This is a classic farm family story. If you practice in any rural areas, you’ve probably heard this one before.
Dad and Son farm together for decades on land owned (in trust) by Dad and Mom.
At some point Dad phases out of actively farming and Son does it all. But Son still consults with Dad about crops and weather and whatnot.
When Mom dies and Dad goes into assisted living, Son and Dad keep talking, and they decide it’s time to spruce up the farmhouse, which Son lives in and which Son will inherit when Dad is gone. Dad approves the plan and Son spends Trust money making the house nicer.
When Dad dies, Son becomes Trustee, and during an extended period of trust administration, Son continues to do things the way they was always done, including commingling funds from the farm business with his personal accounts and with trust money. The “accountings” he provides to his siblings are sporadic and jumbled.
In time, the siblings decide to sue Son (their brother) for the money that was spent fixing up the house, and for failing to account.
The Trial Court nails Son for both failing to account and self-dealing on the home repairs.
In the case of In Re Esther Kratzer Revocable Trust (click on the name to read the case), the Michigan Court of Appeals agrees that Son breached his duties as Trustee by failing to adequately account, but they reverse the Trial Court on the issue of the farmhouse improvements.
As to the farmhouse, the COA says the undisputed evidence is that those improvements were made with Dad’s ok, while Dad was still Trustee and sole present beneficiary. Although Dad delegated much of his Trustee responsibilities to Son, Son was not the Trustee. What’s more, even if Son were the de facto Trustee, his fiduciary duty would have been to Dad and fixing up the farmhouse was not a breach as to Dad because Dad wanted it done.
The case is unpublished.