Two Essential Cases in Washington, D.C.'s Law on Trust Administration

Continuing on with our “summary articles” on essential estate and trust law cases in both D.C. and Maryland, in this post we will focus our attention on two cases which both give some critical piece of information pertaining to the administration of trusts in the District of Columbia. These are just a couple of examples of cases which contributed some layer to our understanding of how trusts are handled, they are not necessarily the “most critical” or “most essential.”

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Estate law, and specifically the law on trust administration, is a complex subject in the jurisdiction of Washington, D.C., and there are literally hundreds and hundreds of cases in this area. But, hopefully, these two select cases will help our readers get a sense of how involved these cases can be, and the importance of consulting with a qualified estate planning attorney (with expertise in D.C. law) prior to establishing a trust.

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Wagman v. Lee (1983)

This case is notable because of its contribution to the construction of “fiduciary duties” in D.C. law: in this case, an intermediary – an escrow agent – was accused of committing breach of fiduciary duty when he “misapplied” funds to a particular transaction. The factual details of the case are complicated, but essentially the escrow agent was hired to perform relatively routine duties in connection with the sale of a particular piece of real property. When the agent used funds which were not meant to be used, an allegation of breach of fiduciary duty was brought. The agent tried to argue that, because the relationship was contractual rather than one deriving from a trust-trustee context, no fiduciary duty was present at all. The court rejected this argument from the agent, holding that such agents did have fiduciary obligations when making decisions, and also that such scenarios could justify “punitive damages.” Punitive damages were in fact awarded, something which is of considerable significance in D.C.’s law on trust administration.

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Now, those who have fiduciary obligations in D.C. know that violations can sustain punitive damages. This is the most critical contribution of this case.

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In re Estate of Randall (2010)

This is another case of high importance: in this case, a physician gradually began to lose his mental capacity (dementia), and as a consequence there was concern regarding “undue influence” from his wife. The physician and the wife were married, but many contended that the marriage should be voided on the ground that the physician lacked sufficient capacity to enter a valid marriage. Ultimately, a guardian was appointed to assist the physician, and ultimately the guardian petitioned to have the marriage annulled on this basis (of incapacity / undue influence). But, before the annulment could be achieved, the physician passed away.

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The guardian argued that the marriage was actually void, not “voidable,” and that therefore the wife didn’t stand to gain from the decedent’s estate. This argument was rejected ultimately but the D.C. Court of Appeals: the marriage may have been voidable on the grounds of mental incapacity or dementia, but it wasn’t “void” on that basis automatically. The fact that the decedent passed away prior to the completion of the annulment was a determining factor in favor of the wife, although it may have been “unfair” in a sense to the decedent and his estate. Because of the timing of the decedent’s passing, the court determined that the wife was still entitled to benefit from the estate as normal.

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This case clearly has powerful implications for trusts, as we can infer that the same principle will hold in the context of trust beneficiaries: if a settlor establishes a trust for a beneficiary who is also a spouse, and the marriage is perhaps faulty or voidable, but the settlor passes prior to completing an annulment, the beneficiary spouse will likely be entitled to continue receiving benefits. Also, the beneficiary spouse will remain a beneficiary of the decedent’s estate as well.

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Contact the Murphy Law Firm for More Information

Readers who want to learn more about estate law in D.C., the administration of trusts, creating revocable or irrevocable trusts, dismantling or modifying revocable or irrevocable trusts, or any other pertinent estate planning topic, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-1187.

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