A trustee‘s intent is an awfully important thing, but for some reason it often gets forgotten or ignored by courts, lawyers, and litigants. An area in which the trustee’s intent and the four corners of the trust instrument may be most at risk is when the parties in trust litigation start hammering out a settlement agreement. What deference is given the trust instrument when the parties settle trust litigation?
In In re the Matter of the Frank J. Rekucki, Sr. Revocable Trust under agreement dated September 8, 1997 (unpublished), the Court of Appeals of Minnesota answered that question under Minnesota law: a lot.
After Frank Rekucki, Sr. died, his adult children got involved in litigation regarding his revocable trust. Some of the parties signed a settlement agreement that provided that the trustee of the trust would resign and would be replaced by two specifically named co-trustees. One of the parties then petitioned the court to enforce the settlement agreement. The district court entered an order enforcing the settlement agreement, but the court of appeals reversed.
The problem was that Frank Sr.’s revocable trust instrument contained a specific provision regarding the appointment and succession of trustees. Under Minnesota law, a trustee has no inherent power to appoint a co-trustee or her successor, and, absent legislation to the contrary, the trust instrument controls the appointment of trustees. And, only by order of a district court, can a successor trustee other than the one specified in the trust instrument be appointed.
Because the settlement agreement conflicted with the trust instrument provision regarding the appointment and succession of trustees, the settlement agreement was unenforceable.