Irrevocable Medicaid Planning Trust Risks: State Refuses to Permit Trust Termination

In April 2011, Don and Marjorie Peterson (the Petersons) established the Peterson Family Irrevocable Trust (the trust). The Petersons’ daughter was the trustee, and their grandchildren were the beneficiaries. The Petersons’ personal residence was the only asset held in the trust. 

The intent in creating the trust was to shield their personal residence from being considered in determining Medicaid eligibility and claims arising from long-term care.  The trust had a common "comfort clause:" 

It is the specific intention of [the Petersons] to create the power in the Trustee and in said Trustee’s sole discretion under this Trust to provide income and support for [the Petersons] and Subsequent Beneficiaries and to protect the assets of the Trust pursuant to the conditions set forth in this Trust Agreement. Said income and support may include, but is not limited to, expenditures for [the Petersons’] and Subsequent Beneficiaries’ health, education, real estate purchases[,] and/or promising business opportunities. In order to protect the Trust assets, the Trustee in her sole discretion, may withhold distribution under circumstances in which [the Petersons] or Subsequent Beneficiaries will not personally enjoy said distribution; said circumstances, including but not limited to, insolvency, pending divorce[,] or other civil litigation and bankruptcy.

While in the control of the Trustee and until actually paid over to [the Petersons] thereof, the interest of [the Petersons] in the income or principal of the Trust shall not be subject to assignment or pledge by [Appellants], the claims of creditors of [the Petersons], or attachment by any legal or equitable procedure.

In re Peterson Family Irrevocable Trust, quoting the underlying court's opinion (brackets included, "Appellants" replaced with 'the Petersons").  

A "comfort clause" is a trust provision comforting the owner that they are not really turning ownership and control of assets over to third party, and that, if absolutely necessary, the trust assets can be used to support the owner. In the best cases these are requested by clients and adopted after careful advice and counsel.  In the worst cases these are deployed by drafters to make the document more "attractive" (read "sellable"), without advising the client of the risks.  "Comfort clauses" can make the owner more comfortable, but they can also threaten the integrity of the plan.  Consider the foregoing language against a more rigorous clause which follows:

The Trustee may, in its sole and absolute discretion, distribute such sums from the trust income and principal that the Trustee deems necessary or advisable to meet the health, education, and/or support needs of the  death/subsequent beneficiaries [in the case of the Petersons, the grandchildren], but shall make no distributions to or for the benefit of the Petersons. Other than the lifetime privilege to reside in any home owned by the trust while the Petersons are able to avail themselves of that privilege, under no circumstances shall the Petersons benefit directly or indirectly from the income or principal of the trust.

The latter is a much harsher statement, but it better comports with the requirements of most state Medicaid rules. 

Complicating matters, when the home was transferred to the trust, there were actual distributions made from the trust to the Petersons' estate.  According to the court, as a result of these transfers, the residence became a countable asset for Medicaid purposes.  Interestingly, neither court decision (lower court or appellate) explains what these transfers were, or how these transfers were possible given that both courts clearly state that the only asset of the trust was the Petersons' home. The courts also don't explain whether the transfers were forbidden under Pennsylvania law in place at the time the trust was settled, or whether they were made forbidden by subsequent changes to the law.

In January 2024, the Petersons filed a petition to terminate the trust, but their granddaughter, a named beneficiary, contested termination.  The Petersons based termination on two grounds.  First, the Petersons argued that the relationship between the Petersons and their daughter, the trustee, had dramatically changed thereby “rendering [the Trust’s] ongoing administration impracticable and wasteful.” Second, the Petersons argued that the trust’s purpose could not be fulfilled because, under the trust’s terms, their residence was a countable asset impacting their eligibility for Medicaid and subject to future healthcare claims under Medicaid.   

