In Re: Rosemary C. Ford Inter Vivos Qtip Trust
176 A.3d 992
| Pa. Super. Ct. | 2017Background
- Rosemary created an irrevocable QTIP trust in 2007 naming George as trustee and primary income beneficiary; the trust holds two commercial parcels (East Mermaid Properties) leased to George Ford & Sons, Inc.
- Trust expressly grants George, during his lifetime, the sole right to require trustees to make non-productive trust property productive; Rosemary has that right only if she survives George.
- Rosemary and George divorced; an Agreement in Principle (2009) and an arbitration award (2010, incorporated into the divorce decree) provided Rosemary one-half of rental income from the East Mermaid Properties (and addressed equitable distribution), and set alimony separately.
- Rosemary alleged George stopped collecting rent (or otherwise allowed the properties to be non-productive) and petitioned the Orphans’ Court for an accounting and relief in 2014; George defended that Rosemary lacked standing as she was not a current trust beneficiary.
- The Orphans’ Court initially ordered an accounting, then—after reviewing the arbitration award—held Rosemary lacked standing to challenge the trustee’s management because she is a contingent beneficiary (no current right to compel production) and her contractual/right-to-rent claims arise as a creditor under the divorce award (not an enforceable support order) and are barred by the trust’s spendthrift clause.
- Rosemary appealed the dismissal of her objections to the trustee’s accounting; the Superior Court affirmed, holding she lacked beneficiary standing to compel production under the Trust Agreement (and she disclaimed reliance on creditor/support arguments on appeal).
Issues
| Issue | Plaintiff's Argument (Ford) | Defendant's Argument (Ford) | Held |
|---|---|---|---|
| Does Rosemary have standing as a trust beneficiary to compel the trustee to make trust property productive? | Rosemary: as settlor and contingent beneficiary she has standing under the UTA to challenge trustee actions and compel productivity. | George: Rosemary is not a current beneficiary entitled to income; only George has that power during his lifetime per the Trust terms. | Held: No. Trust grants the power only to George during his lifetime; Rosemary lacks standing as a beneficiary to compel productivity. |
| Do Rosemary’s divorce agreement/arbitration rights to half the rent give her standing to reach trust income despite the spendthrift clause? | Rosemary (below): asserted rights to rent under the Agreement/Award entitle her to enforce collection. On appeal she disclaimed reliance on creditor status. | George: Those rights are as his creditor under equitable distribution; the Trust’s spendthrift clause shields trust income from such creditors unless it is a support/maintenance order under §7743. | Held: The Orphans’ Court (and Superior Court) treated that remedy as creditor-based (equitable distribution), barred by the spendthrift provision; appellant did not appeal that holding and disclaimed reliance on creditor theory. |
| Does Rosemary’s status as settlor confer additional standing beyond contingent beneficiary status? | Rosemary: claimed settlor status gives standing. | George: Trust terms control rights; settlor cannot expand post-creation rights contrary to express trust terms. | Held: No separate, effective argument; court found settlor status did not alter that the Trust granted George the relevant power. |
| Was the Orphans’ Court’s dismissal for lack of standing error of law? | Rosemary: court erred by dismissing because she is a beneficiary/settlor with standing. | George: dismissal correct because Trust terms and arbitration award show she lacks current beneficiary rights and her contractual claim is creditor-based and barred. | Held: No error. Superior Court affirmed dismissal for lack of standing under the Trust Agreement. |
Key Cases Cited
- Jones v. Wilt, 871 A.2d 210 (Pa. Super. 2005) (discussing QTIP trusts and related tax/estate concepts)
- In re Ware, 814 A.2d 725 (Pa. Super. 2002) (explaining purpose and effect of spendthrift provisions)
- In re Francis Edward McGillick Found., 642 A.2d 467 (Pa. 1994) (beneficiary standing to enforce a trust)
- Rellick-Smith v. Rellick, 147 A.3d 897 (Pa. Super. 2016) (standard of review for standing issues)
- Estate of Spencer v. Commissioner of Internal Revenue, 43 F.3d 226 (6th Cir. 1994) (background on QTIP concept)