Friday, October 6, 2006
In In re Chervitz Trust, 198 S.W.3d 658 (Mo. App. 2006), Evelyn left her husband Morris the assets in a trust she established. Included among the trust provisions, in pertinent part, was the following:
[u]pon the death of my spouse, the entire principal remaining in the trust shall be paid over, conveyed and distributed to such person or persons, but excluding the estate of my spouse, free of trust, in such manner and in such proportions as my spouse may designate and appoint in and by my spouse's last will and testament executed either before or after my death making specific reference to this power of appointment. (emphasis added)
…[e]xcept as herein limited, such power of appointment shall be exercisable by my spouse exclusively and in all events.
Morris created his own trust after Evelyn passed away, funding it with only $25.00. He executed a will in which he exercised his power of appointment from Evelyn's trust, and appointed all property subject to that power to his trust.
Upon Morris' death, several beneficiaries and two co-trustees of Evelyn's trust sued saying the language "free of trust" mean free of any trust. The trustee for Morris' trust countered, saying that Evelyn's use of the language "free of trust" showed her intent that her trust assets, upon the death of Morris, should be distributed free of her own trust.
The appellate court said that the settlor's intent, viewed from the trust instrument as a whole and the circumstances surrounding its creation, control the meaning of the trust provisions.
The language "[e]xcept as herein limited" reveals that Evelyn's intent was to only limit Morris' power of appointment so that the property subject to it shall not qualify for the marital deduction in Evelyn's estate and also shall not be considered as part of Morris' taxable estate. Thus, we find that Appellants contention that Item VI(b) reveals Evelyn's intention to avoid trust administration and expenses for beneficiaries other than Morris is without merit.
And while the beneficiaries of Evelyn's trust claimed that her trust assets would be taxed as a part of Morris's gross estate, they lacked standing to challenge the assessment of taxes against Morris's estate.