Morse v. Kraft
466 Mass. 92
| Mass. | 2013Background
- Richard Morse, disinterested trustee of the Kraft Irrevocable Family Trust (1982 Trust), seeks a declaratory judgment whether he may transfer (decant) subtrust assets into new subtrusts under a 2012 master trust without beneficiary or court consent.
- The 1982 Trust created four subtrusts for the Kraft sons (income beneficiaries) with their children as contingent remaindermen; only a “Disinterested Trustee” may make distribution decisions, precluding the sons from that role.
- Morse has been sole disinterested trustee since creation; he is aging and proposes moving assets to new subtrusts that would permit the sons to serve as trustees with distributive powers.
- The key legal concern is whether such a distribution would trigger the federal generation-skipping transfer tax (GST), which depends in part on whether the 1982 Trust “authorizes distributions to the new trust ... without the consent or approval of any beneficiary or court.”
- The 1982 Trust grants broad discretionary distribution powers (Articles III, VI, VII) and expressly permits actions “without order or license of court”; affidavits from the settlor, draftsman, and trustee support an intent to permit distributions in further trust.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 1982 Trust authorizes decanting (distributing assets in further trust) without beneficiary or court approval | Morse: broad discretionary language (pay/apply for beneficiary’s benefit; full power without court order) implicitly includes decanting; settlor/draftsman/trustee affidavits support this | Opponents: trust does not expressly state decanting authority; court approval or beneficiary consent required absent clear authorization | Court: Held that the 1982 Trust's broad language and extrinsic evidence authorize the trustee to distribute assets in further trust without beneficiary or court consent |
| Whether a guardian ad litem must be appointed for minor/unborn contingent remaindermen | Morse: waiver acceptable because adult beneficiaries (fathers) consent and interests align | Some amici preferred appointment as typical practice | Court: Waiver granted; no guardian ad litem necessary because interests align and issue limited to authority to decant |
| Whether Massachusetts should recognize an inherent, trust-language-independent decanting power for trustees | Boston Bar Amicus: request to recognize an inherent power irrespective of trust language | Morse: seeks relief based on specific trust language, not a blanket rule | Court: Declined to adopt an inherent decanting power; left statutory adoption to Legislature |
| Whether court decides if decanting will be fiduciarily appropriate or GST consequences | Morse: asks only whether authority exists; not asking court to approve merits or tax outcome | Interested parties/IRS: GST consequences relevant but Commissioner did not participate | Court: Limited decision to whether authority exists; offered no judgment on fiduciary duties or GST consequences |
Key Cases Cited
- Phipps v. Palm Beach Trust Co., 142 Fla. 782 (1940) (trustee with sole/absolute discretion may create a second trust for beneficiaries)
- Wiedenmayer v. Johnson, 106 N.J. Super. 161 (App. Div. 1969) (absolute/uncontrolled discretion to benefit a beneficiary includes power to transfer in further trust)
- Loring v. Karri-Davies, 371 Mass. 346 (1976) (donee of special power of appointment may create trusts for objects absent contrary donor intent)
- Hillman v. Hillman, 433 Mass. 590 (2001) (procedural authority for declaratory relief to fiduciaries on tax-related trust construction issues)
- Walker v. Walker, 433 Mass. 581 (2001) (same; interpretive guidance on trust construction and settlor intent)
- First Agric. Bank v. Coxe, 406 Mass. 879 (1990) (declaratory relief appropriate where fiduciaries seek instructions regarding trust construction for federal estate tax implications)