Decedent’s Language In Will Of His ‘Desire’ And “If Expedient And Possible” Concerning Family Business Was Merely Precatory

In the estate litigation and estate administration case of In Re Estate of Mumma, PICS Case No. 15-1546 (Pa. Super. Oct 2, 2015), the Patricia H. Jenkins, writing on behalf of the Pennsylvania Superior Court, ruled that the orphans’ court properly upheld auditor’s report and properly authorized trustee to vote shares of family stock as she saw fit because despite remaindermen’s argument. Language in the will about decedent’s “desire” that family business companies remain owned by family was merely precatory.

Window and one of four children served as co-executrices of decedent’s estate and co-trustees of two trusts created by his will. The remaindermen of the trusts were decedents’ four children.

Widow died in 2010, leaving one child as personal representative and trustee. After almost 30 years of litigation, two of decedent’s children filed appeals from the orphans’ court’s order denying their exceptions to the final auditor’s report and confirming all accounts. One child appealed an order that authorized the remaining trustee to vote shares of family company stock owned by the residual trust. The court consolidated all of the appeals.

Daughter asserted that the provisions in decedent’s will, including article eight, which stated that it was decedent’s “desire” that “if expedient and possible” that family businesses be continued under the management and control of the family, required each child to receive an equal share of each trust in precisely the state that the principal existed at the termination of the trust. She argued for equal distribution in kind instead of equal distribution of the monetary value of the principal and insisted that trustee had to make distributions of stock.

Trustee had requested and auditor recommended that the trusts liquidate some assets of the terminated trusts for distribution purposes and the orphans’ court had accepted the auditor’s recommendations. The orphans’ court acted within its discretion and correctly determined that the decedent’s “desire” that the businesses remain in the family was merely precatory language and that the will expressly gave the trustee discretion to distribute trust assets through means other than “in kind.” Additionally, daughter had raised the in-kind argument in prior appeals and had lost. Thus, her argument failed under the law of the case doctrine.

Daughter also challenged widow’s annual right to take up to five percent of the principal of the marital trust for herself, alleging that widow and trustee deliberately misconstrued the marital trust article in the will, “overfunded” the marital trust, and allowed widow to “steal” money that should have gone to the remaindermen. The auditor rejected the daughter’s argument and the orphans’ court agreed with the auditor’s reasoning. In the context of the will provision, “including therein” plainly required addition of amounts passing to widow outside the will to the value of assets passing under the will in order to derive the proper figure against which to apply the fifty percent factor.

Brother argued the orphans’ court lacked jurisdiction over assets owned by non-party corporations and tenancies in common organized outside and apart from decedent’s estate. Brother asserted that an asset grandfather’s estate was not part of decedent’s estate but testimony and documents presented at the hearing confirmed that the asset remained an asset of a family company which was how trustee and widow treated it.

Brother also contended that the Orphans’ Court erred in confirming accounts when the plan of distribution of estate assets into those accounts was never confirmed. The plan of distribution was not at issue in the litigation because the parties indicated during oral argument that “it would be premature…to approve a certain schedule of distribution.” Brother argued that article 13 in the will precluded sales of family businesses to non-family members. The orphans’ court properly rejected that argument because the “desire” expressed in that article was mere precatory language and the argument failed under the law of the case doctrine.

Reference: Digest of Recent Opinions, Pennsylvania Law Weekly (October 20, 2015)

Filed Under: Estate Administration; Estate Litigation; Precatory Language in Will

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