Case law relating to trusts and estates is constantly evolving. To keep you updated, this newsletter reports on new decisions of note. I hope you and your clients find it helpful.
Here's the latest from the Massachusetts courts:
On April 28, 2009, the Supreme Judicial Court issued two decisions in trust cases that had been reserved and reported by a single justice. In both cases, the SJC denied the equitable relief being sought.
First, in Linehan v. Linehan, SJC-10303 (Apr. 28, 2009), the plaintiff trustees sought a declaratory judgment pursuant to G.L. c. 231A that the settlor's late son could validly exercise his power of appointment to appoint his share of trust property in further trust for the benefit of his spouse and issue, as he did in his will. The SJC ordered the dismissal of the complaint because there was no actual controversy among the parties, as required under Chapter 231A. The widow and children of the settlor's late son had admitted the factual allegations in the complaint and assented to the relief requested. The SJC explained that although it has sometimes granted similar relief in trust cases that lacked the usual adversary characteristics, those cases typically involved evidence of an adverse position by the IRS or of some uncertainty that affected the trustees' ability to fulfill their duties or plan for future events. There was no such evidence in this case, where the trustees alleged only that the children of the settlor's late son "could" face "possible" tax consequences if his exercise of his power of appointment were deemed invalid.
Second, in Fierst v. Laird, SJC-10338 (Apr. 28, 2009), the SJC denied the plaintiff trustees' request to reform trusts that they allege will produce tax results inconsistent with the settlor's tax objectives. Although the SJC again noted that it has decided many cases such as this which lack some of the usual adversary characteristics, the SJC declined to grant the requested reformation in this case because the trustees did not provide satisfactory evidence and did not present adequate appellate arguments to demonstrate that, as a matter of Federal tax law, the trusts will produce the inconsistent tax results alleged. The SJC concluded its decision with a caution that actions of this sort should not be brought lightly.