New York Probate and Estate Administration Lawyer Blog
In Matter of Estate of June F. O’Connor, the Surrogate’s Court considered a case involving the interpretation of a trust and the distribution of trust assets to the beneficiaries. The case is a reminder of the importance of clear and unambiguous language in trust instruments, and the potential consequences of unclear or ambiguous language.
Background
June F. O’Connor established a trust in 2003, which was later amended in 2007 and 2009. The trust instrument provided for the creation of two separate trusts upon the death of the settlor, referred to as Trust A and Trust B. Trust A was a marital trust for the benefit of the settlor’s husband, while Trust B was a family trust for the benefit of the settlor’s children.
The trust instrument also included a provision that directed the trustee to distribute the remaining assets of the marital trust to the settlor’s children upon the death of the settlor’s husband. However, the provision did not specify whether the distribution should be made to the children outright or in further trust.
Discussion
After the settlor’s husband died, the trustee sought guidance from the court regarding the distribution of the remaining assets of the marital trust. The trustee argued that the provision directing the distribution of the assets to the settlor’s children should be interpreted as requiring that the assets be distributed to the children in further trust. The trustee claimed that this interpretation was consistent with the settlor’s intent and the overall structure of the trust instrument.
The beneficiaries of the family trust, on the other hand, argued that the provision should be interpreted as requiring the assets to be distributed outright to the settlor’s children. The beneficiaries claimed that the provision was clear and unambiguous, and that the settlor intended for the assets to be distributed outright to her children.
Analysis
The court ultimately sided with the beneficiaries of the family trust, finding that the provision directing the distribution of the assets to the settlor’s children was clear and unambiguous, and that the settlor intended for the assets to be distributed outright to her children. The court noted that while the settlor had included provisions in the trust instrument directing the creation of trusts for the benefit of her husband and children, she had also included language indicating that she intended for her children to receive the remaining assets of the marital trust outright.
The court also noted that the settlor had been advised by an attorney during the drafting of the trust instrument, and that the attorney had specifically advised the settlor to include language in the provision directing the distribution of the assets to her children that would make it clear whether the distribution should be made outright or in further trust. However, the settlor had chosen not to include such language, which the court found to be a clear indication of her intent for the distribution to be made outright.
The court’s decision in this case highlights the importance of clear and unambiguous language in trust instruments, particularly with regard to provisions directing the distribution of trust assets. The case also serves as a reminder of the potential consequences of unclear or ambiguous language, which can result in disputes among beneficiaries, as well as between beneficiaries and trustees.
Conclusion
When creating a trust, it is important to work with an experienced New York estate lawyer who can help ensure that the language of the trust instrument is clear and unambiguous, and that it accurately reflects the settlor’s intentions. It is also important to periodically review and update the trust instrument as needed, to ensure that it remains current and reflects any changes in the settlor’s circumstances or wishes.
In addition, it is important for trustees to seek guidance from the court when there is uncertainty or disagreement regarding the interpretation of the trust instrument, in order to minimize the risk of liability and ensure that the trust assets are distributed in accordance with the settlor’s wishes.