Thursday, September 19, 2013
My thanks to Evelyn Brody for bringing the South Carolina Supreme Court's decision in Wilson v. Dallas to my attention. The case arose out of a dispute involving the Estate of James Brown, his alleged spouse, and several of his adult children. James Brown provided in his will and an irrevocable trust that the bulk of his estate should go into a newly created charitable trust, but the individuals involved sought to set aside those directions and instead have the estate divided pursuant to the applicable laws of intestate succession. The then South Carolina Attorney General become involved and directed negotiations that ultimately led to a settlement under which approximately half of the estate went to a charitable trust to be governed by an AG-appointed trustee, and the other half would go to the challenging individuals. The court-appointed personal representatives of the estate and trustees of the irrevocable trust challenged the settlement (and their removal in the wake of the circuit court's approval of the settlement).
While there are many interesting aspects of the decision, the most significant is the Supreme Court's criticism of the AG's role in shaping the settlement that the court ultimately found was not just and reasonable. I will let the court's speak for itself:
- "In our view, the evidence does not support the finding that the compromise was just and reasonable. The compromise orchestrated by the AG in this case destroys the estate plan Brown had established in favor of an arrangement overseen virtually exclusively by the AG. The result is to take a large portion of Brown's estate that Brown had designated for charity and to turn over these amounts to the family members and purported family members who were, under the plain terms of Brown's will, given either limited devises or excluded."
- "We find the compromise proposed here is fundamentally flawed because the entire proposal is based on an unprecedented misdirection of the AG's authority in estate cases."
- "The AG undoubtedly has the authority to intervene to protect the public interest of a charitable trust. However, the AG has no authority to become completely entrenched in an action that began here as one to set aside a will and for statutory shares, direct the settlement negotiations, and then fashion a settlement that discards Brown's will and his 2000 Irrevocable Trust and replaces them with new trusts, only to give himself sole authority to select the managing trustee. By so doing, the AG has effectively obtained control over the bulk of Brown's assets and has given his office unprecedented authority to oversee the affairs of the parties that has not heretofor been recognized in our jurisprudence."
- "As the enforcer of charitable trusts, we believe the AG's efforts would have been better served in attempting to make a cursory evaluation of the claims rather than directing a compromise which ultimately resulted in the AG obtaining virtual control over Brown's estate. Based on all the circumstances, we do not believe the effect of the compromise is just and reasonable, and we cannot condone its approval."
- "The settlement provisions allowing the AG to select the trustee, and his continued influence over the trust overreaches his statutory authority, as there is no provision allowing an AG to become involved in the day-to-day operations of a trust. Moreover, the AG's primary job is the enforcement of charitable trusts, and in this case, the compromise dismantles the existing charitable trusts, to great ill effect on Brown's estate plan, rather than enforces it."
The Supreme Court concluded by remanding the case to the circuit court to appoint fiduciaries to implement the original directions provided for in the will and irrevocable trust.