1. What is fair might not be equal, but may it may be appropriate.
2. When you know what you have and who are the natural objects of your bounty you can give what you want to whom you want, when you want and the way you want.
3. Whatever you say in your estate planning documents needs to be written clearly and precisely.
Earl Long’s legacy will continue for more years than he probably would have cared to know. I did not know Mr. Long but I was able to read a lot about him in a recent South Dakota Supreme Court opinion. Anyone can read the opinion on the South Dakota Supreme Court’s website, here is the link: http://ujs.sd.gov/uploads/sc/opinions/26748.pdf
Earl was 79 when he died in 2010. The South Dakota Supreme Court just recently upheld his estate plan as written. The opinion was handed down on April 30, 2014.
After Earl died, one of his daughters decided to challenge his entire estate plan. Earl had done some relatively sophisticated estate planning. He had thought about it pretty clearly, he had a will and a living trust and he had a Limited Liability Company to hold land and manage his business. He worked on the plan for several years.
He had a thoughtful attorney working with him too. The attorney got the sense that there might be trouble brewing. The attorney knew that the four daughters, (Earl’s only beneficiaries) would be treated unequally. The attorney probably knew many details as to the reasons the daughters would be treated unequally. He had a mental status examination conducted because he had a sense that there may be a challenge. Later, when the plan was challenged, the evidence of the mental status examination was useful to show what is called “testamentary capacity.”
As it turned out it appears that one of his daughters received a good portion of her distribution protected in a trust, three sisters received their inheritance outright (no trust restrictions or protections), and of those three sisters, one received quite a bit more than the others.
The one who received the property restricted and protected in a trust appears not to have liked that one sister got more stuff than she did. She apparently did not like that a lot of what she received was wrapped up in a trust. The trustee was instructed to give distributions to her for specific items, her basic housing expenses and maintenance of her residence. The trustee was to pay health, dental, and car insurance based on the discretion of the trustee. The other three daughters received the bulk of their inheritance without such restrictions.
The one who apparently felt there were problems with the plan and how it got created took the entire estate plan to court to challenge whether the estate plan was valid. A trial was held for three days. The circuit court said that the plan was valid and Earl could treat his four daughters differently.
There were several legal issues raised on appeal. Since this is not written for lawyers I will not go into too much detail, but I will set out the key rulings and the important things to remember below. There is some real legal nitty-gritty stuff in there but this is not the right place to write in that much detail.
In my opinion the one who challenged the estate plan appears to have been motivated by two things. First, her one sister received about $700,000.00 in inheritance more than she did. Second, a lot of the inheritance she received was wrapped up in a trust, so she could only get what the trustee was instructed to give and what the trustee had discretion to give.
The Legal Issues
1) Did Earl Long have testamentary capacity when he put together his estate plan?
The Supreme Court said that the law in this area is that for purposes of making the kind of distributions that Earl made, one has a sound mind if, without prompting, Earl was able to comprehend the nature and extent of his property, the persons who are the natural objects of his bounty and the disposition that he desires to make of such property. Additionally, testamentary capacity is not determined by any single moment in time, but they needed to look at Earl’s condition for a reasonable period of time before and after the distributions were made.
This is why it is clear that Earl’s attorney did a good job when he had the mental status examination done around the same time the planning was going on.
2) Was Earl Long subjected to undue influence?
The Supreme Court said the daughter who received more had a confidential relationship with Earl and because there was this very close relationship between Earl and his daughter and she was a beneficiary, there was a presumption of undue influence. This special or confidential relationship exists whenever a decedent has placed trust and confidence in the integrity and fidelity of another.
Even though there was this presumption of taking advantage of Earl, the one daughter still had to show the existence of undue influence, and to do that she had to show the following:
– Earl’s susceptibility to undue influence
– the opportunity to exert such influence and effect the wrongful purpose
– a disposition to do so for an improper purpose
– a result clearly showing the effects of undue influence
In this case these elements could not be shown.
3) What did the trust really mean and was it ok?
The Supreme Court said some very important things here:
Trust interpretation is a question of law. When something is a question of law the Supreme Court makes its own analysis regardless of what a lower court may have said. When they interpret a trust instrument, they must ensure that the intentions and wishes of the settlor, in this case Earl, are honored. To carry out the settlor’s intentions, they first look to the language of the trust instrument. If the language of the trust instrument makes the intention of the settlor clear, it is the Supreme Court’s duty to declare and enforce it.
Top 3 things to remember when estate planning:
1. What is fair might not be equal, but may be appropriate.
a. We don’t know why Earl treated his daughter differently, although she may have had some spending issues.
b. We know he put a lot of time and effort into his plan. He thought it was fair and the Supreme Court upheld it.
2. When you know what you have and who are the natural objects of your bounty, you can give what you want to whom you want, when you want and the way you want.
a. Earl was sharp as a tack and decided that one of his daughters needed the protection of a trust wrapper, to protect from creditors and others. The reported provisions of the trust appear to make this clear.
3. Whatever you say in your estate planning documents needs to be written clearly and precisely.
a. The most important thing the Supreme Court does is to determine what the settlor’s intent is from the language of the trust to declare and enforce it.
The most important thing is to get to know your estate planning attorney. Hire an attorney who is willing to take the time to get to know you and your family. Find the attorney who recognizes your needs and creates a plan that will work in your family and your circumstances.
Call or email me and set up a time to get to know me. We can meet here in my Siuox Falls office. There is no charge for this initial meeting because you need to have an opportunity to decide if I am right for you. I am looking forward to serving your estate planning needs.