After a hearing, the court denied the Petersons’ petition to terminate the trust. On appeal, the Peterson's abandoned their first argument. It is intriguing to consider, though, whether the first argument, which clearly does not constitute grounds to terminate the trust, might be the actual basis of the Petersons' dispute. Unfortunately, disagreement with a trustee does not constitute grounds to terminate a trust; an inherent risk with irrevocable trust planning is that circumstances may change. Seeking removal of a trustee for breach of fiduciary duty or other infirmity would accomplish the same goal without necessitating termination of the trust. I will also note for the interested that the simple drafting solution to this type of scenario is a trust protector- an independent third party that can remove a trustee without cause. See, e.g., Unpacking Trustees- Primary, Successor, and Special Trustees, Trust Protectors and More. Even a decanting provision might have provided an alternate solution making "termination" unnecessary (let me know if you want me to write an article explaining "decanting").  The bottom line is that changes in circumstances won't always justify termination or reformation of a trust instrument. 

The Pennsylvania Superior Court addressed the sole remaining legal basis for termination: whether the Petersons’ mistaken belief that their trust worked for its intended purpose was an “unanticipated circumstance” under Pennsylvania’s Uniform Trust Act, 20 Pa. Stat. and Cons. Stat. Ann § 7740.2(a), which would permit the court to terminate the trust.  The Petersons contend that when they created the trust, their mistaken belief that it would preclude their residence from being considered for Medicaid eligibility and used to satisfy Medicaid healthcare claims was  an unanticipated circumstance.

The Court mostly agreed with the Petersons arguments. In its review, the court stated that a plain reading of section 7740.2(a) revealed that a trust may be terminated if, due to unanticipated circumstances, termination would further the purposes of the trust. The court noted substantial precedent establishing that the intent of a trust’s settlor, as set forth in the language of the trust instrument, must prevail. The court also found that the plain language of the trust agreement demonstrated the Petersons’ intention to create a trust that would provide income and support for their healthcare needs and protect their assets from creditors. Although the trust’s language did not explicitly provide that it was intended to shield the trust assets from Medicaid claims, it did specifically state that it was intended to protect the trust assets from claims arising from the Petersons’ debts or obligations, which would include claims for healthcare services provided by Medicaid.

The court agreed with the Petersons’ assertion that their personal residence may have been exempt from claims asserted under Medicaid if it had remained titled in their names instead of being held by the trust, and that due to the transfer of ownership to the trust, the residence was a countable asset if one or both of them applied for Medicaid.  The court agreed that the trust "no longer" protected the home from healthcare claims made under Medicaid. The court determined, however, that the Petersons’ misunderstanding of the legal consequences of the trust at the time of its creation was a "mistake of law" rather than an “unanticipated circumstance”—i.e., unforeseen facts about the future—that would permit the court to terminate the trust under section 7740.2(a). Accordingly, the court affirmed the lower court order denying the Petersons’ petition to terminate the trust.  

IF either the husband or wife ends up in a nursing home, and is forced to apply for Medicaid, the community (healthy) spouse could lose his or her home, or be forced to spend down its value.  This is a tragic result given that Medicaid protects the home for the community spouse when owned by both spouses.  In other words, if the Petersons had done nothing, the community spouse would have been able to rely upon the home being there for him or her for as long as they could enjoy it.  

More, the trust may have encouraged, rather than discouraged, family discord.  Rather than representing a unifying plan for the best interest of the Petersons and their family, the planning may have played a role in fracturing familial relationships.  The evidence is that a grandchild contested termination of the trust, in essence opposing their grandparents' wishes.  This is always a possibility with or without any estate plan, but family discord should always be a consideration, and granting grandchildren interests, rights, and privileges should always be considered carefully.  Without knowing the circumstances, it is difficult to make hard assessments, but one has to wonder why a daughter was made a fiduciary of the parent's assets, but not a beneficiary.  This anomaly might be well justified, or a warning sign of future problems, which might have been resolved with reconsideration of the plan or alternate drafting.          

Bottom line: irrevocable trusts have advantages and disadvantages, costs, expenses, and risks.  My experience is that these are rarely discussed thoroughly  or considered carefully.  Extra care must be taken when planning while both spouses are alive and healthy, especially given the protections built into Medicaid to protect spouses.  Any planning to avoid Medicaid spend down puts assets at risk of losing the already existing protections.  

