"i'll Give You My Trust Assets, When You Pry Them from My Cold, Dead Hands": the Supreme Court of Georgia Clarifies That a Mere Challenge to a Trust's Formation Will Not Trigger an in Terrorem Clause

• Publication year: 2023

"I'll Give You My Trust Assets, When You Pry Them From My Cold, Dead Hands": The Supreme Court of Georgia Clarifies That a Mere Challenge to a Trust's Formation Will Not Trigger an In Terrorem Clause

Kiana Johnson

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"I'll Give You My Trust Assets, When You Pry Them From My Cold, Dead Hands": The Supreme Court of Georgia Clarifies That a Mere Challenge to a Trust's Formation Will Not Trigger an In Terrorem Clause

Kiana Johnson^*

I. INTRODUCTION

Imagine a television infomercial wakes you up from your sleep. While refocusing your vision, you faintly hear the television say: "Are you a disgruntled beneficiary?" You think to yourself, "I'm not disgruntled, but I sure wish I could have more money." You are slightly intrigued, so you crank up the volume on the television, and the infomercial emphatically states, "Do you believe you are entitled to 'ill-gotten gains'?" You think to yourself, "I have no idea what ill-gotten gains are." I just want ownership over the assets I —."

The television ad interrupts your contemplation with the solemn question, "Has a departed loved one's lingering authority over inherited property caused harm to you, a friend, or family member?" You glance

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about your house and wonder, "Wait a minute, is this advertisement reading my mind?" After a little delay, the television announces, "Of course, we're not reading your mind. We are here to inform you, according to the Georgia Court of Appeals's reasoning in Giller v. Slosberg,¹ if you are willing to secure a trust's assets by holding a gun to a settlor's head and have the foresight to insert an in terrorem clause, you may be entitled to financial compensation." "That's absurd!" your inner monologue continues. "The American court system would never permit such terrible public policy." You switch off the television and go back to sleep, certain that everything you have just heard was a dream—but what if it wasn't?

Prior to the Supreme Court of Georgia's ruling in Slosberg v. Giller,² legal instruments containing an in terrorem clause, commonly referred to as a no-contest clause, permitted those whose influence overpowered the decedent's free will to escape liability with unjustly received benefits. The court of appeals' acknowledged that it was against public interest to allow a person to exert undue influence over a trust's formation to employ in terrorem clauses to cloak their actions.³ The court reached its decision based on this assumption, holding that it is not the role of the judiciary to create public policy.⁴

Refusing to skip common law's prologue, the supreme court reversed the court of appeals holding.⁵ The court recognized in Giller that an in terrorem clause does not prevent an interested beneficiary from initiating legal proceedings to contest the valid formation of a trust; because contesting the validity of a legal instrument is a matter of common law and not public policy.⁶

II. FACTUAL BACKGROUND

A bitter battle between siblings occurred when their elderly father revoked an existing power of attorney (POA), issued a new POA, and modified crucial financial accounts linked to his estate-planning strategy.⁷ In the latter years of David Slosberg's life, he was reportedly entangled in intense disputes between his children over the management

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of his affairs.⁸ These occurrences included legal proceedings, outbursts of yelling, incrimination, physical altercations, restraining orders, and complaints filed with the police.⁹

Nevertheless, this dispute started with two parents, David and Myrna Slosberg, who just wished to distribute their wealth evenly among their children. When Myrna passed away in 2007, David designated his son, Robert (Bobby) Slosberg as his agent under a properly executed power of attorney. After David was admitted to the hospital for surgery in October 2011, the family's formerly peaceful dynamic began to deteriorate. David began to exhibit signs of diminished mental capacity, which emphasized the necessity of the durable POA authorizing Bobby to act as his attorney-in-fact.¹⁰

The first hint of impending strife between the siblings arose in 2012, when David's daughters Suzanne (Suzy) Giller and Lynee (Amy) Seidner sought to replace their brother Bobby as their father's attorney-in-fact.¹¹ David reportedly confided in his former attorney, Steve Merlin, that David feared he was "being brainwashed" after signing a new POA on February 22, 2013. This POA was designated to all three of his children with a majority rule, and then six days later, David executed a second POA that entirely excluded Bobby as David's attorney-in-fact. Because of the new POA, David's daughters now had exclusive authority to make decisions on their father's behalf.¹²

