Dickson v. Shook
| Decision Date | 29 March 2019 |
| Docket Number | NO. 2017-CA-000023-MR,NO. 2017-CA-001115-MR,2017-CA-000023-MR,2017-CA-001115-MR |
| Parties | ROBERTA M. DICKSON; WILLIAM M. DICKSON; AND SULPHUR GUM, LLC APPELLANTS/CROSS-APPELLEES v. MARY LOUISE DICKSON SHOOK; AND DICKSON OAKS, LLC APPELLEES/CROSS-APPELLANTS |
| Court | Kentucky Court of Appeals |
TO BE PUBLISHED
APPEAL AND CROSS-APPEAL FROM JEFFERSON CIRCUIT COURT
A Jefferson County jury sided with Mollie. For the various reasons set forth below, we reverse, in part, vacate, in part, and remand.
In 2000, Stanley and Roberta began estate planning together. That December, each executed separate wills and revocable trusts. As part of their plans, they sheltered real property in a limited liability company, Glen Oak, LLC, named after their farm which became the LLC's capital.
Glen Oak was somewhat informally divided into two tracts. A larger tract was known as "Bill's Farm" and a smaller tract was known as "Mollie's Farm." Glen Oak, LLC, had four members: Stanley; Roberta; Sulphur Gum, LLC (created by Stanley for Bill's benefit); and Dickson Oaks, LLC (created by Stanley for Mollie's benefit).1 Although not a member of Glen Oak, LLC, Bill was the farm's manager. In accordance with the operating agreement for Glen Oak, LLC,only Stanley and Roberta had a say in governance, with each holding 50% of the LLC's "Governance Units"; Sulphur Gum and Dickson Oaks were passive beneficial participants in Glen Oak's profits and losses.
Other parts of Stanley's and Roberta's December 2000 estate planning - i.e., Stanley's will, his revocable living trust, and his power of attorney in favor of Roberta - are at the center of this litigation and appeal. Stanley's will bequeathed to Roberta certain tangible personal property. The residue of his estate, including such intangible property as his Governance Unit in Glen Oak, LLC, was to be conveyed at his death to a revocable living trust he executed as the trust's grantor and initial trustee ("Stanley's trust").
Stanley's trust provided that, upon his death, the successor trustee (Roberta, if she survived him) would divide his interest in Glen Oak, LLC (i.e., his Governance Unit) equally between Mollie and Bill. The trustee was then to divide the remaining estate into two separate, but not equal, shares denominated the Marital Share and the Trust "B" Estate.
Stanley's trust was designed to minimize the tax impact on the Marital Share by requiring taxes to be paid from the Trust "B" Estate. In addition to other language intended to preserve the Marital Share, the trust provided that: The trust even contemplated the possibility that "the assets constituting Trust 'B' [could] be exhausted, or [that] Trust 'B' [could] not be established . . . ."2
After minimizing taxes, the priority for use of the Trust "B" Estate assets was to benefit Roberta. The trust granted Roberta an annual "right, at her discretion, to withdraw up to a maximum of five percent (5%) of the net fair market value of the Trust 'B' Estate . . . ." Furthermore, "until the death of [Roberta], the Trustee shall pay to or for the benefit of [Roberta] such sums from the remaining net income and/or principal of the Trust 'B' Estate as in the Trustee's reasonable discretion shall be necessary or advisable from time to time for the health, education, support and maintenance of [Roberta] according to the accustomed standard of living" she had come to enjoy while Stanley was alive. Once Roberta passes away, whatever remains of Trust "B" Estate assets, if anything, is to be divided equally between Bill and Mollie.
A few years after this round of estate planning, in 2006, Stanley and Roberta engaged in a second round. Because Bill's Farm was worth more than Mollie's Farm, Stanley amended his trust to add an "equalizing payment" to Mollie. In substance, after Roberta's death the trustee would first distribute toMollie from any remaining Trust "B" Estate assets the difference in value between the two farms before dividing the remainder between Mollie and Bill. Significantly, Stanley did not amend the provision of his original estate plan that permitted Roberta to use as much of the funds in the Trust "B" Estate for her own support as she deemed proper, nor did he designate or restrict any of the Trust "B" Estate to be set aside solely to make the equalizing payment.
