SW Legal studies in Business

Court May Approve Trust Revision over Objection of One Trust Beneficiary
Description

Appeals court held that a trial court acted properly in approving a restructuring of a trust that benefitted four parties. All parties agreed to a new settlement except one party who later claimed not to have agreed. Even if the lack of agreement had been clear, a court may approve a fair and reasonable settlement.

Topic Wills, Estates, and Trusts
Key Words

Trust, Settlement, Beneficiary

C A S E   S U M M A R Y
Facts

McNulty formed a trust in 1992 to provide income for his daughter, Sondra, and his grandson, Scott, during Sondra’s life. The main asset of the trust was a working ranch. After Sondra’s death, Scott would continue to be ranch manager and the trust corpus could be distributed to McNulty’s four grandchildren in stated percentages. Eventually the trustees resigned and Sondra was the sole trustee. She sold the ranch to Scott for $1.75 million. Scott made a $300,000 down payment. Six years later, Scott sold the property for more than $10 million. The other three grandchildren petitioned to have Sondra removed as sole trustee and for an accounting of the sale of the property. They sued Sondra and Scott for breach of fiduciary duty. Prior to trial, the parties engaged in mediation. One grandchild, Kevin, participated only in part by telephone. At the end of the mediation, the attorneys who were present believed an agreement had been reached. That included the attorney for the grandchildren, who represented Kevin and signed on his behalf. The agreement called for Scott and Sondra to make additional payments to the trust. Kevin then rejected the agreement, calling the payments inadequate, and hired a new attorney. Sondra moved to enforce the mediated agreement. The trial court held the settlement to be enforceable as reasonable and prudent in the best interest of the parties and because Kevin’s attorney had authority to agree to the settlement. Kevin appealed.

Decision

Affirmed. Affirmed. The trial court could approve a settlement of claims brought on behalf of the trust over the objection of one beneficiary of the trust. It acted within its discretion by finding the settlement to be fair, reasonable, and in the parties’ best interests. The primary issue is protecting the interests of the trust as a whole, not maximizing the position of one beneficiary of the trust. If one beneficiary could block modification of a trust, the purpose of the trust could be impaired. Kevin had no grounds to complain about the action taken by the attorney that represented him at the mediated settlement as he had reason to believe Kevin had approved the settlement.

Citation

Saunders v. Muratori, ---P.3d--- (2010 WL 3259826, Ct. App., Colo., 2010)

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