In re Estate of Reisman

• Decision Date: 03 August 2005
• Docket Number: Docket No. 252172.
• Parties: In re ESTATE OF Samuel G. REISMAN, Deceased. Shelley N. Paine and E. Michael Reisman, Petitioners-Appellees, v. Jack Kaufman, Respondent-Appellant.
• Court: Court of Appeal of Michigan — District of US

702 N.W.2d 658

266 Mich. App. 522

In re ESTATE OF Samuel G. REISMAN, Deceased.

Shelley N. Paine and E. Michael Reisman, Petitioners-Appellees, v. Jack Kaufman, Respondent-Appellant.

Docket No. 252172.

Court of Appeals of Michigan.

Submitted May 3, 2005, at Detroit.

Decided May 24, 2005, at 9:30 a.m.

Released for Publication August 3, 2005.

Butzel Long (by Michael P. Witzke and Amy L. Glenn), Bloomfield Hills, for Shelley N. Paine and E. Michael Reisman.

Warner Norcross & Judd LLP (by John H. Martin and John J. Bursch) and Ishbia & Gagleard, P.C. (by Michael J. Weisberg), Grand Rapids, Birmingham, for Jack Kaufman.

Before: MURPHY, P.J., and WHITE and SMOLENSKI, JJ.

SMOLENSKI, J.

Respondent Jack Kaufman, the personal representative of Samuel Reisman's estate, appeals as of right from an opinion and order holding that Samuel Reisman's exercise of a limited power of appointment granted to him in a marital trust was invalid. We reverse and remand. This case is being decided without oral argument pursuant to MCR 7.214(E).

I. Basic Facts and Procedural History

Geraldine G. Reisman established a revocable living trust, which in part created a marital trust for the benefit of her husband, Samuel Reisman.¹ In the marital trust, Geraldine provided:

Upon the death of [Samuel], ... [he] shall have a limited power of appointment, exercisable only by the Last Will and Testament of [Samuel] and only by specific reference to such power, to appoint the entire principal and undistributed income ... to a class of persons consisting of [Geraldine's children] and the descendents of [Geraldine's children] and subject to any conditions, trusts and restrictions as may be determined by [Samuel].

In the third codicil to his last will and testament, Samuel provided that if he were survived by two of his five children, petitioners E. Michael Reisman and Shelley Naomi Paine, he was exercising the power of appointment by appointing all the property to the trustee of his revocable living trust, and directing that it be distributed pursuant to § 5 of his trust. Further, he provided:

It is my intention that the property appointed by me under this Section shall not be an asset of my probate estate, or be subject to administration by the personal representative of my will, or otherwise be treated for any purpose as if it were an asset of my probate estate.

Section 5 of Samuel's revocable trust provided for distribution into issue trusts for his surviving children and, on a per capita basis, to descendants of his deceased children. However, concurrent with his third codicil, Samuel executed the sixth amendment to his revocable living trust, which amended § 5 to state that if petitioners, but not their living descendants, survived him, the petitioners should be treated as having predeceased him. Thus, the effect of the third codicil and the amendment of § 5 of the trust were to bypass petitioners in favor of petitioners' children.

Petitioners challenged Samuel's exercise of the power of appointment.² The probate court held that Geraldine had granted Samuel a special limited power of appointment, as defined in MCL 556.112(i), and not a general power of appointment, as defined in MCL 556.112(h). The court further held that the limited power of appointment designated the permissible appointee to be a class of persons consisting of Geraldine's children and their descendants, and that "by appointing the property to the Trustee of his own revocable living trust, or his own estate, rather than to the limited class specified in Geraldine['s] Revocable Living Trust," Samuel had exercised a general power of appointment. The court concluded that the exercise of the power of appointment was invalid.

II. Standards of Review

This Court reviews de novo the proper interpretation of statutes such as the Powers of Appointment Act of 1967.³ Macomb Co. Prosecutor v. Murphy, 464 Mich. 149, 157, 627 N.W.2d 247 (2001). In addition, this Court reviews de novo the language used in wills and trusts as a question of law. In re Bem Estate, 247 Mich.App. 427, 433, 637 N.W.2d 506 (2001).⁴

III. Construction of Statutes, Wills and Trusts

Because this case involves the construction of statutes, wills, and trusts, we shall briefly state the applicable standards.