At the same time, Roberta, too, amended her revocable living trust to add a "pour over" clause whereby her assets, including whatever remained of the Marital Share, would be conveyed upon her death to Stanley's Trust "B" Estate. Significantly, Stanley's and Roberta's estate planning, although coordinated, did not include a joint will. Nor did their planning include reciprocal provisions, either in their wills or their trusts, that would have the effect of a joint will or otherwise prohibit either from later amending any part of his or her respective estate plan.
The year 2009 brought a decline in Stanley's health, owing largely to Alzheimer's disease. It also brought a decline in Mollie's bond-trader husband's income from approximately $1.75M in 2008 to $340,000 in 2009. By September 2009, Mollie was pursuing a buyout of her interest in Glen Oak farm.3 She soughtapproximately one-fourth of its assets which she valued at a little more than one-and-a-half million dollars ($1.5M).4
During this time, Mollie first told Roberta that Bill sexually abused her when she was fifteen years old, some thirty years earlier. Increasing levels of family strife ensued. Believing it best to retain control of Glen Oak, Roberta used her authority as Stanley's attorney-in-fact to sell his Governance Unit in Glen Oak to herself for $26,634.00. Stanley died the following day.
Mollie engaged counsel to accelerate her efforts toward a buyout. In a letter dated January 4, 2010, from her attorney to Roberta's attorney, Mollie claimed Bill mismanaged the farm and reiterated her assertion that Bill sexually assaulted her when she was fifteen requiring "years of therapy" for Mollie.5 She said she was 6
A week later, Roberta amended her will and bequeathed most of her estate to a new revocable trust. As stated in paragraph 3.3.1 of her new trust:
The trustee shall set aside the sum of $1,500,000 reduced, however, by any amount payable at my death to [Mollie] pursuant to paragraph 5.a. of the Amendment to Trust Agreement executed by Stanley . . . referred to as "Mollie's Equalization Amount" [provided that Mollie,] subsequent to the date of this instrument and prior to [Roberta's] death . . . has not made public allegations of wrongdoing by [Bill] for the purpose of humiliating him or his wife, seeking revenge against him for injuries done to her (whether such allegations are true or untrue) or for some other malicious purpose . . . .
Roberta's estate planning after Stanley's death did not affect Stanley's trust. Although Mollie claims otherwise - that Roberta's new will and trust "interfered with the Equalizing Payment" - Mollie did not allege that Roberta failed to comply with the terms of Stanley's trust itself.7 Stanley's trust and its component parts, the Marital Share and the Trust "B" Estate, remain unchanged to this day. To the extent the Trust "B" Estate has sufficient assets to fund the equalizing payment on the date of Roberta's death, Mollie still will receive the equalizing payment. This explains why Roberta's new trust provided for a reduction of the $1.5M set aside for Mollie to the extent remaining Trust "B" Estate assets are available to fund the equalizing payment.
However, Roberta's lawful access to Trust "B" Estate assets from which the equalizing payment is to be made still makes it possible, just asStanley's trust always recognized, that "the assets constituting Trust 'B' [could] be exhausted." Reading together the surviving provisions of Stanley's trust and its amendment shows that the equalizing payment will be made only to the extent there are assets in the Trust "B" Estate to fund it. Stanley's trust does not guarantee Mollie will ever receive the equalizing payment. The fact is that Mollie's compliance with the condition in Roberta's new trust would guarantee (to the extent of the value of Roberta's estate upon her death) that Mollie would receive $1.5M even if Trust "B" Estate assets were diminished or exhausted.
Mollie did not interpret Roberta's actions after Stanley's death this same way. She and Dickson Oaks filed suit in circuit court against Roberta, Bill, and Sulphur Gum. The court allowed a first amendment to the complaint after which Mollie's and Dickson Oaks' causes of action were as follows:
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