In Re the Estate of Washburn
581 S.E.2d 148, 158 N.C. App. 457, 50 U.C.C. Rep. Serv. 2d (West) 1190 (2003)
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Rule of Law:
The effective transfer of assets into an inter vivos trust requires adherence to the specific legal requirements for each type of property. For certificated securities, transfer of legal title requires both endorsement and physical delivery of the certificate to the trustee as prescribed by the Uniform Commercial Code, whereas for tangible personal property, a clear written assignment of assets demonstrating the settlor's intent can be sufficient to transfer title, even if the settlor retains possession.
Facts:
- On September 16, 1999, Vera Yarborough Washburn executed an Irrevocable Trust Agreement, appointing Jerry Scruggs and John Cabiness as trustees.
- Contemporaneously, Washburn signed an 'Assignment of Assets to Trust' document, which listed all common stock, household furnishings, appliances, cash, and an Oldsmobile automobile to be transferred to the Trust.
- Washburn owned two BB&T stock certificates, each for 13,508 shares.
- On October 3, 1999, Washburn endorsed the first stock certificate (No. BBT080224) over to the trustees and physically delivered it to them.
- The second stock certificate (No. BBT093753) was never endorsed or delivered; it remained in Washburn's possession and was found in her residence after her death.
- The trustees' attempt to have BB&T re-register the stock in the Trust's name was refused because the delivered certificate lacked a signature guarantee and the second certificate was not presented.
- Washburn retained possession of her household furnishings, appliances, and the Oldsmobile automobile until her death on October 23, 2000, and the car's title was never changed to the Trust.
- From the date of the trust's creation until her death, Washburn continued to receive dividends from both stock certificates in her own name, which were then deposited into trust bank accounts.
Procedural Posture:
- Following Vera Washburn's death, a dispute over asset ownership arose between the trustees of her trust (Jerry Scruggs and John Cabiness) and the co-executors of her estate (Sylvia Hutchins and J.D. Champion).
- The parties brought the matter before the Cleveland County Clerk of Superior Court, which served as the trial court, to determine the proper distribution of the disputed assets.
- The trial court entered an order and judgment on January 7, 2002, which allocated some assets to the trust and others to the estate.
- Both the trustees and the co-executors of the estate appealed the trial court's order to the North Carolina Court of Appeals.
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Issue:
For an inter vivos trust, does a general written 'Assignment of Assets,' without more, suffice to transfer legal title of (1) certificated securities and (2) tangible personal property to the trust?
Opinions:
Majority - Bryant, Judge
No as to certificated securities; Yes as to tangible personal property. A general assignment of assets is insufficient to transfer legal title to stock certificates, which requires both endorsement and delivery under the UCC, but such an assignment is sufficient to transfer title to tangible personal property where the settlor's intent is the primary guide. The creation of a trust requires an effective conveyance of property to the trustee. For certificated securities, Article 8 of the UCC governs, mandating both endorsement and delivery for a valid transfer of title. Here, the first stock certificate was properly endorsed and delivered, so legal title passed to the Trust, regardless of the missing signature guarantee needed for corporate registration. The second certificate was neither endorsed nor delivered, so title never passed and it remains an asset of the estate. In contrast, for tangible personal property like furniture, where no specific statute governs transfer, the court looks to the settlor's intent. The 'Assignment of Assets' document clearly expressed Washburn's intent to transfer the furnishings, and her retention of possession was not inconsistent with the trust's terms, as she was the lifetime beneficiary. Therefore, the assignment was a sufficient legal conveyance for the furniture.
Analysis:
This decision clarifies the distinct requirements for funding a trust with different types of assets, emphasizing that a one-size-fits-all approach is legally insufficient. It reinforces the principle that for securities, strict compliance with statutory formalities like endorsement and delivery is paramount, and a general declaration of intent in a separate document cannot substitute for these actions. For tangible personal property, however, the ruling gives more weight to the settlor's expressed intent in a formal assignment, allowing for a valid transfer even without physical delivery. The case serves as a crucial reminder for estate planners to meticulously execute the transfer of each individual asset according to its specific legal requirements to avoid future litigation between a trust and an estate.
