By Fred Franke
Franke, Sessions & Beckett LLC
A recent Court of Special Appeals case, Shump v. Wannall, 2016 W.L. 588, 572-9 (10/4/16)(unreported), addressed whether a pour-over will is effective if the inter vivos trust comes into existence several weeks after the will is executed. The answer is no.
Maryland Estates & Trusts Art. § 4-411 provides that a legacy may be made to a revocable inter vivos trust, even if unfunded at the time of the testator death, if the trust instrument is in existence at the time that the will is executed. In part, the statute is meant to sidestep the “issue” of whether an unfunded trust exists and could therefore be a proper legatee. It also addresses whether the terms of the trust permitting amendment would violate the rules governing the formalities of wills.
The Maryland statute was derived from the Uniform Testamentary Additions to Trust Act (“UTATA”). The common law basis for validating pour-over devises is either grounded in the doctrine of incorporation by reference or by the doctrine of independent significance. Both of these doctrines are addressed by the Shump Court.
Incorporation by reference, of course, requires that the writing be in existence at the time that the will is executed. As it operates with revocable trusts, however, there is a bit of a mismatch because the revocable trust – by definition – can be amended or revoked post-execution. This is part of the issue that the statute addresses.
The doctrine of independent significance, on the other hand, focuses on the fact that there is a specific trustee acting under a trust to whom the assets can be directed. This doctrine permits the legacy to exist despite the fact that the beneficiaries of the donee trust or their interests are not fully described when the will is executed.
Neither doctrine, however, would permit a trust not in existence to be a legatee from a pour-over will. In theory, an oral trust might be sufficient. See Estates & Trust Art. § 14.5-406 (“[A] trust need not be evidenced by a trust instrument, but the creation of an oral trust and the terms of the oral trust may be established by clear and convincing evidence.”) The Shump Court notes that the Maryland statute refers to the trust instrument being in existence at the time the will is executed. The statute, accordingly is not conditioned upon the existence of a trust but upon the existence of a trust instrument. The court upheld that the term “contemporaneous” cannot be stretched to embrace a document executed three weeks after the will.