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In re Foley Trust

November 18, 2003

IN THE MATTER OF THE MARY O. FOLEY TRUST CREATED UNDER AGREEMENT DATED AUGUST 22, 1974.


Ramsey County District Court File No. C9-01-200062

Considered and decided by Wright, Presiding Judge; Toussaint, Chief Judge; and Anderson, Judge.

SYLLABUS BY THE COURT

1. Where a petition for construction of a trust places issues before the district court that were not contemplated by the trust agreement, the district court did not err in considering extrinsic evidence.

2. A district court's equitable resolution of a petition for construction of a trust will not be reversed absent an abuse of discretion.

The opinion of the court was delivered by: Wright, Judge

Affirmed as modified

OPINION

On appeal from an order construing a trust and an order denying a motion for a new trial, appellants contend that the district court erred in considering extrinsic evidence to construe the trust and in reforming earlier transactions in the trust. We affirm as modified.

FACTS

Mary O. Foley established the Mary O. Foley Trust (Foley trust) in 1974 to provide for her heirs upon her death. The trust agreement provided that the trustees could make distributions from the trust at the direction of Foley unless she was under an incapacity. In the event of Foley's incapacity, the trustees were authorized only to make payments from the trust for her maintenance, care, and support. In addition to the Foley trust, Foley had created a trust for her daughter, Janet Villaume, in 1966 to provide for Janet Villaume's care and support because Janet Villaume was unable to provide for herself.

At Foley's death, the trust assets were to be distributed in four parts to her children or their heirs if her children predeceased her. Mary Foley had four children: Mary Denise Villaume, Janet Villaume, Eugene Villaume, and Walter Villaume. Her two sons predeceased her and each is survived by three children. These six grandchildren are the appellants here. The trust also provided that certain pre-death gifts were to be considered advances on the final distribution. These included Foley's gifts to her two sons of $107,500 each, and the value of Janet Villaume's 1966 trust at the time of Foley's death.

The trustees of the Foley trust during the relevant time period were U.S. Bank and Sister Mary Denise Villaume. In spring 2000, the grandchildren approached U.S. Bank to discuss whether they could receive pre-death gifts from the Foley trust to minimize taxes the Foley trust would otherwise incur upon a forced sale of certain stock. The bank's administrator for the trust met with Foley to discuss the gifts. The administrator concluded that Foley, who was 92 years old, lacked the capacity to direct the trustees to make the gifts. Instead, the trustees and the grandchildren decided to make the gifts from the Foley trust. The beneficiaries, including Janet Villaume, Sister Mary Denise Villaume, and all of the grandchildren, signed an agreement consenting to the gifts. The trustees then transferred funds from the Foley trust as follows:

• $225,000 divided among the three children of Eugene Villaume.

• $225,000 divided among the three children of ...


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