This article was first published in Private Wealth.
The year 2015 provided another bumper crop of decisions in trusts and estates disputes. While the courts generally experienced a nationwide decrease in the filing of civil lawsuits, trust and estate disputes continued to fill court dockets and a few noteworthy trends emerged. The last 12 months brought notable decisions in the areas of: a) jurisdiction, b) removal of a trustee, c) exculpatory clauses and d) undue influence. The new decisions are important guideposts and warning signs for families to consider in their trust and estate planning.
What Court Decides?
In 2015, courts continued to struggle with the issue of what court should decide cases that are brought by estate beneficiaries who assert a panoply of claims against the executor. Non-probate courts continued to affirm their exercise of jurisdiction over claims of executor wrongdoing, including those that are typically the province of probate courts, such as the removal of an executor. In retaining jurisdiction over these cases, the courts continued to develop the parameters of the “probate exception” articulated by the U.S. Supreme Court in Marshall v. Marshall, 547 U.S. 293, 311-12 (2006), which limited the exclusive jurisdiction of probate courts to the probating of a will, the administration of an estate or the disposing of property that is before the probate court.
Queen v. Schmidt, C.A. Nos. 10-2017 and 11-2117, 2015 WL 5175712 (D.D.C. Sept. 3, 2015), illustrates this trend. In Queen, a federal district court retained jurisdiction over a lawsuit brought by trustees and a personal representative, who was terminated by the alleged trust protector and replaced when some of the estate’s real property was sold against her wishes. Rejecting the defendants’ argument that the case belonged in probate court because it was inextricably intertwined with the administration of the decedent’s trust, the court refused to remand the case to the Superior Court, finding that the court had diversity jurisdiction and that the probate exception did not apply.
Similarly, in Geremia v. Geremia, 125 A.3d 549 (Conn. App. Ct. 2015), the Connecticut Court of Appeals held that the trial court erred when it found that only the probate court had jurisdiction over the plaintiffs’ claims of breach of fiduciary duty, tortious interference with reasonable expectation of inheritance, conversion, unjust enrichment and other claims arising out of the defendants’ pre- and post-death handling of the decedent’s assets. Noting that the probate court is a juridical body of limited jurisdiction created by statute, the court held that the trial court should have exercised jurisdiction over the plaintiffs’ claims, which were broader than the probate court’s jurisdiction. See also Potts v Potts, Civ. No. WDQ–13–1986, 2014 WL 4060031 (D. Md. Aug. 13, 2014)(claims for failure to provide a trust accounting, breach of trust, constructive trust, conversion, unjust enrichment and removal as trustees, relating to trust created by testator’s will, properly remained in federal court rather than in state probate court).
Removal of Trustees
In 2015, trustees continued to remain largely impervious to efforts to remove them through court action.
In In re Donald Briks Revocable Lifetime Tr. Agreement, No. A14-0318, 2014 WL 7011200 (Minn. Civ. App. Dec. 15, 2014), review denied (Feb. 25, 2015), the court refused to remove trustees who allegedly favored certain relatives over the plaintiff in making distributions from the trust and in other actions. Finding that the trustees acted in good faith, relied on practices observed by the trust settlor before his death, or could correct past failures, the court declined the request to remove the trustees.
Similarly, in In re Trust Fund Created Under Terms of Last Will and Testament of Baumgart, 868 N.W.2d 568 (S. D. 2015), the court refused to remove a trustee who allegedly committed breach of the trust by leasing land at below market rates to a relative by marriage, delaying in responding to requests for information, missing tax payments, failing to provide full liability insurance for trust property, and suffering from a conflict of interest. Finding that these alleged breaches were not individually or cumulatively serious, the court refused to remove the trustee.