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In Re Estate of Thomson





Appeal from the Circuit Court of McLean County; the Hon. James A. Knecht, Judge, presiding.


This appeal stems from a McLean County circuit court order closing the estate of Chester Thomson, discharging his executors, and releasing their bond. In closing the estate proceedings, the trial court declined to construe the provisions of a testamentary trust established by the will. The circuit court overruled all objections to the estate accounts and reports, determining that many of those objections could be adequately addressed in a future proceeding to either construe the trust or for an accounting by the trustees. We believe that the issues raised by the appellants are better addressed before the executors are discharged. We therefore reverse the trial court judgment and remand for further proceedings.

The decedent, Chester Thomson, died testate on February 3, 1977. His will and a codicil were admitted to probate on February 22, 1977. The McLean County circuit court issued letters of office to the decedent's son, Stephen M. Thomson and to W. Loren Thomson, the decedent's nephew, as executors under the will. On June 10, 1981, Loren Thomson resigned as co-executor and was replaced by the Corn Belt Bank of Bloomington.

The decedent's will bears every indication of "a document dictated, but not read." The instrument appoints Stephen M. Thomson and W. Loren Thomson co-executors of the estate. Article I instructs these executors to pay all proper charges against the estate. In this regard, the testator directed that his "legatees and devisees share ratably in said expenses" and contribute ratably to taxes on the estate. The will seeks to exempt the testator's wife from paying estate taxes to the extent her legacy qualifies for the "marital deduction," presumably referring to the marital deduction under Federal estate tax law.

Article II gives the testator's entire estate in trust to Stephen M. Thomson and W. Loren Thomson, the son and nephew who were appointed co-executors. The article then proceeds to give the trustees a number of instructions. However, we will set forth only those which are relevant to our disposition of this case. The trustees were instructed to convey certain farmland and other city tracts to trustee-executor Stephen Thomson and to convey all of the decedent's property in Arizona to his stepdaughter, Donna Jean Wannemacher. The will then instructs the trustees to hold in trust certain property on North Main Street in Normal (North Main trust). This trust property includes the Falcon Motel, which is the subject of much dispute in this litigation. The trustees are instructed to pay the income from the North Main trust to the decedent's daughter Rita "for life and then to her children, share and share alike, for their needs and best interests." The trustees have the power to invade principal and are "likewise given the discretion as to how much income to pay her [Rita] or said children from time to time." The will provides that the trust shall terminate "as to each child when said child reaches the age of 25 [later altered to 30] and the trustees shall pay to him or her his proportionate share of principal and accumulated income then." The North Main trust is to terminate when the last child reaches the proper age and if any child predeceases the daughter Rita, the other children are to receive the deceased child's share.

The second article then directs the trustees to convey one-half of the decedent's residual estate to his wife Orphelia in fee simple. The remaining half of the residual estate is to be held in trust and the trustees are to pay "such portion of income and principal as they see fit to [Orphelia] for her lifetime * * * and upon her death, to pay and convey all accumulated income and principal into the trust hereinafter created for my grandchildren."

The will then provides that the trustees shall have the "absolute power and discretion to mortgage and remortgage the properties under this trust for the purpose of equalizing the value of the gifts as best they can to my three children and with a view to my said wife's taking her residence house debt-free except for real estate taxes as well as the other property going to her and qualifying for the marital deduction." Uncertainty as to the correct interpretation of this so-called "equalization clause" has prompted much discussion and argument between the parties both in the trial court and before this court.

Finally, the second article grants the trustees the authority to "withhold payment of income or conveyance of property hereunder during the pendency of probate proceedings in their absolute discretion." The discretion to withhold payment temporarily was granted for the express purpose of increasing the cash available to the estate during estate administration.

The third article appoints Stephen and Loren Thomson as co-trustees of yet another trust to be funded by the residual estate not given outright to the decedent's widow. These trustees are to pay the income from the trust to the grandchildren or their guardians until each grandchild shall attain the age of 25. As each grandchild reaches 25 they are to receive their proportionate share of principal and accumulated income.

Article III also provides that the trustees of the various trusts may resign at any time and provides them with the power to designate their successor trustee. The trustees are to receive compensation for their services and "are not to be required to account to any Court to [sic] their acts and doings as trustees or make reports to any Court." This provision is explicitly extended to each of the trusts which the will creates.

The executors-trustees completed the conveyances directed by the will to Stephen Thomson and Donna Jean Wannemacher on or about January 20, 1978.

On September 11, 1978, a fire destroyed the Falcon Motel on the North Main trust property. The executors-trustees collected $169,213 in insurance proceeds from this fire. The executors used these proceeds to pay taxes, fees, and other costs of estate administration on behalf of Stephen Thomson and Donna Jean Wannemacher, as well as Rita Howe and her children. Neither Stephen Thomson nor Donna Jean Wannemacher paid any portion of the taxes or expenses out of the properties which had been conveyed to them in January 1978.

The executors filed several interim reports and accountings prior to the final account and report. These interim reports and accounts are not directly in issue; however, they ultimately impact the final account and report, which is the subject of this appeal. On October 21, 1983, the executors filed a current report covering the period February 1, 1981, through June 30, 1983. The circuit court held a hearing on this report on October 21, 1983, and ordered appointment of a guardian ad litem for the minor children of Rita Howe. The guardian ad litem filed objections to the current report on November 17, 1983, and a hearing was held on those objections. However, at this hearing, the circuit court determined that resolution of the issues regarding construction of the trust should be postponed until the estate was formally transferred from the executors to the trustees. Accordingly, the court directed the executors to prepare a final report, concerned only with expenses of administering the estate and conveyance of the estate to the trustees.

On January 11, 1984, the executors filed a final report and account; the trustees acknowledged receiving the estate's remaining assets from the executors. Rita Howe and her minor children each filed objections to the final report and a hearing was held on the report and objections on January 18, 1984. The final account covered a period ending November 16, 1983. It was supplemented by an amended final report filed on November 13, 1984. On November 19, 1984, Rita Howe and her minor children filed objections to the amended final report. No further hearing was had on these objections because the circuit court ruled that the amended report was simply an aid to the court in closing the estate and not an invitation for further objection. Among other things these ...

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