Recently, the Arkansas Supreme Court delivered an opinion which may change how you set up your wills and trusts. In re Estate of Thompson, published on May 22, 2014, holds that a trust which was created in order to deprive a spouse of marital property remains part of the deceased’s probate estate and is subject to that spouse’s right to elect against a will.
In Thompson, a multi-million dollar trust had been initially set up to provide sustained income and continuing care for the surviving spouse; however, in 2009, the husband amended the trust and limited the surviving spouse beneficiary’s expectation in the multi-million dollar trust estate to a mere $100,000.00 but only if she did not elect to take against the will. The separate will awarded the spouse a substantially smaller share of the estate than she would have otherwise been entitled to receive.
The surviving spouse elected to take against the will. In Arkansas, a spouse who was married to a deceased spouse for longer than one (1) year may opt to take an elective share if he or she feels it would provide more for them than the will provided. The elective share is calculated from the property owned by the deceased at the time of death. Here, the surviving spouse elected to take against the will, as it would give her rights in millions rather than thousands of dollars.
The Court in Thompson upheld a circuit court order that, because the deceased husband had intended to defraud the surviving spouse by transferring his property into the trust—thereby denying her rights to the property as his surviving spouse—that the trust assets were held in constructive trust and could be counted as part of the husband’s property at his death.
Arkansans who want to use a trust in order to keep their property out of the Probate Courts can still do so; however, it is important that the documents be drafted in a way which makes it clear that the trust is not intended to defraud a surviving spouse. Where there is no finding of fraud, the trust assets remain outside of a deceased person’s estate and will continue to be managed according to the instructions set forth in the trust.
If you have any questions about your trust or will, please call Aaron Heller, or one of the other attorneys at Owens, Mixon, Heller & Smith, P.A. 1-870-336-6505.