In re Estate of Wimberley

186 Wash.App. 475

349 P.3d 11

In the Matter of the ESTATE OF Margaret WIMBERLEY, Deceased.

No. 31757–9–III.

Court of Appeals of Washington, Division 3.

Jan. 29, 2015.

Publication Ordered March 31, 2015.

Kameron Lee Kirkevold, Helsell Fetterman LLP, Seattle, WA, for Appellant.

Cam C. McGillivray, Northwest Trustee & Management Services, Spokane, WA, Linda Ann Sellers, Sara L. Watkins, Halverson Northwest PC, Yakima, WA, for Respondent.

Opinion

FEARING, J.

¶ 1 Two brothers, James and Wesley Wimberley, quarrel over assets in their parents' trusts. The trial court removed James Wimberley as the successor trustee of the trusts and personal representative of the estate of the mother, Margaret Wimberley. James Wimberley's successor trustee, Stephen Trefts, performed an accounting and concluded that James over-distributed to himself the amount of $254,437.91 in trust assets. Trefts petitioned the trial court for approval of the accounting.

James appeals the trial court's approval and order directing him to reinstate $254,437.91 to the mother's trust and estate. We affirm all trial court orders.

FACTS

¶ 2 C.W. and Margaret Wimberley married on July 7, 1945. They bore and raised two children, Carroll Wesley Wimberley (Wesley) and James Keith Wimberley (James). C.W. and Margaret Wimberleys' estate planning process spanned the course of many years. This statement of facts follows the creation and administration of a family trust and changes to the trust, after the death of husband C.W. Wimberley, with Wesley or James lurking in the background.

¶ 3 On August 17, 1967, C.W. and Margaret executed a community property agreement designating all property owned or later acquired by the couple as community property. On January 15, 1999, the couple created a revocable living trust: “The Wimberley Family Trust, C.W. Wimberley and Margaret Wimberley, Trustor and/or Trustees” (Trust). The Trust identified C.W. and Margaret as trustors, one of them as survivor trustee upon the death of the first spouse, and beneficiaries while living. The Trust named James and Wesley Wimberley as heirs and primary beneficiaries. The trust designated James as successor trustee, upon the deaths of C.W. and Margaret. As trustors, C.W. and Margaret Wimberley retained the power to make amendments to the Trust or change its beneficiaries, but only as long as both remained alive.

¶ 4 The Wimberley Family Trust, like many family trusts, contained A–B–C trust provisions. The instrument directed the surviving trustee of C.W. and Margaret Wimberley to divide the Trust equally into two shares: Survivor's Trust A (Survivor's Trust) and Decedent's Marital Share (“Decedent's Trust B” and “Decedent's Trust C”), upon the death of the first spouse. The purpose behind this division was to avoid or limit estate taxes.

¶ 5 The Wimberley Family Trust instrument read:

Survivor's Trust A

Survivor's Trust A shall consist of the Survivor's one-half (1/2) interest in the commonly owned property or community property, quasi-community property and all other property included in the Trust Estate as the separate property of the Surviving Trustor. Upon division into shares at the death of a Trustor, Survivor's Trust A shall remain revocable by the Surviving Trustor during the life of the Surviving Trustor. Upon the death of the Surviving Trustor this share shall become irrevocable.

Any property not allocated to the Decedent's Marital Share, or otherwise allocated by the provisions of this Trust at the death of the first of the Trustors to die, shall be allocated to this Survivor's Trust A.

Decedent's Marital Share

Decedent's Marital Share shall consist of the Decedent's one-half (1/2) interest in the commonly owned property or community property of the Trust Estate, one-half (1/2) interest in the quasi-community property and all other property included in the Trust Estate as the Separate Property of the Decedent Trustor. Decedent's Marital Share shall be divided and allocated into Decedent's Trust B and C. Upon creation of such Trust shares, Decedent's Trust B and Trust C are irrevocable.

The Surviving Trustee shall have the sole discretion to select the commonly owned, community and quasi-community assets or the proportionate share of any such assets which shall be included in the Decedent's Trust B and Trust C. In no event, however, shall there be included in Trust C any assets or the proceeds of any asset which will not qualify for the federal estate tax marital deduction, and Trust C shall be reduced to the extent that it cannot be created with such qualifying assets. The Trustee shall value any asset selected by the Trustee for distribution in kind to the Decedent's share at the value of such asset at the date of distribution to the Decedent's share.

