In re Estate of Thompson
434 S.W.3d 877
Ark.2014Background
- Anne Thompson (surviving spouse) elected to take against H. Ripley Thompson’s 2009 will; she sued the trustee (Vance Thompson) seeking inclusion of assets held in the decedent’s 2009 revocable inter vivos trust in the probate estate for calculation of her elective share.
- Decedent executed earlier wills and trusts (2002, 2004) that provided substantially for Anne; the 2009 Will and Trust drastically reduced her benefits (only a $100,000 bequest conditioned on non-contest) and removed her as trustee/co-trustee.
- Decedent executed the 2009 instruments while in a nursing home less than a year before his death; the 2009 Trust became irrevocable on his death and held the bulk of his assets (≈$5.8 million in trust v. ≈$230,000 probate personalty).
- The circuit court found the decedent intended to deprive Anne of her marital/elective rights and therefore ordered that trust assets be included in the estate solely for calculating her elective share; the trustee appealed.
- The Supreme Court of Arkansas affirmed, adopting the test that where a settlor intended to defeat a surviving spouse’s elective rights by creating or amending an inter vivos revocable trust, trust assets are included in the settlor’s probate estate only for the limited purpose of computing the elective share; other trust purposes remain intact.
Issues
| Issue | Plaintiff's Argument (Anne) | Defendant's Argument (Vance) | Held |
|---|---|---|---|
| Whether trust assets can be included in the decedent’s estate for calculating an elective spousal share when the trust became irrevocable at death | Trust assets should be counted because the decedent intended to deprive her of her elective share by amending the trust | Elective share is limited to property owned by decedent at death; trust property was not owned by decedent at death and statutes do not create an augmented estate | Included for limited purpose: if settlor intended to deprive spouse of marital rights, trust assets are included in estate only for computing elective share |
| Proper test to determine whether an inter vivos revocable trust is a device to defeat marital rights | Use settlor’s intent evaluated by all facts and circumstances | Trusts are valid absent fraud; settlor may provide as he pleases; intent must be proven | Adopted Richards’ settlor-intent test; court may infer intent from circumstances and instrument terms |
| Whether plaintiff must prove common-law fraud elements to prevail on “fraud on marital rights” claim | No; the relevant inquiry is intent to deprive marital rights, not classic fraud elements | Plaintiff must meet traditional fraud elements (allegedly) | Rejected common-law fraud elements requirement; use intent-to-deprive standard |
| Proper remedy if a trust was created to defeat marital rights (invalidate trust vs. limited remedy) | Equitable remedy should permit recovery of elective share; trust need not be invalidated entirely | If intent to defraud, trust should be set aside and prior (2004) trust revived; court cannot augment estate beyond statute | Remedy: include trust assets in estate only for computing elective share; do not invalidate trust for other lawful purposes |
Key Cases Cited
- Richards v. Worthen Bank & Trust Co., 261 Ark. 890, 552 S.W.2d 228 (1977) (adopts settlor-intent test to determine whether inter vivos trust is a device to defeat spouse’s marital rights)
- Gregory v. Estate of Gregory, 315 Ark. 187, 866 S.W.2d 379 (1993) (elective share vests only in property owned by decedent at death)
- West v. West, 120 Ark. 500, 179 S.W. 1017 (1915) (equity may avoid conveyances designed to deprive spouse of marital rights)
- Hamilton v. Hamilton, 317 Ark. 572, 879 S.W.2d 416 (1994) (elective share is zealously protected despite testamentary freedom)
- Estate of Dahlmann v. Estate of Dahlmann, 282 Ark. 296, 668 S.W.2d 520 (1984) (spouse may be excluded by will but surviving spouse can elect against the will)
- Karsenty v. Schoukroun, 406 Md. 469, 959 A.2d 1147 (2008) (consider all facts and circumstances to determine settlor’s intent to defeat marital rights)
- Rose v. St. Louis Union Trust Co., 48 Ill.2d 812, 253 N.E.2d 417 (1969) (a trust void as to widow’s rights need not be void as to other beneficiaries)