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We have previously discussed the importance of trusts in estate planning.touched on how there are many different types of trusts – revocable living trusts, irrevocable trusts, and so forth. Irrevocable trusts have numerous distinguishing features: for one, they are considered discrete entities for tax purposes; in other words, they have their own tax related obligations, and therefore must file their own tax returns. Irrevocable trusts also cannot be unilaterally terminated by the grantor, or person who established the trust. On the whole, irrevocable trusts tend to be a bit less common than revocable trusts, but they can be highly beneficial in certain instances. In the matter of Mergner v. Estate of Mergner (2025), the use of an irrevocable trust was a prominent part of the case.
In this recent case, a party attempted to claim that her right to an “elective share” -- a concept we recently discussed on our blog – wasn't waived after she apparently made such a waiver in a property agreement. Let’s explore this case in detail.
Factual Scenario
The parties in this case were married in 1996. Both parties had been married previously, and the husband had children from his prior marriage. The husband was more financially well off than the wife, and the husband set up several revocable trusts for the benefit of the wife during the course of the marriage. At one point, after the husband had suffered serious health issues, the husband established an irrevocable trust which was designed to provide the wife with additional income and ensure she remained in comfort in the event of his demise. The irrevocable trust was funded with a principal amount of $2,000,000, generated income, and made periodic disbursements to the wife.
Importantly, the husband and wife signed a marital property agreement shortly after the irrevocable trust was created. In this agreement, the wife specifically stated that she would waive her right to an elective share (something ordinarily guaranteed to a surviving spouse) in the event that the husband predeceased her; the agreement specified that this waiver was a direct result of her acceptance of the benefits of the irrevocable trust. Subsequently, the wife experienced significant financial problems, even after receiving nearly $450,000 in payouts from the trust. Partly in response to these financial problems, she filed a court action for declaratory judgment to ensure that she retained the ability to have an elective share. The husband challenged this action via summary judgment, and the husband was successful at the trial court level. The wife then appealed.
Outcome & Discussion
There were several issues involved in this case, but one of the main issues had to do with the fact that the wife clearly accepted the benefits of the trust. As mentioned, by the time she brought her court action, the wife had already received nearly $450,000. Her financial problems largely derived from bad investment decisions, not from natural consequences such as ill health. The plain language of the property agreement signed by both her and the husband stated that her right to an elective share was waived because of the acceptance of the benefits of the irrevocable trust. There was no question that the wife did, in fact, accept those monetary benefits. One of the more established contract law principles in Maryland holds that someone who accepts the benefits of an agreement cannot turn around and state that the agreement is invalid; the acceptance of the benefits is an estoppel to the challenge of that agreement. In this situation, although the wife tried to rescue her right to an elective share, she was barred from doing so because of the fact that she decided to accept the benefits.
Contact the Murphy Law Firm for More Information
If readers want to know more about estoppel, irrevocable trusts, using marital property agreements for estate planning purposes, or any other related matter, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-5243.
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