Clerk's Papers (CP) at 138–39 (emphasis added).

¶ 6 Under the Trust document, Decedent's Trusts B and C would pay their net income to the surviving spouse, while the principal of Trusts B and C could pay for the survivor's health care, education, support, and maintenance. Decedent Trust B also allowed, at the surviving spouse's request, a year-end principal payment of $5,000 or 5 percent of the trust's aggregate value.

¶ 7 C.W. and Margaret desired to place all their assets in the Trust. The Wimberley Family Trust instrument read:

The Trustors intend this Trust to be the recipient of all their assets, including without limitation assets whether commonly owned, jointly owned, marital, deferred marital, community, quasi community or separate. The Trustors intend this trust to be the named beneficiary of all interests of which either or both Trustors are, or may become, Beneficiaries.

....

Property held by the Trustees of this Trust, which is held in trust for the benefit of the beneficiaries subject to the provisions of this Trust Agreement, is and shall be property owned by the Trust.

The Trustors have paid over, assigned, granted, conveyed, transferred and delivered, and by this Trust Agreement do hereby pay over, assign, grant, convey, transfer and deliver unto the Trustees their property ... any other property that may be received or which has been received by the Trustees hereunder, as invested and reinvested (hereinafter referred to as the “Trust Estate”), shall be held, administered and distributed by the Trustees as hereinafter set forth.

CP at 114. A 1999 deed placed title to real property in the Wimberley Family Trust. Numerous financial account statements designated the trust as the account holder.

¶ 8 The Wimberley Family Trust instrument mentioned the possibility of loans from the parents to James and Wesley and directed that such loans be forgiven upon the death of the parents, but reduce the debtor son's distribution of trust assets. The instrument read:

Gifts or Loans

The Trustee shall reduce a Beneficiary's share by any gifts or loans as shown in Schedule A.

CP at 158. No gifts or loans were ever recorded in Schedule A.

¶ 9 At the time of executing the trust instrument, C.W. and Margaret signed wills. Both wills contain “pour-over” provisions that:

give, devise and bequeath all the rest, residue and remainder of my property of every kind and description (including lapsed legacies and devises), wherever situated and whether acquired before or after the execution of this Will, to the Trustee under that certain Trust executed by me, which is known as “The Wimberley Family Trust.”

CP at 359. A pour-over will is a testamentary device wherein the writer of a will creates a trust and decrees in the will that the property in his or her estate, at the time of his or her death, shall be distributed to the trustee of the trust.

¶ 10 The Wimberleys also articulated their wishes in a Letter of Intent and Declaration of Gift, executed as part of the Family Trust:

As part of our estate plan, we have established a Revocable Living Trust. We have transferred property into the Trust and in the future we will take property out and put it into the Trust as we desire. It is our intent that all property held in the Trust be our commonly owned or community property, subject to the laws governing joint ownership. In confirmation of this intent, we make the following declaration:

1. All property held by the undersigned in the Trust ... is the commonly owned or community property of the said Trustors unless otherwise designated by writing in the Trust documents, or in the manner in which title is held in the Trust.

2. All property which is the separate property of either Trustor has been and will be so designated in writing and signed by the Trustors.

3. Any property in the said Trust which had its origin as separate property, or which cannot be traced as to its origin, is the commonly owned or community property of the Trustors. If any question should arise, it is the intent of each of the Trustors to gift, in consideration of their mutual love and affection, so much of any disputed property to the other as is necessary to create joint ownership in both Trustors. This gift is intended and made as and when any asset is placed into the Trust.

4. Any previous community property agreement entered into between the undersigned shall no longer be applicable to, and is thereby revoked with respect to, all property held by the undersigned in the Trust known as: The Wimberley Family Trust.

CP at 175.

¶ 11 C.W. Wimberley died on January 20, 2002, rendering Margaret Wimberley, at the age of 85, the Trust's survivor trustee. The Trust instrument directed her to divide the trust in half, with one-half becoming Trusts B and C. Margaret never divided the Trust into the Survivor and Decedent's trusts.

¶ 12 On July 18, 2007, five years after the death of C.W., Margaret Wimberley amended the Wimberley Family Trust “so as to fully comply with the Trust Laws of the State of Washington.” CP at 178. Richard C. Greiner, a Yakima estate planning attorney, drafted the amendment. The 2007 amendment contained provisions that contradict key provisions of the original Trust.

¶ 13 The 2007 amendment stated in...