dynasty trust problem

[daisyamy]

What is the name of your state? florida

My parents set up a dynasty trust for their children and grandchildren that was funded with one policy. After my father died my mother added onto the ILIT with another new policy from a separate life insurance company. Initially she named the trust as owner/bene but did not complete the entire app until a few months later when she made the trustees of the trust ( 2 siblings) the owner/bene but did not do so as "trustee." I feel lthis was done by my siblings without children pressuring her.

When she died the probate attorney said that the proceeds of the life insurance in question should have gone into the dynasty trust as the premiums were gifted on form 709 for 10 years as being part of the trust and even had gst allocations. However, the siblings did not put it into the trust but paid it out to the rest of the siblings which meant the grandchildren were left out.

My question: In a court of law do I/or the grandchildren have a case and a right to get the moneys disbursed "wrongly" back into the trust or does the life insurance app as written though wrongly prevail? Thanks

 

[Dandy Don]

Your post is a bit confusing because it's hard to determine exactly WHO was designated beneficiary on the form. Is there any language in the trust that specifies exactly how this money was to be handled?

Only a certified estate planning attorney with experience in dynasty trusts can provide the definitive answer to your question by looking at the actual documents and by reviewing case law to see if a situation similar to yours has occurred in the past. Most likely it is going to be chalked up to a mistake by your mother in which the incorrect designation is allowed to stand, but I'm wondering if the trustees have opened themselves up to breach of fiduciary duty.

DANDY DON IN OKLAHOMA ([email protected])

 

[daisyamy]

Thank you for your response.

I don't know if this will alter your answer any or not but the trust had the children of my parents as primary beneficiary and the remaindermen were my children my parents only grandchildren. The principak was to be preserved for the grandchildren while the primary bene lived off the income. The trustees were 2 of my childless siblings who then became owner/bene of the second policy but in their individual capacity.

My concern is like you said--weren't the trustees duty bound to overrrule the mistake in the insurance app and appoint the funds to the trust? The trustees told the probate attorney that they would discuss it with all primary bene but I was never consulted because they knew I wouldn't agree to it because of my children the only grandchildren of my parents.

 

[Dandy Don]

They can't just automatically overrule the mistake--the mistake may have been perfectly legal and may have given them the legal loophole they needed to do whatever they wanted with the money. Take the dynasty trust to an attorney and have him review it and a copy of the trust to see if you have grounds to take action against the trustee or not. You might have a chance to collect if there is language in the trust to specify how the insurance money is to be handled, but the mistake that was made is very common and will be awfully difficult to overcome.

DANDY DON IN OKLAHOMA ([email protected])

 

[daisyamy]

Thanks, Dandy Don. I am having an attorney review it.

The trust document states that the principal should be reserved for the grandchildren. I am counting on FLorida law which has a tortious interference with inheritance claim which states that if someone interfers with a bequest which was intended to go to someone (proven by form 709) but someone else, through fraud, breach of fiduciary duty, etc., interfered and the bequest ws not perfected then it is illegal.