Ambiguous Drafting can Cause Expensive Litigation

What’s the meaning of a sentence in a Trust or a Will? once the ink is dry on the paper, the document is expected to “speak for itself” without the need to hunt for external evidence to understand the meaning of the words. A recent case called In the Trust of Roger S. Linn, decided by the Nebraska Supreme Court, illustrates the problems caused by ambiguous drafting.

Roger Linn had established a trust for benefit of his wife Shirley, and his children were the remainder beneficiaries. At a certain point after his death, Shirley moved to an assisted living facility. The Trust document required  the Trustees to pay all income to Shirley, but distribution of principal was within the Trustee’s sole discretion. The trust document specified in Article V.10(f) that the trustees had to pay “any obligations that the Donor’s spouse may incur in acquiring assisted living or nursing home care.” The Trustees paid the down payments and move-in fees to “acquire” the apartment within the assisted living facility, but they refused to pay for the ongoing monthly costs for Shirley to live there. That led to this litigation. Each side argued that the Trust was unambiguous and supported their position. The Trial court (District Court) found that the Trust was clear – unambiguous — and that it did not obligate the Trustees to pay for the ongoing costs. The Supreme Court ruled that the language was actually unclear – ambiguous — and remanded for a trial to determine the intent of Mr. Linn.

Similar cases have occurred in New Jersey, and the standards are similar – the Court looks first to the express words of the document read in conjunction with the document as a whole to arrive at their natural meaning, and seeks to determine the intention of the Trust’s creator in that manner first, before turning to extrinsic evidence. There is a state statute about this — N.J.S.A. 3B:3–33.1(b), which says that the trust’s language and statutory rules of construction control “unless the probable intent of such settlor or of such individual, as indicated by the trust or by such governing instrument and relevant circumstances, is contrary.”  A recent New Jersey case with this problem was In re the Trust of Violet Nelson (2018).  However, as with all litigation, it’s expensive for everyone involved.

Sometimes it’s necessary to draft the language with many more words or sentences to achieve clarity. Always, the draft should be reviewed from the perspective of someone reading it years down the road when all that one can depend on is the words themselves. Will the plain intention be clear? That’s the test of a well-written document.

Careful planning can avoid a crisis. Call us for advice and assistance with preparing your estate and trust plans ……… 732-382-6070

 

Time marches on and the Trust in your Will may no longer be needed

Estate planning can be thought of as a life-long process. A young person may not have much in the way of worldly posessions, but may have particular opinions about who should make the medical and financial decisions for them if they become incapacitated. So a power of Attorney, health Care Directive and basic Will can be signed anytime starting at age 18. Later, you get into a relationship or get married and although you may be leaving everything to your partner or spouse, you wouldn’t want them to have to deal with the hassles of an estate with no Will (including posting a cash bond), so you might make a Will that leaves it all to them and appoints them as Executor with a few backups. After you have children you need a Will that designates their legal guardians (in case your spouse also dies), and if there’s significant assets, you’ll likely want a trust to receive the children’s inheritance (in case your spouse has died).

Things change over time, though. Suppose one of your children is now in their 20s and has become Disabled. That discretionary trust for them may be the wrong trust — they might need their inheritance sheltered in a  Supplemental Needs trust now. The kids may be grown up and doing great – perhaps a trust is no longer needed. Or one of your kids may be strung out or on the verge of divorce.  If your Will doesn’t leave their share in trust, perhaps it should. And it’s also possible that you are in a high-asset situation and signed a Will with certain Trusts for your spouse that just no longer fit the situation because the estate tax laws have changed, or their health situation has changed. Or you’ve been sued for divorce. Or you want to leave charitable bequests.

Just as there’s no one plan that fits everyone, the plan that was the perfect solution when you were in your thirties may be a bad plan now that you’re in you’re 60’s. Bad plans can result in legal and tax and financial headaches that are avoidable with thoughtful planning. Seemingly complicated plans can sometimes be the simpler and perfect  solution, and a ‘simple plan” may not end up simple after all.

Call us for estate planning  at all ages … 732-382-6070