Wills, Trusts, Guardianships, and Fiduciary Administration
| Publication year | 2012 |
Wills, Trusts, Guardianships, and Fiduciary Administration
Mary F. Radford
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This Article describes selected cases and significant legislation from the period of June 1, 2011 through May 31, 2012 that pertain to Georgia fiduciary law and estate planning.1
A. Construction of the Terms of a Will
The case of Stewart v. Ray2 involved the interpretation of the commonly-used term "per stirpes" in the will of Willy Ray, Sr., who was survived by bis eight children.3 One of Ray's daughters, Stewart, served as his conservator during life4 and was named as the executor under his
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will.5 One of Ray's other daughters asked for a declaratory judgment interpreting the following Item IV of Ray's will:
All the rest, residue and remainder of my property, I give, devise and bequeath to my eight (8) children, per stirpes, at the discretion of my Executor, to be divided among them as and in the manner in which my Executor in his or her sole discretion determines to be fair and reasonable. If any of my children do not survive me, his or her share of my property shall pass to bis or her lineal descendants, if any, per stirpes. If a child predeceases me without leaving lineal descendants, his or her share shall pass to my surviving children.6
The Fulton County Probate Court determined this language indicated that the testator intended his children to share equally in his estate.7 Stewart had interpreted the language as giving her sole discretion over how and to whom to distribute the property, including the discretion to distribute the estate to herself alone and thus exclude her sibilings.8 The Georgia Supreme Court affirmed the probate court's interpretation of the language of the will.9 The term "per stirpes" is used in the Georgia Probate Code to describe how property is to pass under the rules of intestacy10 in the event that the primary taker has died before the decedent. A distribution "per stirpes" is a distribution that divides the property among the "stocks" of "roots" of the decedent's family.11 So, for example, if a decedent dies and is survived by one daughter and by two grandchildren who are the children of a son who died before the decedent the daughter represents one "root" and takes one-half of the estate and the children of the deceased son (the other "root") share that
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son's one-half interest.12 When the term "per stirpes" is used in a will, it is presumed that the term directs the property to be distributed "where the law carries it"13 (in other words, in the same manner as the term is used for intestate distribution), although the court may find that the testator intended a different meaning when he or she used the term in the will.14 The court in Stewart emphasized that the testator's intent will prevail in the construction of the will and that the court should look to the "four corners" of the will to find that intent.15 The court also noted that, in addition to the term "per stirpes," Ray used the term "share" throughout the will, indicating that he did not intend to allow the executor to distribute the entire estate to herself, thus depriving the other children of a "share."16 The supreme court also looked to its past ruling in a 1980 case that contained a devise to "my nieces and nephews, per stirpes."17 In that case, the court had determined that the term "per stirpes" indicated a desire that all of the nieces and nephews would be "the stirps" and thus the "primary legatees."18 The court concluded that each of Ray's children were meant to take an equal share of his estate.19 The court said that to grant the executor unbridled discretion to distribute the estate in any other manner would leave the terms "share" and "per stirpes" without meaning.20
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B. Discretionary Power of a Trustee
In Reliance Trust Co. v. Candler,21 the Georgia Court of Appeals affirmed a jury verdict of over $1 million against a trustee and in favor of the remainder beneficiaries.22 The trust was a revocable marital trust set up by Claire Candler in the year before she died. The trust gave the income to Claire's husband, Buddy, for life and provided that the remainder would be distributed among their children and grandchildren as appointed by Buddy in his will.23 The trust also included the following provision:
Whenever in the sole judgment of the [t]rustee the income being paid to [Buddy], together with any other income or periodic payments known to the [t]rustee that are being received by [Buddy] shall be insufficient for his proper support, maintenance, or to enable him to meet any difficulty produced by sickness, accident, or similar cause, such portion of the corpus of this trust estate as in the discretion of the [t]rustee is deemed appropriate shall be paid to him or for his benefit.24
