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Northern Trust Co. v. Tarre

OPINION FILED APRIL 28, 1980.

THE NORTHERN TRUST COMPANY, TRUSTEE, PLAINTIFF-APPELLEE,

v.

SYLVIA TARRE ET AL., DEFENDANTS-APPELLEES. — (LEONARD KAPLAN ET AL., DEFENDANTS-APPELLANTS.)



APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.

MR. JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:

This is an appeal from a judgment of the circuit court of Cook County finding that because inter vivos trusts executed by Harry Kaplan (Harry) and Fannie Kaplan (Fannie), as settlors, and the Northern Trust Company (Northern), as trustee, were not joint, mutual and reciprocal agreements irrevocable upon the death of one of the parties, an amendment to the trust agreement executed by Harry after Fannie's death was valid.

Harry and Fannie, husband and wife, had two children, Leonard Kaplan (Leonard) and Sylvia Tarre (Sylvia). Harry and Fannie had four grandchildren: Raymond Kaplan and Linda Kaplan Beatus, son and daughter of Leonard, and Marc Tarre and Laurel Tarre Goodman, son and daughter of Sylvia. Harry and Fannie had one great-grandchild: Joseph Tarre, a minor, son of Marc Tarre.

On August 26, 1969, Harry and Fannie, as settlors, and Northern, as trustee, entered into a trust agreement whereby Harry transferred certain property to Trust A (Harry's trust) and Fannie transferred identical property to Trust B (Fannie's trust). The two trusts were contained in a single document entitled "TRUST AGREEMENT TRUST NO. 36368" executed by both settlors.

Each trust directed the trustee to distribute all income from the trust property to the settlor in quarter-annual or more frequent intervals during his or her lifetime. The trustee was also authorized to distribute to the settlor such amounts from the principal of the trust as the trustee determined to be necessary or desirable to provide for the settlor's support, comfort or welfare or to be in accordance with his or her needs and best interests. Each trust further provided that if during the settlor's lifetime his or her spouse had insufficient income and cash resources available to adequately provide for his or her support or to meet any emergency, the trustee could distribute to the settlor's spouse so much of the principal of the trust as the trustee deemed necessary. In addition, each trust made provision for distribution of so much of the principal of the trust as necessary to the settlor's children or descendants if an emergency such as a serious illness or injury affected one of them. Each settlor reserved the right to amend or revoke "at any time and from time to time" his or her trust by delivering a written instrument to the trustee.

Each trust contained a paragraph authorizing the trustee to use the assets in the trust to pay funeral expenses, death taxes, legally enforceable claims against the estate and reasonable expenses of administration of his or her estate if assets of the settlor's estate not part of the trust were insufficient. Fannie's trust provided that upon her death $5,000 was to be distributed to her nephew, David Sterlin, from the principal of the trust.

Each trust provided that if one settlor survived the other for a period of 180 days, the trustee was to allocate to the survivor's trust from the principal of the deceased settlor's trust an amount which in no event would exceed the difference between the value of the deceased settlor's trust and $75,000 so that no less than $75,000 remained in the deceased settlor's trust.

In addition, each trust provided that if one spouse survived the other, the survivor was to receive the income from his or her spouse's trust during his or her lifetime. If at any time or from time to time during the surviving settlor's lifetime, the income and cash resources available to the survivor were insufficient to provide adequately for his or her support, the trustee could distribute to the survivor so much of the principal of the trust as the trustee deemed necessary therefor.

Article III of the trust agreement directed that upon the death of the survivor of Harry and Fannie, the trustee was to commingle Harry's trust and Fannie's trust. From the fund established after the two trusts were commingled, the trustee was to make certain distributions. If the settlors' daughter, Sylvia Tarre, was alive, the trustee was to set aside $100,000 in cash or property and hold the same in a separate trust designated Trust C (Sylvia's trust). Provision was made to divide the $100,000 between Sylvia's children if Sylvia was not alive when the surviving settlor died. The Northwest Home for the Aged (Northwest) was to receive $5000. The residue of the commingled trusts was to be divided one-half to the settlors' son, Leonard Kaplan, and one-half in equal shares to the four grandchildren. However, if Harry's trust and Fannie's trust after having been commingled were insufficient to set aside $100,000 in trust for Sylvia and to distribute $5000 to Northwest, the $100,000 to be set aside in Sylvia's trust was to be satisfied before the distribution to Northwest. The provision directing the disposition of the residue of the commingled trusts was subject to satisfaction of the $100,000 to be set aside in Sylvia's trust and the $5000 distribution to Northwest.

Article IV of the trust agreement set forth the provisions regarding Sylvia's trust. Article V concerned the administration and distribution of shares to the children and descendants of Leonard and Sylvia. The remaining articles of the trust agreement dealt with the powers and duties, resignation and succession of the trustee, restrictions on transfers, the law governing construction of the agreement and definitions of terms used in the agreement.

Fannie died April 12, 1976. At the time of Fannie's death, the gross value of Fannie's trust was $123,981.20. Insurance on Fannie's life in the amount of $2,122.53 was paid to Fannie's trust. In accordance with the trust agreement, Northern paid $15,234.86 for expenses, claims and Federal estate taxes. In addition, Fannie's nephew, David Sterlin, received $5,000. The net value of Fannie's trust was $110,868.87. Because Harry survived Fannie for 180 days, the trustee allocated to Harry's trust the difference between Fannie's trust and $75,000. Therefore, the trustee allocated to Harry's trust $30,868.87. The amount of $75,000 remained in Fannie's trust.

On May 26, 1976, Harry executed an amendment to his trust. After directing that certain expenses and a distribution of $5000 to Northwest be paid upon his death, the amendment provided that the income from Harry's trust was to be paid to Sylvia during her lifetime. The trustee was given the authority to make distributions from the principal to Sylvia in accordance with prescribed standards and to make distributions from the principal to either of Sylvia's children in the event of an emergency. Upon Sylvia's death, Northern was to pay Sylvia's funeral expenses and expenses of last illness and distribute the rest of the trust in equal shares to Sylvia's children.

Articles III (dealing with the disposition of Harry's trust and Fannie's trust upon the death of the survivor of Harry and Fannie, including the creation of Sylvia's trust therefrom), IV (dealing with the disposition of Sylvia's trust), and V (dealing with the administration and distribution of any share provided for any child or descendant of Leonard or Sylvia) were deleted from Harry's trust.

Harry died July 8, 1977. At the time of Harry's death, the gross value of Harry's trust was $164,744.60. This amount included $25,305.89 of life insurance on Harry's life payable to Harry's trust and the $30,868.67 transferred from Fannie's trust to Harry's trust upon Fannie's death. In accordance with the trust agreement, Northern paid $14,200.90 for expenses, claims ...


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