was sufficient to support trial court’s finding that son had no apparent ability to pay his share of court appointed expert fees. They made seven attempts to serve him with a writ of general execution were unsuccessful, and attempts to garnish his bank accounts were unsuccessful because he had no money or assets, other than exempt funds, in those accounts. The trustor created the Norma J. Hall Living Trust and appointed her son as co-trustee. In 2008 when learning her son misappropriated money and assets belonging to both her and the trust, the trustor removed him as trustee and appointed her daughter as co-trustee. This case eventually went to trial on December, 2012. Appellants recovered a judgment against the son of approximately $1.4 million. After a hearing, the trial court issued an Order finding that each party was responsible for one-half of the accountant’s fees but that the son had no apparent ability to pay his share. The court ordered Appellants to pay the balance owed to the accountant and granted Appellants a cost judgment against the son in the amount of $30,510.35, the portion of the accountant’s fees owed by the son.

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This case is stating that even though you are a trustee that doesn’t mean you can take money out of the trust. Being a co-trustee means that if the trustor passes away or gets ill, you and the other co-trustee are in charge of the trust. You have no responsibility of the trust until you act as a trustee of the trust.

Integrity and common sense will avoid lawsuits. If you are a trustee be honest. Don’t pay yourself without notifying the beneficiaries what you doing, how much you are paying yourself and why you deserve the fee. Do not commingle the trust funds with your money. Keep a separate trust account. Use a business arms length approach when conducting trust business. Bend over backwards to be fair to the beneficiaries. These are precautions you can follow that will make your life easier if you accept the responsibility to serve as a trustee.

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An experienced probate and living trust attorney like Brent D. Coldiron, knows what to do in these situations. His fees are reasonable. The best money ever spent is to get good legal advice before signing your name to something. Contact Brent at (405) 478-5655 or 737-2244. His website is http://coldironlaw.com.

The language used in your trust determines when a beneficial share will vest, or be secure.

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This language was used in a recent court case in a mother’s revocable trust intended to benefit her children and grandchildren if a child was deceased:

Division of Trust and to Shares upon My Death, Division Date Defined: Upon my death, the Co-Trustee, shall immediately divide the trust principal into separate shares for the benefit in equal seven (7) shares for [children’s names deleted] …, per stirpes. This date shall be called the “Division Date”. Each share set aside for a child or more remote descendant of mine shall constitute a separate and distinct trust. The person for whose benefit a share is created … is the primary beneficiary of that share.

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Distribution of Income and Principal to My Descendants After the Division Date: After the Division Date, the Co-Trustee shall have the discretionary power to pay all or any portion of the income and principal of each share of each independent trust to or for the benefit of …, per stirpes. If any beneficiary shall be deceased at the time of distribution, their share shall be distributed to their children so long as they have obtained the age of 25 years or older. Any heir not of the age of 25 years shall have their share held in trust until such time as they reach the age of 25 years.

Termination of Trust: The share or proportionate part thereof of the trust principal set aside for each primary beneficiary shall be held and eventually distributed and paid over free and clear of trust [children’s names deleted]… within three years of the death of [mother’s name deleted] ….

One of the children survived his mother but died a year later [before the distribution date], leaving a surviving spouse but no children. His surviving spouse contested the trust seeking to recover her husband’s share of the trust for his estate [and ultimately in her pocket as his sole heir]. The trial probate and trust court entered its judgment against the wife and in favor of mother’s trust. The trial judge found the intent of the trust agreement was that in order for a child to inherit the child had to be alive at his mother’s death and also when the distribution was made. And because this child left no children his bequest had lapsed.

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The appellant court reversed the trial court. The interpretation of an unambiguous trust agreement is a question of law. Corr v. Corr, 2001 OK CIV APP 31, 21 P.3d 642, 644 [The appellant court cited a case handled by my law office :)]. In construing a trust agreement, our primary purpose is to ascertain and give effect to the trustor’s intent. If the language of the agreement is unambiguous, we must ascertain the intent of the trustor from the terms of the agreement as a whole.

The appellant court said there was no ambiguity in the language of the trust agreement in this case. Contingent rights vest when the contingency is removed. Pursuant to the trust agreement, the contingent beneficiaries’ rights in the trust vested upon the trustor’s death. The mother directed the co-trustee to establish separate and distinct trusts for the benefit of each beneficiary upon her death, establishing that date as the Division Date. As of that date, the contingency was removed and the beneficiaries’ interests vested. Personally I think the lawyer who drafted the trust could have made it clear that if a child did not survive to the division date his share would lapse.