Employing that authority, the sisters made their next move, and the second point of contention arose in late April 2013. David's long-time accountant, Dick Babush, and financial advisor, Roger Sullivan, were asked to transfer the late Myrna Slosberg's trust assets, as well as all of David's assets, from Wells Fargo in Atlanta to First National Bank & Trust (FNBT) in Wisconsin.¹³ The disparity between these requests and David's previous conservative approach to investing concerned Babush and Sullivan. However, when they approached David about these transactions, he denied knowledge of the transfer of his assets.¹⁴

In March of 2013, the controversy intensified.¹⁵ Bobby claimed that after years of visiting his father several times per week, Amy and Suzy

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began isolating David. Bobby reported that in the final year and a half of his father's life, he was only allowed to visit him four times.¹⁶

The sibling rivalry significantly escalated when David created the David K. Slosberg Asset Protection Trust (Trust #2) on January 17, 2014.¹⁷ The irrevocable trust stated Bobby would receive a "nominal gift" of $25,000 upon David's passing and that the remaining 80% of the trust's assets would be divided evenly between Suzy and Amy.¹⁸ While David had previous trust agreements, Trust #2 was distinctive in that it featured the following in terrorem clause:

[S]hould my son, ROBERT KENNETH SLOSBERG, or his legal representative, or either of my daughters, or their legal representatives[,] contest or initiate legal proceedings to contest the validity of this Trust or my Last Will and Testament executed by me and dated October 31st, 2013, or any provision from being carried out in accordance with its terms as I expressed (whether or not in good faith and with probable cause), then all the benefits provided herein for my son and/or for my daughters are revoked and annulled. Such benefits, if not a part of the residue of my estate, shall go over to and become a part of the remainder of my Trust Estate.¹⁹

In essence, the in terrorem clause stated that if any of David's children, namely Bobby, contested or initiated legal proceedings to challenge the validity of the trust instrument, the challenger would be barred from receiving any assets from that trust. The challenger would effectively forfeit his or her share of the trust property.

The family's controversy reached its boiling point in May of 2013. Bobby filed a claim for declaratory judgment a year before David passed away, alleging that his sisters, Suzy, and Amy, had used undue influence to change their father's inheritance plan.²⁰

A year after their father's death on August 31, 2014, Bobby filed his third amended complaint to consist of several claims, most importantly asserting undue influence.²¹ In his complaint, Bobby sought relief in the form of a constructive trust and injunctive relief to prohibit his sisters from receiving any benefits to which he would be entitled.²²

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After a two-and-a-half-week trial,²³ the trial court concluded the trust instrument was void due to Suzy and Amy's undue influence.²⁴ Suzy and Amy filed a motion for judgment notwithstanding the verdict.²⁵ Not disputing that their "father's actions were the product of diminished capacity and undue influence,"²⁶ but "that the in terrorem clause . . . precluded [Bobby] from asserting the undue-influence claim in the first place."²⁷

The trial court denied the motion.²⁸ The Georgia Court of Appeals, however, reversed after hearing Suzy and Amy's pleas for an appellate correction of a potentially everlasting trial court error on Georgia case law.²⁹ Despite Suzy and Amy's "undisputed role in unduly influencing their father to secure the trust containing the in terrorem clause," the court was "constrained to conclude that [Bobby's] 'initiation of legal proceedings triggered the (trust's) in terrorem clause.'"³⁰

Following this holding, a petition for writ of certiorari was filed in July of 2021.³¹ The Supreme Court of Georgia was urged to approve the petition in an amicus curiae brief that was filed by twenty-three Georgia estate planning attorneys.³²

The supreme court granted certiorari to address whether an in terrorem clause barred a plaintiff's claim and resulted in forfeiture of any benefits from the trust.³³ Specifically, the court evaluated whether an in terrorem clause precludes an individual from even initiating a legal proceeding to challenge the clause. This court held that an individual's initiation of legal proceedings or challenge to an invalid legal instrument does not trigger a forfeiture of the trust instrument's assets.³⁴

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III. LEGAL BACKGROUND

A. Trust Instruments

A trust is a fiduciary relationship resulting from a settlor's intention to impose legal obligations on a person to retain, manage, or otherwise administer property for the benefit of another person.³⁵ In general, a private trust's terms are whatever the settlor intended them to be when the trust was established, provided that the terms are legal.³⁶ A majority of express trust disputes—even when the initial facts arose during the settlor's lifetime—occur after the settlor has died.³⁷ As a result, the "touchstone" for understanding...