The trust was funded when Claire died, and Buddy then became the cotrustee, along with another individual. A few years later, Wachovia Bank replaced that individual as co-trustee and, in 2001, Reliance Trust Co. replaced Wachovia. The trust contained $2.1 million in assets when Reliance became co-trustee. While Reliance was acting as co-trustee, the trust distributed over $1 million from the principal of the trust to Buddy. When Buddy died, the remainder beneficiaries received $838,762 from the trust. They brought suit against Reliance for the total amount of the distributions made to Buddy (plus interest from the time each distribution was made), and the jury rendered a verdict in their favor.25 The court of appeals affirmed.26 The court of appeals prefaced its discussion by listing the three elements of a breach of fiduciary duty claim: (1) the
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existence of the duty; (2) a breach of the duty; and (3) damages proximately caused by that breach.27 The court determined that all three elements had been satisfied.28 The court noted the trustee's duty to balance the interests of the income and remainder beneficiaries.29 The court then addressed whether the trustee had abused the discretion granted it by the trust instrument, pointing out that a trustee's discretion is subject to judicial control only if such control is needed to prevent misinterpretation or an abuse of that discretion.30 The court of appeals quoted former case law (and said that the 2010 Revised Georgia Trust Code was in agreement)31 for the following proposition: "[A] court may interfere with an exercise of discretion by a trustee only if that discretion is 'infected with fraud or bad faith, misbehavior, or misconduct, arbitrariness, abuse of authority or perversion of the trust, oppression of the beneficiary, or want of ordinary skill or judgment.'"32 The court held that the trustee's actions were "'infected with . . . arbitrariness,' as well as 'oppression of the beneficiary' grandchildren."33 The court pointed to evidence that Reliance had treated Buddy's encroachment requests inconsistently, sometimes asking for
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documentation to support the request, sometimes not.34 Reliance sometimes asked for a budget from him and sometimes did not, and even granted requests that were outside of the submitted budget.35 Reliance sometimes approved mortgage and upkeep payments on Buddy's vacation property, and at other times it did not.36 The court said that "Reliance offered no consistent explanations for these disparities."37 The court concluded that the grandchildren showed they had been damaged by the encroachments that had depleted the value of their remainder interest.38 The court of appeals also found no merit to Reliance's contention that the trial court should have allowed evidence about previous litigation involving Buddy and his competence to serve as trustee of other trusts, nor did it discern error in the trial court's statement to the jury that they were not bound to define "income" in the way it is defined in the Official Code of Georgia Annotated (O.C.G.A.) but should instead look to the intent of the settlor.39 Reliance filed a petition for writ of certiorari with the Georgia Supreme Court on May 1, 2012, but as of the date of the writing of this Article, no action has been taken on the petition.40
C. Property of the Decedents Estate
1. Contents of Decedent's Safety Deposit Box. In Longstreet v. Decker,41 the court of appeals examined the issue of the ownership of the contents of a safety deposit box that had been leased jointly by the testator and another individual. In this case, the testator and her niece entered into a lease agreement to lease a safety deposit box. The agreement allowed either of them access to the box and instructed the bank to provide access to the other in the event of the death of one of them. The testator put cash in the safety deposit box before she died.42
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She told her niece to hold on to the key and "'if anything ever happened to her, [the niece] should remove the contents of the safe deposit box.'"43 The niece interpreted this to mean that she would own whatever was in the box upon her aunt's death. At the testator's death, the niece removed undisclosed sums of cash from the box and refused to give it to the executor of the testator's estate. The estate sued her for conversion and money had and received. The niece asked for and was denied summary judgment based on the terms of the lease contract, which allowed her access to the box both during the testator's life and at the testator's death. The estate was granted its motion for partial summary judgment on the ground that the contract did not indicate that the niece owned the contents of the box, and there was no evidence that the testator had made an inter vivos gift of the contents of the box to the niece.44
On the issue of the lease agreement, the niece claimed the terms of the contract unambiguously gave her "survivorship rights" to the contents of the box.45 The trial court pointed out that the contract governed the...
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