The appellant court went on to say that a trust’s terms may postpone vesting of a beneficiary’s interest to the happening of some future event, such as survival to a distribution date. The appellant court observed in another decision the trust language provided that if any beneficiary was not living on the distribution date, then that person’s share would go to her issue per stirpes, or if she had no surviving issue, it would be divided among the other beneficiaries. Trust language may also provide for the interest of the beneficiary to be divested upon the happening of a condition subsequent.

In the case at hand the mother’s trust did not use any language establishing a distribution date. This is something the drafting lawyer missed. Because of this, the son’s share will pass to his surviving spouse under his estate.

The dissent was more sympathetic with the drafting lawyer. It said that the majority’s holding, that a gift in trust vested at the time of the trustor’s death and could not lapse when the beneficiary died before the distribution date, is incorrect pursuant to Oklahoma law and the unambiguous intent shown in the mother’s trust document.

With no authority, the majority declares “the contingent beneficiaries’ rights in the Trust vested upon the trustor’s death.” The majority finds that the death of the trustor was the contingency, then notes authority that a later event may divest the beneficiary’s rights, but that it did not in this case. Oklahoma authority shows that a trust gift vests on the distribution date, absent an express declaration to the contrary.

In construing a trust instrument, the intention of the trustor controls. In re Dimick’s Will, 1975 OK 10, 531 P.2d 1027, 1030. In Dimick, the testamentary trust directed that after the corpus was delivered to the trustee, the trust would continue for ten years, at which time half the assets would be divided between the testator’s two daughters and the other half would remain in the trust for the care of his wife until her death, at which time the remaining funds would be divided between the two daughters. At the end of the ten years, the trust was in debt so the trustees did not distribute any assets. One daughter survived the ten year period but died before the assets were distributed. The trial court held that her quarter share of the trust was a vested right and the court directed the trustee to distribute that share to her estate. The appellate court framed the issue as whether at the end of the ten year period, the then-surviving daughter acquired a vested interest in her share of the trust, which was not divested by her subsequent death before the actual distribution of the trust corpus. The court noted that if an instrument provides a definite time when the right to receive the legacy accrues, then the gift vests at that time, even though actual distribution may occur later. Id. at 1030. The Oklahoma Supreme Court found that the trust showed the testator’s intent that half the trust property should be vested in and distributed to his daughters alive at the end of the ten years, or if either was dead on that date then to her children. Id. at 1031. The court held that the daughter who survived the ten years had a vested interest at that time, even though distribution occurred later. Id.

In Sivia v. Snyder, 1973 OK CIV APP 8, 517 P.2d 813 (cert. denied), the trustor created a living trust which provided that on his death, the trustee should pay various last expenses and after all of the preceding parts of the trust had been complied with, pay the residue to four named persons. The trust provided that if any of those persons were deceased but had living issue at the distribution date, then the trustee should distribute their share to their issue, but if the deceased left no living issue, then that share would be divided between the surviving named residuary beneficiaries. After the trustor died, the trustee paid the expenses as required by the trust, but the IRS proposed additional taxes. The trustee then planned to distribute the trust to the four beneficiaries but retain the amount of the proposed additional taxes. After the partial distribution commenced but before it was complete, one of the beneficiaries died without issue. The trustee asked the court to construe the trust to determine whether the deceased beneficiary survived until the “distribution date” so that her share of the trust would be paid to her estate. The trial court found that the deceased beneficiary’s interest vested at the time of the testator’s death. The appellate court was unable to see how the trustor could have intended “distribution date” to be his date of death because the trust directed certain payments to be paid upon the trustor’s death, but payment of the residuary was not among those. Id. at 815. Indeed, the court noted that the trust provided the residuary beneficiaries were to be paid after all the other trust provisions were complied with, which necessarily indicated some later date. The court noted an estate is never distributed on the date of death and to find otherwise would be to give the phrase “distribution date” an “interpretation contrary to its ordinary meaning.” Id. at 815-816. The appellate court noted there were two remaining possibilities for the “distribution date”-either the date of actual distribution, or the date the trustee could first have made distribution. The court concluded the second option “seems to comport more nearly with what the settlor most likely intended.” The court found that the settlor would not have desired the beneficiaries’ enjoyment of the gift to depend on accident, delay, or inconvenience. The court held it chose to follow the majority view, and the more practical one, that vesting in these circumstances takes place on the first date the legacy could reasonably be paid by the trustee, which was when all the provisions of the trust had been complied with, with the exception of payment of the additional tax, for which a fund was set aside. This date of course was prior to the death of Miss Sivia. To hold otherwise would be to find that the settlor, by using ‘distribution date’ in the trust, provided for such unpredictable occurrences and delays to defeat the gift. Such occurrences and delays would then replace the settlor’s manifest intent to give to certain named beneficiaries. We find such an interpretation would be completely contrary not only to settlor’s intentions, but also contrary to the very purpose for which the trust instrument was prepared in the first place.

