When Fiduciary Trust International of California found itself in a dispute with a decedent's marital trust over payment of $25 million in estate taxes and other expenses, it turned to Holland & Knight's Trusts, Estates and Fiduciary Dispute Resolution Team to navigate the matter. The dispute centered on an interpretation of a payment provision contained in a marital trust that had been established many years earlier.
Willet H. Brown, a California radio and television pioneer, had amassed a considerable fortune by the time he passed away in 1993. He and his wife of 45 years, Betty R. Brown, entered into a premarital agreement that essentially left Betty penniless when Willet died. However, Willet had established a testamentary marital trust for Betty. In addition to providing for Betty during her lifetime, the marital trust contained a provision that mandated the payment of the expenses of Betty's last illness and funeral, legally enforceable claims against Betty or her estate, expenses of administration, and all estate or inheritance taxes that were payable by reason of her death.
When Betty passed away in 2011, Fiduciary Trust International of California – the trustee of the Betty R. Brown Trust and administrator of the Estate of Betty R. Brown – paid $19.4 million in estate taxes attributable to the wealth Betty had accumulated from distributions she received from the marital trust. Based on the mandate contained in the marital trust, Fiduciary Trust demanded that the marital trust trustees pay claims on Betty's estate that included her funeral expenses and estate taxes. The trustees of the marital trust refused, claiming that the provision in the marital trust was ambiguous and inconsistent with Willet's intent, and that California's equitable proration statute required that the $19.4 million in taxes be paid from Betty's assets, rather than from the marital trust.
Holland & Knight attorneys filed a petition in the Superior Court of Los Angeles County and argued that the marital trust provision was clear and unambiguous, and that California's equitable proration statute did not apply. After a two-day trial, the court agreed and ruled in Fiduciary Trust's favor on virtually every issue, ordering the trustees of the marital trust to pay $19.4 million in estate taxes and almost $6 million in funeral expenses, claims and costs of administration.
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