Taliaferro v. Taliaferro, 72929

• Court: Kansas Supreme Court
• Writing for the Court: LARSON
• Citation: Taliaferro v. Taliaferro, 260 Kan. 573, 921 P.2d 803 (Kan. 1996)
• Decision Date: 26 July 1996
• Docket Number: No. 72929,72929
• Parties: Betty TALIAFERRO, Appellee, v. Adoria M. TALIAFERRO, et al., Appellants.

Page 803

921 P.2d 803

260 Kan. 573

Betty TALIAFERRO, Appellee, v. Adoria M. TALIAFERRO, et al., Appellants.

No. 72929.

Supreme Court of Kansas.

July 26, 1996.

Syllabus by the Court

1. An express trust has three requisite features; namely: (1) an explicit declaration and intention to create a trust; (2) the transfer of lawful and definite property by a person capable of making transfer thereof; and (3) a requirement to hold the property as trustee for the benefit of a cestui que trust with directions as to the manner in which the trust funds are to be applied.

2. A trust is a fiduciary relationship with respect to property, subjecting the person by whom the property is held to equitable duties to deal with property for the benefit of another person and arising as a result of an intention to create the relationship.

3. Before property can be said to be held in trust bya trustee, the trustee must have legal title.

4. A trust can exist even where the settlor is both trustee and life beneficiary.

5. Where the settlor and the trustee are the same person, no transfer of legal title is required, since the trustee already holds legal title.

6. A declaration of trust is a conveyance of an equitable interest.

7. In a case where a trust is purported to have been created by declaration, to determine whether the trust is valid the factfinder must ascertain whether, at the time the declaration was executed, there was a present intent to transfer an equitable interest to the cestui que trust and thereby create a trust.

8. Once a trust is established, the settlor's declarations thereafter in derogation are immaterial unless they rise to the level of a revocation.

9. The fact that a trustee exceeded the trustee's power and violated his or her trust would not terminate the trust, but merely would provide justification for removal of the trustee and appointment of a successor.

10. To establish a trust it is the commended practice to execute documents of transfer along with the declaration of trust. Such documents may help prove the settlor intended an ambiguous declaration to be operative to create a trust, help prevent a challenge to the trust as a testamentary disposition and avoid the necessity of probating the property, but they are not required by the law of trusts.

11. The intent to create a trust can be manifested through a plain affirmative declaration by a person that he or she holds property for the benefit or use of another person.

12. The subsequent actions of the parties to a written instrument can be considered only to resolve ambiguity that appears on the instrument's face.

13. If the owner of property declares by a written instrument that he or she holds the property upon a particular trust, extrinsic evidence, in the absence of fraud, duress, mistake, or other ground for reformation or rescission, is not admissible to show that he or she intended to hold the property upon a different trust or to hold it free of trust.

14. Where securities are the subject matter of a trust created by declaration the law of trusts does not require that the securities be transferred to the settlor "as trustee."

15. The fact that the proceeds of a life insurance policy are declared to be equitably conveyed is independent of who pays the premiums, and it is immaterial that the insured or the settlor continues to pay the premiums.

16. If the trustee fails to assume any relationship with the subject matter of the trust, there is no acceptance of trust property by the trustee; if the trustee treats trust property as his or her own inconsistent with the duties imposed by the trust instrument, the property, although accepted, is not accepted as trust property.

Michael Scott Taliaferro, Lakeway, Texas, argued the cause and was on the briefs, for appellants.

Benjamin F. Farney, of Law Offices of Benjamin F. Farney, Olathe, argued the cause, and Bradley L. Farney, of the same firm, was with him on the brief, for appellee.

LARSON, Justice:

In this declaratory judgment action, proponents of the Will C. Taliaferro Trust appeal from a trial court decision that the trust was invalid because the settlor had not transferred title to property he owned to himself as trustee. We reverse and hold that where the settlor of a trust executes a declaration of trust, no transfer of legal title to the trust property is required to fund the trust.

On March 29, 1990, while in the hospital, Will C. Taliaferro executed two revocable trust indentures, a will, and various other documents. The trust documents had been prepared by his nephew, an attorney, who had little estate planning experience. The first trust was called the Taliaferro & Browne Trust. It covered the ownership of Will C. Taliaferro's business venture, the Taliaferro & Browne, Inc., engineering firm, and the proceeds of a life insurance policy on his life. This Taliaferro & Browne Trust was the subject of our decision in Taliaferro v. Taliaferro, 252 Kan. 192, 843 P.2d 240 (1992).

