A Strong Offense
A Stronger Defense
A deed transfers a lake cottage to a revocable living trust. Title to the cottage is still in the name of that trust when the grantors die. The cottage gets distributed according to the terms of that trust, right? According to the Wisconsin Court of Appeals in Simon v. Sheedy, maybe not. It depends whether someone can show that the grantors wanted the asset disposed of in another way.
Patrick and Margaret Sheedy created a revocable living trust in 1995. They deeded their lake cottage along with some other properties to that trust. Under the terms of the 1995 trust, the cottage would essentially end up being jointly owned by the Sheedys’ children. In 2004, Patrick and Margaret created another revocable trust, the terms of which were different from the 1995 trust. In particular, the cottage was to be distributed to only one of the Sheedys’ children. In creating the 2004 trust, Patrick and Margaret did not expressly revoke the 1995 trust even though the 1995 trust contained a “Revocation and Amendment Provision” permitting revocation by a written instrument. Margaret died, and Patrick executed several amendments to the 2004 trust. Under these amendments, the lake cottage would be distributed equally among the Sheedys’ daughters.
The appellate court found that the 2004 trust revoked the 1995 trust because the terms of the two trusts clearly conflicted. Under Wisconsin law, there is no requirement that a subsequent trust expressly revoke a prior trust when the two are inconsistent and cannot be reconciled.
At the time of the death of Patrick and Margaret, however, title to the cottage remained in the name of the 1995 trust. It was argued that this fact was controlling. The appellate court was unimpressed:
While the deed might reflect a lack of care in handling the details of what would happen upon the death of the first spouse, the 2004 trust leaves no ambiguity as to what Patrick and Margaret decided to do with the cottage. Although the deed might not have been updated, it is clear that the cottage did not remain a 1995 trust asset. As we have seen, the 1995 trust was revoked by the 2004 trust.
This finding may sit uncomfortably with some because we often look to title as the evidence of ownership. We frequently see grantors engage in extensive estate planning and later change their minds, as apparently Patrick and Margaret did. Title may be the clearest evidence of what the actual intent of the grantor is. On the other hand, the court certainly cuts grantors and planners some slack here with the formalities of title. We also see, for example, grantors never getting around to having assets, like stock, re-titled in the name of a trust even though they clearly wanted those assets held by the trust. To eliminate this potential ground for trust litigation, transfer of title should be on the “checklist” and checked off when a dispositive scheme changes.
One fact not revealed in the opinion is who the trustees of the trusts were. Presumably Patrick and Margaret were the trustees and, thus, as grantors and trustees of a revocable trust, they retained broad control over the trust assets. Had the trustees of the 1995 trust and the 2004 trust been different, the outcome may have been different.