The Trust Instrument Controls

In In re George W.Scheer Inter-Vivos Trust, the Court of Appeals of Michigan demonstrates thereluctance of courts to allow equity to interfere with the language of trustinstruments.

The beneficiaries of a trust came to a settlement agreementwhereby the trust assets would be distributed in varying amounts among thebeneficiaries.  An issue arose regardingthe distribution plan proposed by the successor trustee.  Another beneficiary objected to the planbecause the successor trustee (1) would receive a disproportionately greatershare of stock and (2) used the stock value at the time of grantor’s death todetermine distributions, value that had declined significantly since. 

The probate court agreed the successor trustee’sdistribution plan achieved an inequitable result, but the trust instrument andsettlement agreement controlled.  Thesettlement agreement provided distributions would be made according to theterms of the trust.  And the trustinstrument gave the trustee the power “to make distribution in cash or in kindand to determine the value of the property distributed in kind.”

See Luke Lantta, Equity Will Not Interfere with PlainLanguage of Trust Instrument and Trust Settlement Agreement, Bryan CaveFiduciary Litigation, Aug. 6, 2013.