Otto v. Gore, — A.3d —, 2012 WL 1852075, C.A. Nos. 559, 582, and 589, 2012 (consolidated appeal), Steele, C.J., (Del. May 22, 2012)

August 2, 2012

Otto v. Gore, — A.3d —, 2012 WL 1852075, C.A. Nos. 559, 582, and 589, 2012 (consolidated appeal), Steele, C.J., (Del. May 22, 2012)

Once again the Delaware Court system through the Delaware Supreme Court (the “Court”), has proven its consistent intention to “give maximum effect to the principle of freedom of disposition and the enforceability of governing instruments” as found in 12 Del. C. §3303(a).

In a recent decision of the Delaware Supreme Court, Chief Justice Myron Steele affirmed the decision of the Chancery Court.  In reviewing two dueling trust instruments signed by the grantors, both purporting to have identical corpus, the Court reviewed extrinsic evidence of the grantors’ intent to create each trust.  The facts considered by the Court included:

  1.  The fact that the grantors did not communicate the trust’s existence to anyone;
  2. The fact that the grantors’ usual trust instrument execution routines were not followed in the execution of the first trust;
  3. The fact that the grantors did not initial the corpus schedule, while they did initial other pages of the trust (in contrast to the formalities  with which they typically executed similar schedules);
  4. The fact that the grantors referenced the first trust instrument as a “draft”;  and
  5. The fact that the first trust instrument failed to accomplish any of the grantors’ stated estate planning objectives, which were stated consistently both before and after the execution of the first trust instrument.

The Court held that while none of these factors were persuasive alone, taken as a whole, the cumulative effect of the extrinsic evidence was sufficient to establish the ineffectiveness of the first trust instrument and allow for the acceptance of the second trust as the official governing instrument and owner of the corpus.

Commonwealth Trust Company is pleased to provide this article as a guide. Commonwealth Trust Company is not engaged in the practice of law and is not providing legal advice by the provision of these materials. Commonwealth Trust Company recommends that clients seek the opinion of their attorney regarding the specific legal and tax issues addressed in this article.