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Great Facts and Experts Can’t Survive Summary

An unpublished opinion today that looks at the question of when expert opinions are sufficient to create a question of fact, versus when they remain mere speculation; in the context of a motion for summary disposition.

In In Re Jeannine A. Palazzo Irrevocable Trust (click on the name to read the case), the attorney/trustee failed to inform beneficiaries of his activities in relation to an irrevocable life insurance trust (an “ILIT”) established for their benefit by an aunt. During the years leading up to the aunt/settlor’s death, the liquidity in the ILIT was depleted to the point of near insolvency.  This prompted the attorney/trustee to liquidate the policy for $36,000 and by doing so give up the $500,000 death benefit. As it turns out, he did this just days before the death of the aunt/settlor.

The successor trustee sued attorney/trustee for breach, and presented testimony of an expert estate planning lawyer and an accountant, both of whom opined that had the attorney/trustee performed his fiduciary duties with respect to informing the beneficiaries, the beneficiaries could have taken steps to protect their interests and potentially preserved the policy so as to receive some or all of the death benefit.

An Interesting Question

The trustee/attorney moved for summary disposition in the trial court and prevailed on the argument that merely speculating that the beneficiaries could have or might have taken steps to alter the outcome is insufficient, if you don’t explain what they would have done and when.

The Court of Appeals affirmed the trial court, adopting the proposition that merely speculating that something could have been done is insufficient to create a question of fact sufficient to survive summary disposition.

An Uncomfortable Result

A central premise to trust law is that beneficiaries are empowered to protect their interests by being provided information. A trustee protects itself by providing that information.  When a trustee fails to provide the required information, the law holds the trustee liable for the resulting damages and does not allow the trustee the protection of time barriers to claims that would otherwise arise.

For a court to conclude that although a trustee breached its duties by failing to provide the required information, but that the trustee is nonetheless absolved of liability on summary disposition even where experts have opined that something could have been done had the information been provided, just feels wrong.

Conclusion

Bottom line is the beneficiaries lost on summary because they did not specifically state what could have been done to alter the outcome had the missing information been provided. While that seems like a fine line to draw; that is the line that worked in this case, and a line litigators will want to remember when they need to make the same distinction in future matters.

They say it is an ill-wind that blows no one good, and no doubt there is one trustee/attorney who will be full of Thanksgiving today.