Must a Trustee Follow a Deceased Settlor’s Separate Written Instructions Concerning the Trust Document?

Dana Gentry - Attorney

Dana Carlson Gentry, Esq., Board Certified in Wills, Trusts & Estates

A recent case involved a trust Settlor who made cash gifts to cover education expenses of her cousin’s grandson.  The Settlor sent a written letter to her trustee confirming that she had paid such expenses for the past two years and that she “expected that” that the  trustee would continue to pay those expenses for the grandson’s junior and senior years at college. The written instructions contained an estimate of the bill for the junior year and a direction to “make arrangements so that his cost will be paid for those two years”.  The Settlor also had verbal conversations with the trustee concerning this written directive. The Settlor’s trust agreement did not contain any explicit written provisions to pay any educational expenses for the grandson. Consistent with past distributions and the directives, the trustee paid the first semester of the grandson’s college educational expenses for his junior year.  Unfortunately, the Settlor passed away during that semester and the trustee, despite stating in writing to the grandson’s mother that the payments would continue, stopped paying the college expenses.  Naturally, the grandson sued for the continued payment of his college expenses and further argued the trust’s terms required the trustee to pay his graduate school expenses. The trust beneficiaries countersued and objected to any further payments.  The appellate court held that the trustee was liable for breach of an oral contract and breach of trust to the extent of the grandson’s junior year and senior year college educational expenses, as the Settlor had given the trustee written instructions (albeit outside of the trust document) to make those payments. However, the Court also determined the trustee was not liable to pay for any graduate school expenses, as the Settlor did not give any written directive concerning those expenses.

The moral of this story: Every trustee should read carefully any written directions made by a Settlor outside of the four corners of the trust instrument, and should be mindful of the implications of any written representations the trustee makes to individuals who are not named beneficiaries of a trust.  If the trustee is uncertain as to what those directives entail, then it is advisable that the trustee seek and obtain a Court Order, particularly when those directives are not stated in the trust document.

How could the Settlor have prevented this litigation and its attorneys’ fees and other costs? Answer: By seeking her lawyer’s advice and amending the trust during her lifetime to include a bequest specifying the sums to be paid or set aside for payment of the grandson’s college education in the event of the Settlor’s death before his graduation.

Dana Gentry is Board Certified in Wills, Trusts, & Estates.  To contact Dana Gentry, call 941.748.0100 or email dgentry@blalockwalters.com.