Probate & Trust Law Section Conference Manual ... - Minnesota CLE

adding the “general charitable intent” language, the trustee also asked that
the trust be reformed to avoid certain taxes on the undistributed income of
the trust. The trustee was finding it difficult to comply with IRC § 4942
(which imposes a tax on any undistributed income retained by a private
foundation at the end of any taxable period in which the initial tax is
imposed) because the scholarship amounts could not exceed $10,000 (or
multiples thereof). Therefore, the trustee asked that the trust be reformed
to allow the scholarship committee to distribute all the distributable funds
in one or more scholarships. The Massachusetts Supreme Court allowed
the trust to be reformed as requested because the record was clear that the
settlor intended to provide scholarships annually and that she intended that
as much of the trust income as possible be used for that purpose. As it
was written, the trust agreement resulted in tax consequences that reduced
the amount of income used for scholarships and frustrated the settlor’s
intent. The court further found that the proposed reformation would not
be adverse to any person’s or entity’s interests under the trust agreement
as there were no other beneficiaries. Therefore, the reformation was
allowed.
8. Koulogeorge v. Campbell, 2012 Ill. Ct. App. 112812 (2012). The
deceased settlor of a revocable trust agreement did not adeem or
revoke certain bequests to charitable foundations by lifetime gifts
made by the settlor to such foundations. During his lifetime, the
decedent was a member and regular contributor to the Rotary Foundations.
The decedent died in 2007, leaving behind a pourover will and revocable
trust agreement to dispose of his estate. The trust agreement provided
that, upon the decedent’s death, the trustee was to distribute a certain
number of shares of Walgreen Co. stock to various beneficiaries, including
the Rotary Foundations, pursuant to Exhibit A to the trust agreement. The
decedent then gave the Exhibit A in a sealed envelope to his nominated
trustee. In the fall of 1999, the decedent made charitable contributions of
Walgreens stock to the Rotary Foundation, among others. At the time of
the decedent’s death, he owned an insufficient amount of shares to satisfy
all of the gifts on Exhibit A. The trust beneficiaries, who were the
decedent’s descendants, argued that the lifetime gift made by the decedent
to the Rotary Foundations adeemed the gifts to be made to such
foundations from the trust estate at the decedents’ death. The court held
that to presume that the decedent intended to adeem gifts to the Rotary
Foundations would be contrary to the plain language of the trust as a
whole, and the trust beneficiaries had failed to demonstrate that a latent
ambiguity existed in the trust agreement.
9. Otto v. Gore, 45 A.3d 120 (Del. 2012). Extrinsic evidence may be
considered when determining the validity of a trust agreement and it
was not the settlors’ intent to treat adult adoptees as grandchildren.
Settlors created two documents in 1972, one in May and another in
October due to concerns over their estate tax liability exposure. Some
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