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WILLS/TRUSTS 10: Dispute over the distribution of trust assets.

In this case, the Revocable Living Trust was established in 1997. The Trust Agreement lists the Settlor as the initial trustee, appellant as the first successor trustee, and Settlor’s children as the beneficiaries.

According to the Trust’s General Assignment and Declaration, Settlor transferred, conveyed, and assigned to the Trust all of her right, title and interest in and to all of her personal property, however owned, whether tangible or intangible, now owned or later acquired. That property is to be distributed in accordance with the Trust Agreement, which differentiates between Settlor’s farm assets and non-farm assets.

Any Farm Assets which the Trust owns (if any) shall be distributed, in equal shares, to Settlor’s sons. The Nonfarm Assets shall be distributed to Settlor’s daughters in approximately equal shares, but only in amounts sufficient to assure that each daughter receives a share equal to the shares received by Settlor’s sons. All remaining property shall be shared approximately equally, by all children.

However, it is my desire that each of my daughters receive an amount equal to at least $100,000. To that end, if I have retained any mineral rights on land previously conveyed, including any ongoing oil and gas leases, the income from such leases and any other mineral rights, shall be paid to my daughters until the total amount of such payments, together with the net amounts they receive from this trust, shall be equal to $100,000 for each of my daughters. Thereafter, the income from any ongoing leases is to be shared equally by all my children, and the Trustee shall convey the mineral rights to the property owners.

On the same day Settlor established the Trust she both leased and deeded to her sons the exact farmland described above.  The Farm Real Estate Lease has Settlor, trustee of the Trust, as landlord of the property, and son as joint tenants.  In contrast, the deed makes no mention of the Trust, stating instead that Settlor quit claimed and conveyed the farmland to her sons, excluding all mineral rights, but retained a life estate in the property which included the right of possession and rents.

Settlor subsequently passed away in 2014.  The daughters filed an initial petition for construction, supervision, and addition of assets to the Trust, alleging that the successor trustee of the Trust, excluded the above farmland from the Trust inventory, which drastically reduced the shares they would receive upon distribution.

The Trust and deed as estate planning documents are wholly inconsistent because the removal of $700,000 from the trust gives the boys an enormous windfall and is totally incongruent with the trust addendum which includes the real estate in the trust because it treats each child equally. The language of the trust was written to include the farm property in the dispositive intentions of the Settlor, but the farmland could not be considered a Trust asset at the time of distribution because the property had been deeded to the sons.

The trial court found that both the lease and the legal description of farmland attached to the Trust Agreement are defective because the Trust never owned the property, as evidenced by the quitclaim deed and its recording in April 1998.

A carefully drafted and properly executed estate plan can pass your property to your loved ones in the manner of your choosing and helps ensure that your children and other family members understand your wishes, thus minimizing the risk of disputes and litigation.  Trusts are one of the most commonly used estate planning documents and can serve a variety of purposes.

Aldrich Legal Services has earned its reputation for integrity and trusted service, we are committed to helping individuals and families plan for the future and obtain peace of mind.

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