Can a joint and contractual trust be revoked by sole surviving settlor?
Florida law recognizes that parties may execute joint and mutual testamentary instruments. One Florida court held that a joint and mutual will may be the product of a contract providing that it cannot be revoked except by the mutual consent of the parties and providing that it be binding on the survivor, and where the terms of the will clearly disclose that it is the product of such a contract, the will itself is sufficient evidence to establish the contract. See, In re Estate of Rowland, 504 So.2d 543 (Fla. 4th DCA 1987).
However, the Florida Probate Code at section 732.701(2) provides that the execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. Thus, the question of whether and when a party to a joint or mutual testamentary instrument, like a will or trust, may revoke it, is one that is frequently disputed in the probate litigation context.
One particularly interested lawsuit was recently resolved in another jurisdiction by a Kansas Appeals Court in Mangels v. Cornell, 189 P.3d 573 (Kan.Ct.App.2008). Mangels involved a revocable trust formed by Bud and Thelma Helwig, husband and wife (the “The Helwig Revocable Trust”). The trust was funded with five 1/4-sections of farmland and “mineral and royalty interests. The trust provided that net income would be distributed to the settlors or survivor and thereafter in one-third shares to each of the Helwig’s adopted children, Darrel Mangels, Carl Mangels, and Judith Cornell; and upon the death of such adopted children, their share was to be paid per stirpes to the children of each.
Bud died and a few months later Thelma amended the trust to change the successor trustees from Darrel’s and Carl’s children to Darrel, Carl, and Judith. Thereafter, Thelma again amended the trust to provide that after her death, the first $ 1 million of net income should be paid to Judith, with the remaining net income divided in one-third shares as originally provided.
Both of these amendments were challenged in a declaratory judgment action filed by Darrel and Carl who argued that the trust was a “joint trust” and was contractual in nature and could not be unilaterally revoked or amended by only one of the settlors.
The appeals court first focused on the language of the joint trust and carefully examined a provision of the trust entitled “Revocability.” It provides:
“13. REVOCABILITY. This trust shall be revocable, and the Grantors expressly acknowledges that they shall have the right or power, whether alone or in conjunction with others, and in whatever capacity, to alter, amend, revoke, or terminate this trust, or any of the terms of this Agreement, in whole or in part.” (Emphasis added.)
The court read that provision and concluded that the language of paragraph 13 clearly and unambiguously permits amendment and revocation by both grantors.
Next, the court looked to the consideration paragraph in the instrument and observed that it clearly provides that funding the trust was “in consideration of the foregoing and mutual covenants and agreements hereinafter contained.” (Emphasis added.) Thus, the court found that it was contractual in nature and supported this conclusion with other sections of the trust instrument which indicated intent to create a joint, mutual, and contractual trust. Notably, the trust carefully guarded against unilateral decisions of either Thelma or Bud as trustees, providing in paragraph 9 that “[a]ll decisions of the Trustees shall be taken unanimously” and requiring a successor trustee be appointed upon the death or other incapacity of either trustee. The court believed these provisions demonstrate both mutuality and clear agreement that decisions regarding the trust were to be made by both Thelma and Bud.
Finally, the court examined the instrument as a whole for indications of contractual intent and listed seven factors generally indicating the intent to be contractually bound by a joint and mutual will:
(1) A provision in the will for a distribution of property on the death of the survivor;
(2) a carefully drawn provision for the disposition of any share in case of a lapsed residuary bequest;
(3) the use of plural pronouns;
(4) joinder and consent language;
(5) the identical distribution of property upon the death of the survivor;
(6) joint revocation of former wills; and
(7) consideration, such as mutual promises.
The court applied these factors to the instrument and found that five of them pointed to the conclusion that the trust was “joint and contractual” and therefore could not be amended by only one of the settlors.
Hats off to the Kansas appellate court for delineating such a logical checklist for examining this challenging issue.