This Court begins the interpretation of a statute by examining the language of the statute itself. Macomb Co Prosecutor, supra at 158, 627 N.W.2d 247. The statute should be read in context to determine if an ambiguity exists. Id. If the language is not ambiguous, judicial construction is precluded and the statute will be enforced as written. Id. Where ambiguity exists, "this Court seeks to effectuate the Legislature's intent through a reasonable construction, considering the purpose of the statute and the object sought to be accomplished." Id. An act must be construed "as a whole to harmonize its provisions and carry out the purpose of the Legislature." Id. at 159, 627 N.W.2d 247.

"A fundamental precept which governs the judicial review of wills is that the intent of the testator is to be carried out as nearly as possible." In re Allen Estate, 150 Mich.App. 413, 416, 388 N.W.2d 705 (1986), citing In re Kremlick Estate, 417 Mich. 237, 240, 331 N.W.2d 228 (1983). Where there is no "patent or latent ambiguity in the provisions of a will, the intention to be ascribed to the testator is that intention demonstrated in the will's plain language." In re Dodge Trust, 121 Mich.App. 527, 542, 330 N.W.2d 72 (1982), quoting In re Willey's Estate, 9 Mich.App. 245, 249, 156 N.W.2d 631 (1967).⁵ Furthermore, "[a] court may not construe a clear and unambiguous will in such a way as to rewrite it," In re Allen Estate, supra at 417, 388 N.W.2d 705, and, where possible, each word should be given meaning, Detroit Bank & Trust Co. v. Grout, 95 Mich.App. 253, 268-269, 289 N.W.2d 898 (1980). The rules of construction applicable to wills also apply to the interpretation of trust documents. In re Maloney Trust, 423 Mich. 632, 639, 377 N.W.2d 791 (1985) (opinion by Cavanagh, J.).

IV. The Power of Appointment

A power of appointment is "a power created or reserved by a person having property subject to his disposition which enables the donee of the power to designate, within any limits that may be prescribed, the transferees of the property or the shares or the interests in which it shall be received; but it does not include a power of sale, a power of attorney or a power of amendment or revocation." MCL 556.112(c). The donor is the person who creates the power of appointment and the donee is the recipient of the power. MCL 556.112(d), (e). Hence, when a donor grants a donee power of appointment over certain specified property, the donee gains the right to specify who will receive that property.

Powers of appointment are broken into two types: general powers and special powers.⁶ A general power is "a power exercisable in favor of the donee, his estate, his creditors or the creditors of his estate, whether or not it is exercisable in favor of others." MCL 556.112(h). A special power is "a power exercisable only in favor of 1 or more persons not including the donee, his estate, his creditors or the creditors of his estate." MCL 556.112(i).⁷ In addition, a donor may place conditions upon the exercise of an appointment, which must be complied with in order to effectively exercise the power. MCL 556.115(2).

In the present case, Geraldine's revocable living trust created a marital trust at her death, which in turn had a clause granting Samuel "a limited power of appointment," over the assets remaining in the marital trust, which could only be exercised in his will and only by specific reference to the power. The power also stated that Samuel could only distribute the assets to Geraldine's children and their descendents, but that the distributions could be "subject to any conditions, trusts and restrictions as may be determined by [Samuel.]" Consequently, under MCL 556.112(i) and the plain language of the trust agreement, Samuel had a special power of appointment with the additional limitations that it could only be effectively exercised in his will and that it must specifically refer to the grant of power.

Samuel exercised the special power of appointment granted by Geraldine by way of the third codicil to his will. The relevant portion stated:

Under Section 3 of the Geraldine G. Reisman Revocable Living Trust Agreement dated February 12, 1987 executed by my wife as Settlor and Initial Trustee, as amended, of which Jack Kaufman and I now are Trustees, a separate trust named the Marital Trust was created at my spouse's death. Under Section 3D of that trust agreement, I am given testamentary power of appointment as to all property constituting the Marital Trust at the time of my death. If my son, Elliot Michael Reisman, or my daughter, Shelley Naomi Paine, survives me, I hereby exercise that power by appointing all property over which I have power of appointment under that Section 3D to the then acting Trustee(s) of the Revocable Trust referred to in Section 4A of this Last Will and Testament, to be distributed pursuant to Section 5 thereof.

Thus, as required by Geraldine's marital trust, Samuel exercised the power of appointment through his will and by specific reference to the power. However, Samuel's exercise of the special power of appointment does not, on its face, appear to distribute the marital trust assets to the class of transferees specified in Geraldine's revocable living trust.⁸ Instead, the appointment transfers the assets of the marital trust to the then-acting trustee of his own revocable living trust, subject to the condition that the trustee distribute the assets according to the terms stated in § 5 of Samuel's revocable living trust. Section 5 of Samuel's living trust, as amended, creates issue trusts for each of his children or their heirs, if they should predecease him, and distributes the assets of the...