Sullivan v. Burkin

• Decision Date: 23 January 1984
• Citation: 460 N.E.2d 572,390 Mass. 864
• Parties: Mary A. SULLIVAN v. Charles BURKIN, trustee et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 572

460 N.E.2d 572

390 Mass. 864

Mary A. SULLIVAN v. Charles BURKIN, trustee et al. ¹

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Nov. 7, 1983.

Decided Jan. 23, 1984.

Maurice F. Joyce, Norwood, for plaintiff.

Christopher C. Tsouros, Boston, for Charles Burkin, trustee.

Before HENNESSEY, C.J., and WILKINS, ABRAMS, NOLAN and O'CONNOR, JJ.

WILKINS, Justice.

Mary A. Sullivan, the widow of Ernest G. Sullivan, has exercised her right, under G.L. c. 191, § 15, to take a share of her husband's estate. By this action, she seeks a determination that assets held in an inter vivos trust created by her husband during the marriage should be considered as part of the estate in determining that share. A judge of the Probate Court for the county of Suffolk rejected the widow's claim and entered judgment dismissing the complaint. The widow appealed, and, on July 12, 1983, a panel of the Appeals Court reported the case to this court. ²

In September, 1973, Ernest G. Sullivan executed a deed of trust under which he transferred real estate to himself as sole trustee. The net income of the trust was payable to him during his life and the trustee was instructed to pay to him all or such part of the principal of the trust estate as he might request in writing from time to time. He retained the right to revoke the trust at any time. On his death, the successor trustee is directed to pay the principal and any undistributed income equally to the defendants, George F. Cronin, Sr., and Harold J. Cronin, if they should survive him, which they did. There were no witnesses to the execution of the deed of trust, but the husband acknowledged his signatures before a notary public, separately, as donor and as trustee.

The husband died on April 27, 1981, while still trustee of the inter vivos trust. He left a will in which he stated that he "intentionally neglected to make any provision for my wife, Mary A. Sullivan and my grandson, Mark Sullivan." He directed that, after the payment of debts, expenses, and all estate taxes levied by reason of his death, the residue of his estate should be paid over to the trustee of the inter vivos trust. The defendants George F. Cronin, Sr., and Harold J. Cronin were named coexecutors of the will. The defendant Burkin is successor trustee of the inter vivos trust. On October 21, 1981, the wife filed a claim, pursuant to G.L. c. 191, § 15, for a portion of the estate. ³

Although it does not appear in the record, the parties state in their briefs that Ernest G. Sullivan and Mary A. Sullivan had been separated for many years. We do know that in 1962 the wife obtained a court order providing for her temporary support. No final action was taken in that proceeding. The record provides no information about the value of any property owned by the husband at his death or about the value of any assets held in the inter vivos trust. At oral argument, we were advised that the husband owned personal property worth approximately $15,000 at his death and that the only asset in the trust was a house in Boston which was sold after the husband's death for approximately $85,000.

As presented in the complaint, and perhaps as presented to the motion judge, the wife's claim was simply that the inter vivos trust was an invalid testamentary disposition and that the trust assets "constitute assets of the estate" of Ernest G. Sullivan. There is no suggestion that the wife argued initially that, even if the trust were not testamentary, she had a special claim as a widow asserting her rights under G.L. c. 191, § 15. If the wife is correct that the trust was an ineffective testamentary disposition, the trust assets would be part of the husband's probate estate. In that event, we would not have to consider any special consequences of the wife's election under G.L. c. 191, § 15, or, in the words of the Appeals Court, "the present vitality" of Kerwin v. Donaghy, 317 Mass. 559, 572, 59 N.E.2d 299 (1945).

We conclude, however, that the trust was not testamentary in character and that the husband effectively created a valid inter vivos trust. Thus, whether the issue was initially involved in this case, we are now presented with the question (which the executors will have to resolve ultimately, in any event) whether the assets of the inter vivos trust are to be considered in determining the "portion of the estate of the deceased" (G.L. c. 191, § 15) in which Mary A. Sullivan has rights. We conclude that, in this case, we should adhere to the principles expressed in Kerwin v. Donaghy, supra, that deny the surviving spouse any claim against the assets of a valid inter vivos trust created by the deceased spouse, even where the deceased spouse alone retained substantial rights and powers under the trust instrument. For the future, however, as to any inter vivos trust created or amended after the date of this opinion, we announce that the estate of a decedent, for the purposes of G.L. c. 191, § 15, shall include the value of assets held in an inter vivos trust created by the deceased spouse as to which the deceased spouse alone retained the power during his or her life to direct the disposition of those trust assets for his or her benefit, as, for example, by the exercise of a power of appointment or by revocation of the trust. Such a power would be a general power of appointment for Federal estate tax purposes (I.R.C. § 2041(b)(1) [1983] ) and a "general power" as defined in the Restatement (Second) of Property § 11.4(1) (Tent. Draft No. 5, 1982).

