Hennepin County District Court File No. PX98484
Considered and decided by Minge, Presiding Judge, Wright, Judge, and
1. An order on a petition to remove a trustee brought pursuant to Minn. Stat. §á501B.16 is final as to all matters thereby determined. Minn. Stat. §á501B.21 (2002). Issues of fact determined by such an order may not be collaterally attacked after the time for appeal has expired and shall have preclusive effect on subsequent proceedings brought pursuant to Minn. Stat. §á501B.16 involving the same trust.
2. Where a will and trust form parts of the same estate plan, they must be construed together.
The opinion of the court was delivered by: Mulally, Judge*fn1
This is an appeal from an order allowing a final accounting and issuing a decree of distribution for a trust. Because we are not persuaded that the district court erred in its supervision of the administration of the trust, we affirm.
Walter G. Anderson (decedent), founder of Walter G. Anderson, Inc., and father to the parties in this case, died in February 1997. Seven years earlier, decedent executed three instruments on the same day: a pour-over will, a trust agreement, and a stock-redemption agreement. At his death, decedent owned approximately 37 percent of the outstanding stock of Walter G. Anderson, Inc. (Anderson, Inc.).
The pour-over will named decedent's son, respondent Richard Anderson (Anderson), as personal representative and devised the residuary estate, defined as "all property remaining in [the] estate after payment of all items required by law to be paid therefrom," to the trustee pursuant to the trust agreement. The trust agreement created a trust with decedent and Anderson as trustees; Anderson and his sister, appellant Jacquelin Powell (Powell), were named beneficiaries. The trust agreement directed the trustee to pay all "death taxes" with proceeds from the redemption of Anderson, Inc. stock held by the trustee pursuant to the stock-redemption agreement. Under the stock-redemption agreement, Anderson, Inc. agreed to redeem [on decedent's death] all or a portion of the Company common stock owned by [decedent's] legal representative on [decedent's] date of death in an amount sufficient to pay the death taxes and the allowable funeral and administration expenses arising as a result of [decedent's] death.
The stock-redemption agreement was designed to take advantage of a provision of the Internal Revenue Code that allows a corporation to redeem a deceased shareholder's stock in an amount necessary to pay federal estate taxes and funeral and administration expenses. See 26 U.S.C. §á303 (2000).
After decedent's death, Anderson transferred the Anderson, Inc. stock that decedent owned to the trust but did not immediately attempt to have the stock redeemed pursuant to the stock-redemption agreement or pay any estate taxes. Anderson apparently elected to pay the federal estate tax in installments, pursuant to 26 U.S.C. §á6166 (2000). Anderson also attempted to probate decedent's will in Florida, where decedent had lived before moving back to Minnesota, his long-time home, ten months before he died.
Powell appeared in and opposed the Florida probate proceeding. The Florida court found that decedent was domiciled in Minnesota when he died, making probate in Florida improper. The will was eventually admitted to probate in Minnesota.
Anderson and Powell have engaged in extensive litigation over decedent's business affairs and estate, but only the recent litigation concerning the trust is relevant to this appeal. In 1998 and 1999, Powell filed petitions seeking to have Anderson replaced as trustee. She alleged that Anderson had failed to comply with the terms of the pour-over will in that he had failed to transfer the stock to the trust before paying any estate taxes. She also alleged that Anderson was unreasonably tardy in redeeming the Anderson, Inc. stock pursuant to the stock-redemption agreement. Powell claimed that this had the effect of reducing her interest in the trust because, so long as the stock remained unredeemed, the liquid assets of the trust, in which she had an interest, were used to pay expenses of the estate, including the estate taxes. In March 2000, a referee ruled on Powell's petition and found that the transfer of the stock before payment of taxes did not violate the terms of the pour-over will. The district court adopted the referee's ruling; Powell chose not to appeal.
In September 2001, a referee heard Anderson's petition for allowance of his final accounting as trustee and for a decree of distribution. Powell again argued that Anderson had not complied with the terms of decedent's pour-over will and that his conduct as trustee amounted to a breach of his fiduciary duty of loyalty to her. By this time, both parties had incurred extensive legal fees because of the litigation relative to the estate, and both sides sought reimbursement from the estate. The referee rejected Powell's arguments concerning Anderson's conduct, allowed Anderson reimbursement for his attorney fees, and denied Powell's request for attorney fees. The district court again adopted the referee's ruling, and Powell now appeals.
I. Is Powell precluded from challenging the district court's interpretation of decedent's will?
II. If Powell is not precluded from raising the issue, did the district court err in its interpretation of decedent's will?
III. Is the district court's finding that Anderson did not breach his fiduciary duty to Powell clearly erroneous?
IV. Did the district court abuse its discretion by allowing Anderson reimbursement and denying Powell reimbursement for ...