It was not clear whether the subject trust was drafted by an attorney.  If it was drafted by an attorney, it may have been crafted or drafted poorly, or it may have been thoroughly misunderstood by the clients.  Even when provided clear written explanations of the limitations, risks, and costs of plans, sometimes clients misunderstand.  

If the Petersons drafted the trust themselves, or utilized a drafting service such as those available on the internet, they received the product they paid for.  Irrevocable trusts, like any complex legal document, should only be crafted and drafted by a competent lawyer representing YOU after s/he understands YOUR goals, circumstances and needs.  YOU deserve legal representation. YOU deserve to have YOUR rights and interests protected.  IF these rights and property interests are so valuable that you choose a complex plan to protect them, retain a lawyer to protect you. A computer, some software, a nameless, faceless representative behind a website, or an "estate planning professional" at a seminar  do not, and cannot serve this role.  Read the disclaimers!  

For more about the case: In re Peterson Family Irrevocable Trust, No. 772 WDA 2024, 2025 Pa. Super. 60 (Pa. Super. Ct. Mar. 13, 2025)(last accessed 4/3/2025).  

For more about the dangers of comfort clauses: 

• Irrevocable Trust Assets Found Available Resources for Medicaid in Arkansas 
• Irrevocable Trust Fails to Protect Assets from Availability for Medicaid 
• "Comfort Clauses" Hobble an Irrevocable Trust for Medicaid Planning 

Recent Criticism of Organ and Tissue Donation: "NO!," the Transplant System is NOT ‘in Chaos’!

According to a recent article in the New York Times, there are issues within the U.S. organ transplant system about which you should be aware if you are a person awaiting an organ transplant, or an intended recipient (the NYT article is behind a pay wall, but you can access the article for free in the Virgin Islands Daily News by clicking here).  If one could believe the headline, the "organ transplant system" is  "in chaos."  The headline is clearly exaggerated and untrue.   

Before delving into the specifics of the article, however, these challenges do not regard organ procurement or recovery.  In other words, please do not reconsider a donation!  If anything, the article raises issues that would be resolved by a larger supply of donors and donor organs.  In other words, the criticism does not, and should not, mean that if you are an intended donor, that your gift will not be honored.  

The article focuses on the practices of providing organs to patients on a waitlist.  According to the article, procurement organizations like Lifebanc in Northeast Ohio, and Legacy of Hope in Alabama sometimes provide organs to patients that are not at the top of a waitlist.  The story highlights the plight of Marcus, a man who reportedly was "next in line" for a kidney transplant, but who has been "skipped" multiple times in favor of patients at different hospitals. According to the Times, the practice of directing donations that do not strictly follow the "official waitlist" raises concerns about fairness and transparency in organ allocation, especially since some hospitals appear to benefit more than others.

The broader question raised by the authors is whether the U.S. organ transplant system, controlled by a single national network,  lacks transparency, leading to what some believe are inequities in who receives life-saving organs. Reforms have been proposed to increase accountability and ensure that the "official waitlist" is followed more strictly. Some argue that systemic changes are needed to prevent hospitals from unfairly influencing organ allocation and to ensure that every patient has a fair chance at receiving a transplant.  Of course, the article does not discuss or explore whether deviation from the official waitlist has any explanations or virtues, or whether strict reliance upon a waitlist might be disadvantageous.   

The article admits, for example, that there is already a highly regulated "official waitlist." The Times article doesn't really explain "why" patients like Marcus are skipped.  The Times did commission a survey showing that more organs in such cases go to hospitals with what it characterizes as "close ties" to organ procurement networks. The fact that hospitals with ties to organ procurement organizations receive more organs, however, may just reflect the fact that they conduct more donor recoveries and organ transplants, and are therefore more likely to be able quickly stand up a transplantation surgery reducing risk of loss of a donated organ.  The authors imply that any deviation from the list results from undue and unfair influence, and is therefore suspect, but the authors don't explore alternate explanations.  

