COA Spits on Fancy Trust Assignment

By Doug Chalgian on June 24, 2023

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What if A creates an irrevocable trust appointing B and C as immediate co-Trustees, and A, B and C all sign a so-called “declaration of trust ownership” which is separate from the trust agreement itself and which declares that all of A’s bank accounts and investment accounts are to be treated as trust property; but then when A dies it turns out that C is named the beneficiary on one of A’s investment accounts?

Does C get to keep the investment account as her own, or is it a trust asset?

These are the facts that gave rise to the unpublished opinion in the case of Ronald Schaddelee Irrevocable Trust (click on the name to read the case).

The “Declaration” in this case seems to be something more than the usual comprehensive trust assignment signed only by the settlor, in which case I think most probate lawyers would agree that the beneficiary designation on the investment account would trump the terms of the trust agreement.  Here it seems that the co-trustees actually signed a document which, in addition to listing the assets intended to be subject to the trust agreement, recites the following statements:

    • I will hold all property described above solely and exclusively for and on behalf of the trust as trust owner, subject to any and all instructions from the acting trustee.

    • Except to the extent of beneficial interests provided to me under the terms and provisions of the trust agreement, as now written and as may be amended in the future, I have and shall have no personal interests in any of the properties described above.

To me that seems pretty clear that C waived her right to inherit anything other than what the terms of the trust provided.  But the Court of Appeals sees it different.  The COA affirms the trial court’s refusal to compel C to disgorge the property she received as a beneficiary on the disputed investment account, holding that the Declaration was not a contract and had no binding effect, but was rather merely a statement of intent.

[Note: The opinion seems to go out of its way to avoid saying that the co-Trustees signed the Declaration along with the settlor, but from the facts as spelled out, one has to conclude that they did sign.]

[Note also: If you read this blog frequently, you know that I am somewhat of a conspiracy theorist in that I believe that the COA has a propensity to manipulate the presentation of facts in a manner designed to make their conclusions sound more just.  In my conspiratorial vision, the COA’s failure to simply acknowledge that the co-trustees signed onto this “Declaration” is another good example of that type of fact-manipulation.]




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mm By: Doug Chalgian
Doug Chalgian

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