JANUARY 18, 1999 VOLUME 6, NUMBER 29
Jack and Frankie Bemis were divorced in Nevada in 1972. At the time, Jack was expecting a distribution from a California trust within the year. As part of the divorce settlement, he agreed (and was ordered) to set up a $25,000 trust for the benefit of the couple's two children with part of the proceeds. The children, Kevin and Scott, were then 13 and 12, respectively; the trust was supposed to be distributed to the boys when Kevin reached age 25.
In an effort to encourage a good father-son relationship, Frankie never mentioned the terms of the divorce settlement to her sons. Jack provided no financial assistance to his sons, and did not set up the trust as he had promised. When Kevin turned 25, in 1984, no funds were distributed to either son.
When Jack died in 1995, his estate plan left nothing to Kevin or Scott. Nearly a quarter of a century after his promise to set up a trust for his sons, they first learned (from their mother) of the agreement and their father's failure to comply with its terms.
Shortly after Jack's death, Kevin and Scott filed a claim against his estate. They argued that they should be paid the original $25,000 plus the interest that would have accrued if the trust had been established.
Jack's estate objected to payment of the claim, and the question was referred to the Nevada probate court. After reviewing the claim, that court determined that Kevin and Scott were years too late; the statute of limitations barred them from asserting the claim at this late date.
The Nevada statute of limitations requires that any claim based on a contract (as Kevin and Scott's was) must be brought within six years of the breach. Whether the date of breach was 1973 (when the trust was supposed to be set up) or 1984 (when the trust was supposed to be distributed to Kevin and Scott), the probate court ruled that it had long expired when Jack died in 1995.
Kevin and Scott appealed. The Nevada Supreme Court reversed the probate court on the statute of limitations issue. Noting that Kevin and Scott claimed to be unaware of the agreement to establish a trust until after their father's death, the justices ruled that the statute of limitations would not begin to run until they knew (or should have known) of their father's breach of contract.
Since Kevin and Scott were still minors when Jack first violated the terms of the contract, the statute of limitations would not have applied to them at that point in any event. They should not be expected, said the court, to have looked up their parents' divorce decree once they turned eighteen; unless someone told them of the trust promise, there was no other way for them to have learned of Jack's violation of the decree. To the probate court's assertion that they should have gone to the courthouse to review their parent's divorce decree, the Supreme Court responded that "we can think of no policy to be served by imposing such an obligation on the children of divorce."
The Supreme Court ruling is not the end of the lawsuit for Kevin and Scott. The court's order simply refers the matter back to the probate court; Kevin and Scott must now show that their failure to learn about the divorce decree was reasonable. If they can show that there was no reason they should have known of the trust promise, they will have laid the groundwork for imposition of a "constructive trust" against their father's assets. They would then be entitled to the original $25,000 plus interest from 1973. Bemis v. Estate of Bemis, November 25, 1998.