The article is replete with strong denunciations by some advocates with little explanation why procurement organizations might "favor" one hospital over another.  Of course, procurement organizations haven't helped themselves, because they have not responded to the criticism.  There is no response from either procurement organizations or hospitalists regarding either the survey findings, or the rationale for anomalies explaining why a person might be "skipped."  I sought a response from two procurement organizations with which I am familiar, sharing the broad outline of my intended article, and I was unable to garner comment or response, but, that may reflect nothing more than a disciplined strategy regarding  public communication.

I am not  a doctor, but I suspect that there may be a variety of reasons, admittedly frustrating to a waitlist patient, that explain such anomalies.  For example, the relative proximity of the patient to the recovered organ (long trips for recovered organs present risks) might explain a skip.  The temporal availability of the patient, transplant teams, and/or operating rooms to make use of the recovered organ might explain anomalies (larger hospitals with large surgical staffs may simply be "ready," and/or one patient may relatively make a better candidate "in the moment" than another, regardless of list placement.  There may also be a variety of risk factors specific to a particular patient, hospital, transplantation, or transport.  Any or all of these seem to be pretty obvious possible explanations for deviating from a list. 

It is also possible that list anomalies occur as a result of the HIV Organ Policy Equity Act (HOPE ACT). What is the Hope Act?  It is the Act which permitted HIV positive individuals to make donations of organs and tissue. Until 2013 it was against federal regulation to transplant organs from someone who was HIV positive into a potential organ recipient, even if the intended organ recipient was also HIV positive. In 2013, these HIV prohibitions were deemed outdated by Congress and lifted. The HOPE Act directed the Health and Human Services (HHS) Secretary to develop guidelines to conduct research relating to HIV positive donors and organ transplantation.

Current regulations ensure that an HIV negative recipient does not receive an organ from a HIV positive donor, but HIV positive donors can donate organs and tissues to other HIV positive recipients. The HOPE Act simply gives more people a chance to donate life. Given the limited number of transplantable organs available for the more than 120,000 people who are awaiting transplants, it makes sense to find all possible ways to safely and ethically save as many lives as possible.  But, it also means that any particular organ may not be suitable for the person at the top of the list.  Of course, these details cannot be shared, due to medical privacy (HIPAA).  A doctor can't tell a reporter or a recipient that an organ is positive or negative because that violates the medical privacy of the organ recipient, potentially disclosing a patient's HIV history. I suspect there are similar restrictions for other health attributes, but I am just spit-balling here. The point is that I would be shocked, given such considerations, if every available donor organ went precisely to the next person on the list.

I get a sense when reading the article that at least some critics treat organs like product deliveries from Amazon: "I ordered first, so I should get mine first." The waitlist, however, isn't a "line" at the car wash where the first in line is always, or even should be, served first. 

I formerly taught medico-legal documentation and deposition preparation and conduct "classes" during Grande Rounds at a local teaching hospital.  I considered the opportunity  to work with such amazing minds a privilege and an honor.   I was amazed and impressed at the vast array of variables and considerations medical professionals in a hospital consider and resolve in making even routine decisions.  My strong suspicion is that the article, while certainly well researched, supported, and written, from the standpoint of a layperson, could not begin to report fairly to a lay audience the myriad reasons a simple list is not reflexively adhered to in making such momentous decisions. That does not mean that there may never be some form of corruption in the system, but the mere possibility of corruption extrapolated from a few cases should be considered critically. 

Regardless, if you are a donor awaiting a transplant, you should be aware of the facts, and better, be prepared for possible frustration and/or disappointment.  I would encourage those in positions of responsibility, if they don't already, to explain to patients and families that the waitlist is not a strict line, and manage expectations, frustrations, and disappointment.  Especially for those clinging to last hopes, honestly managing expectations would seem both moral and necessary. 