In this case, the trustor clearly showed an intent that the distribution date differed from the date of death and she provided for an outside limit to the distribution date, to guard against unforeseen delays as shown in Sivia. The distribution date cannot be more than three years after her date of death. But as in Sivia, the interest of the beneficiaries does not vest on the date of the trustor’s death. Because Donald did not survive until the distribution date and because he did not leave children, his share lapsed under the plain language of the trust instrument.

This outcome is also supported by the Restatement. The trust instrument here shows the trustor’s intent to provide for her seven children. Restatement (Second) of Property, Don. Trans. § 27.3 (1988), provides: If a gift is made in favor of a class described as “children,” “grandchildren,” “brothers,” “sisters,” “nephews,” “nieces,” “cousins,” or by similar class gift terms that describe a one-generation class,

(1) a person within the primary meaning of the class gift term who dies after the dispositive instrument takes effect but before such class member is entitled to distribution of his or her share is not excluded from the class by reason of such death, if such death does not make impossible the fulfillment of a condition, unless additional language or circumstances indicate otherwise, or an applicable statute provides otherwise.

(2) If additional language or circumstances indicate otherwise or an applicable statute provides otherwise, the share in the class gift that such deceased class member would have taken had he or she lived, when the share of each class member is not a specified amount, goes to enlarge the shares of the class members not excluded, except to the extent that substitute takers are provided to take in place of the deceased class member by additional language or circumstances or by a statute.

Here, distribution was conditioned upon the class member or his living issue surviving until the distribution date. Donald’s death without issue prevented fulfillment of that condition.

The trust instrument at issue here shows the trustor’s intent that to receive a share, a beneficiary must survive (or have surviving issue) by the time of distribution, which was to be no more than three years after the death of the trustor.

The trustee has complete discretion when to distribute during that time frame. It also seems clear that the trustor’s intent was to provide for her seven children. If any child died before the distribution date, without children, that child’s share would necessarily go to the remaining living children. That comports with the trust language and the trustor’s intent. Donald died before his interest vested and the trial court correctly found that his interest lapsed.

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As well as the dissent argued it could not save the mother’s trust from the drafting of the trust attorney. An experienced living trust attorney like Brent D. Coldiron, knows what to do in these situations. His fees are reasonable. The best money ever spent is to get good legal advice before signing your name to something. Contact Brent at (405) 478-5655 or 737-2244. His website is http://coldironlaw.com.

IN THE MATTER OF THE ESTATE OF ADAMS, 2004 OK CIV APP 91, 101 P.3d 344
APPEAL FROM THE DISTRICT COURT OF McCLAIN COUNTY, OKLAHOMA
The decision of the HONORABLE NOAH EWING, JR., TRIAL JUDGE, was AFFIRMED.

United States Supreme Court

United States Supreme Court

Wanda Belle Adams, the decedent executed a will on July 1, 1996. She was then in declining health but lived until February 8, 2003, at which time she was seventy three. During her later years she needed increasing assistance with her normal life activities. She had never married and had no children. As the result of illness at the age of twelve or thirteen, she found it necessary to use a wheelchair for all her adult life, but was able to work as a public accountant. She was survived by four sisters and three brothers. Another brother predeceased her.

A brother filed his Petition for Letters of Administration and Determination of Heirs on March 12, 2003. He alleged his sister had died intestate. A sister objected alleging that her sister had died with a valid will made on July 1, 1996. It was produced for probate. The will left the Decedent’s home and adjoining land to the sister’s son and daughter-in-law, and the remainder of the estate was to go to the sister. Nothing like getting left out of a will is better to kindle a family fight!

At the hearing the brother argued that his deceased sister “was not competent to execute a will on July 1, 1996.” The two witnesses to the decedent’s will testified at the hearing in support of its validity, as did the beneficiaries of the will. One of the witnesses to the will was the attorney who drafted it, and the other was another attorney.

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The trial court found the will was valid and admitted it to probate. The court concluded the case centered around the issue of testamentary capacity and that the “most complicating factor” was the court’s granting of guardianship over Decedent at approximately the same time as Decedent executed her will. The trial court found the guardianship did not, as a matter of law, preclude Decedent from executing a valid will, and that the testimony of the lawyer who drafted the will was “most convincing” because he had been involved with both execution of the will and application for Decedent’s guardianship.

