Wills, Trusts and Estates – Part 1

Church Law and Tax 1989-05-01 Recent Developments Wills, Trusts, and Estates Richard R. Hammar, J.D.,

Church Law and Tax 1989-05-01 Recent Developments

Wills, Trusts, and Estates

Can a church that is named as a beneficiary under a charitable trust challenge the sale of trust property on the basis of inadequacy of sales price? Yes, concluded a Michigan state appeals court. A decedent had established a charitable trust, naming an Episcopalian diocese and a local church among the beneficiaries. The major asset of the trust was a 315-acre estate that included a large residence. The trustees sold the estate (for $3.25 million) in order to obtain cash to pay trust expenses. The diocese and church challenged the sale on the following grounds: (1) the trustees breached their duty to notify the beneficiaries regarding this important aspect of trust administration; (2) the trustees failed to obtain an appraisal; (3) the trustees failed to adequately market the property; and (4) the sales price was inadequate. A probate court agreed with these contentions, removed the trustees from office, and awarded monetary damages to the beneficiaries. The trustees appealed, and a state appeals court affirmed the ruling of the probate court. The court began its opinion by emphasizing that trustees have certain “fiduciary duties” toward trust beneficiaries, which include acting with care, diligence, integrity, fidelity, and sound business judgment. The court concluded that the trustees had violated these duties by failing to keep the church and diocese “reasonably informed of the trust and its administration,” failing to obtain a “sound appraisal,” inadequately marketing the property by failing “to bring the property’s availability to the attention of a wide spectrum of potential purchasers,” and “selling the property for less than its fair value.” The court upheld the dismissal of the trustees, and the award of $1.9 million in damages. This case will be of interest to any church or denominational agency that is named as a beneficiary under a trust or will. Remember this—as a beneficiary under a will or trust, a church or denominational agency has the right to be informed regarding the administration of the estate or trust, and to receive a fair value for any sale of estate or trust assets following a reasonable marketing effort. Don’t be reluctant to ask questions. Matter of Green Charitable Trust, 431 N.W.2d 492 (Mich. App. 1988).

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