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2006-2343. Stevens v. Radey, Slip Opinion No. 2008-Ohio-291.
Cuyahoga App. Nos. 87273 and 87274, 2006-Ohio-5579. Judgment reversed.
Moyer, C.J., and Pfeifer, Lundberg Stratton, O'Connor, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Opinion: http://www.supremecourtofohio.gov/rod/docs/pdf/0/2008/2008-Ohio-291.pdf
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(Feb. 6, 2008)The Supreme Court of Ohio ruled today that, when a individual’s will creates and funds a trust to support a specified beneficiary, but makes no provision for distributing unexpended amounts that remain in the trust after the death of that beneficiary, the residual trust assets belong to the statutory heirs of the settlor (trust creator) that were living on the date of the settlor’s death.
The Court’s 7-0 decision, which reversed a ruling by the 8th District Court of Appeals, was written by Chief Justice Thomas J. Moyer.
The case involved a dispute among the surviving relatives of Andrea Sangrik, the only child of Andrew and Helen Sangrik. Andrea never married and had no children. Following her mother’s death, Andrea executed a will directing that, if she should die before her father, all of her assets should be placed in a trust for the benefit of Andrew. The trust was to be administered by Andrea’s cousin, Carole Radey. Andrea’s will made no provision for the distribution of any “residue” (unexpended funds remaining in the trust) after the death of her father.
Andrea died in 1997 and was survived by her father. Pursuant to her will, her assets were transferred into a trust and were used by Radey to pay for Andrew’s support, care and maintenance until his death in 2003. At the time of Andrew’s death, the trust created by Andrea still held assets of approximately $680,000. Andrew’s will left his entire estate to Radey.
Because Andrea’s will had provided no instructions on how any residual funds remaining in the trust after her father’s death should be distributed, Radey sought a declaratory judgment from the Cuyahoga County Probate Court to determine who should receive those funds. The probate court ordered that the residue be distributed to Andrea’s heirs in accordance with R.C. 2105.06 – the state law that provides a formula for distributing the estates of persons who die partially or fully intestate (i.e., without disposing of some or all of their property in a will) among the decedent’s relatives according to the closeness of their familial relationship.
After that decision was rendered, six of Andrea’s maternal cousins, including Jessica Stevens, filed a separate declaratory action in the probate court seeking a determination that they qualified as Andrea’s heirs at law and were thus entitled to the residue. Radey objected, arguing that Andrew was Andrea’s sole heir at the time of Andrea’s death, and thus the remainder of Andrea’s estate passed to Andrew at her death – and then to Radey upon Andrew’s death in accordance with Andrew’s will. The trial court adopted Radey’s argument and ordered the residue to pass to Andrew’s estate. On review, the Eighth District Court of appeals reversed the trial court. Radey appealed the 8th District’s decision, and the Supreme Court agreed to review the case.
Writing for a unanimous Court in today’s decision, Chief Justice Moyer wrote that unless a testator indicates a contrary intent in his or her will, case law establishing a strong public policy preference for the immediate vesting of estates “requires interests (in the testator’s estate) to be assigned at the testator’s death, not held in abeyance until a future uncertain date.”
“The issue in dispute is the point at which the heirs are determined when a testamentary trust is not exhausted at the beneficiary’s death and the will lacks a residuary clause,” the Chief Justice wrote. “Radey argues that, to determine who has the right to the residue, R.C. 2105.06 should be applied at the date of Andrea’s death. Thus, because Andrea died unmarried and childless, her father, Andrew, inherited the right to the entire residuary through intestate succession. Stevens argues that the possibility of a residue does not arise until the purposes of the testamentary trust are fulfilled, and thus the heirs should not be determined until that time. Under this position, the determination of heirs occurs at the time of Andrew’s death; because Stevens and the other cousins were Andrea’s closest remaining relatives at that time, they share the residue equally.”
Citing as precedents the Supreme Court of Ohio’s decisions in Ohio National Bank of Columbus v. Boone (1942) and Tax Commissioner v. Oswald (1923), Moyer said Radey’s position was consistent with the holdings in those cases that “(t)he rights of the beneficiaries become fixed and certain at the death of the testator unless a contrary intent is manifested. ... Thus, in the absence of some contrary intent expressed by the testator to postpone vesting, we abide by the preference for the vesting of all interests, including residuary interests, in the testator’s heirs at the earliest possible time.”
“Because Andrea’s will did not dispose of the residue of her estate and did not express a specific intent for it, the residue was intestate property at the time of her death,” Moyer wrote. “While the residue held an uncertain value at Andrea’s death because the amount depended on the amount of the trust estate that would be used for Andrew’s care, such uncertainty does not prevent the interest in the residue from being assigned under the laws of descent and distribution. Under these laws, the right to the residue passed to Andrea’s father Andrew upon her death, and he could dispose of it as he saw fit. ... Because Andrew left his entire estate to Radey in his will, the residue belongs solely to her.”
Contacts
Angela G. Carlin, 216.241.6602, for Carole Radey.
John M. Widder, 216.283.8617, for Jessica Stevens.