The second trust was a personal revocable inter vivos trust, the Will C. Taliaferro Trust, and is the subject of this action. Section One of the Will C. Taliaferro Trust provides in part:

"I, Will Cedric Taliaferro, as Grantor, hereby declare the establishment of the Will C. Taliaferro Trust (hereinafter sometimes referred to as 'the trust'). I hereby declare that I have appointed myself as Trustee of the Trust (hereinafter sometimes referred to as 'The Trustee') and declare, further, that as the Trustee, I accept and hold in trust all of the property described in Schedule A, which is attached hereto and incorporated herein by reference. Such property, together with any other property that may later become subject to this trust, shall constitute the trust estate, and shall be held, administered and distributed by the Trustee as herein provided."

The trust property was described in Schedule A to the trust indenture:

"The following described property of Will. C. Taliaferro is held in trust and made subject to the terms and provisions of the foregoing Declaration of Trust for the Will C. Taliaferro Trust:

"1. All Douglass Bank stock that is solely or separately owned by Grantor.

"2. Grantor's entire interest in Equitable Insurance Company Policy number 34-590-634 MSC/KSM, a policy of insurance on the life of Carl Buckner.

"3. All of Grantor's household goods, the contents of Grantor's safe deposit box, and all other tangible personal property owned by Grantor at the time of execution of this agreement, subject to disposition at the Trustee's discretion from this date forward, and all such property hereinafter acquired by Grantor and delivered to Trustee as of the date of death of Grantor."

Will C. Taliaferro was the income beneficiary of this trust during his life. After his death, the successor trustee was to distribute the accrued income and corpus among a number of named beneficiaries, with the remainder to go to Betty Taliaferro, who was Will C. Taliaferro's wife, his sole heir, the executor named in his will, the designated successor trustee of the Will C. Taliaferro Trust, and the opponent of the trust herein.

Will C. Taliaferro died September 1, 1990. The present case is a declaratory judgment action brought by Betty Taliaferro to determine the validity of the Will C. Taliaferro Trust. In her petition, Betty Taliaferro contended that Will C. Taliaferro never transferred any of the property allegedly subject to the trust into the trust because none of the property in Schedule A had been assigned to the trust or to Will C. Taliaferro as trustee. She further alleged that Will C. Taliaferro did not treat the property as trust property during his lifetime but rather as if he owned it individually. Mrs. Taliaferro purported to bring the action to establish the ramifications if she were required to elect against her husband's estate plan.

After hearing cross-motions for summary judgment, the trial court determined that a material question of fact existed as to whether Will C. Taliaferro had the requisite intent to create a valid trust and ordered an evidentiary hearing. The court reasoned: "The intent of Mr. Taliaferro (as expressed in the trust document) to create a pour-over trust is clear enough, but the fact that he did no overt acts transferring property to the trust leaves his intent in question."

After the evidentiary hearing, the trial court found the Will C. Taliaferro trust to be invalid. It held the evidence did not show that Will C. Taliaferro had intended to transfer property to the corpus of the trust. The trial court held that Pizel v. Pizel, 7 Kan.App.2d 388, Syl. p 3, 643 P.2d 1094, rev. denied 231 Kan. 801 (1982) laid down three requirements the trust had to meet to be a valid inter vivos trust: "(1) an explicit declaration and intention to create a trust; (2) definite property or subject matter of the trust; and (3) the acceptance and handling of the subject matter by the trustee as a trust."

The trial court found there was a sufficient declaration of trust and intent to create a trust to meet the first Pizel requirement--an explicit declaration and intention to create a trust--and that the second requirement--that there be definite property or subject matter of the trust--was satisfied by the Douglass Bancorp stock owned by Will C. Taliaferro, the life insurance policy on Carl Buckner, and Will C. Taliaferro's personal jewelry and clothing.

However, the trial court found that the evidence failed to establish the third requirement of a valid trust it attributed to Pizel. The court found the evidence did not establish that the trustee, Will C. Taliaferro, had accepted and handled the subject matter of the trust as trust property, nor had Will C. Taliaferro, as settlor, effected the transfer of the property to the trust. The trial court reasoned at length, but concluded in relevant part: "Under Pizel he was required by words or acts to immediately divest himself of...