I also want to be careful that my criticism of the Times article is not woven into the  rhetorical crutch, "fake news." Reporting that raises awareness, asks questions, and challenges, even if by casting circumstances in the worst possible light, should be celebrated.  I am not suggesting that the authors engaged in shoddy reporting; as discussed I believe that the authors cast is probably limited by the fact that they aren't surgeons, hospitalists, or professionals routinely dealing with organ procurement and transplantation questions or concerns.  Professionals understand and appreciate, or should, that these articles, headlines, and narratives may not reflect the "whole story," just like a client's or patient's fears, apprehensions, or concerns, are usually not based upon the "whole story."  To the anxious or frightened layperson, though, these emotions are the only story.  That is why professionals work so hard to cultivate good productive relationships with clients/patients, and where appropriate, their families, so that their decisions and risks can be evaluated carefully, based upon their specific circumstances, thereby leaving them with only appropriate concerns, and realistic expectations.  Reporters, admittedly, are not in that "business."  

Full disclosure: both my wife and I were Ambassadors for Lifebanc.  My clients can attest, though, that I never, professionally "encourage" or "discourage" donation; as a lawyer my  professional responsibility is to see my client's wishes fulfilled.  Most clients have made decisions regarding donation prior to settling an estate plan. I can sometimes play a role in answering questions regarding the procurement and recovery process, and dispel unfounded fears or concerns (the most common being that the family of of a donor bears the cost of organ recovery), but my role as an "advocate "is appropriately left to seminars, public forums, and articles.          

For more information see Bryan M. Rosenthal, Mark Hansen and Jeremy White, "Organ Transplant System ‘in Chaos’ as Waiting Lists Are Ignored," New York Times, March 10, 2025. 

Trump Administration Removes Burdens and Threats of the Corporate Transparency Act (CTA)

The following is from a Treasury Department Announcement issued March 2, 2025:

The Treasury Department is announcing today that, with respect to the Corporate Transparency Act ("CTA"), not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.

U.S. Secretary of the Treasury Scott Bessent issued the following statement:

"This is a victory for common sense.  Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy."

Prior to this announcement, there was a great deal of uncertainty regarding the risk of non-compliance with the Act's reporting requirements.  There were several lawsuits seeking to block implementation of the Act.  On January 7, 2025, the U.S. District Court for the Eastern District of Texas issued an order staying FinCEN’s regulations implementing the BOI reporting requirements, precluding FinCEN from requiring BOI reporting or otherwise enforcing the CTA’s requirements. On February 5, 2025, the U.S. Department of Justice—on behalf of Treasury—filed a notice of appeal of the district court’s order and, in parallel, requested a stay of the order during the appeal.

On February 18, 2025, the court agreed to stay its January 7, 2025, order until the appeal is completed. Given this decision, FinCEN’s regulations implementing the BOI reporting requirements of the CTA were no longer stayed. Thus, subject to any applicable court orders, BOI reporting was finally mandatory, but FinCEN notified the courts and the public that it would be providing additional time for companies to report.

The United States Corporate Transparency Act (the “CTA”) became effective at the start of 2024. Under the CTA, your company may have been be required to report its “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the Treasury Department charged with protecting the US financial system from illicit use, fighting money laundering and promoting national security. Failure to report risked significant fines and penalties for both companies and for their beneficial owners.  The law also exempted large and publicly traded companies. focusing instead on smaller entities, like small limited liability companies, corporations, and partnerships. 

The CTA requires non-exempt existing companies to file a report with FinCEN before the end of the 2024 calendar year and requires companies that are newly created or registered to file a more detailed report within 90 days after the company is first organized or registered in the US. The CTA also requires companies to update these filings within 30 days of any change in previously filed information.

The CTA only applies to organizations that either(a) are formed by making a filing with a state’s Secretary of State (or other office charged with forming entities) or (b) are foreign companies that have registered to do business in the United States by making a filing with a state Secretary of State (or other office). So, the CTA does not apply to sole proprietorships, general partnerships or (depending on state) unincorporated nonprofit associations, or trusts.

