Brown v. Miller
undisclosed (2008)
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Rule of Law:
A trust provision allowing a beneficiary to request principal "from time to time" grants an absolute and unrestricted power to withdraw the entire principal at once. A transfer of such principal to a revocable trust over which the beneficiary exercises complete control is equivalent to a transfer to the beneficiary himself.
Facts:
- Elinor Estes Miller created a trust, making her husband, Thomas W. Miller, Jr. ('Bill'), the trustee and lifetime beneficiary.
- A sub-trust, Trust A-2, provided that the Trustee shall pay Bill 'such additional amounts of principal from Trust “A-2” as he may from time to time request.'
- The trust granted Bill a testamentary power of appointment over any balance remaining in Trust A-2 upon his death.
- If the power of appointment was not effectively exercised, the remaining assets of Trust A-2 would be held in a lifetime trust for their son, Thomas W. Miller, III ('Tom').
- Between his wife's death in 1999 and January 2002, Bill, as trustee, transferred approximately $420,000 from Trust A-2 to himself and others in multiple transactions.
- On January 25, 2002, Bill transferred the entire remaining balance of Trust A-2, approximately seven million dollars, to the 'Bill Miller Trust,' a revocable trust over which he had complete control.
- Bill died in April 2004.
Procedural Posture:
- Thomas W. Miller, III ('Tom') sued his father's estate and related parties in a Florida trial court.
- Tom sought to set aside a seven million dollar transfer his father had made from a trust.
- The trial court granted Tom's motion for partial summary judgment, finding the transfer was improper and invalidating it.
- The defendants ('Appellants') appealed the trial court's partial summary judgment order to the Florida Fifth District Court of Appeal.
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Issue:
Does a trustee, who is also the lifetime beneficiary with the power to request 'such additional amounts of principal ... as he may from time to time request,' violate the terms of the trust by transferring the entire remaining balance of the trust principal to his own revocable trust in a single transaction?
Opinions:
Majority - Evander, J.
No. The transfer did not violate the terms of the trust because Bill had an absolute right to withdraw all of the Trust A-2 assets, and transferring them to his own revocable trust was equivalent to transferring them to himself. The court's reasoning is threefold. First, the cardinal rule of trust construction is to give effect to the grantor's intent. Elinor's intent was to permit transfers to an entity, such as a revocable trust, over which her husband retained complete control and the right to absolute ownership. Second, the phrase 'from time to time' was not intended as a limitation on Bill's right to withdraw principal but rather to permit withdrawals whenever he requested. Interpreting it as a limitation would lead to the illogical result that withdrawing all but a nominal sum would be permissible, but withdrawing the entire amount would not. Third, because Bill possessed the absolute right to withdraw all of the Trust A-2 assets, he cannot be found to have acted in bad faith by exercising that right.
Analysis:
This decision clarifies that seemingly restrictive language like 'from time to time' may not limit a beneficiary's broad power of withdrawal if the overall trust language indicates an intent to grant absolute access to the principal. The ruling reinforces the legal principle that a transfer to a wholly-controlled revocable trust is legally equivalent to a transfer to the individual, a significant point for estate planning and asset management. For future cases, this precedent suggests that grantors wishing to impose genuine limitations on a beneficiary's withdrawal rights must use explicit and unambiguous language to avoid having the power interpreted as absolute.
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