Take-Away: It is important to follow the terms and specified procedures of a trust instrument if the trust is to be amended by its settlor. Courts look closely to the trust internal requirement to be complied with when amending a trust.

Background: Often a trust is amended in a crisis setting, such as when the settlor is scheduled to go into the hospital for surgery, or when the settlor is on his/her deathbed and last-minute testamentary wishes need to be documented via a trust amendment. Yet it is often the case that more attention is given to getting the trust amendment prepared and executed by the settlor, and less attention is given to what the trust instrument requires for that trust amendment to be treated as valid. Indirectly this topic was recently addressed by the Michigan Court of Appeals

In re Pasquale Storto Jr. Trust, Michigan Court of Appeals, No. 360134 (January 12, 2023)

Facts: The settlor’s 2005 trust instrument contained a common provision that indicated that the settlor might prepare a written statement or list, in his own handwriting, to dispose of tangible personal property. The settlor’s trust instrument also contained the simple statement: “I reserve the right to amend or revoke this Agreement, wholly or partly, by a writing signed by me or on my behalf and delivered to the Trustee during my life.” Mr. Storto’s trust instrument had been amended twice in 2008. He subsequently created a “Memorandum Regarding Desire [sic] Distribution of Personal Property (for ease of reference, the Memo.)

Memo: The 2011 Memo began with a typewritten statement: “Certain of my personal effects have special meaning; I desire that upon my death, these items be given to those herein indicated.” Then, on the Memo were spaces which were handwritten by Mr. Storto, including “my personal vehicle, my home, a Traverse City timeshare unit, and $50,000- cash minimum” as personal property to be distributed to—” the woman who was Mr. Storto’s then romantic partner (for ease, the partner.)

Presumed Revocation?: After Mr. Storto’s death in 2020, the Memo was claimed to have been delivered by the partner to the successor trustee, Mr. Storto’s sister, in a binder along with his other estate planning documents. The successor trustee did not remember seeing the Memo in the binder, but she did testify that at a later date the partner brought to her a copy (or original, she just was not sure) of the Memo. A debate then arose between the two whether the Memo existed at the time of Mr. Storto’s death, i.e. was it included in  the hand-delivered binder to the successor trustee?, thus implicating the statutory presumption of revocation if an original estate planning document is not located after the settlor’s death. Considerable testimony was given whether the binder included the Memo or not, leading  the probate court to have to deal with questions of witness credibility.

Trust Amendment Validity: While much of the court time dealt with the presumption of revocation and the credibility of the partner (who delivered the binder) and that of the successor trustee (the decedent’s sister), the sister also argued that the Memo was not a valid trust amendment under EPIC. The sister argued that the Memo was not a valid trust amendment because the rules of construction for Wills also apply to trust instruments, and thus the statutory provisions with regard to the validity of writings amending or supplementing Wills also applies to trusts. Specifically, MCL 700.2513 renders the cash gift portion of the Memo invalid since a Will may refer to a written statement or list to dispose of items of tangible property not otherwise specifically disposed of by the Will, other than money. Hence, the sister argued that the Memo failed because of the inclusion of the cash bequest of $50,000, which is expressly forbidden by the Michigan statute.

Probate Court: The probate court held for the partner against the successor trustee (the settlor’s sister.) The Court found that the sister failed to provide evidence that refuted the partner’s claim, and because the sister’s own inconsistent testimony that she had received either the original, or a copy, of the Memo separate from the binder, which she had copied and then returned to the partner, which supported partner’s position. In short, the partner won the credibility contest with the sister.

As for the successor trustee’s claim that the Memo was an invalid trust amendment because it did not comply with the terms of the trust instrument and because it violated the Michigan statute, the probate court found that the Memo substantially complied with the trust instrument’s method for amendment, as required by statute, and that the Memo was not merely an attempt to distribute personal property.

Appellate Court: The petitioner’s efforts to include the Memo as a valid trust amendment was sustained by the Court of Appeals. Some of its findings included-

MCL 700.7602(3): This section addresses the manner of amendment of a trust. “The settlor may revoke or amend a revocable trust in any of the following ways: (a) by substantially complying with the method provided in the terms of the trust; (b) if the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive…in the following way: (i) If the trust is created pursuant to a writing, another writing manifesting clear and convincing evidence of the settlor’s intent to revoke or amend the trust.”

Prior Precedent: In In re Stillwell Trust, 299 Mich App. 289 (2012) the Court held that the settlor’s handwritten notes amending her trust delivered to the trustee on her death as directed by her to her grandson, were treated as trust amendments, even though the notes were unsigned and not labeled as trust ‘amendments.’ The Court relied on the facts that the notes were placed in an envelope addressed to the successor trustee, and marked with specific instructions with regard to the distribution of her assets under the trust. Consequently, Ms. Stillwell had substantially complied with the terms of her trust that governed the trust’s subsequent amendment.

Comply with the Terms of the Trust: Here, Mr. Storto ensured that the Memo would be delivered to the successor trustee upon his death by signing the Memo and keeping it with the rest of his estate documents in a  single location (the binder) in which he instructed his successor trustee, and his romantic partner, to find such documents on his death. In addition, Mr. Storto fully complied with the terms of his trust with regard to amendments by making a writing changing the terms of the trust, signing the writing, an delivering it to himself as the initial trustee before his death. The fact that the Memo was not labeled as a ‘trust amendment’ was irrelevant.

Cash Gift: Because the Memo qualifies as an amendment to the Trust under MCL 700.7602(3), it is not merely a list disposing of personal property. Therefore, MCL 700.2513’s proscription on distributing cash gifts does not apply, and the probate court did not err by holding the amendment valid.”

Conclusion: While the Court in Storto was fairly lenient in its conclusion, it is important to remember the limitations of MCL 700.7602(3), which makes reference to a trust instrument that contains a method of amendment that is expressly made exclusive, in which case the standard of construction is much higher than merely substantial compliance with the statute. So in those situations where a trust amendment is needed quickly, for whatever reason, it still pays to review the trust instrument to confirm if it contains an exclusive manner in which the trust may be amended.