Trustee Authority to Sell Trust Property to Pay for Settlor’s Long-Term Care Costs

Reversing a lower court, Wyoming’s highest court has ruled that a trustee has authority to sell property in the trust to pay for the settlor’s long-term care even though the trust provided that the property was to be placed in trust for the settlor’s daughter when the settlor died. Jackson v. Montoya (Wyo., No. 2020 WY 116, Sept. 4, 2020).

David Jackson’s parents created a trust and transferred their property to the trust. The trust provided that the trustee had authority to pay the surviving settlor from the trust property, including selling trust property, as necessary to provide for his or her comfort. The trust also provided that on the death of both parents, the property in the trust should be conveyed to a trust for the benefit of Mr. Jackson’s sister, Candyce Montoya, who was authorized to live on the property rent free. Mr. Jackson became the successor trustee of the trust and wanted to sell the property to pay for his father’s long-term care, so he served an eviction notice on Ms. Montoya. Ms. Montoya refused to vacate the property. 

Mr. Jackson sued, seeking a declaratory judgment that the trust was entitled to the property. The trial court interpreted the trust to grant Ms. Montoya a life estate in the property, which prevented Mr. Jackson from selling the property. Mr. Jackson appealed. 

This is an all-too common cause for dispute; does a surviving spouse have the authority to sell property held in a marital trust (or sometimes even a separate trust) that benefits the surviving spouse, where the property is ultimately retained in trust for the benefit of a child?  Typically, the trust is clear and ambiguous, by, for example, reciting an order of intent and authority (for example, "it is my/our intention to provide for each other, and then for the surviving spouse, and then upon the death of both of us to provide for our surviving children, and then for our grandchildren if there is a death of one our children...").  Sometimes, though, a trust is not so clearly crafted, and in this case, ambiguity arose, at least in part, from a specific amendment which the daughter claimed provided a specific and different intention as to specific property for her benefit. 

The Wyoming Supreme Court reversed, holding that Mr. Jackson had authority to sell the property to pay for his father’s long-term care. According to the court, the trust makes clear that the trustee has the right to “sell or deal with any Trust property, in his or her sole discretion, without interference, for the benefit of the surviving settlor’s care, comfort, support, welfare or maintenance, as may be necessary.” The court ruled that when the trust provisions are read as a whole, “it is clear” that Ms. Montoya’s interest “will not vest until the death of the remaining Settlor.” 

Source of original article: "Trustee Has Authority to Sell Property in Trust to Pay for Settlor’s Long-Term Care Costs," Elderlaw Answers (9/21/2120).