Taxation & Estate Planning

To Restate Or Not To Restate - That Is The Question

By michael

Professor Berry tangentially raises the above question in a post today on the Wills, Trusts & Estates Prof Blog via his telling of the case of Soefje v. Jones, 270 S.W.3d 617 (Tex. App.?San Antonio 2008, no pet. h.).

The case pits brother against sister in a dispute over the meaning of a trust amendment to dad’s trust.  “Brother argued that the amendment only added to the property to which Sister was entitled under the original trust instrument but left the property to which he was entitled intact.  On the other hand, Daughter claimed that the amendment revoked the entire property distribution provided for in the original trust causing property originally given to Brother to pass under the trust?s residuary clause permitting her to share in that property.” Sounds like brother was being reasonable, sister was being greedy.  But I haven’t read the trust yet folks so shelve the mail bombs.

Daughter won.  Brother appealed.  Appellate Court reversed:

The court began its analysis by recognizing that a trust amendment does not revoke a provision of the original trust ?unless the words used in the amendment clearly show the [settlor?s] intent to revoke the trust.?  Soefje at 629.  The court studied the trust and the amendment and held as a matter of law that the instruments are unambiguous.  The amendment merely added to Sister?s entitlement by giving her certain properties to which Brother was originally entitled under the original trust.  The amendment did not act to revoke gifts of other property to Brother.

The case is interesting in and of itself but its more useful as a tale of the trouble with amending one’s trust.  If you want to substitute a fiduciary, amend how qualified assets are handled, even expand/reduce the fiduciary’s authority, an amendment can be fine.  But they’re tricky.  They muddle the Grantor’s original intent which is drawn from the whole of the original document, its one more piece of paper for you to lose as the years pass and they’re usually more expensive than the change alone is worth.

The question therefore is, do you amend the trust?  Or do you restate the trust in its entirety?

More often, I’m a fan of the latter option.  The sanctity of the single document is maintained and you lessen - to the extent possible - the likelihood of interpretive litigation.  Also, believe it or not, the cost is about the same.

Full post as published by The Ohio Trust & Estate Blog on April 18, 2009 (boomark / email).