Wills

Contractual Wills

Estate of Hearn v. Hearn, 101 S.W.3d 657 (Tex. App.—Houston [1st Dist.] 2003, pet. denied).

 

Husband and Wife executed reciprocal wills leaving personal and household effects to the survivor with the residuary passing to an inter vivos trust. After Husband died, Husband’s Children from a prior marriage asserted that Husband and Wife had executed contractual wills which would require Wife to fund the trust with her property immediately upon Husband’s death. The trial court granted Wife’s motion for a summary judgment that she was under no obligation to fund the trust with her property. Children appealed.

The appellate court affirmed. The court began its analysis by examining Probate Code § 59A which requires a contractual will to be established by the provisions of the will stating both that a contract exists and the material provisions of the contract. Accordingly, the court refused to consider any extrinsic evidence in determining whether Wife’s will was contractual. (In dicta, however, the court did examine the terms of the trust and concluded that this evidence would not have changed the court’s holding even if it could have been considered.)

The court studied the will and determined that it was contractual in nature. The will expressly stated that it was contractual, referenced § 59A, and stated the material terms of the contract, that is, that each spouse will maintain a will that directs the executor of the first spouse to die to make a qualified terminable interest property (QTIP) election for property passing into the trust. The contract did not require Wife to maintain her will or transfer her property to the trust upon Husband’s death. Instead, the contract was fully performed when Husband died and his residuary estate passed to the trust for which the executor made the QTIP election.

Moral: The terms of a contractual will should be clearly stated in the will because courts are reluctant to imply additional terms.

 

Trusts

Reformation

Estate of Hearn v. Hearn, 101 S.W.3d 657 (Tex. App.—Houston [1st Dist.] 2003, pet. denied).

 

Husband and Wife executed reciprocal wills leaving personal and household effects to the survivor with the residuary passing to an inter vivos trust. After Husband died, Husband’s Children from a prior marriage unsuccessfully claimed that Husband and Wife had executed contractual wills which would require Wife to fund the trust with her property upon Husband’s death. Children then urged the court to reform the trust to reflect Husband’s alleged intent. The court refused to reform the trust.

The court began its analysis by identifying the two elements which Children must satisfy before the court would reform the trust. First, there must have been an agreement between Husband and Wife. Second, there must have been a mutual mistake in reducing that agreement to writing. (The court expressed no opinion as to whether a unilateral mistake would support reformation of a trust.) Wife successfully negated these elements by showing that she had never agreed to place her property in the trust upon Husband’s death. The court examined a letter from the attorney who drafted the wills and trust and concluded that it did not even raise a fact issue with regard to whether Wife had agreed to fund the trust with her property when Husband died.

Moral: A person attempting to reform a trust must have solid evidence that an agreement exists and that there was a mistake in reducing that agreement to writing.



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