The CTA contains 23 exemptions for various types of companies. Most of these exemptions are for companies which are already subject to a high amount of regulation, such as public companies, banks, insurance companies, other types of financial firms and utilities. There are also exemptions for certain types of entities where either Congress or FinCEN believed the burden of reporting would be inappropriate or unnecessary. These include tax-exempt entities, including most charities, and certain inactive entities. Importantly, The CTA also has an exemption for larger companies who meet certain employment and income thresholds and which also have operating offices in the U.S.

Crypto and Estate Planning: One Man's effort to Recover $800 million in Bitcoin

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you can play the full size video in its own window by clicking below (RECOMMENDED):

Crypto and Estate Planning: One Man's effort to Recover $800 million in Bitcoin

In this article we return to the saga of James Howells, the subject of a previous article on this blog, as he continues his years-long battle to get back a hard drive that contains a discarded bitcoin key currently worth somewhere around $800 million by offering to purchase a landfill in Great Britain in an effort to find the wallet before it closes down. James Howells had repeatedly requested that the Newport City Council, in South Wales, grant him access to the mountains of waste to find the hard drive that was accidentally discarded in 2013.  

When his repeated requests were denied, he offered to fully fund the excavation process and share 25% of the recovered Bitcoin with the Newport City Council.  When that offer was rejected, he filed a lawsuit to compel the Council to accept his offer.  The lawsuit seems to be in the vein of 'taxpayer" suits common in the U.S. where a taxpayer contests some official act or denial as wasteful of taxpayer dollars. That case, however, ended with a judge dismissing his claim holding that Howells had “no reasonable grounds” for bringing the claim and that there was “no realistic prospect” of success if the case were to proceed to a full trial."

Now, the city is planning to close the landfill for good.  

Whether this is a welcome or ominous development for Mr. Howells remains to be seen.  Mr. Howells has not given up, though, as he is now proposing to purchase the landfill. His plan involves either reclaiming and remediating the landfill and turning it into a park, or re-launching it as a landfill.  

Mr. Howell's predicament underscores the risks and challenges of cryptocurrency investing beyond just the risk of investment.  Digital currencies have digital or virtual 'keys" that must be protected.  For more information, please consider the following:

LegalVault® Offers Solution to Estate Planning Challenges of Bitcoin and Cryptocurrencies 

The Strange Case of Crypto Exchange QuadrigaCX: Death and a Missing $200 million 

 

Second Marriage? FUND YOUR TRUST! A Pour Over Will is Subject to Spousal Claims

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you can play the full size video in its own window by clicking below (RECOMMENDED):

A Pour-Over Will is Subject to Spousal Claims

A recent case provides an object lesson for those in a second marriage who either have a trust separate from their spouse, or have retained their original trust upon remarriage.  The case is also instructive regarding trust funding in general. 

Only a properly and completely funded trust protects your estate planning choices. A pour-over will does not magically repose assets in your trust upon death; it must be probated in order to be effective, at least in most states.  Probate means risk, cost, and expense. A pour-over will is subject to the same limitations, requirements, risks, costs, expenses, advantages and disadvantages and rewards as any will created where there is not trust.  One of these risks is spousal claims.

The Montana Supreme Court held that a widow could claim a spousal elective share of the deceased husband's estate, notwithstanding that her deceased husband’s will directed everything to his trust, and, by implication, even if the trust provides a substantial share to the surviving spouse. In Silverwood v. Tokowitz (Mont. No. S-23-0114, January 12, 2024).

Carol Tokowitz was married to her husband, Neal Tokowitz, for 30 years before he died. Mr. Tokowitz left behind surviving children from a previous marriage. He had a pour-over will that funded a revocable living trust. His will did not name his wife or anyone else as a beneficiary, but, as is customary, directed assets only to the trust.

Mr. Tokowitz's executor, Mr. Silverwood, filed a petition to probate the will, suggesting that some assets or property were not owned or controlled by the trust.  Mrs. Tokowitz asserted her rights to the elective share of her late husband’s estate under the Wyoming spousal elective share statute.