In probate cases, being of equitable cognizance, the appellant court will examine and weigh the evidence, but we must abide by the presumption that the trial court’s determination is correct unless it is found to be clearly contrary to the weight of the evidence or to some governing principle of law. In re Estate of Holcomb, 2002 OK 90, 63 P.3d 9. The trial court enjoys deference when it comes to the resolution of conflicting evidence because it had the opportunity to observe the demeanor and conduct of the witnesses. And, the burden of persuasion on the issue of testamentary capacity lies with the party contesting the validity of the will. In re Estate of Maheras, 1995 OK 40, 897 P.2d 268.

In Estate of Holcomb, at, 13, the Supreme Court defined testamentary capacity as follows:

Testamentary capacity exists when a person possesses, in a general way, the ability to appreciate the character and extent of the devised property, understands the nature of the relationship between himself and the natural objects of his bounty, and apprehends the nature and effect of the testamentary act. … In adjudging a decedent’s testamentary capacity, it is appropriate for the trial tribunal to consider evidence of the testator’s mental capacity, appearance, conduct, habits and conversation both before and after the will’s execution to the extent these factors are relevant to the maker’s mental condition at the time the will was executed.

¶8 Appellant concedes the contested will was executed with the requisite formalities dictated by 84 O.S. 1991 § 55, but in his Brief in Chief contends the will is invalid because of noncompliance with 84 O.S. Supp. 1992 § 41. This latter section provides that one subject to guardianship or conservatorship may lawfully dispose of his or her estate by will, but requires the will to be subscribed and acknowledged in the presence of a judge of the district court. This contention fails because Appellant did not raise it before the trial court and is barred from raising it for the first time on appeal. Marlin Oil Corporation v. Barby Energy Corporation, 2002 OK CIV APP 92, 55 P.3d 446.1

A long standing rule of law in Oklahoma is that a presumption of want of testamentary capacity does not arise from the fact that the maker of a will may have been under guardianship at the time of the making of the will. In re Nitey’s Estate, 1935 OK 1218, 175 Okla. 389, 53 P.2d 215. Thus, incompetency or impairment which may support guardianship does not, as a matter of law, mean that the subject of the guardianship is unable to still make a will. The guardianship is some evidence for consideration of the court in determining the condition of Decedent’s mind at the time the will was signed.

The court also stated that being unable to manage one’s own estate was not inconsistent with testamentary capacity. That testamentary capacity is not identical to business capacity and a person subject to a guardianship is not necessarily a person of unsound mind. Tthat a person may not then have sufficient mind and vigor of intellect to transact business generally and make contracts, yet be competent to make a will. The presumption is that every person is sane.

The Order Appointing Guardians over the deceased sister stated, that she was “impaired by reason of mental confusion and physical limitations, resulting in an inability to receive and evaluate information effectively, meet the essential requirements for her physical health and safety, and manage her financial resources.” The appellant court stated that there was nothing in the finding, which was entered a month after the Decedent executed her will, which would necessarily preclude a determination of testamentary capacity.

The court also commented on the fact that the will left everything to one sister and her child and spouse. That the Decedent’s will was “an unnatural will in its disposition of her property.” Because she left the bulk of her estate to one sister only and wholly omitted her remaining six brothers and sisters and the children of her deceased brother. An unnatural disposition of property may be considered in determining his testamentary capacity. But the appellant court stated that leaving everything to one sibling is not an unnatural will.

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The court went on to observe that no presumption of testamentary incapacity arises because a will gives property to persons other than those “who are natural objects of the testator’s bounty”, and if a testator is possessed of testamentary capacity, he may “give his property entirely to strangers.” In re Newkirk’s Estate, 1969 OK 93, 456 P.2d 104. The Oklahoma Supreme Court has held “[i]t is natural for a person to make provisions in his will for those who were particularly close and helpful to him during his lifetime, and more especially, to those within his own family.” In re Lacy’s Estate, 1967 OK 123, 431 P.2d 366.

The sister proponent of the will testified she had a long and close relationship with Decedent and that she was the “primary person who took her deceased sister to where she needed to go” until her child and spouse moved next door to Decedent. At Decedent’s request they moved a house trailer onto her property in 1985. The Decedent helped pay off the trailer and they remained there for twelve years.

The court went on to discuss the testimony of the other witnesses, and concluded saying that there is no dispute that Decedent did not enjoy good health at the time she executed her will. However, advanced age or physical infirmity alone do not render one incapacitated to make a will. Rose v. Foster, 1955 OK 242, 288 P.2d 745. The extent of Decedent’s mental impairment is contested, but the trial court’s finding that she possessed testamentary capacity at the time she executed her will is not clearly against the weight of the evidence. The trial court’s order admitting Decedent’s will to probate is accordingly AFFIRMED.

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Brent D. Coldiron is an experienced will, probate, guardianship, and living trust attorney. He understands the rules for capacity to make a will. He knows what to do. He has over 39 years experience. Call Brent at (405) 478-5655.