Planning for Life

No Legal Right to Notice, But How About a Moral Right?

Posted by Harry S. Margolis on January 10, 2022

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By Harry S. Margolis

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The case of In the Matter of the Colecchia Family Irrevocable Trust (Mass. App. Ct. 20-P-224, November 29, 2021) involves the claim of Michael Colecchia that he should be compensated for the years of work he performed maintaining his parents' home in Revere which he says he would not have done had he known the house had been placed in an irrevocable trust of which he was only a 10% beneficiary. The question ultimately is what notice was Michael entitled to as beneficiary of the trust.

(The case also involves a number of procedural and notice issues which will be useful for anyone involved in trust litigation, but of less interest to general readers.)

The Facts

Mario and Lillian Colecchia bought their house in Revere in 1955, raised their six children there, and transferred it to an irrevocable trust 50 years later in 2005. Under the terms of the trust, Mario and Lillian retained the right to continue to live in the house during their lives and had the obligation to pay all maintenance costs. After they had both passed away, the trust was to be divided 10% each to their three sons with the remaining 70% to be distributed equally to their three daughters. They named two of their daughters, Donna and Denise, as trustees.

Michael did not know about the trust and between 2005 and Lillian's death in 2016 "maintained the property by landscaping the yard, removing snow from the sidewalks and driveway, renovating a bathroom, and performing general maintenance." He says he performed these services anticipating that he would be an equal one-sixth beneficiary of the trust. After Lillian's death, Donna and Denise sold the house for $366,000.

The Case

Michael then sued alleging that he should have received notice of the existence of the trust, that he should receive compensation for his services under the doctrine of quantum meruit, and that Mario and Lillian were induced to create the trust by undue influence. The litigation also ended up involving complicated issues of proper pleading and notice, but ultimately Michael lost at the trial court level and was ordered to pay Donna and Denise's legal fees in the amount of $45,000. He appealed.

The Appeals Court vacates the trial court's order that Michael pay attorneys fees because that was based in large part on a notice issue and the Appeals Court finds the Probate Court's form directing whether notice must be by publication or direct service or both to be confusing. On the substantive issues, however, it still rules largely against Michael.

Compensation for Services

The Appeals Court rules against Michael's claims that he is entitled to compensation for his work maintaining the house because under the terms of the trust Mario and Lillian were responsible for the property's maintenance, not the trustees. Presumably Michael had a claim for compensation against Lillian's estate, but it seems like the only asset was the house which was in the trust rather than her estate.

Notice

Next, the Appeals Court addresses the question of whether Donna and Denise violated their duty to inform and account to Michael as a beneficiary of the trust. This raises an interesting question under the relatively new Massachusetts Uniform Trust Code (MUTC) which became effective on July 8, 2012, about seven years after Mario and Lillian created their trust. After that date, trustees have a duty under section 813 of the MUTC to give notice of the trust's existence to "qualified beneficiaries" who are defined at G. L. c. 203E, § 103 as:

a beneficiary who, on the date the beneficiary's qualification is determined:

(i) is a distributee or permissible distributee of trust income or principal; or

(ii) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

Based on this definition, although Michael was a trust beneficiary from the time of the trust's creation, he was not a qualified beneficiary until Lillian's death because until then the trust under its terms could not make distributions to him. As a result, the trustees did not have a duty to give Michael notice of the trust or to account to him.

Undue Influence

While Michael loses in his claims against the trustees, he and his case do live to fight another day because the Appeals Court reverses the dismissal of his undue influence claim. That issue can still be litigated.

But it probably shouldn't be given the amount at stake. If the undue influence claim is successful, the house proceeds will be distributed in six equal shares, or 16.67% for each child. The difference between a 10% share of the $366,000 in proceeds and a 16.67% share is just about $24,000 ($61,012 - $36,600 = $24,412), assuming legal fees haven't already eaten up the bulk of the trust funds. Presumably, while it's not stated in the opinion, Michael's original claim for payment for services far exceeded $24,000, perhaps justifying the initial litigation. (Though it may be too many years after Lillian's death for Michael to bring his claim for compensation against the estate, perhaps if Michael is successful on his undue influence claim in voiding the trust, thus bringing the house proceeds back into Lillian's estate, he can then sue Lillian's estate.)

Conclusion: Transparency is the Best Policy

No doubt, this case was driven by emotion rather than financial calculation. Michael felt cheated. While according to the MUTC, he did not have a legal right to know about the trust, he had a moral right. Transparency in family interactions is almost always the best approach. While Michael and his brothers might have been upset had they learned in 2005 that the trust favored their sisters, Mario and Lillian might have been able to explain their reasoning at that time. Michael then could have decided whether he wanted to continue to provide maintenance for the house even though he was ultimately to receive a smaller share of the proceeds.

Or Mario and Lillian might have decided that while they preferred to favor their daughters, the potential family strife was not worth the benefit to the daughters. Absent legal fees, the trust distribution only brings each daughter an additional $24,000, in effect, transferred from each son. While there may have been many reasons that Mario and Lillian thought that this was more fair, the ultimate result of this distribution probably was not what they had in mind.

Other trust cases:

Limited POA Does Not Make Trust Countable SJC Rules

8 Dos and 2 Don'ts for Serving as Trustee

Timing is Everything: Don’t Wait Too Long to Sue Your Brother

Topics: probate litigation

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