In re Kurrelmeyer Estate ( 2004 )

In Re Kurrelmeyer Estate, No. 1079-03 Cncv (Katz, J., July 14, 2004)
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STATE OF VERMONT SUPERIOR COURT
Chittenden County, ss.: Docket No. 1079-03 CnCv
KURRELMEYER ESTATE
ENTRY
Two surviving children challenge the widow’s having established a
revocable trust under the Power of Attorney granted her by the deceased.
It is stipulated that he was competent at the time the POA was made,
although not competent at the time she established the trust, four year
later. All assets of the deceased were placed in the trust, thus having the
effect, if valid, of avoiding probate. Existence of the trust, however, has
the effect of transferring the real estate from a mere life estate for the
benefit of the widow to a situation in which it is owned by the trust and
therefore within her ability, as trustee, to sell it and then dip into the
principal thereby obtained. The surviving children assert that this is
lakeshore real estate, which has substantial opportunity for capital
appreciation, thereby enhancing the value of their remainder interests
under their late father’s much earlier will.
The Power of Attorney has very broad language. It includes
provisions authorizing the deceased’s agent, his wife,
(a) To add all of my assets deemed appropriate by my said
attorney to any trust of which I am the Donor by: assigning,
transferring and delivering to said trust . . . real estate . . .
owned by me . . . .
(b) [T]o execute and deliver any . . . deeds or trust
instruments . . . .
In a nutshell, these are the facts upon which this case turns. The
question raised is whether Mrs. Kurrelmeyer had the authority to create
the revocable trust, convey into it the real estate, and thereby alter her own
rights vis à vis plaintiffs, the surviving children. We conclude the answer
is that she did not.
In reaching this conclusion, we look to both the specific POA
language and the general law governing such powers. Turning first to that
general law, we are persuaded of several principles which appear
germane:
C Powers of attorney are strictly construed as a general rule and are
held to grant only those powers which are clearly delineated;
C Discount or disregard, as meaningless verbiage, all-embracing
expressions;
C Ambiguities in instrument are resolved against the party who made
it or caused it to be made, because that party had the better
opportunity to understand and explain his meaning;
C General words used in an instrument are restricted by the context in
which they are used, and are construed accordingly.
King v. Bankerd, 303 Md. 98, 492 A.2d 608, 611-12 (1985) (citing, in
part, Restatement (Second) of Agency § 34 and cmt. h (1958)). Applying
these general principles, the court in King v. Bankerd cited several ways
in which powers of attorney have been delimited by the courts:
C A general power authorizing the sale of real estate permits the
attorney-in-fact to determine the price and terms, but implies that
the sale shall be for the principal’s benefit;
C The attorney-in-fact does not have the authority to make a gift of
the property.
Id., 492 A.2d at 612, citing cases. The particular holding in King was that
the agent was not authorized to give away property covered by the power,
even to its author’s wife.
This general rule regarding gifts is, of course, not unique to
Maryland. No gift may be made by an attorney in fact to himself or
herself unless the power to make such a gift is expressly granted in the
instrument itself and there is shown a clear intent on the part of the
principal to make such a gift. Mischke v. Mischke, 247 Neb. 752, 759-
760, 530 N.W.2d 235, 240-41 (1995); Vejraska v. Pumphrey, 241 Neb.
321, 488 N.W.2d 514 (1992). Absent express intention, an agent may not
utilize his position for his or a third party's benefit in a substantially
gratuitous transfer. Id.The law imposes few restrictions on acts that may be performed by
attorneys in fact. Stafford v. Crane 241 F.Supp.2d 1239, 1246 (D.Kan.,
2002). Generally, restrictions relate to the delegation of personal powers
such as "making or revoking a will, funding a trust, changing beneficiaries
on an insurance policy, taking a marriage vow or an oath, voting,
performing under a personal service contract, and performing fiduciary
responsibilities." C. Dessin, Acting As Agent Under a Financial Durable
Power of Attorney: An Unscripted Role, 75 Neb. L.Rev. 574, 582 n. 38
(1996) (citations omitted). The power to create a trust is generally non-
delegable, see P. Sturgul, Financial Durable Powers of Attorney: A
Primer 41 No. 5 Prac. Law. 21, 29-30 (July 1995). At least one court has
held that a durable power of attorney which grants the power to manage
and sell real and personal property to maintain and care for the principal
does not authorize the agent to create an irrevocable trust. See Kotsch v.
Kotsch, 608 So.2d 879, 880 (Fla.Dist.Ct.App.1992). In Kotsch, the court
reasoned that a durable power of attorney grants only those powers
specified therein and is closely examined to ascertain the intent of the
principal. See id. In Kansas, a power of attorney is strictly construed and
must be closely examined to ascertain the intent of the principal. See
Muller, 28 Kan.App.2d 136, 12 P.3d 899. On the basis of these
authorities, the court in Stafford v. Crane concluded that a power of
attorney does not authorize the creation of an irrevocable trust, even if on
the deceased’s behalf, barring explicit authority.
Here, we have a situation in which the attorney-in-fact has both
created a trust and thereby had a potentially material effect on the post-
mortem wishes of the deceased, as reflected in his will. That instrument
gave his widow a life estate in the real estate, but no more. The children
were preserved its remainder. Hence, appreciation of this lakeshore
parcel, so close to Burlington, remained a substantial interest left to them.
The trust, however, has the potential for eliminating this interest. If an
attorney-in-fact may not make a will, we conclude that she may not alter
an existing will under authority purported to derive from the POA. A
party may not do indirectly what she may not do directly. See In re Cabot
Creamery Coop., 164 Vt. 26 at 29 (1995); Conseco v. Wells Fargo
Financial Leasing, Inc., 204 F. Supp. 2d 1186, 1191 (S.D. Iowa 2002); but
see In re Estate of Hegel, 668 N.E.2d 474, 476 (Ohio 1996) (rejecting
exception to ademption law for attorney-in-fact who sells testator’s
property).
Having in mind the general rules for construing powers of authority
first set out, we cannot conclude that the language here afforded Mrs.
Kurrelmeyer the necessary authority to create the trust. To “add all my
assets” to a trust implies the pre-existence of that trust. It is at least
ambiguous on the issue of “adding” those assets to a trust which was not
already extant. Similarly, to “execute trust instruments” does not
explicitly authorize the creation of a trust where none existed. Rather, it is
consistent with the idea that the attorney-in-fact may execute instruments
necessary for the maintenance of a trust already in existence. Franzen v.
Norwest Bank Colorado, 955 P.2d 1018, 1022 (Colo. 1998) (lower
standard of specificity necessary to give authority when a trust is already
in existence). The rule of strict construction bars stretching this language
to the extent of creating a trust which not only was not already extant, but
of a type such as was not extant at the time of creation of the Power in
question.
For these reasons, we grant the motion of appellant children for
summary judgment, deny that of appellee, and reverse the ruling of the
Probate Court. We hold that creation of the revocable trust was beyond
the authority of Martina Kurrelmeyer, and that the trust is therefore void.
We note that appellants also seek the termination of Mrs. Kurrelmeyer’s
status as executor. We nevertheless decline to reach this issue, as the
Probate Court is in a better situation to assess the propriety of her
continuing in that office. With the trust issue resolved, it may be that Mrs.
Kurrelmeyer may be quite content and appropriate for executing the
balance of any requirements of the will and estate.
Dated at Burlington, Vermont, _________________, 2004.
__________________________
Judge