Deathbed Instructions to Attorneys Did Not Amend Trust
On October 7, 2020, the Iowa Court of Appeals issued an opinion on whether a document signed by the trust grantor the day before he passed away was an amendment to his estate plan or merely instructions to his attorneys to redraft the plan. Because the document was “vague, obscure, and ambiguous,” the court affirmed that it was not an amendment to the trust.
In 1993, a wealthy Iowan created a revocable trust that held almost all of his assets. In 2017, the grantor amended the trust to create two groups of beneficiaries. The first group included his children’s lineal descendants, and the second group consisted of charities. The amendment did not provide for his children, because he believed that his five children had “been adequately provided for by [the grantor] during [his] lifetime.”
The trust directed that approximately six million dollars in assets would be distributed to the charities. The grantor also issued a promissory note payable to a Des Moines church to be set at an amount necessary to avoid “federal estate taxes and generation skipping taxes.”
Two months after he executed the amendment, the grantor’s health began to decline. After learning of his grandfather’s declining health, one of the grantor’s grandsons came to visit. Having regularly discussed the estate plan with the grantor, the grandson set up a meeting with his grandfather’s two estate planning attorneys, with his permission. There, the grandson learned that the actual amount to be gifted to the charities was much higher than he expected. He also learned that there was some uncertainty about lifetime exclusions.
The next day, the grantor and the grandson met with the attorneys to discuss the estate plan. After the meeting, one attorney was tasked with drafting an amendment the trust. The amount to be donated to the charities was not addressed until later that night when two family members approached the grantor about his charitable giving plan. Concered about his health, the grantor called his grandson to document his intent regarding his estate the following morning.
After several family meetings, the grandson typed up and sent a one-page document to the attorneys at the grantor’s request. The grantor and two family members signed the document. Entitled “Re: [Grantor] Follow-Up Estate Discussion, October 13, 2017.” It stated several changes, including:
- That the grantor would like to support charities, but in an attempt to avoid federal taxes he may have potentially over-designated the amount for the charities;
- He is “supportive of contributing up to $2 million” to charity;
- The balance of his estate, at least $1 million total after taxes, which is not designated for the Generation-Skipping Trust will be divided among his five children;
- The grantor’s five children must use the money in the “near-term” to support certain endeavors the grantor had supported; and that
- These changes are in addition to what was already discussed with the attorneys.
The attorney was uncertain about several aspects of the document. Before drafting the amendment, he asked family members several questions about the grantor’s intent and drew diagrams to make sure he understood the grantor’s intent. The parties made plans for the grantor to execute a formal amendment on October 17, but the grantor died on October 14, the day after signing the document expressing his intent. The successor trustee petitioned for judicial interpretation of the terms of the trust. The district court found the document was ambiguous and was not an amendment to his estate. The grantor’s children appealed.
Ambiguity in Trust Documents
On appeal, the grantor’s five children claimed the document signed by the grantor was an amendment to the trust. They also argued that extrinsic evidence demonstrated the grantor’s intent to modify the trust. The court rejected this argument, finding that even if a document is intended to be a trust amendment, it will be void if it is vague or insufficiently clear.
In this case, the document did not mention the trust or that the document was an amendment to the trust. It was unclear whether the grantor’s wishes in the document should be accomplished through amending the trust or through an overall change in the grantor’s estate plan. The language stating that the grantor was “supportive of contributing up to $2 million” to charity was vague because it did not specify the actual amount to be contributed or who would decide. Similarly, the document did not provide instruction on how the balance of the estate would be divided among his children. The definition of “near-term” was also not provided. Additionally, the document was incomplete because it stated that these were changes “in addition to” other changes discussed with the attorneys. The court found that the overall lack of clarity made the document ambiguous.
The family also claimed that extrinsic evidence established the grantor’s intent to modify the trust. However, the court found that the grantor’s family members did not instruct the attorneys to stop drafting the amendment after the document was sent to them. Instead, the attorneys believed the document to be an instructional letter. They stated it would serve as a guide as the attorneys drafted any necessary amendments.
Additionally, the document lacked the formality and specificity of the grantor’s other amendments and estate planning documents. This showed that while the grantor was clearly contemplating changes to his estate plan, he intended this document to be used as starting point to discuss those changes to implement at a later time. Because the document was vague, obscure, and ambiguous, the court affirmed the district court’s finding that the document was not an amendment to the grantor’s trust.
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