When we put pen to paper, sometimes the words don’t come out right. If that happens, hopefully there’s an opportunity to explain what we meant. Most times that’s true – even in estate planning. For example, we have seen how scrivenor’s errors can be explained. But, for the second time in less than a year, Georgia has limited the role evidence of the settlor’s intent plays under Georgia trust law. In Gibson v. Gibson, the Georgia Supreme Court strictly applied a statute governing the transfer of property to a trust to determine that mistitled brokerage accounts were never transferred to two trusts regardless of the settlor’s intent.
In Gibson, the Georgia Supreme Court had to decide a number of issues arising out of a divorce. One of the multitude of issues on appeal was whether the husband failed to transfer properly two brokerage accounts into two trusts. Of critical importance was that the trusts were irrevocable and the husband was not a beneficiary or a trustee of the trusts. Nevertheless, the husband purportedly transferred the brokerage accounts to the trusts incorrectly listing the husband as trustee of the trusts. The trial court ruled that the accounts were properly transferred to the trusts despite the error in naming the husband as the trustee because the husband demonstrated his intent to convey those assets to the trusts and even listed the trusts’ federal tax identification numbers on the accounts.
The Georgia Supreme Court reversed and ruled that those brokerage accounts never made it into the trusts and, thus, were subject to equitable division. Furthermore, the Georgia Supreme Court ruled that the husband’s intent didn’t matter.
Georgia’s Trust Code contains a statute that provides that “[t]ransfer of property to a trust shall require a transfer of legal title to the trustee.” Thus, we have previously seen that transferring property to a trust, rather than to the trustee, is an invalid transfer.
The Court looked to this statute and stated that the language of the statute is plain that legal title must be transferred to the trustee. The brokerage accounts were not transferred to the actual trustee of the trusts and, thus, the transfer failed to comply with Georgia law.
But why didn’t the husband’s intent matter? Unlike most cases, this was not an inquiry into the intent of a dead settlor; here, the settlor was alive and testified about his own intent. In the only other appellate case interpreting this particular statute, the Georgia Court of Appeals sent a case back to the trial court for further proceedings to determine the settlor’s intent to transfer property to a trust. The Georgia Supreme Court distinguished that prior case on two grounds. First, the trusts here were not self-settled trusts. Second, the other decision relied on authority to the effect that, before enactment of this statute in 2010, “a settlor who declared a trust naming himself as trustee was not required to separately and formally transfer the designated property into the trust.”
Because evidence of the intent of a settlor – whether dead or even living – may be limited, it’s all the more important for settlors to be sure that they say what they mean to say.