We consider first whether the inter vivos trust was invalid because it was testamentary. A trust with remainder interests given to others on the settlor's death is not invalid as a testamentary disposition simply because the settlor retained a broad power to modify or revoke the trust, the right to receive income, and the right to invade principal during his life. Ascher v. Cohen, 333 Mass. 397, 400, 131 N.E.2d 198 (1956); Leahy v. Old Colony Trust Co., 326 Mass. 49, 51, 93 N.E.2d 238 (1950); Kerwin v. Donaghy, 317 Mass. 559, 567, 59 N.E.2d 299 (1945); National Shawmut Bank v. Joy, 315 Mass. 457, 473-475, 53 N.E.2d 113 (1944); Kelley v. Snow, 185 Mass. 288, 298-299, 70 N.E. 89 (1904). The fact that the settlor of such a trust is the sole trustee does not make the trust testamentary. In National Shawmut Bank v. Joy, supra 315 Mass. at 476-477, 53 N.E.2d 113, we held that a settlor's reservation of the power to control investments did not impair the validity of a trust and noted that "[i]n Greeley v. Flynn, 310 Mass. 23, 36 N.E.2d 394 [1941], the settlor was herself the trustee and had every power of control, including the right to withdraw principal for her own use. Yet the gift over at her death was held valid and not testamentary." We did, however, leave open the question whether such a trust would be testamentary "had the trustees been reduced to passive impotence, or something near it." Id. 315 Mass. at 476, 53 N.E.2d 113. We have held an inter vivos trust valid where a settlor, having broad powers to revoke the trust and to demand trust principal, was a cotrustee with a friend (Ascher v. Cohen, supra 333 Mass. at 400, 131 N.E.2d 198) or with a bank whose tenure as trustee was at the whim of the settlor (Leahy v. Old Colony Trust Co., supra 326 Mass. at 51, 93 N.E.2d 238). In Theodore v. Theodore, 356 Mass. 297, 249 N.E.2d 3 (1969), the settlor was the sole trustee of two trusts and had the power to revoke the trusts and to withdraw principal. The court assumed that the trusts were not testamentary simply because of this arrangement. The Theodore case involved trust assets transferred to the trust only by third persons. For the purposes of determining whether a trust is testamentary, however, the origin of the assets, totally at the disposal of the settlor once received, should make no difference. See Gordon v. Feldman, 359 Mass. 25, 267 N.E.2d 895 (1971), in which the court and the parties implicitly accepted as valid an inter vivos trust in which A conveyed to himself as sole trustee with the power in A to withdraw income and principal. We believe that the law of the Commonwealth is correctly represented by the statement in Restatement (Second) of Trusts § 57, comment h (1959), that a trust is "not testamentary and invalid for failure to comply with the requirements of the Statute of Wills merely because the settlor-trustee reserves a beneficial life interest and power to revoke and modify the trust. The fact that as trustee he controls the administration of the trust does not invalidate it."

We come then to the question whether, even if the trust was not testamentary on general principles, the widow has special interests which should be recognized. Courts in this country have differed considerably in their reasoning and in their conclusions in passing on this question. See 1 A. Scott, Trusts § 57.5 at 509-511 (3d ed. 1967 & 1983 Supp.); Restatement (Second) of Property--Donative Transfers, Supplement to Tent. Draft No. 5, reporter's note to § 13.7 (1982); Annot., 39 A.L.R.3d 14 (1971), Validity of Inter Vivos Trust Established by One Spouse Which Impairs the Other Spouse's Distributive Share or Other Statutory Rights in Property. In considering this issue at the May, 1982, annual meeting of the American Law Institute the members divided almost evenly on whether a settlor's surviving spouse should have rights, apart from specific statutory rights, with respect to the assets of an inter vivos trust over which the settlor retained a general power of appointment. See Proceedings of the American Law Institute, May, 1982, pp. 59-117; Restatement (Second) of Property--Donative Transfers, Supplement to Tent. Draft No. 5 at 28 (1982). ⁴

The rule of Kerwin v. Donaghy, supra 317 Mass. at 571, 59 N.E.2d 299, is that "[t]he right of a wife to waive her husband's will, and take, with certain limitations, 'the same portion of the property of the deceased, real and...