In cases involving the construction or validity of an estate plan, the testimony of counsel who prepared the plan often is pivotal – for good or ill.
Such was the case in Tay v. Grondin in which we defended the Trustee from an action seeking to remove and surcharge him for alleged mismanagement of the sale of a manufactured housing park owned by the Trust. Critical legal issues to be decided by the Court included: 1) whether the applicable standard of care was the the business judgment rule or the traditional prudent administration rule of RSA 564-B:8-804; and 2) whether the Trustee’s appointment was a material purpose of the Trust. We prevailed on both issues, thanks largely to the persuasive testimony of settlor’s counsel, Fred J. Forman, supported by the testimony of our expert witness, Attorney Joseph J. McDonald, III.
The testimony of drafting counsel is often centrally important because honoring settlor intent is paramount under NH law. In his carefully reasoned 39 page Trial Order, Judge Mark Weaver summarized the law governing the introduction of extrinsic evidence to construe a trust as follows:
New Hampshire law is clear that the intent of the settlor is of the upmost importance when a court is interpreting a trust. See, e.g., Shelton, 164 N.H. at 495 (intent of settlor is “paramount”) King v. Onthank, 152 N.H. 16, 18 (2005)(intent of testator is the “sovereign guide”). “Similarly, it is the settlor’s intent, as ascertained from the language of the entire instrument, which governs the distribution of assets under a trust.” Kinq, 152 N.H. at 18. Courts “determine that intent, whenever possible, from the express terms of the [instrument] itself.” Shelton, 164 N.H. at 495. “[I]f no contrary intent appears in the [trust], the words within the [trust] are to be given their common meaning . . . . [C]lauses in a [trust] are not read in isolation; rather, their meaning is determined from the language of the [trust] as a whole.” In re Clayton J. Richardson Trust, 138 N.H. 1, 3 (1993); see In re Trust by Dumaine, 146 N.H. at 681. Finally, settlors are presumed to understand the import of the words used in the instrument, see, e.g., Blue Ridge Bank & Trust, Co. v. McFall, 207 S.W.3d 149, 157 (Mo. App. W.D. 2006); and similarly, have been found to understand how to include limiting language as well. See Amoskeag Trust Co. v. Haskell, 96 N.H. 89, 92 (1950).
Moreover, the technical rules of construction are intended to aid in the discovery of the settlor’s intention. See In re Frolich’s Estate, 112 N.H. 320, 326 (1972)(“canons of construction always give way in this jurisdiction to a single broad rule of construction favoring the maximum validity of the [settlor’s] dispositive plan” (quotations omitted)). “When interpreting an inter vivos trust evidenced by a written instrument, the terms of the trust are determined by the provisions of the instrument as interpreted in the light of all the circumstances and other competent evidence of the intention of the settlor with respect to the trust.” In re Trust by Dumaine, 146 N.H. at 681 (quotations and ellipses omitted). “The relationship of the settlor to the beneficiaries and the duties toward them are among the facts to be considered by a court trying to place itself in the shoes of the creator of the trust in order to ascertain what was intended by the trust instrument.” Bartlett v. Dumaine, 128 N.H. 497, 505 (1986)(quotations and brackets omitted).
The New Hampshire Supreme Court has directed that in any effort to discern a settlor’s intent, “[a]lthough extrinsic parol evidence is inadmissible to vary or contradict the express terms of a trust, such evidence may be received to determine the settlor’s intent where the language used in the trust instrument is ambiguous.” Bartlett, 128 N.H. at 505; see, e.g., Simpson v. Calivas, 139 N.H. 1, 8 (1994) (“where the terms of the [trust] are ambiguous, . . . extrinsic evidence may be admitted to the extent that it does not contradict the express terms of the will” (citations omitted)). Thus, “[e]xternal facts may be received to explain or resolve doubts, but not to create them.” White v. Weed, 87 N.H. 153, 156 (1934); 7 C. DeGrandpre New Hampshire Practice, Wills, Trusts, and Gifts, § 13.07, at 144 (4th ed. 2003) (quotations omitted).
For example, the New Hampshire Supreme Court, while observing that courts “examine extrinsic evidence of the settlor’s intent only if the language used in the trust is ambiguous,” In re Trust by Dumaine, 146 N.H. at 681, noted that extrinsic evidence offered support for its construction of “unambiguous” trust terms. See id. at 683. Therefore, a settlor’s comments before or after execution of a trust is not permitted to contradict the express language in the instrument, but where appropriate may serve as a helpful tool in discerning intent. See, e.g., Merrow v. Merrow, 105 N.H. 103, 106 (1963); accord Simpson, 139 N.H. at 8.
Guided by these principles, the Court determined, as is often the case, that the governing instrument was subject to varying interpretations, opening the door to extrinsic evidence. Because the settlor was deceased, the testimony of her counsel became critically important in the determination of her intent on the key issue of the applicable standard of care. In light of counsel’s testimony, the Court ruled:
Based upon a consideration of that extrinsic evidence, this Court finds that Carylyn Grondin intended to limit the liability of her brother, or any other successor trustee, through the application of a fiduciary duty standard that was less than the prudent person standard in the UTC. In short, she was looking for her successor trustees to use good faith and their “honest belief” that what they were doing was in the best interests of the beneficiaries. This is essentially the business judgment rule as noted earlier in this order.
Likewise relying on the testimony of counsel, the Court held that the appointment of our client as Trustee was a material purpose of the Trust, making his removal highly difficult in this and any future dispute.
In my experience, estate planning counsel is often the most critical witness at trial. Ideally, counsel will have kept careful notes of discussions with his/her client on the key issues and have a good recall of their meetings.