An elective share is a term used to describes a proportion of an estate which the surviving spouse of the deceased may claim in place of what s/he was left in the decedent's will. It may also be called a widow's share or statutory share, or described as an election against the will, or a forced share.  In Ohio it is governed by Ohio Revised Code 2106.01 (last accessed 2/10/2025), and is often described as a surviving spouse "taking" against the will.  In Missouri, it is governed by Section 474.160 of the Revised Statutes of Missouri (last accessed 2/10/2025).

The Wyoming spousal elective share statute provides that a married person domiciled in the state must provide a spouse at least an elective share subject to distribution in the will. If, as in this case, the surviving spouse is not a parent of the decedent’s surviving children, the elective share is a quarter or twenty-five (25%)of the estate.

The probate court granted Mrs. Tokowitz her spousal share.  Mr. Silverwood and a trustee, Randy Green, (hereafter referred to simply as "Mr. Tokowitz's family")  argued that she was not entitled to take a spousal elective share and that taking an elective share should prevent her from receiving anything from the trust. In essence, Mr. Tokowitz's family was arguing that granting her an elective share, on top of a percentage of the assets in the trust estate permitted Mrs. Tokowitz to receive more that Mr. Tokowitz intended her to receive.  Indeed, given an elective share of the probate estate, it is likely that Mrs. Tokowitz's total inheritance exceeded that which she would have received if all assets had been reposed in the trust at death.  A hypothetical illustration follows:

The probate court declined to make any ruling regarding disposition of the trust estate.  Mr. Tokowitz's family appealed. 

Mr. Tokowitz's family first argued that although Mr. Tokowitz was a Wyoming resident, he was not domiciled in Wyoming full-time.  A domicile is a legal residence where a person intends to stay. A person can have many residences but only one domicile. The Supreme Court rejected the argument.  The petition to probate the will (filed by Mr. Tokowitz's family) will stated that he was a resident of Park County, Wyoming, but the pour-over will stated that he was domiciled there. According to the court, since the will presented evidence that the decedent’s domicile was in Wyoming, Mrs. Tokowitz met her burden of establishing a Wyoming domicile. The burden then shifted to Mr. Tokowitz's family to disprove the statement in the will, and they failed to show that Mr. Tokowitz was domiciled elsewhere. According to the Supreme Court, it was sufficient that the probate court implied that Mr. Tokowitz was domiciled in Wyoming when the will was created and executed, and applied Wyoming law to determine Mrs. Tokowitz's elective share.  In other words, the probate court did not make an explicit "finding" regarding Mr. Tokowitz's domicile.    

The Tokowitz's family's next argument concerned the amount Mrs. Tokowitz would receive under the trust. They asserted that the probate court should not have given her the elective share because it did not know whether she would receive more or less than a quarter of the estate under the trust. The Supreme Court dismissed the argument holding that the trust’s terms are not relevant to the probate estate. The spousal elective share statute solely pertains to the will. Mr. Tokowitz’s will only left his property to his trust and did not name his wife, which effectively entitles her to the spousal elective share statute.

Finally, Mr. Tokowitz's family claimed that the property was not subject to probate because the will poured all assets and property into the trust. Property that passes by way of a pour-over will, however, is part of the probated estate and subject to the spousal elective share. Assets that transfer through a pour-over will are not exempt from the probate estate, or its rules and regulations simply because they estate assets ultimately repose to a trust.

The Supreme Court held that the lower court did not err when it declined to rule on Mrs. Tokowitz’s interests in the trust, holding that once the assets pass to the trust, they become non-probate assets. The Supreme Court could find no  case law or statutory authority supporting a ruling on non-probate assets in the probate case.

The Supreme Court of Montana held that the district court correctly allowed Mrs. Tokowitz to take a spousal elective share, and that the lower court rightly determined that it lacked jurisdiction to rule on claims arising from the trust.

This case became very complicated by the circumstances and the law.  One assumes the value of the assets warranted appeal to the Montana Supreme Court. All of the complexity, cost, and expense would have been unnecessary if the property and/or assets were funded to the trust prior to Mr. Tokowitz's death.