In Hull v. Wilcock, 2012 UT App 223 (filed August 16, 2012), the court of appeals affirmed the trial court’s admission of extrinsic evidence to interpret the terms of the trust instrument.
Following a long line of cases, the court explained that extrinsic evidence is admissible when, and only when, the trust instrument is ambiguous, and that the extrinsic evidence may be used only to construe – not to contradict – the trust instrument.
At issue were certain provisions in various trust documents suggesting that the settlor intended to forgive a $250,000 “debt” of the settlor’s son that resulted from trust losses that the son incurred in the course of managing the trust investments, and other provisions in the trust documents stating that outstanding loan amounts were to be deducted from the son’s share. The trial court found that the trust documents were ambiguous and admitted extrinsic evidence to interpret them. Based on the extrinsic evidence, the trial court held that the settlor did intend to forgive the $250,000. The court of appeals affirmed the trial court’s ruling on the settlor’s intent.
The court of appeals noted that whether a trust instrument is ambiguous, and therefore justifies the admission of extrinsic evidence, is a question of law that must be reviewed for correctness, while a trial court’s determination of the settlor’s intent based on admitted extrinsic evidence is a question of fact that is reviewed under a clearly erroneous standard.
For a detailed discussion of the admissibility of extrinsic evidence to interpret wills and trusts, see Section 3.10.13 (wills), Section 4.14.5 (revocable trusts) and Section 8.3.2 (irrevocable trusts) in the Utah Law of Trusts & Estates, a comprehensive legal reference treatise that can be accessed from this site’s home page.
Separately, the court held that in order for property to be held in a trust, either title to the property must be transferred to the trustee, or the trustee must declare that he holds the property in trust. For a detailed discussion of the funding of trusts, see Sections 4.1.4 (funding of revocable trusts) and 8.2.13 (funding of irrevocable trusts) in the Utah Law of Trusts & Estates.
Rust Tippett is the author of this blog post.
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This blog post in no way creates an attorney-client relationship between the reader and either Robert S. (Rust) Tippett or Bennett Tueller Johnson & Deere, P.C. The reader should consult with his or her own estate planning attorney regarding his or her particular circumstances.