T&E Litigation Newsletter - 8/5/13

August 2013Advisories

The month of July produced two Appeals Court decisions of passing interest and one much-anticipated SJC decision that is garnering national attention.

In Harp v. Swartz, 83 Mass. App. Ct. 1139 (July 1, 2013) (Rule 1:28), the Appeals Court affirmed the removal of trustees who had successfully increased the value of the trust property, and were not found to have breached their fiduciary duties, but who were nevertheless neglectful in their administration of the trust. The trial court noted that the trustees had failed to file accounts for ten years, that there was a family division between the plaintiffs and the trustees, and that one of the trustees is physically deteriorated because of his advanced age and resides outside of Massachusetts. In affirming, the Appeals Court explained that trustee removal is a matter of equity and courts are vested with broad discretion in determining whether removal is appropriate.

In Scanzani v. Scanzani, 84 Mass. App. Ct. 1102 (July 12, 2013 ) (Rule 1:28), the Appeals Court affirmed the dismissal of the plaintiffs’ action seeking the appointment of a guardian for their mother, who had revised her estate plan to exclude the plaintiffs. The trial court, which noted that the complaint was more akin to one for undue influence, even though undue influence was not pled, found that the plaintiffs had failed to establish their mother’s incompetency. The Appeals Court held that the trial court judge had not abused his discretion in making this finding, citing the standard that an individual is presumed competent unless demonstrated to be incompetent by a preponderance of the evidence.     

Most significantly, in Morse v. Kraft, Case No. SJC-11233, 2013 Mass. LEXIS 629 (July 29, 2013), the Supreme Judicial Court addressed the question of whether Massachusetts common law permits trustees, in their discretion, to “decant” assets of an irrevocable trust by distributing them to another trust for the benefit of one or more of the beneficiaries. The SJC held that decanting is permitted by the language of the trust at issue, which gives the trustee broad discretion to make payments of income or principal to beneficiaries or for their benefit without first applying to the court.  Based on this language, the SJC concluded that the trustee can transfer property in the trust to new trusts without the consent of the beneficiaries or the court. The SJC limited its holding, however, to trusts with this particular kind of language. “[W]e recognize a trustee’s decanting power given the trust language and the circumstances here . . . [but] we decline to adopt the request of the Boston Bar Association, in its amicus brief, that we recognize an inherent power of trustees of irrevocable trusts to exercise their distribution authority by distributing trust property in further trust, irrespective of the language of the trust.” This limitation came with the following caution to settlors and their lawyers: “In light of the increased awareness, and indeed practice, of decanting, we expect that settlors in the future who wish to give trustees a decanting power will do so expressly. We will then consider whether the failure to expressly grant this power suggests an intent to preclude decanting.”

This update was authored by Mark Swirbalus, a Director in the firm's Probate & Fiduciary Litigation group. For questions or additional information on this topic, please contact Mark at [email protected] or contact any member of the Probate & Fiduciary Litigation group.

This newsletter should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

Pursuant to IRS Circular 230, please be advised that, this communication is not intended to be, was not written to be and cannot be used by any taxpayer for the purpose of (i) avoiding penalties under U.S. federal tax law or (ii) promoting, marketing or recommending to another taxpayer any transaction or matter addressed herein.

©2013 Goulston & Storrs – A Professional Corporation All Rights Reserved