A very recent Kentucky case dealt how money can split a family and how Trust Lawsuits can break out after parents died or when a Guardianship is needed. This case has a myriad of Estate & #Trust issues at the heart of a Probate Lawsuit: Marital Trusts, transfers of money after death, Powers Of Appointment, and Disclaimers. At the heart of this Probate Lawsuit were children fighting over millions.
REVOCABLE TRUSTS (AKA LIVING TRUSTS)
- Sam and Julia were married
- In 1991, Sam and Julia May each created revocable living trusts also known as living trusts
- Each trust had 2 separate shares or funds, sometimes referred to as substrusts:
- A Marital Trust & a CreditShelterTrust — a Credit Shelter Trust is intended to pass wealth free of the Estate Tax and otherwise save a family Estate Taxes
- Each would be the other’s success or trustee when the other died. When they were both gone, their three children would be successor trustees. Or so everyone thought………..
WHO INHERITS ? CHILDREN INHERIT BOTH TRUSTS: HALF OUTRIGHT & HALF REMAINING IN TRUST
- Upon the death of the surviving spouse, the trusts passed to the three daughters
- One half of each beneficiary’s share was to be distributed and the other half remained in trust
SURVIVING SPOUSE HAS POWER OF APPOINTMENT
- When one died, the widow or Surviving Spouse was the beneficiary of the other’s trust for his or her lifetime.
- At the death of the second spouse to die, that spouse would have a Power Of Appointment over the Marital Trust : a power to appoint, or give away, the principal of the trust — to anyone.
REVOCABLETRUSTS AMENDED & NEW TRUSTEES ADDED — MOTHER PASSES AWAY
- A number of TrustAmendments were made in the 90’s
- 3 children were made trustees of each of their parent’s RevocableTrusts right now
- The 3 children did not all sign an acceptance of the terms of the trust amendments
- Julia May died on March 24, 1998,
- Sam became the EstateExecutor, or what we call in Florida Probate cirlces the Personal Representative of the estate: what others call an #EstateAdministrator
POST DEATH, A LOT GOING ON: SURVIVINGSPOUSE DISCLAIMS MARITALTRUST, CREATES LLC
- Sam signed a disclaimer of all his rights to the MaritalTrust
- Sam disclaimed his #General Power Of Appointment
- The #Disclaimer was filed with the Probate Court
- Sam signed and filed a 2nd disclaimer on October 13, 1998
- Sam creates a LimitedLiabilityCompany or LLC
- LLCs are often used for EstatePlanning purposes to minimize the Federal Estate Tax. With proper planning for TaxableEstates in excess of $10.5 Million, LimitedLiabilityCompanies can save you EstateTaxes, permitting you to leave more to your HeirsAtLaw, NextofKin or TrustBeneficiaries
TRUST ASSETS TRANSFERRED TO LLC ALONG WITH REAL ESTATE — GUARDIANSHIP CREATED
- Sam transferred the Marital Trust assets, including a brokerage account and real estate to the LLC, and then gave the LLC to his 3 daughters — this would later become a central point to the ProbateLawsuit
- Sam later became the subject of a conservatorship, or what we typically call in Florida a Guardianship
- One of the 3 children died, so her husband opened up a #Probate and was named Estate Executor
TRUSTEE WANTS BROKERAGE ACCOUNT BACK IN MOM’S TRUST — PROBATELITIGATION
- One of the Co Trustees tried to transfer the brokerage account from the LLC back into Mom’s Trust: the MaritalTrust.
- Siblings filed a Probate Lawsuit
- Enter the Probate Litigators
ESTATE LITIGATION: FIGHTING OVER MOM & DAD’S TRUSTS
- Who should be Trustee ?
- Were Dad’s transfers of property to the Marital Trust void ?
- Was Sam acting as Trustee ?
- Was the Disclaimer in-effective ?
- Who gets the Trust Funds ?
The matter ended up going to arbitration and then to a 2 day Trust Trial, with two of the #beneficiaries ordered to pay damages out of their Trust Inheritance — one for $100,000.