Phelan v. Baskin

The Facts

  • T established 2 separate trusts to provide for his wife, 2 minor sons, and 2 adult daughters (from prior marriages).
  • Trust 1 was an irrevocable trust for all of the beneficiaries
  • Trust 2 was a revocable trust for his wife and 2 minor sons, but did not include 2 adult daughters
  • T died on Nov. 27, 2000
  • Trust 1 was prepared in 1999 by T’s brother-in-law
  • In accordance with section 2035 of the Tax Code, the Trust 1 provided that if T died within three years of giving up incidence of ownership of the insurance policies that formed the corpus of the trust, the proceeds of those policies would be distributed to the personal representative of the Phelan estate, not the trustee of the Trust 1.
  • T’s main concern was to provide for his 2 minor sons
  • Because T died less than 3 yrs. After date of Trust 1, the money was distributed to personal representative of T’s estate and the named beneficiaries got nothing
  • Trust 2 was drafted in May or June of 2000
  • Drafts were faxed to T in July of 2000
  • T signed the copies and returned them back with some changes made in ink
  • T denied need for clean drafts and said that the drafts were sufficient as is
  • Pour-over clause made the residue from the estate be added to Trust 2
  • T’s will w/ pour-over clause was executed on July 7, 2000

Procedural History

  • T’s will was admitted to probate on Jan. 8, 2001
  • T’s adult daughter petitioned to contest the will and for reformation of trusts.
  • TC granted executor’s motion for directed finding on daughter’s claim for reformation of the trusts, and after trial ruled that the pour-over residuary clause failed and that the residuary was to be distributed as if the decedent had died intestate.
  • Daughter appealed
  • Executor cross-appealed.

The Issue

  • P’s issue: Whether P carried her burden to establish a prima facie case to warrant a reformation of either trust (whether the plaintiff presented some evidence of T’s mistaken belief that he provided for his adult daughters in his estate plan)
  • D’s cross-issue: Whether TC erred in ruling that Trust 2 was not in existence at the time of T’s will execution thereby invalidating the pour-over clause (whether Trust 2 had to be signed by T to be “in existence” before the will was executed)

The Rule

  • Under the first prong, the court determines whether, as a matter of law, the plaintiff presented a prima facie case.
  • A plaintiff establishes a prima facie case when she proffers some evidence on every element essential to her cause of action.
  • Because this presents a question of law, we review such a determination by the trial court de novo.
  • Under the second prong, the trial court acts as the finder of fact to determine whether the plaintiff presented a prima facie case at the close of her case under the totality of the evidence.
  • As finder of fact, the trial court must weigh all the evidence and determine the credibility of the witnesses and may draw reasonable inferences from the evidence presented.
  • Because the court also considers evidence that is favorable to the defendant, the “weighing process may result in the negation of some of the evidence presented by the plaintiff.”
  • A document will be incorporated into a will where:
  • (1) the will itself refers to the document as being in existence at the time of the execution of the will and in such a way as to reasonably identify it and show the testator’s intention to incorporate the document in the will and make it part thereof;
  • (2) the document is in fact in existence at the time of the execution of the will; and
  • (3) the document corresponds to the description in the will and is shown to be the instrument referred to therein.

The Holding/Disposition

  • The Appellate Court, Garcia, J., held that:
  • unfunded trust was not subject to reformation;
  • testator was not under mistaken belief that he provided for adult daughters in his estate plan by trust funded with insurance policies;
  • -revocable trust was “in existence” for purposes of incorporating the trust into the pour-over will by reference.
  • Affirmed in part, reversed in part, and remanded.

Court’s Reasoning

  • P’s appeal
  • As for reformation of Trust 1, this trust had no funds so could not be reformed
  • As for reformation of Trust 2, T knew and understood that what would happen if he died before the 3 year period was over, therefore T knew there was a possibility the adult daughters would not be provided for and thus there was no mistaken belief
  • E’s cross-appeal
  • TC held that because Trust 2 was not signed before the will was executed, the Trust was not “in existence”
  • The two testamentary documents were sent to the testator in a simultaneous manner;
  • he treated each as part of his total estate plan;
  • each was notarized by the same attorney on the same date, so that each, the Revocable Trust and the pour-over will, was signed contemporaneously with each other.

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