Posts Tagged ‘Covino v. Forrest’

Does Your Personal Property Belong to Your Living Trust?

JULY 21, 2014 VOLUME 21 NUMBER 26

When you create a revocable living trust, you usually want to transfer most (maybe even all) of your assets to the trust — especially if one of the reasons for creating the trust is to avoid the probate process. A new deed to your home, a change in titling of your brokerage and bank accounts, perhaps even a new title for your car or cars are often part of the process. But what about your household possessions — furniture, art hanging on the wall, your priceless collection of antique tape dispensers, your stamp and coin collections?

Commonly (but not always) people who establish a living trust might also sign a document purporting to transfer all of their personal property to the trust. Usually this is not much of an issue, since there are no title documents for most of your personal effects, and your intended beneficiaries can just collect, disperse and/or sell the contents of your house.

But another purpose in executing a living trust is usually to reduce the possibilities for disputes among your family members. Your trust, after all, should include a comprehensive approach to your plans for distributing assets on your death. Even a well-drafted trust document, though, will not resolve all family disagreements.

Consider Cliff Cruz (not his real name). Cliff and his first wife had four children, all grown. After Cliff’s wife died in 2003, he moved to Arizona to be near some of his children — and here he met and married Geraldine.

Cliff and Geraldine took steps to arrange their estate plans. The signed a revocable living trust agreement, providing that on the death of either spouse the trust would be divided into two shares — one belonging outright to the surviving spouse, and one held in trust for the benefit of the surviving spouse but ultimately distributed to the deceased spouse’s children. They explicitly agreed that everything they owned, even those things they each brought into the marriage, would be treated as community property — which meant that each of them would henceforth own a one-half interest in all of their combined assets.

The couple also signed “pourover” wills, each leaving everything they owned to the trust upon death. They signed a deed transferring their home to the trust, along with transfer documents for all their other assets. Just to be thorough, they also signed a document which said that all of their personal property — household effects, furniture, contents of their home, and anything else — also belonged to the trust.

Cliff died three years later. Five days after his death, two of his children went to the couple’s home and removed four safes, all of Cliff’s gun collection and various other items, and took them to their homes. They argued that Cliff had given his children the contents of the safes and the guns during his life — before he even met Geraldine. In the safes: almost $400,000 worth of gold and silver coins.

Geraldine sued, arguing that her step-children had essentially stolen assets belonging to her as trustee and intended to form part of the trust for her benefit. The children responded claiming the prior gift, and arguing that the trust should be modified to reflect their right to the gold coins and guns. After months of legal maneuvering, the case was tried before a jury. Geraldine pointed to the documents and testified that she understood that Cliff had transferred everything to the trust; the children testified that Cliff had purchased all of those items as investments for the children, and had given them to his children (but held on to them for safekeeping) many years before his death.

If you were on the jury, do you know what you would have decided? Before you read on, stop a moment and see if you can make up your mind, or whether you need more information. If you need more information, what do you want to know?

After a three-day trial, the jury returned a verdict that two of Cliff’s four children had, indeed, taken property belonging to Geraldine and the trust. They entered a dollar verdict, rather than ordering return of the items; they therefore did not identify which items they believed were wrongfully taken. But the dollar amount of the judgment, just $15,000, made it hard to figure out what they thought belonged to the trust.

Geraldine appealed, arguing that the judgment made no sense. If the jury believed that trust property was taken by the children, she argued, then the judgment should have been more like $400,000.

The Arizona Court of Appeals disagreed. First, the appellate court noted, if there is any theory on which the jury’s verdict can be upheld, it will normally be confirmed. In this case, the fact that Cliff gave his children the combinations to the safes might have been sufficient proof of his “constructive” delivery of the coins and safe contents to the children prior to his marriage, even though he kept the safes themselves at his home. In that case, the jury verdict would make sense — and so it was affirmed. Covino v. Forrest, July 3, 2014.

What does Cliff’s estate plan tell us about good practice in other cases? For one thing, if you think you have given property to your children — or anyone else — during your life, you should make that clear. That is especially important if you still have some of the gifts in your possession. Especially in second-marriage cases, it would be really helpful if families talked about ownership and expectations early, before the death of a parent simultaneously raises the emotional level and removes an opportunity to simply ask for clarification. And, finally, just signing an assignment of personal property to your trust might not be enough, depending on your individual and family situation — you might be better served by sitting down and writing out your intentions and understanding.

©2017 Fleming & Curti, PLC